What is a joint venture agreement? Explanation and use

What is a joint venture agreement? It is the written agreement by which two or more companies establish a joint project or joint enterprise together, with stipulated contributions, control, profit distribution, and exit. The core of the question is therefore not only what you are going to do together, but also the legal form you use to do so and how you separate if things go wrong.

The short answer

• Objective: collaboration between independent enterprises for a defined project or a joint venture.
• Two main forms: contractual (cooperation agreement or general partnership) or via a joint private limited company (equity joint venture).
• Regulates: contribution, control, decision-making, profit distribution, and liability.
• Crucial: a deadlock clause and an exit clause in case the parties fail to reach an agreement.
• Basis: for a JV-BV, the articles of association (Book 2 of the Dutch Civil Code) and a shareholders' agreement belong together.

What exactly is a joint venture agreement?

A joint venture is a collaboration in which two or more parties pool resources for a common goal without merging. Both companies continue to exist independently. The agreement specifies what each party contributes (capital, knowledge, customers, machinery), how control is divided, and how revenues and risks are shared. Without these agreements, disputes quickly arise regarding who decides what and who is entitled to which share of the profits.

Consider a producer who knows the market and a technology party that builds the platform. Together, they establish something that neither can do alone. The joint venture agreement is the document that makes that collaboration manageable and terminable.

Contractually or via a joint BV?

The most important choice is the legal form. There are two routes.

• Contractual joint venture. The parties formalize the collaboration purely in an agreement, without a separate legal entity. This often takes the form of a general partnership (VOF) when the parties act jointly and share profits. Advantage: quick and inexpensive to set up. Disadvantage: in a general partnership, each partner is jointly and severally liable for the debts of the partnership (Art. 18 Commercial Code).
• Equity joint venture via a joint BV. The parties jointly establish a new BV with a notary (Article 2:175 of the Dutch Civil Code) and each holds shares. Liability is then, in principle, limited to the contribution. This form is common for larger, long-term collaborations and for external financing.

For a clearly defined one-off project, a contractual form may suffice. For a structural collaboration involving investments and personnel, most parties opt for a joint limited liability company (BV), precisely because of the limited liability and the clear ownership structure via shares.

The shareholders' agreement and governance

A joint venture BV involves two layers. The articles of association regulate the formal structure and the blocking arrangement for shares (Art. 2:195 BW). The shareholders' agreement governs the mutual agreements between the parties and is not subject to any formal requirements (Art. 6:213 BW). The core of the collaboration lies precisely in that shareholders' agreement.

Governance determines who decides on what. In a fifty-fifty split, neither party casts the deciding vote, which increases the risk of a deadlock. Therefore, parties often include a list of reinforced decisions: topics such as major investments, hiring a director, or taking out loans that require unanimity or a qualified majority. For a deadlock, a solution is agreed upon, such as escalation to shareholders, an independent third party, or a buy-sell mechanism.

Exit and termination

Every collaboration comes to an end eventually. A good joint venture agreement regulates how this will happen in advance. Common components include an obligation to offer shares upon departure, put and call options (the right to offer or claim shares at a predetermined price), and tag-along and drag-along provisions for sale to a third party. A valuation method for the shares should also be included, so that you do not end up arguing about the price upon exit.

If the process truly reaches a deadlock, the law offers the dispute resolution procedure of Articles 2:336 to 2:343 of the Dutch Civil Code: a shareholder can seek expulsion or withdrawal through the courts. This is a difficult and costly process. A contractual exit arrangement prevents you from having to resort to this.

Practical example

A catering company and an event agency wanted to jointly operate a permanent hospitality venue. They established a joint limited liability company (BV), each holding 50 percent. In the shareholders' agreement, they agreed that investments exceeding 25,000 euros would require unanimous approval, that a fixed annual dividend would be distributed at a minimum, and that in the event of a persistent dispute, one party could buy out the other based on a pre-agreed valuation formula. When one of the parties wanted to withdraw after two years, the buyout was arranged within a few weeks instead of through a lengthy procedure.

Honest recommendation

For a small, one-off project with limited risk and two parties who know each other well, you do not always immediately need a lawyer. You can then draft a clear cooperation agreement yourself as a basis, including arrangements regarding contributions, division, and termination. However, as soon as real money, personnel, or joint liability come into play, or as soon as you establish a joint BV, professional customization becomes advisable. After all, the choice of legal form, governance, and exit arrangements determine whether the partnership remains manageable and whether you can separate without conflict. These are precisely the elements that cannot be repaired afterwards.

Want to know more? View the joint venture agreement, read how to drafting a joint venture agreement , and what it costs to have a joint venture agreement drafted .

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