Shareholders agreement vs joint venture

Early in my career, I was asked to draft a shareholders’ agreement for a company which was yet to be incorporated. I was under the impression that a shareholders’ agreement could only come into play after formal incorporation, since technically, there are no shareholders until the company exists. In my view, a joint venture agreement was the right choice for co-owners before incorporation. When I raised this with my boss at the time, she sent me to the office library to dig into the authorities. At the time, it felt like an extra burden but today, I’m deeply grateful for that assignment, because the insights I gained have stayed with me ever since.

If you’re starting a business or partnering with others, you may hear these two terms thrown around a lot: shareholders’agreement and joint venture (JV) agreement. Both are used to formalise business relationships, but they serve slightly different purposes depending on what you’re trying to build.

Timing and Purpose

A shareholders’ agreement is typically used where a company exists—or is about to be incorporated—and the parties intend to become shareholders. It can be signed just before incorporation, with parties committing to take specific steps (like subscribing for shares) once the company is formed.

A JV agreement, by contrast, is broader and more flexible. It can be used before, during, or after incorporation—or even where no company is intended at all—because it governs collaboration between parties for a project regardless of whether shareholding is involved. If the parties wish to form a company, a JV agreement can guide how that’s done. But even without a company, a JV agreement is still valid.

What Does the Agreement Cover?

A shareholders’ agreement focuses on ownership and corporate governance, covering matters such as share transfers, board composition, voting rights, dividend policies, and decision-making thresholds. While shareholders can set strategic direction and agree on certain key decisions that require their approval in accordance with the Companies Act, 2019 (Act 992), specific operational decisions are generally left to the board of directors.

A JV agreement has a broader scope. It outlines how parties will contribute capital, intellectual property (IP), assets, or services to a defined project; how profits will be shared; how the venture will be managed; and what happens if things go wrong. It is more project-focused than ownership-driven, often involving specific management and decision-making structures.

When a JV Agreements is mandatory

In some sectors in Ghana, such as the upstream petroleum industry, the local content laws require foreign companies to partner with local companies through a JV company. This isn’t optional; it’s a legal requirement to ensure technology transfer and the development of local expertise.

In such cases, the JV agreement becomes critical. It must spell out all the details of the partnership, including governance, capital structure, intellectual property use, and how knowledge and skills will be shared. The JV company formed under this agreement becomes the legal vehicle through which the project is executed in line with regulatory expectations.

How Do You Exit?

In a shareholders’ agreement, exit mechanisms usually involve the sale or transfer of shares. You’ll find clauses like pre-emptive rights (existing shareholders get first pick), drag-along and tag-along rights.

In a JV agreement, exit clauses depend on whether a company was formed. If yes, share transfer rules will apply. If not, the agreement will explain how to wind up the project, divide assets, and deal with IP or outstanding obligations.

Practical Examples

When Setting Up a Company

Imagine that three partners are building a fintech platform. Before the company is registered, they can sign either a shareholders’ agreement or a JV agreement to outline who brings what (cash, technology, movable or immovable properties), how decisions will be made, and how profits will be shared. Once the company is duly incorporated, this document continues to govern how the company operates and can even be reflected in the Constitution of the company.

When Working Without a Company

Imagine a group of landowners partnering with a real estate developer to build residential units on their land. Instead of forming a company, they sign a JV agreement that clearly outlines each party’s contributions—land from the owners, capital and technical expertise from the developer. The agreement also spells out how profits from the sale of the units will be shared, who will handle construction and marketing, and how disputes will be resolved. The parties operate under this agreement without setting up a new company.

Key Clauses to Include

If You’re Forming a Company:

• Capital contributions and resulting shareholding
• Governance structure (board, voting, reserved matters)
• Share transfer controls (pre-emptive, tag-along and drag-along rights)
• Profit sharing (dividends)
• Warranties and indemnities

If You’re Not Forming a Company:

• Clear project purpose and scope
• Who contributes what (cash, human resources, movable and immovable properties IP, etc.)
• Decision-making rules and dispute resolution
• Revenue and cost sharing
• IP ownership and post-exit use
• Confidentiality and non-compete clauses
• Exit mechanisms

Conclusion

The biggest difference between a shareholders’ agreement and a JV agreement is flexibility. A shareholders’ agreement only works if there’s a company involved. A JV agreement works whether or not you decide to incorporate.

That said, always check the regulatory requirements of the sector you’re working in. Sometimes, the law itself will determine what kind of partnership structure you need. Understanding the purpose, structure, and timing of each agreement will help you pick the right one for your situation—and draft it with confidence.

You may also read on Share register and company registers