Joint Venture Agreement

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At a Glance

Joint Venture Agreement

This Joint Venture Agreement Template is designed for two or more parties entering into a project-based joint venture. It defines their respective rights, responsibilities, and liabilities while regulating the management of the joint venture.

What This Agreement Covers

• Definitions, commencement date, and scope of the joint venture
• Obligations of each party and allocation of responsibilities
• Division of profits, losses, and capital contributions
• Establishment of a management committee and voting rules
• Appointment of a project manager and delegation of authority
• Financing arrangements and consequences of default on contributions
• Books of account, audits, and financial reporting
• Restrictions on transfer of interests without consent
• Indemnity provisions between joint venturers
• Distribution of proceeds after completion
• Default, dissolution, and termination provisions
• Governing law, notices, and binding effect

 

Why Use This Template?

• Provides a clear legal framework for collaborative projects
• Protects the rights of each party and limits liability
• Ensures proper management through a committee and voting rules
• Allocates profits, losses, and capital contributions fairly
• Includes safeguards on default, restrictions, and indemnities
• Easy to edit, customise, and implement

Suitable For

This precedent is ideal for businesses undertaking a specific project together where parties wish to share resources and profits but remain independent, without forming a partnership or company.

INCLUDES

Included

  • Meetings of the management committee
  • Voting rights of joint venturers
  • Decision making procedures
  • Appointment of a project manager
  • Mutual indemnity
  • Winding up of the joint venture.
  • apportionment of profits and losses.

Most variables are contained in a Schedule to the agreement for ease of drafting.

The term “joint venture” is commonly used but its meaning is not precise. The term “joint venture” generally refers to undertakings that may or may not use incorporated structures, and, rely on a contract to govern the relationship of the parties.

When two or more parties join forces for the purpose of one specific business venture it is called a joint venture. The parties can be individuals or companies. Joint ventures are different from other business structures as they are designed to be transient as distinct from an ongoing arrangement such as a partnership. A good joint venture agreement will govern and protect the rights of each party and their capital. Joint venture agreements often seek to exclude the operation of laws which relate specifically to partnerships. This is because partnerships can be deemed to exist. Including provisions in the agreement which expressly negative this intention can be crucial in avoiding the imputation of a partnership arrangement where none was intended.

The term “joint venture” refers to the purpose of the relationship and not to a type of legal entity. A joint venture may be a corporation (incorporated joint venture), a partnership, trust or other legal structure.

Joint ventures are formed by the parties entering into an agreement that specifies their mutual responsibilities and goals in a project. A written contract is crucial. All joint ventures also involve certain rights and duties. Some joint ventures are begun by creating a new company. Such an enterprise is called an incorporated joint venture.

A Joint Venture Agreement sets out the contractual arrangements between the parties. As such, it documents the roles, responsibilities and obligations of each party and because the control of operations is likely to be an important contributing factor to the success of the joint venture, the management structures and decision.

 

 

 

Unincorporated Joint Ventures

An unincorporated joint venture will usually have the following features:

  • The parties co-operate in order to pursue a particular business enterprise for a limited period rather than a series of such enterprises for an indefinite period;
  • Each party owns an interest in the assets of the business activity;
  • Each party will usually contribute funds for the purposes of the joint venture, and will be entitled to deal with a share of the product of the joint venture, in proportion to its joint venture interest;
  • No party is an agent or partner of the other participants;
  • The liability of the parties to third parties is several rather than joint;
  • The management of the business activity is conducted by one of the joint venture parties, a jointly owned company or, a committee;
  • The parties agree that the relationship between them is that of joint venturers and not a partnership.

Advantages of unincorporated Joint Ventures

  1. The ability of each party to finance its participation in the joint venture in the manner most convenient to it. This is particularly useful where the respective participants have different levels of assets and financial sophistication;
  2. The possibility of offsetting losses against the assessable income of each party;
  3. The flexibility for each party to treat its interest in the joint venture assets in accordance with its preferred accounting procedure;
  4. The absence of the need to agree on a common dividend policy as in the case of an incorporated joint venture; and
  5. The ability of each party to separately take and dispose of the product produced by the joint venture.

 

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