INCORPORATED JOINT VENUTRE

Incorporated Joint Ventures

In some situations it is desirable to create a company for the specific purpose of conducting the joint venture on behalf of the joint venture partners. An incorporated joint venture will usually be constituted by the creating of a new company in which the joint venturers are shareholders and have an agreement governing the relationship between them.

Advantages of Incorporated Joint Ventures:

A corporate vehicle for an incorporated joint venture offers the following advantages to the participants:

1. The parties will usually understand and be familiar with the operation of a company;
2. A company is easier to administer because accounting will be simpler and security for borrowing can be taken easily by way of charges;
3. A company provides the best opportunity for limiting the liability of the joint venture. Even if the parties have to provide guarantees in addition to their capital contribution, those guarantees can be limited to specific amounts;
4. A transfer of a participant’s interest will involve a transfer of shares;
5. A corporate vehicle has an easily recognised management structure based on the board of directors;
6. Companies have the ability to pay franked dividends to shareholders; and other tax advantages such as the ability for tax losses incurred by companies to be carried forward.

Your client should have its Intellectual Property protected where possible or have other protection strategies in place such as confidentiality agreements and non disclosure agreements. This should be done before detailed discussions with potential partners and disclosure of trade secrets and know-how. Maintain confidentiality arrangements with all parties.

Always be aware of who your client is. This is particularly important when asked to create an incorporated joint venture. If you are asked to act for the newly incorporated joint venture company remember to enter into a new fee agreement and costs disclosure and check for any conflict of interest.