5 Considerations Before Entering a Joint Venture in Spain

5 Considerations Before Entering A Joint Venture In Spain

5 Considerations Before Entering a Joint Venture in Spain

Joint ventures can make good business sense and many foreign companies opt for this collaboration to ease their entrance into the Spanish market. Thanks to this type of strategic alliance, participants can spread the risks of a new project. They also have increased access to capital to invest or earmark for M&A opportunities.

But there are ground rules for any successful joint venture in Spain.

Here are five guidelines:

• Ensure you know your future partner or partners well. Fully evaluate their financial and operational situation.

• Decide on each partner’s responsibilities before sealing the agreement. This limits the potential for misunderstandings later.

• Ensure any verbal agreement is put in writing.

• Define some success indicators in advance. Set financial and operational goals.

• Ensure you are well acquainted with the regulations regarding joint ventures in Spain.  Madrid-based corporate law firm Argali Abogados has extensive experience in this area and can advise on all the legal aspects.

 

A JOINT VENTURE IN SPAIN: 3 MAIN OPTIONS AVAILABLE

There are three main types of joint ventures in Spain:

• A Temporary Business Association. A form of co-operation for specific projects during a limited period. This form of association is usual in engineering and construction projects and can involve several companies.

• An Economic Interest Grouping. A non-profit legal entity created for the sole purpose of helping its profit-making members achieve their objectives. Members agree on how to contribute to the entity’s capital and how to share expenses. Each member is liable for the whole of the entity’s debts.

• A Partnership Agreement. A type of unincorporated partnership, by which one or more entrepreneurs (non-managing participants) contribute with money or in kind to a venture managed by another entrepreneur (managing participant). The non-managing participants have the right to an agreed share of the profits.

 

A JOINT VENTURE: POSSIBLE PRELUDE TO FULL INTEGRATION

Joint ventures are very often set up by companies to take advantage of specific business opportunities in new markets. These partnerships can remain in place for many years or be terminated when one of the companies’ strategies changes.

In 2012, Canadian copper company Cadillac Ventures sold out of its four-year joint venture with Spanish mining firm Minas de Aguas Tenidas to focus on a key project in Ontario.

But a joint venture can also be a prelude to full integration. In 2002, Starbucks opened its first coffee stores in Spain in a joint venture with Grupo Vips, the country’s leading multi-format restaurant. Nine years later, Grupo Vips fully acquired the Sigla joint venture. It justified the move as an effort to improve profitability in its core market, the Iberian Peninsula.

For information on joint ventures in Spain, contact Argali Abogados.

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