The business world is a story of strategic alliances. Few entrepreneurs reach the highest spheres without surrounding themselves with qualified partners. However, not all partnerships are made to last and sometimes associations are only concluded on a temporary basis. Which business structure is best suited to such commercial situations?
The joint venture, without a doubt! This is an avenue underestimated by many entrepreneurs while it turns out that many partnerships concluded in this form would benefit. Do you want to associate your company with another to accomplish a specific project that requires the mobilization of significant resources?
Look no further, JuriGo has the solution for you, the joint venture also called the "Joint Venture"! See how your commercial affairs could benefit from such a legal structure!
What is a joint venture in Quebec?
The joint venture is an unnamed contract in the Civil Code of Quebec. This means that it is not the subject of specific framing and that it is framed by different provisions of the law, notably those concerning partnerships.
However, in all cases it is recognized that this is a contractual business agreement concluded between two or more companies with the aim of achieving a common goal. The joint venture is therefore a collaboration agreement between companies that allows each of the participating entities to maintain its independence and individuality.
The joint venture does not even have a separate legal personality! Indeed, unlike a corporation which has a legal personality under the Civil Code, a joint venture, even if it can be formed by two corporations, does not have such power. It does, however, have a contractual power that allows it to sign agreements on behalf of the joint venture, but the members of it remain personally liable for the debts.
When a dispute arises, the courts will assimilate, in many cases, the joint venture to a partnership contract. Not being governed by any specific provision, the joint venture must be subject to the various provisions of the Civil Code applicable in the circumstances and in most cases, it will be the articles on partnerships.
Interested in such a business alliance? See the formation conditions to be met in order to provide a complete, solid agreement that respects the rights of all companies involved in the joint venture.
What conditions to form a "joint venture"? Plan a solid agreement!
The joint venture can be formed by several individuals or several corporations. Indeed, two individual businesses or even two incorporated companies can join forces to form a joint venture, but certain major principles should still be respected!
Writing a detailed joint venture contract is the starting point of a successful and safe association for all involved partners. This contract forms the basis of the agreement between the joint-venture companies and will serve as law between them in case of disagreement. For this reason, the contract should contain the following provisions!
The purpose of the joint venture. The interpretation and application of a contract are both guided by the intention of the parties. Stating the aim of the joint venture from the outset allows the parties to maintain a specific direction throughout the partnership, in addition to constituting an element of interpretation in case of dispute or disagreement.
The contribution and rights of the parties. Pooling is the principle at the base of a joint venture. The contract should therefore clearly stipulate the contribution in money, in time, in resources and in knowledge provided by each of the companies. The rights of each of them should also be stipulated with regard to the contribution and the actions they are authorized to take.
Sharing of gains and debts. Will the responsibility for the joint venture's debts be joint or several? Will each benefit in equal proportion from the profits of the joint venture? Contractual freedom allows you to provide what you want by mutual agreement with your associate company. The proportion of the sharing of revenues and losses is one of the most important provisions of a joint venture contract.
Name the managers or administrators of the joint venture. As a new "temporary" entity is formed by the establishment of a joint venture, it may be useful and even necessary to appoint managers and administrators responsible for carrying out the project. The powers and duties of these individuals must once again be specified in the joint venture contract.
Provide a dispute resolution mechanism. All companies involved in the joint venture have an interest in providing a mediation or commercial arbitration clause. Indeed, such a provision will avoid (and prevent) resorting to judicial courts in case of conflict, which will prevent a legal saga generating delays and exorbitant costs.
Stipulate a non-competition clause. The joint venture aims at the realization of a specific business project. The least of the protections is to prevent the other party from leaving without reason to another company to accomplish the same project, isn't it? This is precisely the effect that the commercial non-competition clause will have!
The duration is generally determined. As the joint venture often has a temporary objective, it is common for the parties to the agreement to stipulate a specific duration or even a date for revising the agreement. This will allow both companies to assess whether or not it is worth continuing this commercial venture.
The use of the joint venture's intellectual property must be planned. If the joint venture develops new trademarks or obtains a patent, to whom will these rights belong in case of termination of the contract? This must be provided for in the joint venture contract!
The termination conditions. Some marriages don't last forever and the same goes for the joint venture. It is therefore imperative to clearly stipulate the terms of termination of the agreement. The timing, the conditions, the circumstances and the applicable penalties, if any, must be clearly provided for.
What are the elements to check and avoid before forming a joint venture!
Even though a joint venture is a contractual agreement, you are still investing significant financial resources in it. Therefore, it is time for due diligence before officially launching into such an agreement. What are the elements that you should scrutinize before involving your company in such an association?
Market analysis is a must! This step is specific to each field of commercial activity, but you have every interest in conducting this study in order to check the market power held by your competitors and by your potential associates within the joint venture.
Checking the solvency and background of partners is another excellent precaution! Even if your new partner's debts will never become yours by forming a company contract, the fact remains that your joint venture project will die in the bud if your partner has to file for bankruptcy protection. This can cause significant financial losses for your company as well, so check the financial statements before signing!
Everything you need to avoid when partnering with another company. The important thing is not to forget to protect the interests of your own company! This includes not only due diligence checks, but also planning for exit strategies, withdrawal conditions and non-competition clauses.
Forming a joint venture involves pooling significant financial contributions from both sides. Protect them adequately with the right legal mechanisms.
What are the benefits of forming a joint venture?
Why not simply establish a new corporation to realize the business project you have in mind? What is the benefit of concluding an official agreement between two companies while keeping each entity separate? Here are the undeniable advantages of forming a joint venture with a lawyer in Quebec!
Establish strategic alliances.
In war as in the business world, success lies in the quality of the alliances formed. Forming a "joint venture" is a way for you to ally, temporarily or permanently, with companies with whom you share common interests.
Facilitate the development of large-scale projects.
The start-up phase of a company is one of the longest and most complex in the life of a company. Forming a joint venture somewhat allows you to "skip" this step and quickly move on to the development of the project with the help of another company.
Combining several areas of expertise.
Is your company operating in a highly specialized market? The joint venture is your opportunity to collaborate with other experts in this field in order to achieve your business objective. These same experts will indeed be more inclined to collaborate in the form of a joint venture, as it allows everyone to maintain their independence.
A simple entity to form, and to dissolve.
The joint venture is a company structure in contractual form. This means that it ends when the termination conditions provided in the contract are met or by agreement of the parties. It is therefore much easier to end such an agreement than an incorporated company.
The possibility of transforming the joint venture into a corporation!
Is your joint venture project a success and you have achieved all the set objectives? Nothing prevents you from formalizing this "commercial marriage" by forming a new company in the form of a corporation or by merging the two existing companies. From here, the possibilities are very numerous!
Should you consult a business lawyer to form a joint venture?
Absolutely! Verbal agreements and ones written on a corner of a table all lead to the same place: commercial litigation. It's one thing for a business partnership to fail, but it's certainly another for it to end in a legal saga between the associated companies. The role of the business lawyer consulted for a joint venture case will be to:
Proceed with due diligence. Are the companies involved in the joint venture contract solvent? Are these companies facing legal problems or unpaid creditors. What is the reputation of these same companies? An answer should be obtained for each of these questions.
Writing contracts. A contract always seems clear until the parties are faced with a conflict. A worthy lawyer will draft a comprehensive and above all clear joint venture agreement to eliminate any possible ambiguity. The same will be true for non-competition clauses and other contracts ancillary to the agreement.
**Representing your interests during negotiations.**A joint venture can involve two or even several companies. Therefore, there are several sometimes diverging interests that are likely to be around the same table, and your lawyer will negotiate in your favor for a fair agreement.
The protection of the legal and financial interests of your company is achieved through the services of an experienced business law attorney. Find such a legal professional among the partners of JuriGo!
JuriGo finds the best lawyer to establish your joint venture in Quebec!
The establishment of a joint venture may be less formal than that of a corporation, but it still requires advanced legal expertise! The interests of several companies are at stake in such an association and it is therefore essential to protect them through a contract clearly written by a legal professional.
Are you looking for a business and commercial law lawyer to set up a joint venture? JuriGo has the solution to find such a specialist faster than ever!
Fill out our form at the bottom of the page and you will be put in contact for free with a business law lawyer for the establishment of a joint venture. This does not commit you to anything, so what are you waiting for to contact us!