A Joint Venture is a term used to describe an association of persons (including companies) for particular trading, commercial, mining, or other financial undertakings or endeavors with a view to mutual profit. Generally speaking the two (or more) parties come together for a particular project rather than going into business together as its main business.
An example of a Joint Venture is Sony Ericsson, where a Japanese consumer electronics company Sony Corporation and the Swedish telecommunications company Ericsson decided to manufacture mobile phones together. Both companies still operate in their main fields (i.e. consumer electronics and telecommunications) separately.
Joint Ventures are not governed by a particular legislation unlike other forms of combining forces with others. For example, partnerships are governed by the Partnership Act, and companies are governed by the Corporations Act. This means that the nature of the particular joint venture (such as how profit is divided, responsibilities of each party, and roles of each party) will purely rely on what the parties have decided.
Therefore it is extremely important to document such an agreement to avoid conflict in the future. This document that reduces the agreement in writing is usually referred to as a Joint Venture Agreement or “JVA” for short. It is extremely important to get this document right, as the words recorded on the agreement will be binding on the parties even if it was poorly drafted and did not accurately reflect your intention.
Joint Ventures are usually different from taking on investors, as parties to the Joint Venture will usually all have skills to contribute as well as capital.
There are various ways to form a Joint Venture. For example, you may wish to incorporate a separate company which will operate the joint venture with the shares owned by each party, or create a trust. What entity to choose will depend on various aspects of the business and should be selected carefully after obtaining legal and accounting advice.
Prime Lawyers can assist you in:
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Advising whether a joint venture is the correct structure for you and your business partner.
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Drafting the Joint Venture Agreement.
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Varying the already existing Joint Venture Agreement to better suit your needs (which may have changed over the years);
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Assist you in dealing with conflicts arising out of a Joint Venture.
If you require advice in relation to a Joint Venture, call us now on (02) 9521 2222 and speak with one of our commercial lawyers. You can also send your enquiry online now and we will call you shortly.