Overview
Joint venture (JV) discussions require deeper information sharing than typical business partnerships. You're not just exploring whether to work together - you're evaluating whether to combine operations, share customers, integrate technology, or create an entirely new entity.
This level of disclosure requires enhanced NDA provisions that go beyond standard confidentiality terms. JV NDAs must address competitive concerns, restrict information use, and provide mechanisms for unwinding if the venture doesn't proceed.
💡 Why JV NDAs Are Different
Joint ventures often involve competitors or potential competitors. The NDA must protect against misuse of information for competitive purposes, even if the JV never materializes. Standard NDAs may not provide adequate protection for this scenario.
Why Joint Ventures Need Special Provisions
Standard partnership NDAs assume parties will share high-level information to evaluate compatibility. Joint venture discussions go much further.
Information Typically Shared in JV Discussions
📈 Complete Financials
P&L details, unit economics, customer lifetime values, cost structures, margins by product line
👥 Customer Data
Customer lists, contract terms, relationship details, renewal rates, key account information
💻 Technical Assets
Source code, algorithms, technical architecture, integration specifications, IP portfolio details
📊 Operational Details
Supplier relationships, manufacturing processes, distribution channels, operational playbooks
Competitive Risks
If the JV doesn't proceed, you've potentially shared your most valuable information with a party who may become or remain a competitor. Key risks include:
- Customer poaching: Using your customer list to target your accounts
- Competitive positioning: Using pricing and cost information to undercut you
- Technology replication: Building similar capabilities based on what they learned
- Talent recruitment: Identifying and recruiting key employees
- Hostile acquisition: Using insights to value and approach acquisition of your company
Key JV-Specific NDA Provisions
Ringfencing / Use Restriction
What it does: Limits use of confidential information strictly to evaluating and implementing the proposed joint venture. Prohibits use for any competitive purpose.
Why it matters: Standard NDAs prohibit disclosure but may not explicitly prohibit competitive use. Ringfencing closes this gap.
Clean Team Provisions
What it does: Restricts highly sensitive information to designated "clean team" members who are walled off from competitive operations.
Why it matters: When parties are competitors, clean teams prevent information from reaching people who could use it competitively.
How it works:
- Both parties designate specific individuals for the clean team
- Clean team members cannot work on competitive products/services during evaluation
- Information shared with clean team cannot be shared with others in the organization
- Clean team members may have extended obligations after discussions end
Standstill Provisions
What it does: Prevents either party from using information gained in JV discussions to pursue a hostile acquisition of the other party.
Why it matters: JV discussions reveal valuation data, strategic weaknesses, and shareholder dynamics that could inform an acquisition approach.
Typical terms:
- Prohibition on acquiring shares above a threshold (e.g., 5%) without consent
- No solicitation of proxies or board seats
- No public announcements of acquisition intent
- Duration typically 12-24 months from end of discussions
⚠ Important Consideration
Standstill provisions may affect your company's ability to be acquired by third parties (due to fiduciary duty concerns). Carefully consider whether the restriction is appropriate for your situation.
Non-Solicitation of Personnel
What it does: Prevents parties from recruiting each other's employees, particularly those involved in JV discussions or identified as key talent.
Why it matters: JV discussions often identify top performers and key technical experts. Non-solicitation prevents using this knowledge for recruiting.
Scope considerations:
- All employees vs. only those involved in discussions
- Direct solicitation vs. general recruitment advertising
- Duration (typically 12-24 months)
- Enforcement mechanisms
Non-Solicitation of Customers
What it does: Prohibits using customer information learned during JV discussions to solicit the other party's customers.
Why it matters: Customer lists and relationship details are often the most sensitive information shared in JV discussions.
Key distinctions:
- Customers identified only through confidential information
- May exclude customers already known or actively engaged with
- May include specific customer segments or accounts
- Duration should match confidentiality survival period
Two-Stage NDA Approach
For complex JV discussions, consider a staged approach with two separate NDAs:
Preliminary NDA
Standard mutual NDA for initial discussions. Share high-level information to assess strategic fit and preliminary interest. Covers general business information, market data, and conceptual discussions.
Deep-Dive / Due Diligence NDA
Enhanced NDA with JV-specific provisions for detailed due diligence. Sign before opening data rooms or sharing customer data, financials, or technical specifications. Includes clean team, standstill, and non-solicitation provisions.
Benefits of Two-Stage Approach
- Faster start: Preliminary NDA can be signed quickly to begin discussions
- Proportionate protection: Enhanced protections only when deeper sharing is needed
- Clear milestones: Signing Stage 2 NDA signals serious intent to proceed
- Negotiation efficiency: Complex provisions negotiated only when deal is likely
When JV Parties Are Competitors
Competitor joint ventures present unique challenges. Antitrust considerations, competitive sensitivities, and the risk of information misuse require careful NDA structuring.
Additional Provisions for Competitor JVs
| Provision | Non-Competitor JV | Competitor JV |
|---|---|---|
| Clean Team | Optional | Usually required |
| Pricing Information | Can be shared broadly | Strict clean team only |
| Customer Lists | Need-to-know basis | Aggregated only; no names |
| Competitive Use Ban | Standard | Enhanced with specifics |
| Antitrust Counsel | Recommended | Essential |
🔴 Antitrust Warning
Competitor joint ventures may raise antitrust concerns. Sharing pricing, cost, or customer allocation information between competitors can violate antitrust law, even under an NDA. Consult antitrust counsel before proceeding with competitor JV discussions.
If the JV Doesn't Proceed
Many JV discussions don't result in a venture. Your NDA should address what happens to shared information:
Return and Destruction Requirements
- Prompt return: All physical materials returned within specified timeframe
- Certified destruction: Written certification that digital copies are destroyed
- Backup system exceptions: Carve-out for automated backup retention (with continued confidentiality)
- Legal hold: Exception for documents required for legal purposes
Continuing Obligations
- Survival period: Confidentiality continues for specified period (typically 3-5 years)
- Non-solicitation: Employee/customer restrictions continue as specified
- Non-use: Prohibition on competitive use continues indefinitely
- Standstill: Acquisition restrictions typically expire 12-24 months after termination
JV NDA Checklist
Essential JV NDA Terms
Template Configuration
When generating an NDA for joint venture discussions, configure these settings:
| Setting | Recommended Value | Rationale |
|---|---|---|
| Type | Mutual | JVs always involve two-way sharing |
| Definition Style | Broad categories + marking | Comprehensive protection for deep-dive sharing |
| Disclosure Term | 2 years | Allows extended negotiation timeline |
| Survival Period | 5 years (trade secrets: indefinite) | Extended protection for sensitive JV information |
| Permitted Recipients | Named individuals or clean team | Tighter control for sensitive information |
| Residuals | Excluded entirely | Maximum protection for competitive information |
| Non-Solicitation | Employees + Customers | Standard for JV discussions |
| Standstill | Include if appropriate | Consider based on relative size and risk |
Next Steps
- Assess the relationship: Determine if you need standard or enhanced JV provisions
- Identify information tiers: Decide what requires clean team protection
- Consider staged approach: Use preliminary NDA for initial talks
- Draft or review NDA: Ensure all necessary provisions are included
- Implement controls: Set up clean team and information handling procedures
📝 Related Resources
Partnership Talks NDA - For standard partnership discussions
Strategic Alliance NDA - For alliance relationships
Negotiation Playbook - Strategies for JV NDA negotiation