A joint venture is one of the most committing forms of partnership you can enter into — without it being a full sale or acquisition. Two (or more) parties set up a jointly owned company, often to pursue a specific project, market or product that neither party could — or would — handle alone.

Short answer: A joint venture makes sense when you both contribute something essential — capital, technology, market access or distribution — that the other lacks, and where the risk and investment is too large for either of you to bear alone. In return, it requires a clear shareholders' agreement from day one, because you're effectively becoming co-owners of the same company.

What sets a joint venture apart from an ordinary partnership?

An ordinary commercial partnership — e.g. a distribution agreement or a loose collaboration agreement — regulates how two independent businesses work together. A joint venture goes further: you typically set up an entirely new, jointly owned company with its own board, finances and management, where both parties hold an ownership stake and therefore share the risk.

When does it make sense?

  • Access to a new market — e.g. a Danish company wanting to enter a foreign market partners with a local player who knows the market, the authorities and the customers.
  • Complementary strengths — one party has the technology or product, the other has the production capacity, distribution network or capital.
  • Sharing risk on a large project — a project is too large or risky for one party to carry alone, but attractive enough that two parties together dare to invest.

When is it NOT the right model?

If what you're really looking for is an ongoing sales partnership — without shared ownership and shared risk — an ordinary exclusive distribution agreement or partnership agreement is far simpler and cheaper to set up and wind down. Joint ventures typically require legal assistance from the start, because you're effectively founding a new company together — with everything that entails in terms of governance, exit terms, and the sharing of profit and loss.

The most important things to agree from the start

Ownership stakes and voting rights, how profit (and loss) is shared, who handles day-to-day management, what happens in the event of disagreement (deadlock), and — not least — how you get out of the partnership again if it doesn't work out. Also read about what to do about deadlock, when the parties can't agree. If you're considering a joint venture, we always recommend having the agreement drafted by a lawyer experienced in corporate law — feel free to book a no-obligation call if you're unsure whether a joint venture is the right model for you.

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