Joint Venture
11. Establishment
Authors: Staff Legal Eagle
Firm / Chambers:
Last updated: 10 Aug 2015
- Once you have decided that a joint venture is the best way for you to combine skills and resources to achieve your commercial goals you will need to go about setting up and establishing your joint venture.
- Getting the terms of the joint venture right from the beginning can avoid unnecessary disputes down the track. As contract law is the main body of law regulating joint venture relationships the agreement is the document on which your individual and combined success relies.
- There are a number of considerations to keep in mind when drafting a joint venture agreement. For example you will normally need to include provisions that:
- clarify all rights and responsibilities of participants including the fact that these are several and not joint;
- specify the situations in which participants may act as agents for each other if any;
- clarify whether the participants have the right to share in the product that results from the venture in proportion to their percentage interest or in any other amount;
- specify the daily operations and tasks of the joint venture and how these are to be managed by the participants;
- specify whether the joint venture is to be conducted by the participants or by a jointly appointed manager or third party;
- specify whether dealings must be entered into under the names of all participants or whether the participants will appoint an agent;
- clarify how any joint property is to be held between the participants;
- explicitly deny the intention to establish a partnership between participants;
- specify how interests can be transferred between participants or to new participants; and
- specify whether the parties intend to be in a fiduciary relationship with each other or whether they want to contract out of these obligations.
- The joint venture document is a risk minimisation document. It is also the key to success. Participants in a joint venture need to be sure that the expected benefit will outweigh any potential disadvantages. The agreement should seek to maximise the chances of success and minimise the potential for roadblocks that would prevent the venture coming to fruition.
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