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Hello, does anyone have any experience setting up a joint venture as a limited company. Especially where the new business is a subsidiary of the partners’ own existing limited companies?
We have been advised by our accountants that this is the best way to proceed but can’t find any information online.
Thanks in advance.
7 Comments-
Hi Jen, really interesting question! Tagging some seasoned portfolio professionals who might be able to offer some words of wisdom Zarir 'Zed' Vakil, Alex Pitt, John Panczak, Vic Mistry, Ian Bessarabia, Rich Mills
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Thanks Ella Bernie. Many years ago I worked for a biotech compamy and we did two seprate JV’s, one with Boots and the other with Air Products. The structure was very similar with the biotech company transferring around 25 people into the new JV, licensing certain technology on a FOC basis while our partner put in £3m in funding. Each JV was 50/50 and they both worked well, however you always need to think through what happens when the partners disagree, which they will at some point in the future. Jen Whitfield I’m happy to chat if it helps. I’m not looking for more work so no obligation on your side. Good luck John
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Hi Jen Whitfield – JVs have differing complexities. Assuming the commercials are agreed then this really is a matter for lawyers (agreements) and accountants ( finance and tax advice) . The phrasing of y§our question prompts me to ask if it is a merger or a JV and that can change a lot of things most importantly ownership. Let me know if you have a particular question, but if you trust your accountant I would go with their advice.
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Thank you so much for your responses Ben Legg Zarir 'Zed' Vakil and John Panczak; it was more practical help I was looking for – I should have specified – around how the formation actually works. My business partner and I both have our own ltd companies (where we are businesses of 1), so understand that basic process, but we didn’t know if there were any additional complexities or requirements with it being a JV, and with it being a subsidary of our two businesses (i.e. the directors being corporate entities, rather than individuals). Its a really small operation and we could have done this more informally; but our accountants both recommended this as the most efficient, transparent and risk-avoiding way of working, rather than one contracting from the other’s business etc.
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Jen Whitfield – can you make it to Pathfinder Check-In today @ 4pm? We can discuss there
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One other thing to consider is TUPE if you end up with employees from each company working in the JV. It gets quite complicated and can lead to difficult conversations; there are also complications with control and disputes but, when done well, JVs are the best solution
hi Jen Whitfield – I set up a JV as a limited company in Singapore, under English law. It was an adtech company with a US adtech company (Adknowledge, where I was CEO) with a large Malaysian/ pan-Asian telco (Axiata). Axiata put in growth capital and Adknowledge put in an existing business for an 80:20 share split. The JV then licensed the tech from Adknowledge at an agreed rate. It worked well for several years, then Axiata bought out Adknowledge’s share.
Happy to chat if helpful?
Ben