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Joint Venture Agreements:

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The expression "joint venture" has a loose meaning and it defines a commercial relationship between companies which is interpreted differently in different jurisdictions. However, the feature common to all meanings is that several companies participate in a single project rather than as a continuing business alliance. Thus a joint venture is a business agreement in which the two or more companies agree to develop, for a finite time, a new entity and new assets by contributing equity. They exercise control over the enterprise and consequently share revenues, expenses and assets. There are many types of joint ventures as they can be limited by guarantee and/or limited by guarantee with partners holding shares. Having professional legal advice from a Commercial Lawyer may be greatly beneficial if you are involved in a joint venture.

The joint venture may be formed for one specific, once-off project, and in this case it is more accurately described as a consortium. The consortium joint venture can be described as a co-operative agreement and is formed where one party seeks technological expertise or technical service arrangements, franchise and brand use agreements, management contracts, rental agreements and for one-time contracts. The joint venture comes to an end when a specific goal is reached. In a joint venture, both parties are invested in the project in terms of money, time, and effort to build on the original concept- this may be on an equal basis or not.  There are synergies that may be available when two companies pool their resources towards a common goal. Joint ventures can be small or large scale, at times major corporations use joint ventures in order to diversify. A joint venture allows a small company to enter into a market with high entry costs and increase the chance of success as they have the backing of a larger more established corporation. As the costs of initiating a new project is generally high, a joint venture allows both parties to share the burden of the project, as well as the resulting profits. Professional legal advice in from a Commercial Lawyer may be of great assistance in explaining all features and benefits of a joint venture.

Since joint venture involves a substantial amount of resources and staff, it is necessary to have a strategic plan in place. Thus it may be a requirement that both parties are committed to focusing on the future of the partnership, rather than just the immediate returns. In order to achieve success the partners in the joint venture need to share certain values with transparency, integrity, communication and acting in good faith with each other.  Sound legal advice from a skilled Commercial Lawyer may be advantageous to ensure that any joint venture agreement is properly drafted.

There can be an incorporated joint venture where a special-purpose company is formed by several participants to carry out a single project. There can also be unincorporated joint ventures which are liable to be held to be partnerships, so that each joint venture party is an agent of the others and can make contracts binding them. Legislation in Australia defines a joint venture agreement and has a form of partnership which is "entered into for a single adventure or undertaking".

An unincorporated joint venture is a form of joint venture between companies, and this is commonly used in the mining and petroleum industry. This is the situation where several companies contract to work together in the operation of a mine or well, but on terms that each party will sell its share of the mineral or oil separately. They intend that, because the common activity falls short of joint realisation of the product of the activity in common, there will not be a carrying on of a business for profit. The advantages they seek by distancing the arrangements from a partnership are twofold, firstly that no party will be an agent to impose liability on any other party simply because of their contract and secondly, that under income tax law each party will be treated as an independent taxpayer and not as a member of a partnership as defined by taxation law.

If you would like further information or wish to discuss your Joint Venture matter with us please do not hesitate to contact us by telephone on (02) 9233 4048 or by email to info@navado.com.au. 

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