Joint ventures are companies whose shares are owned partly by a government department or public authority, and partly by another organisation, such as a private sector contractor.
Resource
Joint ventures are companies whose shares are owned partly by a government department or public authority, and partly by another organisation, such as a private sector contractor. There are risks and benefits to shared ownership which should be considered as part of the role of directors and how government sets up corporate governance. To make sure joint ventures work well, the ventures’ corporate governance and stewardship arrangements should coordinate with the owning department’s oversight and accountability requirements.
This guidance describes corporate finance in the public sector through the lens of the National Audit Office’s investigations and value for money studies involving government transactions, organisations and functions. It contains key questions to support scrutiny of corporate finance activities by senior decision‑makers informed by case studies drawn from our published reports and supported by references to additional government guidance.
Points to consider when embarking on creating or joining a joint venture
Rationale
- What is the purpose, business model and strategy of the joint venture and have alternatives been considered?
- What process did the team use to identify, select and perform due diligence on the joint venture partner?
- How do the founding documents, including the articles of association, reflect the specific objectives and purposes of the company?
Governance
- Has each party’s share of ownership of the joint venture been determined based on an independent valuation of contribution of assets and liabilities?
- What are the governance arrangements, and how are non-executive director appointments related to the participation or ownership of each shareholder?
- Are there other matters that need to be set out in a shareholder agreement or framework document – for example, strategic priorities, commercial objectives, or dispute resolution?
- What forms of control or influence does the department have and how does this affect how the Office for National Statistics classifies the joint venture?
Performance
- What are the joint venture’s financial and commercial objectives?
- How will performance be measured and monitored?
Outcomes
- On what basis will the joint venture be awarded future commercial business with the public sector?
- What process will the department use to identify when the joint venture has achieved its planned outcomes?
Review/exit
- Have potential future equity funding rounds and their effects on each owner’s share of the joint venture been considered?
- What is the process for exiting the joint venture?
Guest preview of selected publicly available resources