Overview Joint ventures are a means by which companies and businesses undertake activities and projects jointly. They may be undertaken when a project is beyond the capacity of an individual company. They are particularly important in the cross-border context and may provide opportunities for a company to enter into new markets and industries. The terms of a joint venture are entirely a […]
Broad Types Joint ventures may take different forms. It may comprise a contractual arrangement. The most common form involves the formation of a new company with shareholdings for the participators. There is invariably a joint venture / shareholders agreement which sets out the terms and conditions of their arrangement. Joint ventures range from a short-term arrangement relating to a particular tender and […]
Minority Protection The issue of minority protection arises in joint ventures in common with other shareholder agreements and arrangements. The most obvious example of where protection is required by the minority is where one joint venture shareholder has the majority of shares. In this case, the majority shareholder could assume complete control of the joint venture entity in the absence […]
General Considerations There will be some form of joint venture agreement between the principal parties. It will usually be formal and negotiated. There is a range of relatively standard forms, particularly in the fields of construction and engineering. Practical consideration must be given to the following issues. the identity of the participants; the apportionment of responsibilities between the parties; the […]
Management Structures The appropriate management structure for a joint venture will depend on the circumstances and the respective shares in the company held by the joint venture parties. Commonly, joint ventures are organised on a 50-50 basis with equal voting and representational rights. Most matters require the agreement of both parties. There may be a joint venture with a majority […]
Funding The means of funding the joint venture will be determined by the financial requirements, the legal joint venture structure chosen and tax considerations. In the case of a contractual joint venture, each party may be simply responsible for a particular proportion of the cost and expenditure. There may be provisions for a joint account with obligations for the parties […]
Exit Mechanism A joint venture agreement will commonly provide for an exit mechanism which is designed primarily to deal with the disposal and realisation of assets at the conclusion of the joint venture. Joint venture agreements are usually based on mutual trust and the personal or entity-specific capacity and characteristics of the other parties. For this reason, the premature transfer […]
Transfer of Assets on Formation; Taxes for Transferor Taxation considerations are important and often critical in the choice of joint venture structure. They are particularly important and complex in the case of international joint ventures where more than two legal and tax systems may apply. There may be tax issues upon the establishment of the joint venture. The contribution of […]
Particular Risks A joint venture may be established by parties from different jurisdictions. This may involve a company with a proprietary brand or product entering a market abroad with a local joint venture “partner” who is already established in the latter state. An international joint venture may involve two or more parties, perhaps from one or more states, undertaking a […]
Technology Transfer or Pooling There may be a transfer of technology by one or other party or both parties for the purpose of the venture.There may be a transfer or licensing of intellectual property rights where one party is bringing intellectual property and technology to the venture. There may be a pooling of technology. Technology transfers commonly arise when an entity […]