The NFUS Joint Venture Hub: Match-Making for a New Agricultural Future
by Stuart Greenwood, Hamish Lean, Stuart Greenwood
Published: December, 2018
Submission: January, 2019
One of the possible vehicles for pursuing a joint venture is by entering into a share farming agreement.
In a typical share farming agreement, an existing farmer or landowner enters into a joint venture with someone who typically has agricultural skills and experience but doesn’t have access to land in order to farm the land together for profit.
Each party conducts a separate business and contributes their own inputs with the overall profit of the joint venture being apportioned between them according to their contribution.
The parties need to be careful that they are not entering into a partnership with all of the consequences of joint and several liability. This is best achieved by having a suitable share farming agreement drawn up, confirming their status as independent businesses, specifying what their respective contributions to the joint venture will be, and detailing how the profit will be split between them.
Share Farming is a relatively new concept to the industry in Scotland and it’s vitally important that parties get proper advice on the terms and conditions of any agreement.
In most cases it will also be necessary for a designated bank account to be opened and operated by one of the parties, from which outputs can be paid and inputs received, and from which profit shares will be paid at agreed intervals.
From a new entrant’s point of view, they will require some form of comfort on the creditworthiness of the other party to the share farming agreement. Any agreement should have a dispute resolution clause and should also provide for the new entrant to be able to withdraw capital at the end of the arrangement.
The new entrant will also want to be sure about the length of the share farming agreement. The fundamental basis of these commercial relationships will be a high level of trust and confidence between the parties, and a thorough understanding and a frank appreciation of the risks involved. Without these elements, the enterprise is unlikely to be successful.
The NFUS Joint Venture Hub is a means of introducing people to one another but it’s for them to seek advice and enter into the arrangements that suit them and their own circumstances. The Hub has no part to play in that.
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