Joint Venture Agreements Canada

Joint Venture Agreements Canada

Joint ventures allow you to explore opportunities outside your area of expertise. A joint venture agreement will protect members’ assets and interests.

A joint venture (JV) is a business arrangement where two or more separate business entities combine resources and expertise to start a mutually beneficial business project. The different parties in the joint venture, which may be a partnership business, corporation, or trust, however, retain their separate legal statuses.
Under a joint venture, members come together for a specific purpose and not to ‘run a business in common’ as happens under a business partnership. Members also retain full ownership of the assets they bring to the joint venture.
The consummation of a joint venture does not mean a member now assumes an ownership stake in the other’s business. Each remains a separate and distinct business. The joint venture itself can take the form of a simple contract or it can be registered as a business partnership or corporation.
That said, the JV requires a separate agreement that sets out what it sets out to do and what individual members’ obligations and benefits are. That agreement must be drafted with the advice of a business lawyer with requisite experience.

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    Why A Joint Venture Business Model Might Make Sense To You

    A joint venture allows members to exploit opportunities they would otherwise not be able to individually, either because of a lack of technical expertise, capacity, or market access.
    Another attraction is individual members can still retain their independence and original brand identities since the JV is only set up to achieve a single, specific, and mutually beneficial purpose. When it no longer serves its purpose or at the conclusion of its pre-defined term, the JV terminates.
    However, because each of the members remain separate entities, it is essential to have a legally binding joint venture agreement that clearly sets the terms of the joint venture, including:
    How the joint venture will be funded What each member brings to the JV and what their responsibilities are How decisions will be made and who will make them How profits and losses will be shared among members Whose responsibility it is to manage the finances and business accounts, Whether the JV will have its own staff and what its makeup will be, How the JV will be concluded and how confidential intellectual information will be handled.
    Clearly, the potential for conflict where separate business entities that exist to maximize financial gain come together is high. The only way to protect members’ interests is to have a detailed JV agreement in place.
    Your joint venture agreement has to take into account the type of the joint venture itself as the legislation that governs the different joint venture types differs. Contractual JVs are governed by contractual law, which will also differ depending on the Canadian province the JV will be set up.
    In the case of a corporate JV, the joint venture itself becomes a separate corporation, with individual members owning shares. Its governance is determined by the company’s Articles of Association and the corporate laws in the province or territory where the JV is incorporated.
    For partnership JVs the provincial or territorial laws governing partnerships apply. So, to achieve your JV’s set goals, you need the help of an experienced business lawyer to draft a joint venture agreement that stands up to the scrutiny of the law and which satisfies the wishes and interests of every member in the joint venture.

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