Joint Venture Agreement, Shareholder Agreement & Commercial Terms

In the business world, crafting the right & effective agreements is key to transaction success.

Here, three (3) main types of agreements often take the spotlight:

• Joint Venture Agreement
• Shareholder Agreement
• Commercial Terms.

Joint Venture Agreement

Joint Venture Agreement is a contract formed between parties to establish a business collaboration. This agreement involves at least two (2) parties with different interests intending to achieve a common goal through the creation of a new business entity.

In this context, each party contributes resources, expertise, or capital to reach the shared objective.

For instance, two companies may form a joint venture to develop new technology or enter a new market.

In setting up a joint venture, the rules are established through the Joint Venture Agreement, which covers aspects like:

• profit-loss sharing
• business management, and
• responsibilities of each party.

Shareholder Agreement

Shareholder Agreement is an internal agreement among the shareholders of a company. This agreement includes the distribution of shares, cost arrangements & other terms related to the rights & obligations of the shareholders.

The agreement governs the relationships between shareholders, particularly in terms of:

• profit distribution,
• decision-making, and
• procedures if a shareholder wishes to exit or sell their shares.

The agreement often also includes provisions on succession planning, preemptive rights & minority rights protection.

In some cases, a shareholder agreement may also contain clauses regarding non-compete & confidentiality to safeguard business interests.

Commercial Terms

Commercial Terms refer to the commercial agreements that form the basis of a transaction. These include details such as:

• price
• quantity
• delivery time, and
• other aspects relevant to the commercial transaction.

These terms are crucial in ensuring that both parties have a mutual understanding of what has been agreed upon, thus reducing the risk of misunderstandings & future conflicts.

Commercial Terms also play a vital role in defining key aspects of the transaction such as:

• guarantees
• payment terms, and
• dispute resolution.

These terms may also encompass more specific legal & technical aspects depending on the type of transaction.

Additional Explanation about Commercial Terms

Commercial Terms in an agreement here refer to what the principal desires. It's more about the big picture of the commercial aspect.

In an agreement, commercial terms are a detailed & integral part of that agreement.

The question arises, why does a business owner who understands the transaction need a Lawyer for commercial terms matters?

The role of the Lawyer becomes crucial to initially bind the commercial terms as a strategy to achieve the transaction's objectives during negotiations.

This avoids lengthy & inefficient agreement discussions & ensures that the agreed-upon commercial terms are not altered later.