Joint Ventures, more commonly known as “JV’s”, are not regulated by legislation.  To give a broad definition of a JV, it is an agreement/arrangement entered into by two or more companies to their mutual benefit. It is also often referred to as a “corporate partnership”. This, in the normal course, involves the sharing of resources, which may include capital; personnel; physical equipment; facilities and in some instances even intellectual property.

In many instances, JV’s are seen as the best way to expand a business with relatively low risk and with shared resources from another. 

Brief case study on Joint Ventures

In Meyer & others v Big Five Developments (Pty) Ltd (1017/17) [2018] ZASCA 136 (28 September 2018), the Supreme Court of Appeal of South Africa was faced with a question on whether the JV entered into between the parties was intertwined with elements of property development as well as the sale of land.

The court held that in order to be able to answer the question, it is necessary to interpret the agreement in order to ascertain the intention of the parties. 

In the above-mentioned case the parties concluded a JV in that the one party requested the development of the land and the other party having the resources and means to develop the land. The primary dispute of the JV was related to the validity and enforceability of the JV.

The parties entered into a JV to benefit from one anther relating to skills and development.  When it came to a claim to sell the developed land the Court held that the agreement did not make provision for the sale of land as the JV only provided for future sale of the land.

Why form a Joint Venture?

Seeing that JV’s are entered into by two or more businesses or individuals pooling their resources and expertise to achieve a particular goal, the best route is to enter into a JV.  The reasons for forming a JV include numerous benefits which every entrepreneur should consider, namely:

•  the expansion of a business;
•  gaining experience in areas individually not achievable; and
•  development of new products or moving into new markets.

Conclusion

JV’s are meant to benefit of both/all parties entering into the agreement. Important aspects such as liability should be agreed.  In many instances JV’s are the best way to develop new products or expand your business.  Each JV entered into needs to be correctly constructed by a professional.

At SchoemanLaw Inc we can assist with your JV agreement or any contractual dispute.  Furthermore, to access a basic JV every entrepreneur can visit our website at https://www.schoemanlaw.co.za/online-legal-services/ to purchase and download a basic JV to expand and grow their services and market.

Written by Beata Warnich, Schoeman Law