{"id":46235,"date":"2025-05-19T12:44:28","date_gmt":"2025-05-19T12:44:28","guid":{"rendered":"https:\/\/firmusadvisory.com\/?p=46235"},"modified":"2025-05-19T12:44:28","modified_gmt":"2025-05-19T12:44:28","slug":"shareholders-vs-joint-venture-agreement","status":"publish","type":"post","link":"https:\/\/firmusadvisory.com\/de\/shareholders-vs-joint-venture-agreement\/","title":{"rendered":"Choosing Between a Shareholders\u2019 Agreement and a Joint Venture Agreement: What You Should Know"},"content":{"rendered":"

Shareholders agreement vs joint venture<\/p>\n

Early in my career, I was asked to draft a shareholders\u2019 agreement for a company which was yet to be incorporated. I was under the impression that a shareholders\u2019 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\u2019m deeply grateful for that assignment, because the insights I gained have stayed with me ever since.<\/p>\n

If you’re starting a business or partnering with others, you may hear these two terms thrown around a lot: shareholders\u2019agreement<\/em> and joint venture (JV) agreement<\/em>. Both are used to formalise business relationships, but they serve slightly different purposes depending on what you\u2019re trying to build.<\/p>\n

Timing and Purpose<\/h2>\n

A shareholders\u2019 agreement is typically used where a company<\/a> exists\u2014or is about to be incorporated\u2014and 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.<\/p>\n

A JV agreement, by contrast, is broader and more flexible. It can be used before, during, or after incorporation\u2014or even where no company is intended at all\u2014because 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\u2019s done. But even without a company, a JV agreement is still valid.<\/p>\n

What Does the Agreement Cover?<\/h2>\n

A shareholders\u2019 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.<\/p>\n

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.<\/p>\n

When a JV Agreements is mandatory<\/h2>\n

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\u2019t optional; it\u2019s a legal requirement to ensure technology transfer and the development of local expertise.<\/p>\n

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.<\/p>\n

How Do You Exit?<\/h2>\n

In a shareholders\u2019 agreement, exit mechanisms usually involve the sale or transfer of shares. You\u2019ll find clauses like pre-emptive rights (existing shareholders get first pick), drag-along and tag-along rights.<\/p>\n

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.<\/p>\n

Practical Examples<\/h2>\n

When Setting Up a Company<\/h3>\n

Imagine that three partners are building a fintech platform. Before the company is registered, they can sign either a shareholders\u2019 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.<\/p>\n

When Working Without a Company<\/h3>\n

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\u2019s contributions\u2014land 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.<\/p>\n

Key Clauses to Include<\/h2>\n

If You\u2019re Forming a Company:<\/p>\n