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.