A joint venture (JV) is a structured collaboration between two or more parties, often through a joint company. In our practice, we observe that Dutch entrepreneurs have a strong interest in JVs for international expansion. At the same time, they underestimate the legal complexity: shareholders' agreement, articles of association, IP licenses, and financing arrangements must be aligned. Good JV documentation makes the difference between a successful collaboration and a costly exit battle.
What is the legal problem?
A joint venture requires alignment between contracts and corporate law. In addition to the shareholders' agreement, articles of association, service contracts, IP licenses, and potentially financing arrangements play a role. In international collaboration, multiple legal systems must be aligned. Without a well-considered structure, deadlocks, unexpected liability, and exit conflicts arise.
What does the law say?
For Dutch JVs, Book 2 of the Dutch Civil Code (legal entities) and freedom of contract within the shareholders' agreement apply. Article 2:18 of the Dutch Civil Code governs conversion; Article 2:333 of the Dutch Civil Code governs cross-border mergers (since the 2023 amendment). The dispute resolution mechanism in Articles 2:335-343 of the Dutch Civil Code offers buy-out and withdrawal in the event of shareholder disputes. For concentration control, EU Concentration Regulation (139/2004) applies to large JVs with full functions.
For minority protection in Dutch JVs, Articles 2:344-359 of the Dutch Civil Code (right of inquiry) apply. Internationally, rules regarding directors' liability and minority protection vary. ICC and IBA model contracts provide starting points.
What risks do companies face?
Poor governance leads to roadblocks, especially in 50/50 JVs. Unintended liability for the parent company can arise through indemnities or guarantees. Without exit clauses, parties are bound for years. Unclear IP licenses lead to disputes over continuation upon termination. Tax structures can turn out unexpectedly unfavorably without prior optimization.
Practical example from our practice
We advised a Dutch and an Indian company on a 50/50 JV for product development. The original contract lacked deadlock resolution and a put option. A stalemate over strategy led to operational standstill. During renegotiation, we incorporated: a Texas shootout clause, prior mediation under the ICC, and an independent chairman for the steering committee. In the subsequent stalemate, one party became the full owner within 90 days through a shootout. The JV was ultimately successfully sold.
What can you do?
Clearly establish governance: decision-making thresholds, supermajority subjects, independent chairperson. Build in deadlock mechanisms (escalation, mediation, shootout). Agree on exit scenarios (put-call, drag-along, tag-along). Carefully coordinate contributions (capital, IP, people) and arrange licensing. Provide for financial reporting and information rights. See also our article on Joint Venture conflicts.