ADVICE ON JOINT VENTURES AND PARTNERSHIPS

JOINT VENTURE LAWYERS YOU CAN TRUST

If you are about to start a new business activity or a new project with a business partner, it is important to ensure your approach maximises the benefits for both you and your business. With a joint venture agreement or partnership, you can establish clear guidelines, responsibilities, and expectations for all parties involved, setting the stage for a successful collaboration that advances your collective business goals.

At GLG Legal, we can help you navigate such agreements and understand your rights and obligations within them. Our joint venture agreements lawyers have years of experience across multiple industries handling matters of this type.

What Is A Joint Venture?

Joint ventures have not been defined under the Australian common law, however, they do exhibit certain characteristics which enable us to identify whether a business structure is a joint venture and (if so) what type of joint venture it is. Generally, what is considered to be a joint venture is a business arrangement in which two or more parties (usually companies or entities) collaborate to undertake a specific project, venture or business activity. The joint venture parties normally pool their resources, expertise and capital to achieve their goal, while still keeping their separate legal identities and ownership.

Joint ventures often involve careful negotiations and a clear delineation of responsibilities, which can be particularly crucial when company directors from different organisations come together to pursue common objectives under a contractual agreement.

Joint ventures can either be incorporated or unincorporated. The one that you select will depend on a variety of factors.

What Is An Incorporated Joint Venture?

An incorporated joint venture structure is characteristically evident whereby a separate legal entity has been established and incorporated for the sole purpose of undertaking a specific project or business activity. The main advantage in choosing an incorporated joint venture is that it will be able to hold and sell its own assets, sue and be sued, and contractually bind itself. Furthermore, being a separate legal entity means that it separates the new business from any of your other businesses which may be advantageous depending on your circumstances.

Incorporated joint ventures are required to fulfil additional duties such as financial reporting and administration which may become onerous depending on the size of the project or business activities that you are undertaking.

What Is An Unincorporated Joint Venture?

An unincorporated joint venture (also known as a contractual joint venture) is usually created by members of the joint venture agreeing to cooperate in relation to a business activity or project undertaking in accordance with a contract. An unincorporated joint venture will not create a separate legal entity. It is important that the shareholders agreement is drafted carefully as some unincorporated joint ventures can be interpreted as partnerships.

What Is A Partnership?

A partnership is defined as a relationship between two or more individuals or companies who carry on a common business with the view to profit. A partnership will be formed and governed by the partnership agreement and the Partnership Act 1891 (Qld). There is also a great deal of common law that discusses partnership agreements and how the different sources of law interact when interpreting partnership matters.

A partnership comes with many legal and fiduciary obligations for the partners, so it is important that your partnership agreement has been drafted carefully and that you have received independent legal advice on this shareholder agreement in relation to your own interests.

What Is The Difference Between A Partnership And An Unincorporated Joint Venture?

One of the main differences between a partnership and an unincorporated venture is that members of an unincorporated joint venture will hold their interests, liabilities, and entitlements in the joint venture separately. In a partnership, the interests, liabilities, and entitlements are held jointly by the parties involved.

Furthermore, another difference between these business structures is often the purpose for the creation of them. A partnership comes with many legal and fiduciary obligations so it is often the case that people choosing to form a joint venture are choosing this on the basis to avoid the creation of a partnership.

Unit Trust Joint Venture

A unique method to establish a joint venture is by using a private unit trust as the foundation for the joint venture arrangement. It is important that the unit trust is private as this will avoid any public trust obligations under the Corporations Act 2001.

A unit trust joint venture can be used as the framework for a joint venture because the beneficiaries’ interests are divided into units. Therefore, the joint venture members will be able to hold units in proportion to their interest in the joint venture.

Using a unit trust as the framework for a joint venture is often a complex task that will require legal advice to ensure that it is done properly

Conclusion

If you are thinking about establishing a joint venture or a partnership and you are not certain which business structure is the most appropriate for your business venture, we highly recommend contacting our office where one of our expert lawyers will be able to guide you through the different structures and highlight the benefits that these business structures can offer to you.