Joint Venture Agreement

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This UK Joint Venture Agreement is suitable where two or more businesses wish to come together for a specific project for a specific length of time but do not wish to be bound together indefinitely.

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A UK Joint Venture Agreement can be used where two or more existing people (individuals or businesses) agree to co-operate and combine their resources with a view to making a profit on a new venture or product. This Agreement is suitable where two or more businesses wish to come together for a specific project for a specific length of time but do not wish to be bound together indefinitely.

Among others, this form includes the following provisions:
  • Appointment of directors
  • Conduct of the company‚Äôs affairs
  • Matters requiring consent of both shareholders
  • Staff
  • Guarantees given by the shareholders
  • Exercise of voting rights
  • Non competition restrictions
  • Procedure in the event of deadlock
  • and more
This Joint Venture Agreement has been created by UK lawyers for use in England and Wales.
This is the content of the form and is provided for your convenience. It is not necessarily what the actual form looks like and does not include the information, instructions and other materials that come with the form you would purchase. An actual sample can also be viewed by clicking on the "Sample Form" near the top left of this page.











JOINT VENTURE AGREEMENT







This Packet Includes:
1. Information;
2. Step-by-Step Instructions; and
3. JOINT VENTURE AGREEMENT





Information
JOINT VENTURE AGREEMENT




When two parties want to work together through the medium of a company on a commercial venture then this is called a joint venture.

It is the joint venture agreement that will regulate the relationship of the two parties and how the company is run. The agreement will set out what the company can and cannot do without both parties consent. This is to protect each partys investment into the company.

This joint venture agreement has been drafted on the basis that two parties will be investing the same amount money into the joint venture company and they will both own 50% of the shares. This is commonly called a dead locked company as because both parties own 50 per cent of the shares of the company and the company cannot do anything fundamental unless both shareholder parties agree.  

As with all our agreements this joint venture agreement covers most material points the parties will wish to negotiate and is prepared in simple and easily understood language. Obviously not all the clauses will be required for your individual deal but this agreement will act as a good foundation for your future negotiations.

Please note that within some specific agreement clauses you will see reference to other clause numbers (eg look at clause 4.3. This clause makes reference to clause 3.1.7). These clause numbers have square brackets around them. The reason for this is that if you delete some clauses in the agreement that you do not require then this clause number in square brackets may have to change (ie in the above example if you delete clause 2, then clause 3.1.7 would now have to be changed to read clause 2.1.7). Once you are satisfied that the clause numbers are correct then please delete the square brackets.

You will also note just blank square brackets. This denotes that information is missing and will need to be inserted by you. Once you have added the information then delete the square brackets.


 Step-by-Step Instructions
JOINT VENTURE AGREEMENT



   

We would like to draw to your attention the following key clauses:

   Clause 3    This is an important clause. It sets out the key things that the parties must ensure the company carries out on the signing of the agreement. For example the shareholders may wish to be appointed directors or have their nominee appointed director of the Company. Further the correct number of shares need to be issued between the shareholders. Or specific employment contracts entered into. The list is not exhaustive and you can and should put in any other items you require the Company to do (eg the Company will make available a Porsche as a company car if that is what you understand you will be receiving from the company!)

   Clause 4    This clause sets out the minimum number of directors the company will have and who the chairman of the company will be. PLEASE NOTE that this agreement does not allow for the Chairman to have a casting vote. The agreement also allows for rotation of the chairman on a yearly basis.

   Clause 5    This clause deals with the conduct of the Companys day to day affairs and is hopefully self-explanatory. We suggest you review carefully clause 5.1.9 and see whether you require this and if so insert your appropriate limit.

   Clause 6    This is a key clause that will protect each of the shareholders interests in the company. It sets out exactly what actions the company cannot do unless both shareholders agree. Again this list is not exhaustive so please make any further additions you want.

   Clause 8   This clause sets out how much loan capital each party will have to loan to the Company.

   Clause 14   As a result of the joint venture relationship each party will gain knowledge and contacts it may not have done had it not been for the commercial venture. Therefore it is not correct for that shareholder party to exploit this knowledge or contacts This clause sets out time limits and restrictions on non competition with the company once a shareholder has disposed of his shares. Please note the specific warning in clause 14.1 as to time limits. You will also need to define the Territory area (eg inside the M25). This can be found in the definitions section of the document at the beginning of the agreement.



   Clause 16   You will need to set out the dividend policy of the company in this clause.

   Clause 18   One of the advantages of having a dead locked company is to encourage both parties to agree on how it should be run. Very little can be achieved if the parties cannot agree. However agreement is not always possible and there must be a mechanism to deal with a deadlock. If the parties reach a point where they cannot agree to go forward then there are only two options available to deal with the matter. Firstly the company is put into liquidation or secondly one party buys out the other party. Both these options are dealt with in this clause.



   Clause 19   If one of the shareholders defaults under the agreement then this clause grants the non-defaulting party the right to purchase the defaulting partys shares at a market value price.




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JOINT VENTURE AGREEMENT


B8011Date:                              20
Parties:
(1)   “A”: [________] Limited (registered no [________]) whose registered office is at [________]
(2)   “B”: [________] Limited (registered no [________]) whose registered office is at [________]
(3)   “Company”: [________] Limited (registered no [________]) whose registered office is at [________]
B8012Recitals:
(A)   The Company was incorporated under the Companies Act 1985 on [________] with an authorised share capital of £[________] divided into [________] “A” Shares of £1 each and [________] “B” Shares of £1 each.
(B)   [________] and [________] wish to participate as shareholders in the Company for the purposes and on the terms set out in this agreement.
Operative provisions:
1.   B8013Interpretation
1.1   In this agreement, unless the contrary intention appears, the following definitions apply:
“Agreed Terms” the terms of an annexed draft agreed between the parties or their respective legal advisers
“Agreed Proportions” 50 per cent in respect of A and 50 per cent in respect of B or (if different) such other proportions as equal, at the time when any loan finance is to be contributed by A and B under clause [8] or any liability arises under clause [9] (as the case may be), the percentages which the nominal value of the shares beneficially owned by A and B respectively in the Equity Share Capital of the Company bears to the combined nominal value of the Equity Share Capital (taken as a whole)
“Board” the board of directors for the time being of the Company
“Business” the business of the Company as described in clause [2.1] and such other business as the parties may agree in writing should be carried on by the Company and its subsidiaries
“Control” the same meaning as in section 840 of the Taxes Act
“Director” a director of the Company, including where applicable an alternate director
“Equity Share Capital” the same meaning as in section 744 of the Companies Act 1985
“Guarantees” all guarantees, indemnities and covenants referred to in clause [9.1], as varied, extended or renewed
“Holding Company” the same meaning as in section 736 of the Companies Act 1985
“Loan Stock” the unsecured loan stock to be issued by the Company under clauses [3.1.10 and 8]
“Person” includes a firm or other body of persons
“Shareholders” A and B and, where appropriate, regard shall be had to clause [26.2]
“Shares” shares of the Company
“Subsidiary” the same meaning as in section 736 of the Companies Act 1985
“Taxes Act” the Income and Corporation Taxes Act 1988
“Territory[________]
1.2   Reference to a statute or statutory provision includes a reference to it as from time to time amended, extended or reenacted.
1.3   Words denoting the singular number only include the plural and vice versa.
1.4   Unless the context otherwise requires, reference to a clause or schedule is to a clause of or schedule to this agreement.
1.5   The headings in this agreement are inserted for convenience only and do not affect its construction.
2.   B8014Objects of the company
2.1   The primary object of the Company and any Subsidiaries is to carry on the business of [________]
2.2   The Business shall be conducted in the best interests of the Company on sound commercial profit making principles so as to generate the maximum achievable maintainable profits available for distribution.
2.3   The central management and control of the Company shall be exercised in the UK. The Shareholders shall use their best endeavours to ensure that the Company is treated as resident for taxation purposes [in] [outside] the UK.
3.   B8015Completion
3.1   As soon as practicable after executing this agreement [and before the Company commences trading], the Shareholders and the Company shall, so far as they are each able, take or procure the following steps:
3.1.1   the subscription by A for [________] “A” shares of £1 each of the Company at par and the allotment and issue of the shares to A against payment in full in cash;
3.1.2   the subscription by B for [________] “B” shares of £1 each of the Company at par and the allotment and issue of the shares to B against payment in full in cash;
3.1.3   the adoption by the Company of new articles of association in the Agreed Terms;
3.1.4   the alteration by the Company of its memorandum of association in the Agreed Terms;
3.1.5   the appointment of [________] and [________] as “A” Directors of the Company;
3.1.6   the appointment of [________] and [________] as “B” Directors of the Company;
3.1.7   the appointment of [________] as [an “A”] [a “B”] Director and the chairman of the Company;
3.1.8   the appointment of [________] as secretary of the Company;
3.1.9   the resignation of all Directors and the secretary of the Company other than [________] holding office prior to the execution of this agreement and delivery, in the form of a deed, of confirmation by each of them that he has no claim or right of action against the Company;
3.1.10   the creation by the Company of the Loan Stock on the terms embodied in the draft certificate set out in Schedule [2], the subscription by A for £[________] and by B for £[________] of the Loan Stock at par and the issue by the Company of certificates in the form of the draft against payment in full in cash;
3.1.11   the execution by the Company of contracts of employment with [________] and [________] in the Agreed Terms;
3.1.12   the execution by the Company and by A and B of an agreement for the supply to the Company of goods/services in the Agreed Terms; and
3.1.13   the assignment by A and B to the Company for no consideration of the contracts specified in Schedule [1], in the Agreed Terms.
3.2   [________] and [________] shall each sign and deliver to the Company their respective contracts of employment mentioned in clause [3.1.11].
4.   B8016Appointment of directors
4.1   The maximum number of Directors holding office at any time shall be [________] unless otherwise agreed in writing by the Shareholders.
4.2   Each of the Shareholders shall be entitled to appoint a further [one] Director each. The Directors appointed by A (including those appointed under clause [3.1.5]) shall be designated as “A” Directors and the Directors appointed by B (including those appointed under clause [3.1.6]) shall be designated as “B” Directors.
4.3   The chairman appointed under clause [3.1.7] shall retire as chairman at the first annual general meeting of the Company. Thereafter, each Shareholder, beginning with A_B, shall have the right, exercisable alternately for a period of one year, of nominating one of the Directors to be the chairman of the Company. The chairman shall hold office until the termination of the next annual general meeting following his appointment. If the chairman is unable to attend any meeting of the Board, the Directors of the same designation shall be entitled to appoint another Director to act as chairman in his place at the meeting.
4.4   In the case of an equality of votes at a meeting of the Board or the Company, the chairman shall not be entitled to a second or casting vote. [Note the Chairman does not have the right to a casting vote. Obviously change if this is not what is required between the parties]
5.   B8017Conduct of the companys affairs
5.1   The Shareholders shall exercise all rights available to them in relation to the Company and (except in relation to clause [5.1.7]) the Company shall do everything necessary to procure (so far as they are able to do so) that during the term of this agreement:
5.1.1   the business of the Company and its Subsidiaries consists exclusively of the Business;
5.1.2   the Shareholders are given full opportunity to examine the books and accounts kept by the Company and its Subsidiaries and are supplied with all relative information, including monthly management accounts and operating statistics and such other trading and financial information in such form as they reasonably require to keep each of them properly informed about the business of the Company and its Subsidiaries and generally to protect their interests;
5.1.3   the auditors of the Company and of each of its Subsidiaries are [________] or such other firm of chartered accountants as the Shareholders agree in writing;
5.1.4   the bankers of the Company and each of its Subsidiaries are [________] or such other bankers as the Shareholders agree in writing;
5.1.5   the registered office of the Company and of each of its Subsidiaries is at [________] or at such other place as the Shareholders agree in writing;
5.1.6   the Company complies with the provisions of its memorandum and new articles of association (as adopted in accordance with clause [3]);
5.1.7   the memorandum and new articles of association of the Company are not altered and no further articles or resolutions inconsistent with them are adopted or passed unless the Shareholders agree in writing;
5.1.8   any company which becomes a Subsidiary of the Company adopts new articles of association in a form approved by the Shareholders in writing;
5.1.9   all cheques drawn by the Company and each of its Subsidiaries in excess of £[________] are signed by one Person nominated by A and one Person nominated by B;
5.1.10   board meetings of the Company and each of its Subsidiaries are convened, at regular intervals not exceeding [________] months, by not less than [________] hours notice in writing accompanied by an agenda specifying the business to be transacted; and
5.1.11   the Board determines the general policy of the Company and of each of its Subsidiaries (subject to the express provisions of this agreement), including the scope of their respective activities and operations and that the Board reserves to itself all matters involving major or unusual decisions.
6.   B8018Matters requiring consent of both shareholders
6.1   The Shareholders shall exercise all rights available to them in relation to the Company so as to procure (so far as they are able) that neither the Company nor any of its Subsidiaries without the prior written consent of the Shareholders:
6.1.1   creates any fixed or floating charge, lien (other than a lien arising by operation of law) or other encumbrance over the whole or any part of its undertaking, property or assets, except for the purpose of securing indebtedness to its bankers for sums borrowed in the ordinary and proper course of the Business;
6.1.2   borrows (except from the Companys bankers in the ordinary and proper course of the Business) in excess of a maximum aggregate sum outstanding at any time of £[________];
6.1.3   makes a loan or advance of any amount or gives credit (other than normal trade credit) in excess of £[________] to any Person, apart from deposits with bankers which are repayable upon the giving of not more than seven days notice;
6.1.4   gives a guarantee or indemnity to secure the liabilities or obligations of any Person (other than a whollyowned Subsidiary of the Company);
6.1.5   sells, transfers, leases, assigns, or otherwise disposes of a material part of its undertaking, property or assets (or any interest in them), or contracts to do so otherwise than in the ordinary and proper course of the Business;
6.1.6   enters into a contract, arrangement or commitment involving expenditure on capital account or the realisation of capital assets if the amount or the aggregate amount of the expenditure or realisation by the Company and all of its Subsidiaries would exceed £[________] in any one year or in relation to any one project; for the purpose of this paragraph the aggregate amount payable under an agreement for hire, hire purchase or purchase on credit sale or conditional sale terms is to be treated as capital expenditure incurred in the year in which the agreement is entered into;
6.1.7   engages a new employee at remuneration which could exceed a rate of £[________] per annum;
6.1.8   increases the remuneration of an employee to a rate which could exceed a rate of £[________] per annum or increase the remuneration of an employee whose existing remuneration could exceed that rate;
6.1.9   appoints or dismisses a Director except in accordance with the rights conferred on the Shareholders under clause [4] to appoint and remove Directors;
6.1.10   appoints a committee of the Directors or a local board or delegates any of the powers of the Directors to a committee or local board;
6.1.11   takes or agrees to take a leasehold interest in or licence over land;
6.1.12   issues any shares or creates any new shares, except as expressly permitted by the Companys articles of association;
6.1.13   alters the rights attaching to any class of shares of the Company;
6.1.14   consolidates, subdivides or converts any of the Companys share capital;
6.1.15   issues renounceable allotment letters or permits any Person entitled to receive an allotment of shares to nominate another Person to receive the allotment except on terms that no renunciation or nomination shall be registered unless the renouncee or Person nominated is approved by the Board;
6.1.16   creates or acquires a Subsidiary or disposes of any shares in a Subsidiary;
6.1.17   enters into a partnership or profit sharing agreement;
6.1.18   does or permits to be done any act or thing whereby the Company may be wound up (whether voluntarily or compulsorily), in accordance with the terms of this agreement;
6.1.19   issues securities convertible into Shares or debentures, or share warrants or options in respect of Shares;
6.1.20   enters into a contract or transaction except in the ordinary and proper course of the Business on arms length terms;
6.1.21   acquires, purchases or subscribes for shares, debentures, mortgages or securities (or any interest in any of them) in any Person;
6.1.22   creates a contract or obligation or renews or varies the terms of an existing contract or obligation, to pay money or moneys worth to any member of the Company or to the Holding Company of a member or to any other Subsidiary of a Holding Company or to any Person as a nominee of a member or a relevant Holding Company or Subsidiary;
6.1.23   holds a meeting of Shareholders or purports to transact any business at a meeting unless there are present duly authorised representatives or proxies for each of the Shareholders.
7.   B8019Staff
7.1   The Company shall recruit and employ such staff as the Board considers necessary for the proper conduct of the Business.
7.2   Each of the Shareholders shall (if requested by the Board) second executive personnel to the Company on a full time basis and otherwise on terms to be agreed between the Shareholders. If the Board determines that a person seconded to the Company is not suitable for employment in connection with the Business, it may require the Shareholder who has seconded him to withdraw and replace him or to take such other steps as it may deem necessary or expedient. All the salaries, expenses and other benefits to which a secondee is entitled and all necessary employers pension and national insurance contributions shall, except where otherwise agreed by the Shareholder who has seconded him, be borne by the Company.
8.   B8020Loan finance
8.1   The Shareholders shall each use reasonable endeavours to procure that the requirements of the Company and its Subsidiaries for working capital to finance the Business are met by borrowings from banks and other similar sources on the most favourable terms reasonably obtainable as to interest, repayment and security, but without allowing a prospective lender a right to participate in the Equity Share Capital of the Company as a condition of making the loan.
8.2   If the Board determines that borrowing from a bank or other similar source is not desirable, it shall issue to each of the Shareholders a notice in writing, requiring each of them to subscribe for their Agreed Proportions of such amount of Loan Stock as, in the opinion of the Board, is required for financing the Business. The maximum aggregate amount of Loan Stock for which the Shareholders shall be liable to subscribe (taken as a whole) is £[________].
8.3   Each of the Shareholders shall subscribe in cash at par for the amount of Loan Stock stated in the notice within [________] weeks.
8.4   If either of the Shareholders fails to contribute its Agreed Proportion of the Loan Stock within the time specified, the Company shall be entitled to take such action as it thinks fit for obtaining payment of the contribution including (without limitation) commencing proceedings against the defaulting Shareholder for breach of its obligations. The defaulting Shareholder shall refrain from using its voting rights and other powers in relation to the Company, and shall instruct the Directors nominated by it not to do anything, to prevent or delay action being taken by the Company.
8.5   If either of the Shareholders fails to contribute its Agreed Proportion of the Loan Stock within the time specified, the other Shareholder shall be entitled (if it has already subscribed its Agreed Proportion of the Loan Stock) to pay to the Company in cash the amount due to the Company by the defaulting Shareholder. The amount shall be wholly applied (notwithstanding any other provision of this agreement) (at its option) in subscribing for additional Loan Stock at par or subscribing for additional Shares at par of the same class as those Shares already held or beneficially owned by the subscribing Shareholder or a combination of additional Loan Stock and additional Shares. If, as a result of exercising this right, either Shareholder becomes the holder or beneficial owner of per cent or more in nominal value of the issued Equity Share Capital of the Company (regardless of class), the provisions of clause [6] shall cease to apply.
8.6   If deemed appropriate or expedient by the Board, the proceeds of issue may be advanced (wholly or partly) by way of loan to a whollyowned Subsidiary of the Company for the proper purposes of the Business.
9.   B8021Guarantees given by the shareholders
9.1   The aggregate amount of liability arising under guarantees, indemnities and covenants given by the Shareholders, whether jointly or severally, to secure the indebtedness and obligations of the Company and its Subsidiaries for the proper purposes of the Business shall be shared by them in the Agreed Proportions. The liability referred to includes legal and other costs which the relevant Shareholder may be ordered to pay or otherwise incurs in any action brought to enforce the guarantees, indemnities or covenants irrespective of whether or not the Shareholders are liable as cosureties and whether or not they are liable jointly or severally and by the same or different instruments.
9.2   Where one of the Shareholders has made a payment or provided other consideration either:
9.2.1   in consequence of a judgment or an order made by a court of competent jurisdiction in any action brought to enforce any of the Guarantees; or
9.2.2   in bona fide satisfaction or compromise of any demand made under any of the Guarantees (including a payment into court which has been accepted); and the payment exceeds or would exceed its Agreed Proportion of the sum for which judgment has been entered or the claim satisfied or compromised, it shall be entitled (as appropriate) to be indemnified by or to recover a contribution from the other Shareholder to the extent specified in clause [9.1] irrespective of whether or not the satisfaction or compromise was wellfounded in law. If a judgment is varied or reversed on appeal the amount of the final judgment (including any costs awarded) shall be borne by the Shareholders in the Agreed Proportions insofar as the amount exceeds the amount of any earlier judgment in the relevant action which has been borne by the Shareholders in the Agreed Proportions. No payment shall be made by either Shareholder in satisfaction or compromise of a demand and no steps shall be taken to appeal against a judgment or to recover from the Company (whether by right of indemnity or subrogation or otherwise) any sum of money paid or other consideration provided to a claimant under any of the Guarantees, without prior consultation with the other Shareholder.
9.3   Any sum payable under clause [9.2] shall be paid within 30 days of receipt of written notice requesting payment together with evidence of payment or provision of other consideration under the Guarantees. If the Shareholder from which payment is requested fails to make the payment within the period of 30 days, the other Shareholder shall be entitled to be paid interest by the defaulting Shareholder on the amount due at the rate of [________] per cent above the base rate of [________] Bank plc from time to time, to accrue on a daily basis from the date of the 30 day period to the date of actual payment (after as well as before judgment).
9.4   If, at any time after one Shareholder has indemnified or made contribution to the other Shareholder, either of them recovers all or part of any sum of money or other consideration paid or provided to a claimant under any of the Guarantees, whether by right of indemnity or subrogation against the Company, by obtaining final judgment against the claimant in any action relating to any of the Guarantees or in any other way, the sum recovered (including any award for costs previously borne by the Shareholders in the Agreed Proportions) shall be apportioned between the Shareholders in the Agreed Proportions. The Shareholder making the recovery shall account to the other Shareholder for its pro rata share as soon as practicable after receipt.
9.5   Where either of the Shareholders gives a guarantee or indemnity to secure the indebtedness of the Company or any of its Subsidiaries, it shall be entitled to receive from the Company a fee for the period during which the guarantee or indemnity is outstanding at the rate of [________] per cent per annum calculated by reference to the maximum amount of its liability under the guarantee or indemnity.
9.6   Neither of the Shareholders shall take or receive from the Company or any other Person any security in connection with the Guarantees without the prior written consent of the other Shareholder. Any security taken or received (and any sum of money derived from it) shall be held by the relevant Shareholder as trustee for both Shareholders so that they share the benefit in the Agreed Proportions.
9.7   Nothing in this agreement shall deprive either of the Shareholders of any rights or remedies available to it at law against the other Shareholder as cosurety under the Guarantees, except insofar as they are inconsistent with or excluded by the terms of this agreement.
9.8   Each Shareholder shall upon request by the other Shareholder provide such evidence as may be reasonably required to establish that it has sufficient financial resources to meet its Agreed Proportion of any actual or contingent liability under the Guarantees or any liability under this clause.
10.   B8022Disposal or charging of the shares
10.1   Neither of the Shareholders shall, except with the prior written consent of the other, create or permit to subsist any pledge, lien or charge over, or grant any option or other rights over or dispose of any interest (legal or beneficial) in, any of the Shares held by it (otherwise than by a transfer in accordance with the provisions of the Companys articles of association).
11.   B8023Issue of shares
11.1   The issue of new Shares shall be regulated in accordance with the provisions in the Companys articles of association.
12.   B8024Transfer of shares
12.1   Unless the Shareholders otherwise agree in writing, a Transfer Notice (as defined in the articles of association of the Company) shall be deemed to be served by the shareholder where there is a change in its Control.
12.2   The transfer of Shares shall otherwise be regulated in accordance with the Companys articles of association.
13.   B8025Exercise of voting rights
13.1   Each Shareholder shall:
13.1.1   exercise all voting rights and powers available to it in relation to the Company so as to give full effect to the terms of this agreement including, where appropriate, the carrying into effect of the terms as if they were embodied in the Companys memorandum and articles of association;
13.1.2   procure that the Directors nominated by it support and implement all reasonable proposals put forward at Board and other meetings of the Company for the proper development and conduct of the Business as contemplated in this agreement;
13.1.3   procure that all third parties directly or indirectly under its Control refrain from acting in a manner which hinders or prevents the Company from carrying on the Business in a proper and reasonable manner; and
13.1.4   generally use its best endeavours to promote the Business and the interests of the Company and its Subsidiaries.
14.   B8026Noncompetition restrictions
14.1   Neither of the Shareholders shall, whilst it is beneficially interested in any Shares or for a period of one year [Note that it is inadvisable to increase this restrictive period to greater than 2 years as the Courts may declare it inadmissible] from the date on which it ceases to be beneficially interested in any Shares, do or permit any of the following without the prior written consent of the other Shareholder:
14.1.1   either solely or jointly with or on behalf of any other Person directly or indirectly carry on or be engaged or interested (except as the holder, for investment, of securities dealt in on a recognised stock exchange) in any business competing in the Territory with the Business;
14.1.2   solicit in the Territory the custom of any Person who is or has been at any time whilst it has been interested in any of the Shares a customer of the Business for the purpose of offering to that Person goods or services similar to or competing with those of the Business;
14.1.3   solicit or entice away, or endeavour to solicit or entice away, any Director or employee of the Company or of any Subsidiary of the Company, but without prejudice to the right of the Shareholder to terminate arrangements under which any of its employees is seconded to the Company or a Subsidiary;
14.1.4   cause or permit any Person directly or indirectly under its Control to do any of the acts or things specified above.
14.2   Clause [14.1] shall not preclude or restrict either Shareholder or any Person directly or indirectly under its Control from:
14.2.1   carrying on any activity carried on during the period of 12 months immediately preceding the date of this agreement; or
14.2.2   offering any service or goods similar to those previously supplied as part of the Business at a time when they are no longer supplied by the Company or a Subsidiary of the Company.
14.3   Each undertaking in clause [14.1] shall be treated as independent of the other undertakings so that, if one or more is held to be invalid as an unreasonable restraint of trade or for any other reason, the remaining undertakings shall be valid to the extent that they are not affected.
14.4   Whilst the undertakings in clause [14.1] are considered by the parties to be reasonable in all the circumstances, if one or more is held invalid as an unreasonable restraint of trade or for any other reason but would have been held valid if part of the wording had been deleted, the period reduced or the range of activities or area dealt with reduced in scope, the undertakings shall apply with such modifications as may be necessary to make them valid.
15.   B8027Warranties
15.1   The Shareholders warrant to each other that except as fairly disclosed in writing to each other prior to the execution of this agreement:
15.1.1   no contract, transaction, commitment, liability or obligation has been entered into or incurred by the Company at any time;
15.1.2   the Company has not commenced to trade and has no assets (other than a balance in its accounts equal to the amount standing to the credit of its share capital account);
15.1.3   no share or loan capital of the Company is under option or agreed to be put under option; and
15.1.4   all returns, particulars, resolutions and other documents required to be filed with the Registrar of Companies by the Company have been duly filed and that all legal requirements in connection with the formation of the Company and issues of its shares have been satisfied.
16.   B8028Dividend and distribution policy
16.1   [The Shareholders shall procure that none of the profits of the Company available for distribution are distributed by the Company to the Shareholders by way of dividend for the next [________] years, unless otherwise agreed by the Shareholders in writing.]
16.2   [The Shareholders shall procure that the full amount of the Companys profit available for distribution in respect of each financial year are distributed by the Company to the Shareholders by way of dividend.]
17.   B8029Surrender of losses eligible for tax relief
17.1   [Unless the Shareholders otherwise agree in writing, all of the trading losses and other amounts eligible for relief from taxation of the Company and its Subsidiaries shall be carried forward and not surrendered (wholly or partly) to the Shareholders.]
17.2   [Unless the Shareholders otherwise agree in writing, all of the trading losses and other amounts eligible for relief from taxation of the Company and its Subsidiaries shall be surrendered by way of group relief to the Shareholders and the members of their respective groups in the Agreed Proportions in accordance with section 402 of the Taxes Act. The terms of surrender shall be that each recipient pays to the Company or the appropriate Subsidiary a sum equal to 100% of the amount by which the recipients tax liability is reduced as a result of receiving the amount surrendered or would have been reduced if the recipient had had sufficient income taxable at the highest rate of corporation tax. Payment shall be made on the date when the recipients tax liability against which relief is to be claimed would otherwise have fallen due for payment.]
18.   B8030Procedure in the event of deadlock
18.1   This clause applies in any case where:
18.1.1   a matter relating to the affairs of the Company or a Subsidiary has been considered by a meeting of the Board; and
18.1.2   no resolution has been carried at the meeting in relation to the matter by reason of an equality of votes for and against any proposal for dealing with it; and
18.1.3   the matter is not resolved within [________] days from the date of the meeting as a result of any intervention by the Shareholders.
Any such case is referred to as a “deadlock”.
18.2   In any case of deadlock each of the Shareholders shall, within seven days of the deadlock arising, cause its appointees on the Board to prepare and circulate to the other Shareholder and other Directors a memorandum or other form of statement setting out its position on the matter in dispute and its reasons for adopting that position. Each memorandum or statement shall be considered by the managing director of the Shareholder to which it is addressed who shall endeavour to resolve the deadlock. If the managing directors agree upon a resolution or disposition of the matter, they shall execute a statement setting out the agreed terms. The Shareholders shall exercise the voting rights and other powers available to them in relation to the Company to procure that the agreed terms are fully and promptly carried into effect.
18.3   If the deadlock is not resolved or disposed of in accordance with clause [18.2] within 30 days after expiry of the seven day period, or such longer period as the Shareholders agree in writing, and if it prevents the Company or a Subsidiary from continuing to achieve its business purposes, either Shareholder may by notice in writing to the other Shareholder require that the provisions of this clause be applied. Within seven days of the notice in that behalf the Shareholders shall procure that their appointees on the Board:
18.3.1   make or concur in the making of a statutory declaration in the terms mentioned in section 89 of the Insolvency Act 1986 (if the state of the Companys affairs admits); and
18.3.2   convene an extraordinary general meeting of the Company to consider:
(a)   the matter from which the deadlock arose; and
(b)   the passing of a special or extraordinary resolution to place the Company in members voluntary liquidation (if a declaration is made in accordance with clause [18.3.1]) or (in any other case) in creditors voluntary liquidation;
18.3.3   where the state of the Companys affairs does not admit of the making of a declaration under clause [18.3.1], convene a meeting of the Companys creditors in accordance with section 98 of the Insolvency Act 1986;
the meeting or meetings to be held within five weeks after the making of a declaration under clause [18.3.1] or, if no declaration is made, within five weeks after the giving of the notice referred to above.
18.4   If, at the extraordinary general meeting referred to in clause [18.3.2], no resolution is carried in relation to the matter from which the deadlock arose by reason of an equality of votes for and against any proposal for dealing with it, the Shareholders shall vote in favour of the resolution for winding up the Company.
18.5   In no circumstances shall either Shareholder create an “artificial deadlock” and then exercise its rights under clause [18.3] to require the winding up of the Company. For this purpose, an “artificial deadlock” is a deadlock caused by either Shareholder, or its appointees on the Board, voting against a proposal the approval of which is required to enable the Company to carry on the Business properly and efficiently in accordance with the general trading principles set out in Schedule [1].
19.   B8031Option
19.1   If either Shareholder commits or suffers an event of default, the other Shareholder shall be entitled, within [________] days of its becoming aware of the occurrence of the event of default, to require the defaulting Shareholder to sell all (but not some only) of the Shares held or beneficially owned by the defaulting Shareholder for the prescribed price. The option shall be exercised by delivering written notice to the defaulting Shareholder stating that the option is exercised.
19.2   If the option is exercised, the defaulting Shareholder shall deliver to the other Shareholder, within [________] days of the date of the prescribed price being agreed or determined under clause [19.3.2], a duly executed transfer of all the Shares held or beneficially owned by it in favour of the other Shareholder (or as it may direct) upon full payment to it in sterling in London of the prescribed price. The Shares which are transferred shall be deemed to be sold by the transferor as beneficial owner with effect from the date of the transfer, free from any lien, charge or encumbrance and with all rights attaching to them as at the date of exercise of the option.
19.3   For the purpose of this clause:
19.3.1   an event of default is committed or suffered by a shareholder if:
(a)   it commits a material breach of its obligations under this agreement and, in the case of a breach capable of remedy, fails to remedy it within 21 days of being specifically required in writing to do so by the other Shareholder; or
(b)   a distress, execution, sequestration or other process is levied or enforced upon or sued out against its property which is not discharged within 10 days; or
(c)   it is unable to pay its debts in the normal course of business; or
(d)   it ceases or threatens to cease wholly or substantially to carry on its business, otherwise than for the purpose of a reconstruction or amalgamation without insolvency previously approved by the other Shareholder (which approval shall not be unreasonably withheld); or
(e)   an encumbrancer takes possession of or a receiver or trustee is appointed over the whole or any part of its undertaking, property or assets; or
(f)   an order is made or a resolution is passed for its winding up, otherwise than for the purpose of a reconstruction or amalgamation without insolvency previously approved by the other Shareholder (which approval shall not be unreasonably withheld);
19.3.2   “the prescribed price” means such sum in respect of the Shares forming the subject matter of the option as may be agreed between the Shareholders within 21 days of the date of the notice exercising the option or (in default of agreement between them) such sum as the specified experts certify to be, in their opinion, the fair value of those Shares as between a willing buyer and a willing seller contracting on arms length terms, having regard to [the fair value of the Business as a going concern] [the net tangible asset value of the Company and its Subsidiaries] [the depreciated replacement cost of the tangible assets of the Company and its Subsidiaries] as at the date of the notice exercising the option, but without taking into account (if it is the case) that the relevant Shares represent a minority interest in the Company;
19.3.3   “the specified experts” means the auditors of the Company or, if they are unwilling to act in the matter, such firm of accountants as, on a request by either of the Shareholders the making of which is promptly notified to the other, is nominated by the President of the Institute of Chartered Accountants in England and Wales.
19.4   The specified experts shall be instructed to determine which of the shareholders should bear, or in what proportions they should share, the experts costs of certifying the prescribed price. In making their determination, the experts shall have regard to the efforts made by each of the Shareholders to agree the prescribed price under clause [19.3.2].
20.   B8032Protection of name
20.1   Neither of the Shareholders shall, whilst the Company or its Subsidiaries carry on the Business, use or permit the use of the name [________] or any similar trading name.
20.2   If A/B ceases for any reason [(other than an exercise by B_A of its option under clause [19])] to own [________] per cent of the Equity Share Capital of the Company or if a resolution is to be passed under clause [18.3] to wind up the Company the Shareholders shall take the necessary steps to change the name of the Company and, if appropriate, each of its Subsidiaries to a name which is wholly dissimilar to [________].
21.   B8033This agreement not to constitute a partnership
21.1   None of the provisions of this agreement shall be deemed to constitute a partnership between the Shareholders and neither of them has authority to bind the other in any way.
22.   B8034Costs
22.1   All costs, legal fees and other expenses incurred in the preparation and execution of this agreement shall be borne by the Shareholders in the Agreed Proportions.
22.2   All costs, legal fees, registration fees and other expenses incurred in the formation of the Company shall be borne by the Company.
23.   B8035Nondisclosure of information
23.1   Neither of the Shareholders shall divulge to any Person (other than those whose province it is to know it or with proper authority) or use for any purpose any of the trade secrets or confidential information or any financial or trading information relating to the other Shareholder, the Company or any of its Subsidiaries which it acquires as a result of entering into this agreement. Each of the Shareholders shall endeavour to prevent its employees from doing anything which, if done by the Shareholder, would be a breach of this clause. This restriction shall continue to apply after the expiration or termination of this agreement without limit in point of time but shall cease to apply to secrets or information which come into the public domain through no fault of the Shareholder concerned.
24.   B8036Duration
24.1   This agreement shall continue until the first of the following dates:
24.1.1   [________], if by that date the Business has not been commenced by the Company or one of its Subsidiaries;
24.1.2   the [________] anniversary of the date of this agreement;
24.1.3   the date on which the Business ceases to be carried on by the Company or its Subsidiaries;
24.1.4   the date of commencement of the Companys windingup; or
24.1.5   [________];
24.2   If this agreement expires or terminates under clause [24.1.1, 24.1.2 or 24.1.3], clause [18.3] shall apply as if notice had been given on the relevant date by one of the Shareholders to the other.
24.3   Neither of the Shareholders shall be entitled to enforce any provision of this agreement, [apart from clause [20.2] and] except in respect of accrued rights, once it has ceased beneficially to own any of the Shares.
24.4   Despite the expiration or termination of this agreement, it shall continue to bind the Shareholders to such extent and for so long as may be necessary to give effect to the rights and obligations embodied in it.
25.   B8037Assignment
25.1   Neither of the Shareholders shall assign or transfer, or purport to assign or transfer, any of its rights or obligations under this agreement without the prior written consent of the other Shareholder, except to a wholly owned subsidiary upon the subsidiary executing a deed in accordance with clause [26] and subject to the assignor guaranteeing to the other Shareholder by deed the due performance of the assignees obligations.
26.   B8038Successors and assigns
26.1   This agreement shall operate for the benefit of and be binding on the successors in title and permitted assigns of each Shareholder.
26.2   Before transferring any of its Shares in the Company, the Shareholder proposing to make the transfer shall procure the transferee executes a deed in favour of the other Shareholder by which the transferee agrees to be bound by terms identical, mutatis mutandis, to the terms of this agreement (including the terms of this clause as regards any subsequent transfer of the Shares).
26.3   If a Shareholder transfers some only of the Shares held or beneficially owned by it, that Shareholder and the transferee shall be treated as being the Shareholder in respect of all the Shares held or beneficially owned by them. Accordingly, they shall jointly and severally bear all liabilities and obligations imposed by this agreement, and jointly be entitled to exercise any rights conferred by this agreement, on a Shareholder in relation to those Shares.
27.   B8039Waiver, forbearance and variation
27.1   The rights which each of the parties has under this agreement shall not be prejudiced or restricted by any indulgence or forbearance extended to another party. No waiver by any party in respect of a breach shall operate as a waiver in respect of any subsequent breach.
27.2   This agreement shall not be varied or cancelled, unless the variation or cancellation is expressly agreed in writing by a duly authorised director of each party.
28.   B8040Governing law
28.1   The construction, validity and performance of this agreement shall be governed in all respects by English law.
28.2   The High Court of England has jurisdiction to settle any dispute which may arise between the parties in respect of the construction, validity or performance of this agreement or as to the rights and liabilities of the Shareholders or in any way connected with the Company. In the event of any action in respect of this agreement being begun, the process by which it is begun, may be served on the parties in accordance with clause [32]].
28.3   [All disputes arising in connection with this agreement shall be finally settled by arbitration. The arbitration shall be held at [________] and conducted in accordance with the Rules of the International Chamber of Commerce. Judgment upon the award rendered may be entered in any court having jurisdiction or application may be made to such a court for a judicial acceptance of the award and an order for enforcement (as the case may be)].
29.   B8041Severability
29.1   If any of the provisions of this agreement is found by [an arbitrator] [court] or other competent authority to be void or unenforceable, it shall be deemed to be deleted from this agreement and the remaining provisions shall continue to apply. The Share holders shall negotiate in good faith in order to agree the terms of a mutually satisfactory provision to be substituted for the provision found to be void or unenforceable.
30.   B8042General matters
30.1   This agreement supersedes any previous agreement between the parties in relation to the matters with which it deals and represents the entire understanding between the parties in relation to those matters.
30.2   Reference to a statute or statutory provision includes a reference to it as from time to time amended, extended or reenacted.
30.3   Words denoting the singular number only include the plural and vice versa.
30.4   The headings in this agreement are inserted for convenience only and do not affect its construction.
31.   B8043The terms of this agreement to prevail
31.1   In the event of any ambiguity or conflict arising between the terms of this agreement and those of the Companys memorandum and articles of association, the terms of this agreement shall prevail as between the Shareholders but not so as to amend the memorandum or articles of association.
32.   B8044Notices
32.1   Any notice to be given under this agreement shall be either delivered personally or sent by first class recorded delivery post. The address for service of each party is (in the case of a company) its registered office and (in the case of an individual) his address stated above or any other address for service previously notified to the other parties. A notice is deemed to have been served as follows:
32.1.1   if personally delivered, at the time of delivery;
32.1.2   if posted, at the expiration of 48 hours.
In proving service it is sufficient to prove that personal delivery was made, or that the envelope containing the notice was properly addressed and delivered into the custody office of the postal authority as a prepaid first class recorded delivery.

Signed by….
On behalf of [Party A]

Signed by….
On behalf of [Party B]B8061SCHEDULE 1
 [Insert particulars of any contracts to be assigned or novated by either of the Shareholders in favour of the Company]





B8081SCHEDULE 2
Draft Certificate for the Loan Stock
[________] Limited
(Incorporated under the Companies Act 1985)
ISSUE of £[________] Unsecured Loan Stock 19[__] under the authority of clause [________] of the Memorandum of Association and articles [________] and [________] of the Articles of Association of the Company and pursuant to a resolution of the Directors dated [________].
INTEREST at the rate of [________] per cent per annum above the base rate of [________] Bank plc from time to time in force on the amount of the principal sum outstanding is calculated on a daytoday basis and payable half yearly on 30 June and 31 December in each year, the first payment of interest being made on [________].
THIS issue of Unsecured Loan Stock [__] is subject to the conditions endorsed on this certificate.
CERTIFICATE
This is to certify that [________] whose registered office is at [________] is the registered holder of £[________] of the stock.
EXECUTED by the Company as a deed and delivered on [________].
NOTE   This certificate must be surrendered before any transfer of the whole or any part of the stock comprised in it can be registered. No fraction of £1 can be transferred.
THE CONDITIONS
1.   In these conditions:
“Company” means [________] Limited
“Stock” means the £[________] Unsecured Loan Stock [__] of this issue or the amount for the time being issued and outstanding
“Stockholders” means the registered holders of the Stock
2.   The Company shall be entitled at any time to repay to the Stockholders the whole or any part of the Stock at par. On any partial repayment the Stockholders shall surrender the attached certificate to the Company for a note to be endorsed on it of the repayment or, where the balance of the Stock then unredeemed is repaid, for retention by the Company.
3.   Insofar as not previously redeemed, the Stock shall be repayable by the Company at par on [________] or on any earlier date on which it becomes repayable in accordance with these conditions.
4.   The Stock shall become immediately repayable (together with all outstanding interest accrued) in any of the following events:
4.1   if the Company defaults in the payment of any moneys due on the Stock and the Stockholders, by notice in writing to the Company, demand immediate repayment of the Stock; or
4.2   if an order is made or an effective resolution is passed for winding up the Company; or
4.3   if the Company stops payment or ceases or threatens to cease carrying on its business or substantially the whole of its business; or
4.4   if an incumbrancer takes possession or a receiver is appointed of any part of the assets or undertaking of the Company; or
4.5   if a distress, execution, sequestration or other process is levied, enforced upon or sued out against the property of the Company and is not discharged within seven days; or
4.6   if the Company is unable to pay its debts within the meaning of section 123 of the Insolvency Act 1986.
5.   The Company will recognise only the registered holder of any Stock as the absolute owner and shall not be bound to recognise or take notice of any trust to which the Stock may be subject. The Stockholders will be recognised by the Company as entitled to the Stock free from any setoff, crossclaim or equity between the Company and the original or any intermediate holder.
6.   The Stock or any part of it is transferable in amounts and multiples of £1 by an instrument in writing in common form or such other form as the Directors of the Company approve. Where the transfer is of a part only of the Stock, a certificate for the balance will be issued free of charge.
7.   Every instrument of transfer must be signed by the transferor and, together with the certificate of the Stock to be transferred, left for registration at the place where the register of Stockholders is kept. The instrument of transfer may be retained by the Company.
8.   If a certificate of the Stock is defaced, lost or destroyed it may be renewed on payment of such fee not exceeding £1 and on such terms, if any, as to evidence of identity and indemnification of expense incurred by the Company in investigating or verifying title as the Directors of the Company think fit.
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This is the content of the form and is provided for your convenience. It is not necessarily what the actual form looks like and does not include the information, instructions and other materials that come with the form you would purchase. An actual sample can also be viewed by clicking on the "Sample Form" near the top left of this page.











JOINT VENTURE AGREEMENT







This Packet Includes:
1. Information;
2. Step-by-Step Instructions; and
3. JOINT VENTURE AGREEMENT





Information
JOINT VENTURE AGREEMENT




When two parties want to work together through the medium of a company on a commercial venture then this is called a joint venture.

It is the joint venture agreement that will regulate the relationship of the two parties and how the company is run. The agreement will set out what the company can and cannot do without both parties consent. This is to protect each partys investment into the company.

This joint venture agreement has been drafted on the basis that two parties will be investing the same amount money into the joint venture company and they will both own 50% of the shares. This is commonly called a dead locked company as because both parties own 50 per cent of the shares of the company and the company cannot do anything fundamental unless both shareholder parties agree.  

As with all our agreements this joint venture agreement covers most material points the parties will wish to negotiate and is prepared in simple and easily understood language. Obviously not all the clauses will be required for your individual deal but this agreement will act as a good foundation for your future negotiations.

Please note that within some specific agreement clauses you will see reference to other clause numbers (eg look at clause 4.3. This clause makes reference to clause 3.1.7). These clause numbers have square brackets around them. The reason for this is that if you delete some clauses in the agreement that you do not require then this clause number in square brackets may have to change (ie in the above example if you delete clause 2, then clause 3.1.7 would now have to be changed to read clause 2.1.7). Once you are satisfied that the clause numbers are correct then please delete the square brackets.

You will also note just blank square brackets. This denotes that information is missing and will need to be inserted by you. Once you have added the information then delete the square brackets.


 Step-by-Step Instructions
JOINT VENTURE AGREEMENT



   

We would like to draw to your attention the following key clauses:

   Clause 3    This is an important clause. It sets out the key things that the parties must ensure the company carries out on the signing of the agreement. For example the shareholders may wish to be appointed directors or have their nominee appointed director of the Company. Further the correct number of shares need to be issued between the shareholders. Or specific employment contracts entered into. The list is not exhaustive and you can and should put in any other items you require the Company to do (eg the Company will make available a Porsche as a company car if that is what you understand you will be receiving from the company!)

   Clause 4    This clause sets out the minimum number of directors the company will have and who the chairman of the company will be. PLEASE NOTE that this agreement does not allow for the Chairman to have a casting vote. The agreement also allows for rotation of the chairman on a yearly basis.

   Clause 5    This clause deals with the conduct of the Companys day to day affairs and is hopefully self-explanatory. We suggest you review carefully clause 5.1.9 and see whether you require this and if so insert your appropriate limit.

   Clause 6    This is a key clause that will protect each of the shareholders interests in the company. It sets out exactly what actions the company cannot do unless both shareholders agree. Again this list is not exhaustive so please make any further additions you want.

   Clause 8   This clause sets out how much loan capital each party will have to loan to the Company.

   Clause 14   As a result of the joint venture relationship each party will gain knowledge and contacts it may not have done had it not been for the commercial venture. Therefore it is not correct for that shareholder party to exploit this knowledge or contacts This clause sets out time limits and restrictions on non competition with the company once a shareholder has disposed of his shares. Please note the specific warning in clause 14.1 as to time limits. You will also need to define the Territory area (eg inside the M25). This can be found in the definitions section of the document at the beginning of the agreement.



   Clause 16   You will need to set out the dividend policy of the company in this clause.

   Clause 18   One of the advantages of having a dead locked company is to encourage both parties to agree on how it should be run. Very little can be achieved if the parties cannot agree. However agreement is not always possible and there must be a mechanism to deal with a deadlock. If the parties reach a point where they cannot agree to go forward then there are only two options available to deal with the matter. Firstly the company is put into liquidation or secondly one party buys out the other party. Both these options are dealt with in this clause.



   Clause 19   If one of the shareholders defaults under the agreement then this clause grants the non-defaulting party the right to purchase the defaulting partys shares at a market value price.




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JOINT VENTURE AGREEMENT


B8011Date:                              20
Parties:
(1)   “A”: [________] Limited (registered no [________]) whose registered office is at [________]
(2)   “B”: [________] Limited (registered no [________]) whose registered office is at [________]
(3)   “Company”: [________] Limited (registered no [________]) whose registered office is at [________]
B8012Recitals:
(A)   The Company was incorporated under the Companies Act 1985 on [________] with an authorised share capital of £[________] divided into [________] “A” Shares of £1 each and [________] “B” Shares of £1 each.
(B)   [________] and [________] wish to participate as shareholders in the Company for the purposes and on the terms set out in this agreement.
Operative provisions:
1.   B8013Interpretation
1.1   In this agreement, unless the contrary intention appears, the following definitions apply:
“Agreed Terms” the terms of an annexed draft agreed between the parties or their respective legal advisers
“Agreed Proportions” 50 per cent in respect of A and 50 per cent in respect of B or (if different) such other proportions as equal, at the time when any loan finance is to be contributed by A and B under clause [8] or any liability arises under clause [9] (as the case may be), the percentages which the nominal value of the shares beneficially owned by A and B respectively in the Equity Share Capital of the Company bears to the combined nominal value of the Equity Share Capital (taken as a whole)
“Board” the board of directors for the time being of the Company
“Business” the business of the Company as described in clause [2.1] and such other business as the parties may agree in writing should be carried on by the Company and its subsidiaries
“Control” the same meaning as in section 840 of the Taxes Act
“Director” a director of the Company, including where applicable an alternate director
“Equity Share Capital” the same meaning as in section 744 of the Companies Act 1985
“Guarantees” all guarantees, indemnities and covenants referred to in clause [9.1], as varied, extended or renewed
“Holding Company” the same meaning as in section 736 of the Companies Act 1985
“Loan Stock” the unsecured loan stock to be issued by the Company under clauses [3.1.10 and 8]
“Person” includes a firm or other body of persons
“Shareholders” A and B and, where appropriate, regard shall be had to clause [26.2]
“Shares” shares of the Company
“Subsidiary” the same meaning as in section 736 of the Companies Act 1985
“Taxes Act” the Income and Corporation Taxes Act 1988
“Territory[________]
1.2   Reference to a statute or statutory provision includes a reference to it as from time to time amended, extended or reenacted.
1.3   Words denoting the singular number only include the plural and vice versa.
1.4   Unless the context otherwise requires, reference to a clause or schedule is to a clause of or schedule to this agreement.
1.5   The headings in this agreement are inserted for convenience only and do not affect its construction.
2.   B8014Objects of the company
2.1   The primary object of the Company and any Subsidiaries is to carry on the business of [________]
2.2   The Business shall be conducted in the best interests of the Company on sound commercial profit making principles so as to generate the maximum achievable maintainable profits available for distribution.
2.3   The central management and control of the Company shall be exercised in the UK. The Shareholders shall use their best endeavours to ensure that the Company is treated as resident for taxation purposes [in] [outside] the UK.
3.   B8015Completion
3.1   As soon as practicable after executing this agreement [and before the Company commences trading], the Shareholders and the Company shall, so far as they are each able, take or procure the following steps:
3.1.1   the subscription by A for [________] “A” shares of £1 each of the Company at par and the allotment and issue of the shares to A against payment in full in cash;
3.1.2   the subscription by B for [________] “B” shares of £1 each of the Company at par and the allotment and issue of the shares to B against payment in full in cash;
3.1.3   the adoption by the Company of new articles of association in the Agreed Terms;
3.1.4   the alteration by the Company of its memorandum of association in the Agreed Terms;
3.1.5   the appointment of [________] and [________] as “A” Directors of the Company;
3.1.6   the appointment of [________] and [________] as “B” Directors of the Company;
3.1.7   the appointment of [________] as [an “A”] [a “B”] Director and the chairman of the Company;
3.1.8   the appointment of [________] as secretary of the Company;
3.1.9   the resignation of all Directors and the secretary of the Company other than [________] holding office prior to the execution of this agreement and delivery, in the form of a deed, of confirmation by each of them that he has no claim or right of action against the Company;
3.1.10   the creation by the Company of the Loan Stock on the terms embodied in the draft certificate set out in Schedule [2], the subscription by A for £[________] and by B for £[________] of the Loan Stock at par and the issue by the Company of certificates in the form of the draft against payment in full in cash;
3.1.11   the execution by the Company of contracts of employment with [________] and [________] in the Agreed Terms;
3.1.12   the execution by the Company and by A and B of an agreement for the supply to the Company of goods/services in the Agreed Terms; and
3.1.13   the assignment by A and B to the Company for no consideration of the contracts specified in Schedule [1], in the Agreed Terms.
3.2   [________] and [________] shall each sign and deliver to the Company their respective contracts of employment mentioned in clause [3.1.11].
4.   B8016Appointment of directors
4.1   The maximum number of Directors holding office at any time shall be [________] unless otherwise agreed in writing by the Shareholders.
4.2   Each of the Shareholders shall be entitled to appoint a further [one] Director each. The Directors appointed by A (including those appointed under clause [3.1.5]) shall be designated as “A” Directors and the Directors appointed by B (including those appointed under clause [3.1.6]) shall be designated as “B” Directors.
4.3   The chairman appointed under clause [3.1.7] shall retire as chairman at the first annual general meeting of the Company. Thereafter, each Shareholder, beginning with A_B, shall have the right, exercisable alternately for a period of one year, of nominating one of the Directors to be the chairman of the Company. The chairman shall hold office until the termination of the next annual general meeting following his appointment. If the chairman is unable to attend any meeting of the Board, the Directors of the same designation shall be entitled to appoint another Director to act as chairman in his place at the meeting.
4.4   In the case of an equality of votes at a meeting of the Board or the Company, the chairman shall not be entitled to a second or casting vote. [Note the Chairman does not have the right to a casting vote. Obviously change if this is not what is required between the parties]
5.   B8017Conduct of the companys affairs
5.1   The Shareholders shall exercise all rights available to them in relation to the Company and (except in relation to clause [5.1.7]) the Company shall do everything necessary to procure (so far as they are able to do so) that during the term of this agreement:
5.1.1   the business of the Company and its Subsidiaries consists exclusively of the Business;
5.1.2   the Shareholders are given full opportunity to examine the books and accounts kept by the Company and its Subsidiaries and are supplied with all relative information, including monthly management accounts and operating statistics and such other trading and financial information in such form as they reasonably require to keep each of them properly informed about the business of the Company and its Subsidiaries and generally to protect their interests;
5.1.3   the auditors of the Company and of each of its Subsidiaries are [________] or such other firm of chartered accountants as the Shareholders agree in writing;
5.1.4   the bankers of the Company and each of its Subsidiaries are [________] or such other bankers as the Shareholders agree in writing;
5.1.5   the registered office of the Company and of each of its Subsidiaries is at [________] or at such other place as the Shareholders agree in writing;
5.1.6   the Company complies with the provisions of its memorandum and new articles of association (as adopted in accordance with clause [3]);
5.1.7   the memorandum and new articles of association of the Company are not altered and no further articles or resolutions inconsistent with them are adopted or passed unless the Shareholders agree in writing;
5.1.8   any company which becomes a Subsidiary of the Company adopts new articles of association in a form approved by the Shareholders in writing;
5.1.9   all cheques drawn by the Company and each of its Subsidiaries in excess of £[________] are signed by one Person nominated by A and one Person nominated by B;
5.1.10   board meetings of the Company and each of its Subsidiaries are convened, at regular intervals not exceeding [________] months, by not less than [________] hours notice in writing accompanied by an agenda specifying the business to be transacted; and
5.1.11   the Board determines the general policy of the Company and of each of its Subsidiaries (subject to the express provisions of this agreement), including the scope of their respective activities and operations and that the Board reserves to itself all matters involving major or unusual decisions.
6.   B8018Matters requiring consent of both shareholders
6.1   The Shareholders shall exercise all rights available to them in relation to the Company so as to procure (so far as they are able) that neither the Company nor any of its Subsidiaries without the prior written consent of the Shareholders:
6.1.1   creates any fixed or floating charge, lien (other than a lien arising by operation of law) or other encumbrance over the whole or any part of its undertaking, property or assets, except for the purpose of securing indebtedness to its bankers for sums borrowed in the ordinary and proper course of the Business;
6.1.2   borrows (except from the Companys bankers in the ordinary and proper course of the Business) in excess of a maximum aggregate sum outstanding at any time of £[________];
6.1.3   makes a loan or advance of any amount or gives credit (other than normal trade credit) in excess of £[________] to any Person, apart from deposits with bankers which are repayable upon the giving of not more than seven days notice;
6.1.4   gives a guarantee or indemnity to secure the liabilities or obligations of any Person (other than a whollyowned Subsidiary of the Company);
6.1.5   sells, transfers, leases, assigns, or otherwise disposes of a material part of its undertaking, property or assets (or any interest in them), or contracts to do so otherwise than in the ordinary and proper course of the Business;
6.1.6   enters into a contract, arrangement or commitment involving expenditure on capital account or the realisation of capital assets if the amount or the aggregate amount of the expenditure or realisation by the Company and all of its Subsidiaries would exceed £[________] in any one year or in relation to any one project; for the purpose of this paragraph the aggregate amount payable under an agreement for hire, hire purchase or purchase on credit sale or conditional sale terms is to be treated as capital expenditure incurred in the year in which the agreement is entered into;
6.1.7   engages a new employee at remuneration which could exceed a rate of £[________] per annum;
6.1.8   increases the remuneration of an employee to a rate which could exceed a rate of £[________] per annum or increase the remuneration of an employee whose existing remuneration could exceed that rate;
6.1.9   appoints or dismisses a Director except in accordance with the rights conferred on the Shareholders under clause [4] to appoint and remove Directors;
6.1.10   appoints a committee of the Directors or a local board or delegates any of the powers of the Directors to a committee or local board;
6.1.11   takes or agrees to take a leasehold interest in or licence over land;
6.1.12   issues any shares or creates any new shares, except as expressly permitted by the Companys articles of association;
6.1.13   alters the rights attaching to any class of shares of the Company;
6.1.14   consolidates, subdivides or converts any of the Companys share capital;
6.1.15   issues renounceable allotment letters or permits any Person entitled to receive an allotment of shares to nominate another Person to receive the allotment except on terms that no renunciation or nomination shall be registered unless the renouncee or Person nominated is approved by the Board;
6.1.16   creates or acquires a Subsidiary or disposes of any shares in a Subsidiary;
6.1.17   enters into a partnership or profit sharing agreement;
6.1.18   does or permits to be done any act or thing whereby the Company may be wound up (whether voluntarily or compulsorily), in accordance with the terms of this agreement;
6.1.19   issues securities convertible into Shares or debentures, or share warrants or options in respect of Shares;
6.1.20   enters into a contract or transaction except in the ordinary and proper course of the Business on arms length terms;
6.1.21   acquires, purchases or subscribes for shares, debentures, mortgages or securities (or any interest in any of them) in any Person;
6.1.22   creates a contract or obligation or renews or varies the terms of an existing contract or obligation, to pay money or moneys worth to any member of the Company or to the Holding Company of a member or to any other Subsidiary of a Holding Company or to any Person as a nominee of a member or a relevant Holding Company or Subsidiary;
6.1.23   holds a meeting of Shareholders or purports to transact any business at a meeting unless there are present duly authorised representatives or proxies for each of the Shareholders.
7.   B8019Staff
7.1   The Company shall recruit and employ such staff as the Board considers necessary for the proper conduct of the Business.
7.2   Each of the Shareholders shall (if requested by the Board) second executive personnel to the Company on a full time basis and otherwise on terms to be agreed between the Shareholders. If the Board determines that a person seconded to the Company is not suitable for employment in connection with the Business, it may require the Shareholder who has seconded him to withdraw and replace him or to take such other steps as it may deem necessary or expedient. All the salaries, expenses and other benefits to which a secondee is entitled and all necessary employers pension and national insurance contributions shall, except where otherwise agreed by the Shareholder who has seconded him, be borne by the Company.
8.   B8020Loan finance
8.1   The Shareholders shall each use reasonable endeavours to procure that the requirements of the Company and its Subsidiaries for working capital to finance the Business are met by borrowings from banks and other similar sources on the most favourable terms reasonably obtainable as to interest, repayment and security, but without allowing a prospective lender a right to participate in the Equity Share Capital of the Company as a condition of making the loan.
8.2   If the Board determines that borrowing from a bank or other similar source is not desirable, it shall issue to each of the Shareholders a notice in writing, requiring each of them to subscribe for their Agreed Proportions of such amount of Loan Stock as, in the opinion of the Board, is required for financing the Business. The maximum aggregate amount of Loan Stock for which the Shareholders shall be liable to subscribe (taken as a whole) is £[________].
8.3   Each of the Shareholders shall subscribe in cash at par for the amount of Loan Stock stated in the notice within [________] weeks.
8.4   If either of the Shareholders fails to contribute its Agreed Proportion of the Loan Stock within the time specified, the Company shall be entitled to take such action as it thinks fit for obtaining payment of the contribution including (without limitation) commencing proceedings against the defaulting Shareholder for breach of its obligations. The defaulting Shareholder shall refrain from using its voting rights and other powers in relation to the Company, and shall instruct the Directors nominated by it not to do anything, to prevent or delay action being taken by the Company.
8.5   If either of the Shareholders fails to contribute its Agreed Proportion of the Loan Stock within the time specified, the other Shareholder shall be entitled (if it has already subscribed its Agreed Proportion of the Loan Stock) to pay to the Company in cash the amount due to the Company by the defaulting Shareholder. The amount shall be wholly applied (notwithstanding any other provision of this agreement) (at its option) in subscribing for additional Loan Stock at par or subscribing for additional Shares at par of the same class as those Shares already held or beneficially owned by the subscribing Shareholder or a combination of additional Loan Stock and additional Shares. If, as a result of exercising this right, either Shareholder becomes the holder or beneficial owner of per cent or more in nominal value of the issued Equity Share Capital of the Company (regardless of class), the provisions of clause [6] shall cease to apply.
8.6   If deemed appropriate or expedient by the Board, the proceeds of issue may be advanced (wholly or partly) by way of loan to a whollyowned Subsidiary of the Company for the proper purposes of the Business.
9.   B8021Guarantees given by the shareholders
9.1   The aggregate amount of liability arising under guarantees, indemnities and covenants given by the Shareholders, whether jointly or severally, to secure the indebtedness and obligations of the Company and its Subsidiaries for the proper purposes of the Business shall be shared by them in the Agreed Proportions. The liability referred to includes legal and other costs which the relevant Shareholder may be ordered to pay or otherwise incurs in any action brought to enforce the guarantees, indemnities or covenants irrespective of whether or not the Shareholders are liable as cosureties and whether or not they are liable jointly or severally and by the same or different instruments.
9.2   Where one of the Shareholders has made a payment or provided other consideration either:
9.2.1   in consequence of a judgment or an order made by a court of competent jurisdiction in any action brought to enforce any of the Guarantees; or
9.2.2   in bona fide satisfaction or compromise of any demand made under any of the Guarantees (including a payment into court which has been accepted); and the payment exceeds or would exceed its Agreed Proportion of the sum for which judgment has been entered or the claim satisfied or compromised, it shall be entitled (as appropriate) to be indemnified by or to recover a contribution from the other Shareholder to the extent specified in clause [9.1] irrespective of whether or not the satisfaction or compromise was wellfounded in law. If a judgment is varied or reversed on appeal the amount of the final judgment (including any costs awarded) shall be borne by the Shareholders in the Agreed Proportions insofar as the amount exceeds the amount of any earlier judgment in the relevant action which has been borne by the Shareholders in the Agreed Proportions. No payment shall be made by either Shareholder in satisfaction or compromise of a demand and no steps shall be taken to appeal against a judgment or to recover from the Company (whether by right of indemnity or subrogation or otherwise) any sum of money paid or other consideration provided to a claimant under any of the Guarantees, without prior consultation with the other Shareholder.
9.3   Any sum payable under clause [9.2] shall be paid within 30 days of receipt of written notice requesting payment together with evidence of payment or provision of other consideration under the Guarantees. If the Shareholder from which payment is requested fails to make the payment within the period of 30 days, the other Shareholder shall be entitled to be paid interest by the defaulting Shareholder on the amount due at the rate of [________] per cent above the base rate of [________] Bank plc from time to time, to accrue on a daily basis from the date of the 30 day period to the date of actual payment (after as well as before judgment).
9.4   If, at any time after one Shareholder has indemnified or made contribution to the other Shareholder, either of them recovers all or part of any sum of money or other consideration paid or provided to a claimant under any of the Guarantees, whether by right of indemnity or subrogation against the Company, by obtaining final judgment against the claimant in any action relating to any of the Guarantees or in any other way, the sum recovered (including any award for costs previously borne by the Shareholders in the Agreed Proportions) shall be apportioned between the Shareholders in the Agreed Proportions. The Shareholder making the recovery shall account to the other Shareholder for its pro rata share as soon as practicable after receipt.
9.5   Where either of the Shareholders gives a guarantee or indemnity to secure the indebtedness of the Company or any of its Subsidiaries, it shall be entitled to receive from the Company a fee for the period during which the guarantee or indemnity is outstanding at the rate of [________] per cent per annum calculated by reference to the maximum amount of its liability under the guarantee or indemnity.
9.6   Neither of the Shareholders shall take or receive from the Company or any other Person any security in connection with the Guarantees without the prior written consent of the other Shareholder. Any security taken or received (and any sum of money derived from it) shall be held by the relevant Shareholder as trustee for both Shareholders so that they share the benefit in the Agreed Proportions.
9.7   Nothing in this agreement shall deprive either of the Shareholders of any rights or remedies available to it at law against the other Shareholder as cosurety under the Guarantees, except insofar as they are inconsistent with or excluded by the terms of this agreement.
9.8   Each Shareholder shall upon request by the other Shareholder provide such evidence as may be reasonably required to establish that it has sufficient financial resources to meet its Agreed Proportion of any actual or contingent liability under the Guarantees or any liability under this clause.
10.   B8022Disposal or charging of the shares
10.1   Neither of the Shareholders shall, except with the prior written consent of the other, create or permit to subsist any pledge, lien or charge over, or grant any option or other rights over or dispose of any interest (legal or beneficial) in, any of the Shares held by it (otherwise than by a transfer in accordance with the provisions of the Companys articles of association).
11.   B8023Issue of shares
11.1   The issue of new Shares shall be regulated in accordance with the provisions in the Companys articles of association.
12.   B8024Transfer of shares
12.1   Unless the Shareholders otherwise agree in writing, a Transfer Notice (as defined in the articles of association of the Company) shall be deemed to be served by the shareholder where there is a change in its Control.
12.2   The transfer of Shares shall otherwise be regulated in accordance with the Companys articles of association.
13.   B8025Exercise of voting rights
13.1   Each Shareholder shall:
13.1.1   exercise all voting rights and powers available to it in relation to the Company so as to give full effect to the terms of this agreement including, where appropriate, the carrying into effect of the terms as if they were embodied in the Companys memorandum and articles of association;
13.1.2   procure that the Directors nominated by it support and implement all reasonable proposals put forward at Board and other meetings of the Company for the proper development and conduct of the Business as contemplated in this agreement;
13.1.3   procure that all third parties directly or indirectly under its Control refrain from acting in a manner which hinders or prevents the Company from carrying on the Business in a proper and reasonable manner; and
13.1.4   generally use its best endeavours to promote the Business and the interests of the Company and its Subsidiaries.
14.   B8026Noncompetition restrictions
14.1   Neither of the Shareholders shall, whilst it is beneficially interested in any Shares or for a period of one year [Note that it is inadvisable to increase this restrictive period to greater than 2 years as the Courts may declare it inadmissible] from the date on which it ceases to be beneficially interested in any Shares, do or permit any of the following without the prior written consent of the other Shareholder:
14.1.1   either solely or jointly with or on behalf of any other Person directly or indirectly carry on or be engaged or interested (except as the holder, for investment, of securities dealt in on a recognised stock exchange) in any business competing in the Territory with the Business;
14.1.2   solicit in the Territory the custom of any Person who is or has been at any time whilst it has been interested in any of the Shares a customer of the Business for the purpose of offering to that Person goods or services similar to or competing with those of the Business;
14.1.3   solicit or entice away, or endeavour to solicit or entice away, any Director or employee of the Company or of any Subsidiary of the Company, but without prejudice to the right of the Shareholder to terminate arrangements under which any of its employees is seconded to the Company or a Subsidiary;
14.1.4   cause or permit any Person directly or indirectly under its Control to do any of the acts or things specified above.
14.2   Clause [14.1] shall not preclude or restrict either Shareholder or any Person directly or indirectly under its Control from:
14.2.1   carrying on any activity carried on during the period of 12 months immediately preceding the date of this agreement; or
14.2.2   offering any service or goods similar to those previously supplied as part of the Business at a time when they are no longer supplied by the Company or a Subsidiary of the Company.
14.3   Each undertaking in clause [14.1] shall be treated as independent of the other undertakings so that, if one or more is held to be invalid as an unreasonable restraint of trade or for any other reason, the remaining undertakings shall be valid to the extent that they are not affected.
14.4   Whilst the undertakings in clause [14.1] are considered by the parties to be reasonable in all the circumstances, if one or more is held invalid as an unreasonable restraint of trade or for any other reason but would have been held valid if part of the wording had been deleted, the period reduced or the range of activities or area dealt with reduced in scope, the undertakings shall apply with such modifications as may be necessary to make them valid.
15.   B8027Warranties
15.1   The Shareholders warrant to each other that except as fairly disclosed in writing to each other prior to the execution of this agreement:
15.1.1   no contract, transaction, commitment, liability or obligation has been entered into or incurred by the Company at any time;
15.1.2   the Company has not commenced to trade and has no assets (other than a balance in its accounts equal to the amount standing to the credit of its share capital account);
15.1.3   no share or loan capital of the Company is under option or agreed to be put under option; and
15.1.4   all returns, particulars, resolutions and other documents required to be filed with the Registrar of Companies by the Company have been duly filed and that all legal requirements in connection with the formation of the Company and issues of its shares have been satisfied.
16.   B8028Dividend and distribution policy
16.1   [The Shareholders shall procure that none of the profits of the Company available for distribution are distributed by the Company to the Shareholders by way of dividend for the next [________] years, unless otherwise agreed by the Shareholders in writing.]
16.2   [The Shareholders shall procure that the full amount of the Companys profit available for distribution in respect of each financial year are distributed by the Company to the Shareholders by way of dividend.]
17.   B8029Surrender of losses eligible for tax relief
17.1   [Unless the Shareholders otherwise agree in writing, all of the trading losses and other amounts eligible for relief from taxation of the Company and its Subsidiaries shall be carried forward and not surrendered (wholly or partly) to the Shareholders.]
17.2   [Unless the Shareholders otherwise agree in writing, all of the trading losses and other amounts eligible for relief from taxation of the Company and its Subsidiaries shall be surrendered by way of group relief to the Shareholders and the members of their respective groups in the Agreed Proportions in accordance with section 402 of the Taxes Act. The terms of surrender shall be that each recipient pays to the Company or the appropriate Subsidiary a sum equal to 100% of the amount by which the recipients tax liability is reduced as a result of receiving the amount surrendered or would have been reduced if the recipient had had sufficient income taxable at the highest rate of corporation tax. Payment shall be made on the date when the recipients tax liability against which relief is to be claimed would otherwise have fallen due for payment.]
18.   B8030Procedure in the event of deadlock
18.1   This clause applies in any case where:
18.1.1   a matter relating to the affairs of the Company or a Subsidiary has been considered by a meeting of the Board; and
18.1.2   no resolution has been carried at the meeting in relation to the matter by reason of an equality of votes for and against any proposal for dealing with it; and
18.1.3   the matter is not resolved within [________] days from the date of the meeting as a result of any intervention by the Shareholders.
Any such case is referred to as a “deadlock”.
18.2   In any case of deadlock each of the Shareholders shall, within seven days of the deadlock arising, cause its appointees on the Board to prepare and circulate to the other Shareholder and other Directors a memorandum or other form of statement setting out its position on the matter in dispute and its reasons for adopting that position. Each memorandum or statement shall be considered by the managing director of the Shareholder to which it is addressed who shall endeavour to resolve the deadlock. If the managing directors agree upon a resolution or disposition of the matter, they shall execute a statement setting out the agreed terms. The Shareholders shall exercise the voting rights and other powers available to them in relation to the Company to procure that the agreed terms are fully and promptly carried into effect.
18.3   If the deadlock is not resolved or disposed of in accordance with clause [18.2] within 30 days after expiry of the seven day period, or such longer period as the Shareholders agree in writing, and if it prevents the Company or a Subsidiary from continuing to achieve its business purposes, either Shareholder may by notice in writing to the other Shareholder require that the provisions of this clause be applied. Within seven days of the notice in that behalf the Shareholders shall procure that their appointees on the Board:
18.3.1   make or concur in the making of a statutory declaration in the terms mentioned in section 89 of the Insolvency Act 1986 (if the state of the Companys affairs admits); and
18.3.2   convene an extraordinary general meeting of the Company to consider:
(a)   the matter from which the deadlock arose; and
(b)   the passing of a special or extraordinary resolution to place the Company in members voluntary liquidation (if a declaration is made in accordance with clause [18.3.1]) or (in any other case) in creditors voluntary liquidation;
18.3.3   where the state of the Companys affairs does not admit of the making of a declaration under clause [18.3.1], convene a meeting of the Companys creditors in accordance with section 98 of the Insolvency Act 1986;
the meeting or meetings to be held within five weeks after the making of a declaration under clause [18.3.1] or, if no declaration is made, within five weeks after the giving of the notice referred to above.
18.4   If, at the extraordinary general meeting referred to in clause [18.3.2], no resolution is carried in relation to the matter from which the deadlock arose by reason of an equality of votes for and against any proposal for dealing with it, the Shareholders shall vote in favour of the resolution for winding up the Company.
18.5   In no circumstances shall either Shareholder create an “artificial deadlock” and then exercise its rights under clause [18.3] to require the winding up of the Company. For this purpose, an “artificial deadlock” is a deadlock caused by either Shareholder, or its appointees on the Board, voting against a proposal the approval of which is required to enable the Company to carry on the Business properly and efficiently in accordance with the general trading principles set out in Schedule [1].
19.   B8031Option
19.1   If either Shareholder commits or suffers an event of default, the other Shareholder shall be entitled, within [________] days of its becoming aware of the occurrence of the event of default, to require the defaulting Shareholder to sell all (but not some only) of the Shares held or beneficially owned by the defaulting Shareholder for the prescribed price. The option shall be exercised by delivering written notice to the defaulting Shareholder stating that the option is exercised.
19.2   If the option is exercised, the defaulting Shareholder shall deliver to the other Shareholder, within [________] days of the date of the prescribed price being agreed or determined under clause [19.3.2], a duly executed transfer of all the Shares held or beneficially owned by it in favour of the other Shareholder (or as it may direct) upon full payment to it in sterling in London of the prescribed price. The Shares which are transferred shall be deemed to be sold by the transferor as beneficial owner with effect from the date of the transfer, free from any lien, charge or encumbrance and with all rights attaching to them as at the date of exercise of the option.
19.3   For the purpose of this clause:
19.3.1   an event of default is committed or suffered by a shareholder if:
(a)   it commits a material breach of its obligations under this agreement and, in the case of a breach capable of remedy, fails to remedy it within 21 days of being specifically required in writing to do so by the other Shareholder; or
(b)   a distress, execution, sequestration or other process is levied or enforced upon or sued out against its property which is not discharged within 10 days; or
(c)   it is unable to pay its debts in the normal course of business; or
(d)   it ceases or threatens to cease wholly or substantially to carry on its business, otherwise than for the purpose of a reconstruction or amalgamation without insolvency previously approved by the other Shareholder (which approval shall not be unreasonably withheld); or
(e)   an encumbrancer takes possession of or a receiver or trustee is appointed over the whole or any part of its undertaking, property or assets; or
(f)   an order is made or a resolution is passed for its winding up, otherwise than for the purpose of a reconstruction or amalgamation without insolvency previously approved by the other Shareholder (which approval shall not be unreasonably withheld);
19.3.2   “the prescribed price” means such sum in respect of the Shares forming the subject matter of the option as may be agreed between the Shareholders within 21 days of the date of the notice exercising the option or (in default of agreement between them) such sum as the specified experts certify to be, in their opinion, the fair value of those Shares as between a willing buyer and a willing seller contracting on arms length terms, having regard to [the fair value of the Business as a going concern] [the net tangible asset value of the Company and its Subsidiaries] [the depreciated replacement cost of the tangible assets of the Company and its Subsidiaries] as at the date of the notice exercising the option, but without taking into account (if it is the case) that the relevant Shares represent a minority interest in the Company;
19.3.3   “the specified experts” means the auditors of the Company or, if they are unwilling to act in the matter, such firm of accountants as, on a request by either of the Shareholders the making of which is promptly notified to the other, is nominated by the President of the Institute of Chartered Accountants in England and Wales.
19.4   The specified experts shall be instructed to determine which of the shareholders should bear, or in what proportions they should share, the experts costs of certifying the prescribed price. In making their determination, the experts shall have regard to the efforts made by each of the Shareholders to agree the prescribed price under clause [19.3.2].
20.   B8032Protection of name
20.1   Neither of the Shareholders shall, whilst the Company or its Subsidiaries carry on the Business, use or permit the use of the name [________] or any similar trading name.
20.2   If A/B ceases for any reason [(other than an exercise by B_A of its option under clause [19])] to own [________] per cent of the Equity Share Capital of the Company or if a resolution is to be passed under clause [18.3] to wind up the Company the Shareholders shall take the necessary steps to change the name of the Company and, if appropriate, each of its Subsidiaries to a name which is wholly dissimilar to [________].
21.   B8033This agreement not to constitute a partnership
21.1   None of the provisions of this agreement shall be deemed to constitute a partnership between the Shareholders and neither of them has authority to bind the other in any way.
22.   B8034Costs
22.1   All costs, legal fees and other expenses incurred in the preparation and execution of this agreement shall be borne by the Shareholders in the Agreed Proportions.
22.2   All costs, legal fees, registration fees and other expenses incurred in the formation of the Company shall be borne by the Company.
23.   B8035Nondisclosure of information
23.1   Neither of the Shareholders shall divulge to any Person (other than those whose province it is to know it or with proper authority) or use for any purpose any of the trade secrets or confidential information or any financial or trading information relating to the other Shareholder, the Company or any of its Subsidiaries which it acquires as a result of entering into this agreement. Each of the Shareholders shall endeavour to prevent its employees from doing anything which, if done by the Shareholder, would be a breach of this clause. This restriction shall continue to apply after the expiration or termination of this agreement without limit in point of time but shall cease to apply to secrets or information which come into the public domain through no fault of the Shareholder concerned.
24.   B8036Duration
24.1   This agreement shall continue until the first of the following dates:
24.1.1   [________], if by that date the Business has not been commenced by the Company or one of its Subsidiaries;
24.1.2   the [________] anniversary of the date of this agreement;
24.1.3   the date on which the Business ceases to be carried on by the Company or its Subsidiaries;
24.1.4   the date of commencement of the Companys windingup; or
24.1.5   [________];
24.2   If this agreement expires or terminates under clause [24.1.1, 24.1.2 or 24.1.3], clause [18.3] shall apply as if notice had been given on the relevant date by one of the Shareholders to the other.
24.3   Neither of the Shareholders shall be entitled to enforce any provision of this agreement, [apart from clause [20.2] and] except in respect of accrued rights, once it has ceased beneficially to own any of the Shares.
24.4   Despite the expiration or termination of this agreement, it shall continue to bind the Shareholders to such extent and for so long as may be necessary to give effect to the rights and obligations embodied in it.
25.   B8037Assignment
25.1   Neither of the Shareholders shall assign or transfer, or purport to assign or transfer, any of its rights or obligations under this agreement without the prior written consent of the other Shareholder, except to a wholly owned subsidiary upon the subsidiary executing a deed in accordance with clause [26] and subject to the assignor guaranteeing to the other Shareholder by deed the due performance of the assignees obligations.
26.   B8038Successors and assigns
26.1   This agreement shall operate for the benefit of and be binding on the successors in title and permitted assigns of each Shareholder.
26.2   Before transferring any of its Shares in the Company, the Shareholder proposing to make the transfer shall procure the transferee executes a deed in favour of the other Shareholder by which the transferee agrees to be bound by terms identical, mutatis mutandis, to the terms of this agreement (including the terms of this clause as regards any subsequent transfer of the Shares).
26.3   If a Shareholder transfers some only of the Shares held or beneficially owned by it, that Shareholder and the transferee shall be treated as being the Shareholder in respect of all the Shares held or beneficially owned by them. Accordingly, they shall jointly and severally bear all liabilities and obligations imposed by this agreement, and jointly be entitled to exercise any rights conferred by this agreement, on a Shareholder in relation to those Shares.
27.   B8039Waiver, forbearance and variation
27.1   The rights which each of the parties has under this agreement shall not be prejudiced or restricted by any indulgence or forbearance extended to another party. No waiver by any party in respect of a breach shall operate as a waiver in respect of any subsequent breach.
27.2   This agreement shall not be varied or cancelled, unless the variation or cancellation is expressly agreed in writing by a duly authorised director of each party.
28.   B8040Governing law
28.1   The construction, validity and performance of this agreement shall be governed in all respects by English law.
28.2   The High Court of England has jurisdiction to settle any dispute which may arise between the parties in respect of the construction, validity or performance of this agreement or as to the rights and liabilities of the Shareholders or in any way connected with the Company. In the event of any action in respect of this agreement being begun, the process by which it is begun, may be served on the parties in accordance with clause [32]].
28.3   [All disputes arising in connection with this agreement shall be finally settled by arbitration. The arbitration shall be held at [________] and conducted in accordance with the Rules of the International Chamber of Commerce. Judgment upon the award rendered may be entered in any court having jurisdiction or application may be made to such a court for a judicial acceptance of the award and an order for enforcement (as the case may be)].
29.   B8041Severability
29.1   If any of the provisions of this agreement is found by [an arbitrator] [court] or other competent authority to be void or unenforceable, it shall be deemed to be deleted from this agreement and the remaining provisions shall continue to apply. The Share holders shall negotiate in good faith in order to agree the terms of a mutually satisfactory provision to be substituted for the provision found to be void or unenforceable.
30.   B8042General matters
30.1   This agreement supersedes any previous agreement between the parties in relation to the matters with which it deals and represents the entire understanding between the parties in relation to those matters.
30.2   Reference to a statute or statutory provision includes a reference to it as from time to time amended, extended or reenacted.
30.3   Words denoting the singular number only include the plural and vice versa.
30.4   The headings in this agreement are inserted for convenience only and do not affect its construction.
31.   B8043The terms of this agreement to prevail
31.1   In the event of any ambiguity or conflict arising between the terms of this agreement and those of the Companys memorandum and articles of association, the terms of this agreement shall prevail as between the Shareholders but not so as to amend the memorandum or articles of association.
32.   B8044Notices
32.1   Any notice to be given under this agreement shall be either delivered personally or sent by first class recorded delivery post. The address for service of each party is (in the case of a company) its registered office and (in the case of an individual) his address stated above or any other address for service previously notified to the other parties. A notice is deemed to have been served as follows:
32.1.1   if personally delivered, at the time of delivery;
32.1.2   if posted, at the expiration of 48 hours.
In proving service it is sufficient to prove that personal delivery was made, or that the envelope containing the notice was properly addressed and delivered into the custody office of the postal authority as a prepaid first class recorded delivery.

Signed by….
On behalf of [Party A]

Signed by….
On behalf of [Party B]B8061SCHEDULE 1
 [Insert particulars of any contracts to be assigned or novated by either of the Shareholders in favour of the Company]





B8081SCHEDULE 2
Draft Certificate for the Loan Stock
[________] Limited
(Incorporated under the Companies Act 1985)
ISSUE of £[________] Unsecured Loan Stock 19[__] under the authority of clause [________] of the Memorandum of Association and articles [________] and [________] of the Articles of Association of the Company and pursuant to a resolution of the Directors dated [________].
INTEREST at the rate of [________] per cent per annum above the base rate of [________] Bank plc from time to time in force on the amount of the principal sum outstanding is calculated on a daytoday basis and payable half yearly on 30 June and 31 December in each year, the first payment of interest being made on [________].
THIS issue of Unsecured Loan Stock [__] is subject to the conditions endorsed on this certificate.
CERTIFICATE
This is to certify that [________] whose registered office is at [________] is the registered holder of £[________] of the stock.
EXECUTED by the Company as a deed and delivered on [________].
NOTE   This certificate must be surrendered before any transfer of the whole or any part of the stock comprised in it can be registered. No fraction of £1 can be transferred.
THE CONDITIONS
1.   In these conditions:
“Company” means [________] Limited
“Stock” means the £[________] Unsecured Loan Stock [__] of this issue or the amount for the time being issued and outstanding
“Stockholders” means the registered holders of the Stock
2.   The Company shall be entitled at any time to repay to the Stockholders the whole or any part of the Stock at par. On any partial repayment the Stockholders shall surrender the attached certificate to the Company for a note to be endorsed on it of the repayment or, where the balance of the Stock then unredeemed is repaid, for retention by the Company.
3.   Insofar as not previously redeemed, the Stock shall be repayable by the Company at par on [________] or on any earlier date on which it becomes repayable in accordance with these conditions.
4.   The Stock shall become immediately repayable (together with all outstanding interest accrued) in any of the following events:
4.1   if the Company defaults in the payment of any moneys due on the Stock and the Stockholders, by notice in writing to the Company, demand immediate repayment of the Stock; or
4.2   if an order is made or an effective resolution is passed for winding up the Company; or
4.3   if the Company stops payment or ceases or threatens to cease carrying on its business or substantially the whole of its business; or
4.4   if an incumbrancer takes possession or a receiver is appointed of any part of the assets or undertaking of the Company; or
4.5   if a distress, execution, sequestration or other process is levied, enforced upon or sued out against the property of the Company and is not discharged within seven days; or
4.6   if the Company is unable to pay its debts within the meaning of section 123 of the Insolvency Act 1986.
5.   The Company will recognise only the registered holder of any Stock as the absolute owner and shall not be bound to recognise or take notice of any trust to which the Stock may be subject. The Stockholders will be recognised by the Company as entitled to the Stock free from any setoff, crossclaim or equity between the Company and the original or any intermediate holder.
6.   The Stock or any part of it is transferable in amounts and multiples of £1 by an instrument in writing in common form or such other form as the Directors of the Company approve. Where the transfer is of a part only of the Stock, a certificate for the balance will be issued free of charge.
7.   Every instrument of transfer must be signed by the transferor and, together with the certificate of the Stock to be transferred, left for registration at the place where the register of Stockholders is kept. The instrument of transfer may be retained by the Company.
8.   If a certificate of the Stock is defaced, lost or destroyed it may be renewed on payment of such fee not exceeding £1 and on such terms, if any, as to evidence of identity and indemnification of expense incurred by the Company in investigating or verifying title as the Directors of the Company think fit.
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