How to form a joint venture


What is a Joint Venture?

A joint venture is a contract between companies, including international ones, for the collaborative realisation of a given purpose or the execution of a project. This business model is a true collaboration contract, which does not provide for the creation of a new legal entity, but rather keeps the companies covered by the agreement separate.

The phases of the realisation and study of the joint venture can be essentially divided into two:

  • an earlier phase, consisting in the study and analysis of the contractual and management needs of the collaboration, followed by the formalisation of the contractual arrangements;
  • a later stage, consisting in the implementation of the collaborations and agreements previously initialised and reached at an earlier stage, can be considered the executive phase.

Both of these phases require the use of specialised legal assistance, as well as private consultants specialised in this business model.

In any case, an Italian company intending to establish a joint venture with a foreign company should carry out prior due diligence on the potential partner company.

Secondly, given that the joint venture has the ultimate aim of providing partner companies with the technology or other value they lack, the alliance should be established in such a way that the Italian company exploits the period of cooperation for the acquisition of that value or the technology, know-how or contacts that represented the contribution of the foreign company. In other words, it is advisable to set up the joint venture so that the company is able, even at its end, to continue to operate on the foreign market of destination.

Just as advisors were essential for the correct development of the above phases, professional experts in the field of legislation are of equal importance. The legislation applied to that institution and the tax regime in the State in which the joint venture is established may be a critical aspect of that model if neglected.

Updated on 28/07/2020