Joint Venture in Germany

Contract/agreement, shareholder agreement in german practice

Business ideas and larger projects can often only be realized in cooperation with several partners. There are many different forms of entrepreneurial cooperation under german law. A joint venture is a possible form of cooperation when two or more legally and economically independent entrepreneurs or companies work together for a certain period of time or even permanently in order to achieve a common goal.

Joint ventures play a particularly important role in cross-border projects, where the joint venture partners coordinate their respective know-how and entrepreneurial activities with each other.

For a non-binding inquiry, please contact one of our contacts directly by phone or e-mail or use the contact form at the bottom of this page.

Our expertise in joint venture agreements in Germany

Our specialized team of M&A lawyers, certified specialists for german corporate law and tax advisors provides advice on joint ventures and joint venture cooperation agreements.

  1. Advice on the selection of possible forms of cooperation
  2. Accompaniment of contract negotiations in the establishment of joint venture and joint ventures; advice from the perspective of german commercial law, corporate law and tax law.
  3. Drafting of joint venture contracts/agreements and participation agreements; examination of suitable joint venture systems for the intended cooperation.
  4. Advice and drafting of shareholder agreements concerning the joint venture (leaver schemes, exit scenarios, call options, put options, drag along, tag along rights, shoot out clauses, etc.) as well as advice on related areas of law, e.g. antitrust law, which can play a major role in joint venture relationships.
  5. Tax advice on the formation and termination of joint venture companies
  6. Dispute resolution in joint venture companies, mediation and judicial assertion of claims arising from joint venture agreements, including the execution of temporary injunctions within the framework of interim legal protection

We are happy to work hand in hand with your tax advisor in advising on and structuring the joint venture.

Joint venture in Germany: partnership or cooperation under the law of obligations

Project-related business combinations can be carried out in the form of a joint subsidiary (equity joint venture) or organized in a looser contractual form through a contractual joint venture. In the context of globalization, the newly opened markets in Eastern Europe and Asia are very often accessed by German SMEs through cross-border joint ventures. Risks can be reduced and synergy effects gained by entering into a joint venture, both when opening up new markets and when relocating production.

In german practice, contractual joint ventures are often found in the form of consortiums, financial consortiums, R&D contracts, licensing agreements or contractually agreed sales cooperation. This type of contractual joint venture typically does not create a joint venture company with its own assets that operates independently on the market.

The closer cooperation in the form of the equity joint venture has a certain complexity and is more elaborate in its design. It is described in more detail below:

Structure of the Equity Joint Venture under german law (GmbH or GmbH & Co. KG)

The establishment of a joint venture company can make sense if the cooperation is planned for the long term and the joint project company is to have independence. With the Equity Joint Venture investment costs can be reduced, a higher flexibility, improved possibilities of influence as well as synergy effects can be gained. Since close cooperation is always associated with the risk of the joint venture partner siphoning off its own know-how, such disadvantages must be captured and safeguarded in the joint venture agreements.

As a rule, the joint venture partners conclude a joint venture agreement in which the operational management, the decision-making under german company law and the termination of the joint project are regulated in detail. This agreement is also concluded in the context of equity joint ventures in addition to the partnership agreement that is required anyway. In this respect, an equity joint venture also has components under the law of obligations.

In Germany, joint venture companies are usually operated as limited liability companies (GmbHs) or as limited liability companies (GmbH & Co. KGs. The choice of legal form will not infrequently depend on the tax situation.

Contractual situation in the equity joint venture in Germany

In addition to the necessary provisions in the partnership agreement within the joint venture company, special service relationships are agreed in the external relationship between the joint venture company and the individual partners, such as the supply of raw materials, the provision of personnel, the supply of machinery, sales services or business supply services. In addition to the internal and external joint venture agreements, there is the separate partnership agreement of the joint venture company. Care must be taken to ensure that there is synchronization between the individual agreements.

Typical areas of regulation in a german joint venture agreement/agreement

The joint venture agreement is the basis for cooperation between the joint venture partners in german practice. In addition to the obligation to establish a joint venture company, the following topics in particular are contractually fixed:

  • Determination of the executive bodies and corresponding nomination rights. In particular, the positions on the management and supervisory boards are defined and departmental responsibilities are standardized.
  • Determination of the economic objectives by adopting a multi-year annual plan concerning the future business operations of the joint venture company.
  • Financing issues and future capital increases
  • Financial reporting and rights to information and disclosure
  • Detailed regulations for shareholders' and supervisory board meetings as well as procedures for conflict resolution (in dead lock situations and anti-escalation procedures)
  • Possibilities and restrictions on the transfer of shares in the joint venture company
  • Non-competition clauses, customer protection clauses, non-solicitation clauses
  • Confidentiality and non-disclosure clauses
  • Severance arrangements in the event of termination of the partnership
  • Call option, put option, pre-emption and acquisition rights, leaver schemes
  • Arbitration agreements, mediation proceedings if necessary

Compared with a looser agreement under the law of obligations, the establishment of a joint venture company involves a greater capital commitment. However, increased profit opportunities are purchased, which go hand in hand with greater management and control rights.

Support from our certified specialists and tax advisors in Germany

Joint venture relationships in Germany are characterized by complex contractual structures. Not only legal and tax requirements have to be considered, but also issues of foreign legal systems in international cooperations. Our team of german business lawyers and tax advisors supports you in joint venture projects and cross-border cooperations. In the event of conflicts among joint venture partners and shareholder disputes, our lawyers develop dispute avoidance strategies and approaches to solutions.

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