The term ‘joint venture’ is a label for a variety of forms of legal association between investors. There is no legal definition of what constitutes a joint venture. Joint venture structures in Australia are many and varied. There are three relatively common variations. Any of those may be used exclusively or as a part of a hybrid arrangement to achieve the objectives of participants in a joint venture. The structure adopted for a joint venture will be influenced by the nature of the business of the joint venture and the assets to be acquired and the aims and strategies of the joint venture participants.

Practice area overview

Documentation for a joint venture can be complex, and also involve a number of ancillary contracts between the joint venture and other persons including particular participants who may undertake part of the activities of the joint venture (e.g. market and sales), it is often advisable for each participant to obtain independent legal advice to ensure that the documentation prepared is adequate to reasonably protect its interests.

Whilst joint venture structures are many and varied, there are three relatively common variations:

‘Incorporated joint venture’ (JV Company) – where a company is the vehicle for the conduct of the business;

‘Unincorporated joint venture’ (UJV) – which is a contractual association of investors which lacks both corporate form and equity capital and which may be a partnership for partnership or taxation purposes, or not;

‘Unit trusts’ (JV Trust) – where:

  • the beneficial interest in the (trust) property in the joint venture is divided into units which may be separately dealt with; and
  • usually a company acts as a trustee and manager of the (trust) property in the joint venture.

 

What we do

As a joint venture has a number of participants we can provide our services either to the joint venture itself or to you as a participant in the joint venture. We can:

  • Act for the joint venture in preparing joint venture documentation or review documentation for a particular participant in the joint venture.
  • Advise you on the features and benefits of a joint venture for you as opposed to other business entities and structures.
  • Write a joint venture agreements and associated documentation to meet your requirements.
  • Advise and write for you procedures & documents required for management of your joint venture.
  • Advise you on & implement subsequent amendments to your joint venture agreement.
  • Advise you as to the rights and obligations of the joint venture participants.
  • Advise you as to the rights and obligations of the operator of the joint venture.
Incorporated joint ventures: An incorporated joint venture exists when a company (JV Company) is used to carry on the business of the joint venture participants who are shareholders in the JV Company. The taxation implications of this form of joint venture (assuming it to be resident in Australia for tax purposes) are the same as for an Australian company.

Unincorporated joint ventures: An un-incorporated joint venture is a contractual association of investors. By its contractual nature it lacks both corporate form and equity capital and may be a partnership for purposes or partnership legislation, or not. If it is not a partnership for taxation purposes, no partnership tax return is required and each joint venturer must lodge a separate tax return and may adopt a differing tax treatment for the income and expenses referable to its share of the joint venture business.

Unit Trusts: A unit trust is a form of trust document where:
The beneficial interest in the (trust) property in the joint venture is divided into units which may be dealt with separately.
Usually a company acts as a trustee and manager of the (trust) property in the joint venture.

Overseas joint venture participants: Various options are available to overseas joint venture participants:

The acquisition of the business by a JV Company (as the legal and beneficial owner of the business) with the buyer and seller being the shareholders in that JV Company.

The acquisition of the business by a JV Trust with the Australian participant and the overseas participant being unit holders in the JV Trust and shareholders in a JV Company that acts as trustee for the unit holders in the JV Trust.

If the business is already is already in existence, the buyer (or its associate) can acquire a half share in the assets of the business. If that structure is adopted the buyer and the seller then own the assets comprising the business as tenants in common in the agreed shares. The business can then be managed by a JV Company (in which the buyer and seller are shareholders) either in its own right or as a trustee for a JV Trust (in which the participants are the unit holders).

The acquisition by the buyer of an interest in the business entity which currently conducts the business (which could be a company, trust, partnership or joint venture. This may occur by purchase of or subscription for equity in that business entity.

Related Practice Areas


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