In the UK, joint ventures (“JVs”) are used across all industries and sectors where parties are seeking to combine varying resources to achieve a common aim.  JVs are frequently used in industries or sectors that require longer term investment or a high capex spend over a long period.  For example, JVs are used in infrastructure projects in sectors such as transport or energy, or on shipping projects; they are used in the pharmaceutical sector, where research and development projects may take place over several years; and in the consumer and retail sectors for projects where companies with complementary brands aim to collaborate to offer new services or products to consumers.  They are also used in the real estate and hotels industry.

JV structures are also often used for corporate acquisitions. Typically, a group of investors will combine capital to acquire a target, with a varying mix of investor involvement – often, a lead investor will manage the JV and the acquisition process, with other investors playing a more passive role and acting as providers of capital.

Typically, a JV in the UK will be a corporate vehicle, most often a limited company (usually a private company with a share capital and limited liability for holders of the shares).  However, there is no prescribed form that a JV must take, so parties also use limited partnerships, limited liability partnerships or (sometimes) general partnerships.  A JV can also be a carried out without an incorporated vehicle at all and can be just a contractual arrangement between the parties.  A contractual arrangement – say a cooperation or collaboration agreement – is sometimes used for a research and development project where various parties contribute assets to a project (for example, expertise or personnel) but retain overall control of those assets (because they are not contributed to a separate corporate vehicle).

The most common corporate vehicle for equity joint ventures or other commercial joint ventures is a private limited company.  Each party to the JV will subscribe for shares in this company (the “JV Co”) and the business and operations of the JV will then be carried out by JV Co.  The way the JV Co is run, and the rights of the various parties to the JV, will be governed by the terms of the constitutional documents of the JV Co (typically its articles of association) and the terms of a shareholders’ agreement put in place between the holders of shares in JV Co.  The governance of a JV Co is discussed in more detail below.  The chief advantage of using a JV Co is limited liability of the shareholders in the JV Co – their liability is limited to the amount, if any, unpaid on their shares.  Absent wrongdoing, they will not be liable for the debts of JV Co.  Limited partnerships (where liability between partners is limited between those having general liability and those having limited liability) are frequently used at the investment fund level, as they can offer greater management flexibility than limited companies, are subject to fewer public filing requirements, and are tax transparent.  They are not often used as a vehicle for commercial joint ventures, however.  Limited liability partnerships offer a combination of limited liability and tax transparency, and they are sometimes used for these reasons; again, however, they are less common as a vehicle for commercial joint ventures.

The key factors which influence the structure and choice of joint venture vehicle are typically a combination of the following:

1. limiting each party’s exposure for liabilities of the JV;
2. preferences for how the JV will be managed – for example, do the parties want to split management between a board of directors and shareholders or have a structure managed by a general partner with other partners playing a more passive role?
3. the ability to transfer interests in the JV and to wind it up;
4. how an exit from the JV is likely to be achieved – e.g., is the intended exit a sale to a third party, a sale to one of the JV partners, or a public offering?
5. the tax position of the parties to the JV and whether they want the JV to be a separate entity for tax purposes or for it to be to be tax transparent such that profits and losses pass through to the JV parties themselves;
6. the accounting treatment of the JV and whether it will have to be consolidated in the parties’ accounts; and
7. regulatory considerations – for example, antitrust or financial regulatory approval.

Where the JV is structured as a private limited company, the principal legal documents will be a set of articles of association (the “Articles”), which are the company’s formal constitutional documents, and a joint venture agreement taking the form of a shareholders’ agreement between the parties to the JV (the “JV Agreement”).  The JV Agreement is a private contract between the parties to it. It typically contains provisions dealing with the purpose of the JV, how capital and profits are to be allocated and distributed, how the JV is to be managed on a day-to-day level (for example, matters to be dealt with by the board of directors and matters reserved for approval to the shareholders), transfers of interests in the JV, issue of new interests in the JV, and exit and winding up provisions.  The Articles are filed publicly at the UK Companies Registry.  They complement the JV Agreement in various ways, chiefly by enshrining as specific share right certain of the provisions agreed in the JV Agreement and ensuring that, as a matter of the JV Co’s constitution, it must abide by the various provisions agreed in the JV Agreement.

Where the JV is structured as a partnership, there will be a partnership agreement which will contain similar provisions to those set forth above, save that day-to-day management will typically be by a general partner (or a manager to whom the general partner may have delegated certain functions) and not by the limited partners.  The partnership agreement will not be publicly filed, however.  If the JV is structured as a simple contractual agreement, then it will be governed by the terms of the contract agreed between the parties.  Again, there is no need for that document to be publicly filed.

Legal formation of a limited company is usually very quick – a private limited company can be incorporated in a day.  It will, of course, often take considerable time for the parties to negotiate the terms of the JV Agreement and the Articles.  Forming a partnership may take longer.

Generally speaking, the answer is yes.  Limited companies in England have separate legal personality, can contract in their own name, and the liability of the shareholders is limited to the amount (if any) unpaid on the shares held by them – they are not liable for the company’s debts or its obligations (whether under contract or otherwise) unless they have otherwise agreed to be.  So, to the extent that the operational activities of the JV are carried out through and by the JV Co, those joint venture partners who are shareholders should be shielded from liabilities for those operations.  There are certain exceptions to this rule, where the courts may look through the company to the shareholders who sit behind it.  These typically arise in situations involving fraud, or where the corporate vehicle is being used to commit intentional misconduct or (potentially) to put assets beyond the reach of creditors.

Where the JV is structured as a limited company, funding can be provided to it in various ways, including ordinary or preferred equity, shareholder debt, and third-party debt.  Where funding is provided by ordinary equity, the capital represented by that equity will often be locked up and not capable of distribution until the JV is dissolved or an exit takes place, so the parties should consider how long they are prepared to leave their capital invested. There is more flexibility with returns of capital on preference shares, and further flexibility for repayment of shareholder debt.  Income distributions on shares (both ordinary and preference shares) are subject to a requirement that the company making distributions have available profits to allow it to do so, and that the availability of such profits is justified by reference to a set of accounts, so parties to a JV need to be aware of these restrictions and may decide to fund their investment using shareholder debt, repayment of which can be more straightforward.  As between the parties themselves, where funding is provided as share capital, it will typically provide an ownership interest that is proportionate to the amounts provided.  So, the parties will need to consider how the amounts contributed impact management and control – for example, will one party end up with a controlling stake and, if so, whether that is the commercial intention.  Finally, depending on the industry in which the JV operates, regulatory capital (for example, in the form of a certain level of ordinary equity) may be required to be retained and restrictions on distributions may also be necessary to meet cash coverage ratios imposed by the terms of any debt in place.

When parties to a JV contribute assets in return for an interest in the JV (as opposed to just contributing cash) then, at a minimum, the following should be considered: (i) the extent to which third-party consents are required to contribute such assets and how such consents will be obtained; (ii) whether, in the context of a significant business contribution, change-of-control consents under existing agreements are implicated; (iii) whether the contribution gives rise to any antitrust filings; and (iv) whether the contribution implicates FDI restrictions under the UK’s National Security and Investment Act.

Minority shareholders will benefit from some limited rights afforded under common law and statute. Where the JV is structured as a limited company, the main legislation containing such rights is found in the Companies Act 2006 (“CA 2006”). These rights include (i) the right to vote at a meeting in person or by electronic means (subject to any rights or restrictions attaching to a class of shares), (ii) rights of pre-emption on an issue of equity securities, (iii) rights to copies of accounts and reports, (iv) rights to inspect and require copies of the register of members and register of directors, and (v) rights to inspect and request copies of the director’s service contract or memorandum of terms. Additionally, a shareholder who holds at least 25% of shares will have veto over matters requiring a special resolution (which requires a majority of not less than 75%), and other statutory rights that require a certain percentage holding of shares will also be available.

Given the limited nature of rights afforded to minority shareholders under statute and common law, minority shareholders will usually try to negotiate enhanced protections, which will be set in the Articles and JV Agreement. For example, minority shareholders will often try to include:

• a reserved matters list – matters that are determined by the shareholders that usually require a higher majority than that imposed under the CA 2006 or the consent of specific shareholders and can provide the minority with an effective veto over matters that are critical to their interests in JV;
• quorum and voting majorities – certain key matters may be subject to higher majority or quorum requirements to ensure a minority’s vote is required in passing resolutions;
• board-level protections, such as rights to appoint and remove directors to the JV company’s board of directors and form part of a quorum for meetings of directors;
• tag-along rights; and
• drag-along consent rights.

The directors of a JV Co are subject to various statutory duties under the CA 2006, insolvency and other legislation, such as legislation relating to the environment and heath and safety. There are also other uncodified and fiduciary duties that a director owes to a company, and they will owe additional duties if they are engaged as employees.

The CA 2006 codified certain common law and equitable director duties, although these still need to be interpreted and applied with the common law rules and equitable principles in mind. The general duties apply to all the directors of a company, including de jure and de facto directors, and, generally speaking, these duties are owed to the company. The CA 2006 also makes no legal distinction between executive and non-executive directors.

In summary, the general director duties under CA 2006 are:

• to act within their powers;
• to promote the success of the company for the benefit of its members as a whole, having regard to a non-exhaustive list of factors;
• to exercise independent judgment;
• to exercise reasonable care, skill and diligence;
• to avoid conflicts of interest;
• not to accept benefits from third parties; and
• to declare certain interests they have in a proposed transaction or arrangement with the company.

Under the duty to avoid a conflict of interest, a director must avoid situations in which they have or can have a direct or indirect interest that conflicts with, or may conflict with, the company’s interests. This applies, in particular, to the exploitation of any property, information or opportunity, and whether or not the company could take advantage of the property, information or opportunity. This duty will not be infringed if the situation cannot reasonably be regarded as likely to give rise to a conflict of interest or if authorisation has been given by directors who are independent.

Directors are also subject to the common law rule whereby they must consider or act in the interests of the company’s creditors. This duty will usually arise when a company is insolvent or close to being insolvent.

Although the general duties are owed to the company, rather to members, in some circumstances members may be able to bring a derivative claim to enforce a director’s duty or issue an unfair prejudice claim. Liquidators and other insolvency practitioners may also apply for the conduct of directors to be examined in the event of insolvency.  A director who breaches their general duties could be disqualified as a director and may be personally liable for damages and/or compensation.

Where the JV is structured as a limited company, it must have at least one director and the power of the directors to run the day-to-day business of the board and to delegate their powers is derived from the Articles. Board powers are usually exercised by the board collectively (either by unanimous approval or by the board acting by a majority of directors voting on a particular matter) and there will usually be a single-tier board structure. The concepts of executive and non-executive directors are fairly common in the United Kingdom but each director, however categorised, will be subject to the same legislative framework (although a court will have regard to their respective roles within the company).

The composition of the board of directors will depend on the particular structure of the JV, and may have representatives appointed by minority shareholders who are required to form part of the quorum for any board meetings.

Although there are default statutory provisions governing the management of LLPs, the members of an LLP are able to agree their own arrangements for the management and control of the LLP.

Under English law, the distinguishing obligation of a fiduciary is loyalty or fidelity. Where the JV is structured as a limited company, its directors will be considered to be fiduciaries of the JV Co owing to the fact that they are entrusted with the management of the company’s affairs and must be guided by the interests of the company and not by their own interests. Generally, the directors of a JV Co owe their fiduciary duties to the JV Co and not to their appointing shareholder.

The CA 2006 codified certain fiduciary duties of directors in the general duties. The statutory regime for limited liability partnerships does not provide for members of an LLP to owe each other fiduciary duties and it is instead necessary to refer to basic equitable principles, in conjunction with the LLP agreement, to decide whether and what fiduciary obligations arise.

Contrastingly, shareholders to a JV are generally free to vote on decisions in their own self-interest. However, whether one party owes another a fiduciary duty will depend on the relationship between the parties, and such fiduciary relationships have been found to arise where the relationship in question has the requisite attributes, even though it is normally inappropriate to expect one commercial party to subordinate its own interest to those of another. For instance, the English courts have found a fiduciary relationship to exist where one joint party has control of assets which are to be exploited for the benefit of both JV parties.

There is no general doctrine of good faith in English law and no duty of good faith arising by default between JV parties. Commercial parties are free to agree to an express obligation to act in good faith, although what obligations arise out of this and what this means for the parties in practice will be very context-specific and should be considered carefully before being included in the JV Agreement. The main body of English case law on the interpretation of such provisions is therefore highly fact specific.  The English courts will only imply a duty to act in good faith into specific kinds of relational contract (such as employment contracts and contracts between parties with a fiduciary relationship) in limited circumstances where the contract would otherwise be commercially or practically incoherent.

Generally, there are no specific rules or restrictions relating to the validity and authorisation of joint ventures with foreign parties, regardless of the corporate form the JV adopts, although parties must consider the National Security and Investment Act, which established a statutory regime for government scrutiny of, and wide-ranging powers to intervene in, acquisitions and investments (including in JVs) for the purposes of protecting the national security of the United Kingdom and whether the composition of the JV or its proposed activities implicate any relevant sanctions legislation..

JVs are subject to general merger control law in the United Kingdom, primarily the Enterprise Act 2002 and the Competition Act 1998. Where these general merger laws apply to the creation of a joint venture, the substantive concerns and procedure will be the same as for any other merger.

A key challenge for joint venture parties is in navigating where the legal boundaries lie to allow beneficial arrangements to take place. In 2018, the UK’s primary competition regulator, the Competition Markets Authority, published a short guide for businesses in relation to joint ventures and compliance with competition law in the form of a list of “do’s and don’ts”.

JVs that are structured as private limited companies must produce, keep and maintain a dedicated register of people with significant control over that company which contains details of those individuals and relevant legal entities that hold significant control in respect of it, by reference to five specified conditions.

This legislation is designed to ensure that a broad range of methods of holding significant control over a company are potentially registrable. These include the holding, directly or indirectly, of shares, certain voting rights or director appointment or removal powers, and a general ‘catch-all’ for any other rights to exercise significant influence or control over a company.

The information on this register must be filed publicly at Companies House through an initial statement of control as part of its application for registration and must also be provided when the company delivers a confirmation statement (at least annually) to the registrar if there has been any change since the relevant information was last delivered.

A limited liability partnership must also keep a PSC register and make the same filings as are required for private limited companies.

As noted above, JVs are often for R&D projects or where the purpose of the venture is to develop and/or exploit forms of intellectual property over a long period.  When setting up a JV of this nature, it is usual for the relevant JV parties to licence the technology and other intellectual property rights to the JV Co on arms’ length terms, rather than to assign the technology outright. In return, the party that contributes such intellectual property will usually receive royalties and/or lump sum payments.

Where the JV is likely to carry out research or develop new products, it is likely that it will generate its own technology and intellectual property which will also need to be identified and addressed in the JV documentation. The parties will need to agree whether the intellectual property rights created by the JV should remain the property of the JV Co or whether they should be licenced back or title transferred to the relevant JV party.

On an exit by one or more parties from the JV or termination of the joint venture itself, the mechanism and effect of such withdrawal or termination on the intellectual property rights licenced to or by the JV Co will differ depending on the cause of such exit or termination. Depending on the particular circumstances, some (or all) existing licences to the defaulting party and rights to future licences may automatically cease, while some (or all) existing licenses and rights to future licences in favour of the non-defaulting parties (including those from the defaulter) may continue. The rights vested in the JV Co will also need to be addressed.

The legal considerations applicable to the transfer of employees into a joint venture will depend on the reason for, and context surrounding, its establishment. Where the establishment of a joint venture involves the transfer into the joint venture of an existing (or part of a) business that will retain its identity following the transfer, the Transfer of Undertakings (Protection of Employment) Regulations 2006 (SI 2006/246), as amended, (“TUPE”) may apply to the transfer of relevant employees. Where TUPE applies to a transfer of employees, the respective parties have certain information and consultation obligations which need to be built into the deal timeframe. The employees are entitled to transfer to the new employer on the same terms and conditions of employment (including some types of pension arrangements) as they were employed on prior to the transfer. In addition, all accrued employee rights will be protected although employees do have the right to object to the TUPE transfer which will likely result in the termination of their employment. If the parties fail to carry out a lawful TUPE process, they risk employees claiming they should have been consulted with and/or transferred to the joint venture. Such claims could result in significant cost to the joint venture.

Where the joint venture involves a new business or if TUPE does not apply for some other reason, the joint venture parties could opt to make the current business employees redundant or, terminate the current employment of any employees and re-offer employment with JV Co. Alternatively, relevant employees could be seconded to JV Co by the relevant joint venture party.

Where a joint venture involves a publicly listed party, it may constitute a significant transaction under the UK Listing Rules. The listed party must consider the size of the joint venture relative to the size of the listed party under the three class tests set out in the UK Listing Rules (using the higher of either (i) the value of the disposal into the joint venture or (ii) the value of the acquired interest in the joint venture). If the entry into the joint venture is a significant transaction then a RIS announcement will be required at certain stages of the transaction. As a result of changes to the UK Listing Rules that came into effect in 2024, shareholder approval is no longer required prior to completion of a significant transaction.

There are a number of tax considerations to be considered, which vary depending on whether the JV is a partnership, a private limited company or merely a contractual arrangement and whether the JV parties are corporates or individuals, UK tax resident or non-resident.

If the JV is a private limited company, then the JV will be subject to corporation tax on its profits, not the JV parties.

Partnerships are tax transparent and so, if the JV is structured as a partnership, the JV parties will each be treated as though it were carrying on the business of the JV itself and will be taxed on its share of the JV’s profits. If a JV party is non-resident, depending on the JV’s activities, the JV may create a permanent establishment of the JV partner thereby making it subject to UK tax (corporation tax at 25% if a private limited company; income tax at a maximum of 45% in an individual) on its share of the JV’s profits. The JV parties will also be treated as owning a proportionate share of each of the JV’s capital assets for tax purposes and the acquisition or disposal of a JV asset will be treated as though it were made by the JV partners.

If the JV is a contractual arrangement, the JV parties will be subject to tax on the profits generated from the performance of the contracts.

Profit extraction also needs to be considered; if the JV parties invest in the JV by way of equity, corporate JVs can distribute profits by way of dividends. Dividends are non-tax deductible for the JV but generally are tax free in the hands of UK corporate JV parties but subject to income tax at the dividend rate (maximum rate of 39.35%) if the JV parties are UK individuals. There is no withholding tax on dividends and so non-UK JV parties will not be subject to UK tax on dividends paid by the JV. If the JV partners invest by way of loans, then profits can be extracted by way of principal and interest payments. Interest payments are generally tax deductible but are subject to corporate interest deductibility restrictions if annual net interest and financing costs exceed £2 million. Shareholder loans may also be subject to the UK transfer pricing rules under which an interest deduction can be partly disallowed if the rate exceeds an arm’s length rate or if the principal lent exceeds an arm’s length amount. If the JV party is non-UK, the JV will have to deduct withholding tax at 20% from interest payments unless the JV party can claim the benefit of the interest article of a double tax treaty with the UK. UK corporate JV partners are subject to corporation tax (at 25%) on interest receipts; UK individuals are subject to income tax (maximum rate of 45%).

Where the JV entity is a private limited company, it may form a tax group with one of the JV partners (broadly, if it is a 75% subsidiary of a JV partner) and so if the JV is loss making it can surrender some or all of its losses to other members of that JV party’s tax group which can then be offset against those group members’ profits to reduce their corporation tax liabilities, subject to certain restrictions; or if it is profitable and other group members are loss making, those losses can be surrendered to the JV to reduce its corporation tax liabilities. If some or all of the JV parties are within the charge to corporation tax, then the JV may be able to surrender losses to certain of the JV parties and vice versa by way of consortium relief. It is important that arrangements regarding claiming group relief or consortium relief are addressed in the JV Agreement. If losses are surrendered by the JV, then those losses are no longer available to carry forward within the JV to set off against future JV profits. The JV Agreement should set out how this will be managed to ensure that one JV party is not disadvantaged compared to the others.

If assets, including intangible assets such as intellectual property, are contributed to the JV by the JV parties, this may result in a tax charge within the JV partner on the disposal, even if no cash consideration has been paid by the JV. Transfer pricing rules may also apply on supplies of assets and services by JV partners to the JV to deem an arm’s length consideration.

VAT (standard rate of 20%) is also a consideration – if the JV partners contribute assets or services to the JV, the contribution is likely to be a supply for VAT purposes and so VAT may be payable on the value of the supply. It may be possible for the JV entity to be VAT grouped with one on the JV partners so that supplies made between the JV and that JV party would not constitute supplies for VAT purposes.

Profits may be distributed in a number of ways depending on how funding is provided to the joint venture by the parties (see question 8 above). Where the joint venture is an English limited company, joint venture profits would ordinarily be distributed by either (i) the payment of interest or repayment of principal arising from shareholder debt; or (ii) the distribution of profits by way of dividend in line with an agreed dividend policy set out in the JV Agreement. Payments of interest or principal on shareholder debt are primarily subject to the terms of the relevant shareholder loan. If the joint venture performs poorly, restrictions arising from insolvency law (governed by the Insolvency Act 1986) will apply to payments made in this manner, notably around unlawful preferences. Where profits are to be distributed by way of dividend, that dividend must be made in accordance with the Articles and may only be made if JV Co has sufficient distributable reserves. Distributable reserves are a company’s accumulated realized profits, less its accumulated realized losses (in each case so far as not previously distributed) and should be calculated by reference to the most recent available accounts. An English limited company can also return capital to its shareholders, subject to the terms of a specific statutory regime. This is a less common approach to distributing profits on an ongoing basis and is more relevant on the winding up of a joint venture. Where the joint venture is a partnership, limited partnership or LLP the provisions of the relevant partnership agreement will apply to the distribution of profits.

A deadlock may arise in a 50/50 joint venture or any joint venture where the parties have agreed to certain reserved matters which require unanimous consent. If a deadlock occurs and agreement cannot be reached between the parties through informal discussion or at a board meeting, general meeting or partners’ meeting (as applicable), the joint venture agreement will customarily set out a deadlock resolution procedure. This procedure can take whatever form the parties agree upon. Parties generally consider the following options: (i) the use of a casting vote, often given to the chair of the board or general meeting; (ii) an outsider’s swing vote; (iii) escalation to senior management; (iv) a dispute resolution mechanism (e.g., mediation, arbitration, or expert determination); or (v) some combination of the foregoing, e.g., escalation to senior management followed by mediation where senior management are unable to reach agreement. Where a deadlock cannot be unlocked, put and call options structured as either ‘Russian roulette’ (where one party offers to buy the other party’s interest, or sell its interest, at the same price) or ‘Texas shoot out’ (where the process is expanded using sealed bids or an auction) can be used to force the purchase or sale of interests to bring the joint venture to a close.

Exit or termination provisions in joint venture agreements will necessarily have to be tailored closely to the joint venture in question. Customarily, termination, or a right for one party to commence a termination process, is triggered by events such as a change of control of either party, insolvency of either party, completion of the proposed venture, expiry of a fixed term, material breach by either party or an unresolved deadlock, or the completion of a successful exit. The termination process is often structured as a put / call option process on similar lines to the process summarized in question 21 above, or the liquidation of the joint venture entity. In some cases, joint venture parties agree that on a termination following a default by either party, the defaulting party will either sell their shares to the non-defaulting party at a discount or acquire the shares of the non-defaulting party at a premium. Joint venture parties are always entitled to agree unanimously to terminate the joint venture agreement at any time, overriding any prior agreement. Exit provisions in a majority/minority joint venture will typically include drag along / tag along rights, whereas a 50/50 joint venture is likely to provide that any exit (as a sale of assets, sale of shares or a listing) is a reserved matter requiring unanimous consent.

The use and legal enforceability of restrictive covenants is a developing area of law internationally, with various jurisdictions moving to ban and/or heavily restrict their use. In general, English courts apply a more liberal approach to restrictive covenants in the context of a commercial agreement (such as a joint venture agreement) as opposed to employment or other service agreements where enforcement of such covenants is only permitted in very limited circumstances. Restrictions in a joint venture agreement are likely to be enforceable if the party seeking to enforce them can demonstrate that they are no wider than is reasonable to protect the parties’ proprietary interests. Usually, the relevant “proprietary interest” is the parties’ respective interest in protecting the business, confidential information, IP and associated goodwill of the joint venture (and relatedly, their financial investment therein). In assessing reasonableness, the English courts would consider the subject matter, geographic scope, extent and duration of the restriction as well as the particular business sector, business cycle and particular market forces, if relevant.

There are no hard-and-fast rules for parties to follow, but overly broad restrictive covenants are likely to be unenforceable if challenged. Parties should therefore take great care when drafting restrictive covenants to ensure that they are tailored to the legitimate interests of the parties in relation to the joint venture. English Courts will only rule on the question of whether a restriction is reasonable and therefore enforceable, or void. Void provisions may be severed (i.e., deemed deleted) from the joint venture agreement, so it is generally advisable to include each restriction in a separate sub-clause to allow for void provisions to be easily severed without also removing other, otherwise enforceable, provisions. Importantly, unlike in certain other jurisdictions (including, for example, various US jurisdictions), courts in England and Wales will not generally “blue pencil” or look to replace an unenforceable restriction with an acceptable one (e.g., by reducing a 5-year non-compete to 12 months). English courts are also not likely to enforce international covenants which offend the above legal principles.

Subject to specific local law restrictions binding on the parties, parties to UK joint ventures generally enjoy freedom of choice over governing law and jurisdiction, with the selection a result of negotiation. Parties to English law governed joint venture agreements or a joint venture incorporated as an English company, LLP or partnership usually choose the exclusive jurisdiction of the English courts or arbitration at the London Court of International Arbitration (LCIA). These are both sophisticated global centres of dispute resolution, accustomed to hearing complex disputes.

We think that that one of the key factors likely to influence the use of JVs is the regulatory landscape, in particular legislation relating to antitrust and national security.  Foreign ownership restrictions may lead to greater use of JVs to deal with control issues arising on acquisition and throughout the life of an investment.  Likewise, if interest rates on debt rise (which looks possible at the time of writing) then acquisition financing using equity via a JV structure may appear attractive to some buyers.