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5 Legal Considerations on Strategic Partnerships for Your NZ Startup 

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Strategic partnerships can be an excellent tool for accelerating your New Zealand startup’s growth. Collaborating with other businesses allows you to access resources and networks you may otherwise not have access to. Despite the benefits of strategic partnerships, you must pay careful attention to ensure your startup’s interests are protected. This article will take you through five legal considerations when engaging in a strategic partnership.

1. Understand Strategic Partnerships

The first step to understanding the legal components of strategic partnerships is to understand the nature and scope of strategic partnerships. Strategic partnerships usually involve formal agreements between two or more entities. The purpose is to pursue common goals while maintaining separate identities. These partnerships take various forms, such as: 

  • joint ventures; 
  • licensing agreements; or
  • research collaborations.

2. Do Your Due Diligence 

Conducting your due diligence is essential in any business context. However, conducting due diligence in the context of business partnerships is critical. You must conduct thorough due diligence on your potential business partners before you enter into a strategic partnership. For example, you should carefully assess your prospective business partners’:

  • reputation in the industry; 
  • financial stability;
  • historic legal compliance; and
  • compatibility with your startup’s values and goals. 

After conducting such an assessment, you must carefully evaluate the partnership’s risks and benefits. For example, the partnership may be worthwhile for your partner and their business and disadvantageous for your startup. This is why you should obtain independent legal and financial advice. Qualified legal and financial professionals can help you identify any potential issues with a partnership proposal. 

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3. Develop Clear Objectives

There is an old saying, ‘a verbal contract is not worth the paper it is written on’. The takeaway from this saying is that your strategic partnership agreement should never merely be an oral understanding. You must define the scope of the strategic partnership in a written agreement. The agreement should address key components of the relationship between your entity and your prospective partner’s entity. Some key areas to assess include:

  • The Roles and Responsibilities of Each Party: Your agreement needs to address each party’s contributions, obligations and authority.
  • Intellectual Property Rights: You should be sure to clarify ownership of intellectual property before and after the conclusion of the partnership. Further, your agreement should address the use rights of intellectual property developed or shared during the partnership. This will help you to avoid future disputes with your partner down the line.
  • Confidentiality Provisions: These provisions should be included to ensure the confidential information exchanged between you and your partner remains confidential.   
  • Length of the Agreement. This includes defining the duration of the partnership and the circumstances under which the parties can terminate the agreement. You will want to consider all potential exit strategies and the potential consequences.

4. Consider Business Structure

Choosing the right business structure for your strategic partnership is crucial. This is because the business structure will ultimately allocate the risks, liabilities and responsibilities of each party. A common way such partnerships may be established in New Zealand is via contractual agreements. For instance, you may establish your strategic partnership via a joint venture agreement. This agreement will outline the rights and obligations you and your partner have and owe to each other.

On the other hand, you may decide to set up a separate legal entity to then enter into the partnership with your prospective partner. This separate legal entity, as the name suggests, would be independent from your existing business. The entity would be the primary party to the partnership. However, most notably, this separate entity would ensure your existing business does not incur any liability stemming from the partnership. This entity might take the form of a limited liability company.

Regardless of how you set up your partnership, you should implement a governance framework to facilitate decision-making and accountability within the partnership.

5. Outline Dispute Resolution Mechanisms

Finally, you must consider that disputes or conflicts may arise during the course of your strategic partnership. As such, you should include mechanisms for dispute resolution in your partnership agreement. These mechanisms will ideally help to minimise the impact of any issues that arise between you and your business partner. You may want to consider alternative dispute resolution methods, such as mediation or arbitration. These methods provide ways to resolve your dispute efficiently and cost-effectively while preserving your relationship with your business partner.

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Key Takeaways 

Collaborating with other businesses allows you to access recourses and networks you may otherwise not have access to. As such, strategic partnerships can be a powerful tool for accelerating the growth of your startup. However, you must pay careful attention to ensure you protect your startup’s interests. Some key considerations you need to bear in mind when engaging in a strategic partnership include:

  • understanding strategic partnerships;
  • doing your due diligence;
  • developing clear objectives;
  • considering the legal structure of the arrangement; and
  • deciding on how disputes will be resolved. 

If you need help understanding how your startup can responsibly engage in a strategic partnership, contact our experienced startup lawyers as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0800 005 570 or visit our membership page

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Emily Young

Emily Young

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