To SPV or not to SPV? That is the question

To be or not to be (002)

A joint venture doesn’t always need to involve the creation of a separate legal entity or special purpose vehicle (“SPV”):  There are plenty of circumstances where a purely contractual joint venture may be a better option.

Purely contractual collaborations allow the parties to retain control over their own assets and employees; they usually involve fewer administrative and filing obligations both on incorporation and during the life of the venture; they are less permanent than an SPV meaning that they’re often easier to terminate; and there is no effect on the direct taxation of either party because no business or assets is transferred.

Clearly, the traditional structure has its benefits (more familiar to third parties, less risk of being treated as a partnership, easier to secure an exit if that is the ultimate goal, etc.), but provided the purpose of the venture and the parties’ respective roles and objectives are clearly set out in the collaboration agreement, a contractual joint venture can be a useful alternative to a formal SPV.

Rebecca Gardner, Corporate & Commercial Partner at Howat Avraam Solicitors comments:  Unincorporated joint ventures are used less frequently than the traditional SPV model, but they are common in research & development collaborations, construction & property development projects, resource sharing arrangements and more generally for any projects where the participants make their contributions at different stages of the process.  Companies and individuals considering establishing a joint venture should always consider at the outset whether a contractual collaboration would be more suitable for their proposed project than a formal SPV.

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Howat Avraam Solicitors provide Corporate, Commercial, Employment, Intellectual Property and Contract Dispute advice to companies, business owners and individuals.  As business owners ourselves, we have a pragmatic in-house approach to resolving issues before they arise by working alongside our clients, as part of their team.  We are commercial, practical and entrepreneurial in our approach to legal services.

To discuss any Corporate or Commercial matter with us on a no obligation basis, please contact Rebecca Gardner on 020 3735 6700 or email Rebecca at Rebecca.Gardner@hasolicitors.co.uk.  Alternatively, visit our website at www.howatavraamsolicitors.co.uk for more information.

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