Comprehensive Report on Joint Ventures: Legal Aspects in Australia

This report provides a comprehensive overview of joint ventures, starting with a definition of mining joint ventures and their significance for raising funds in the mining industry. It distinguishes between incorporated and unincorporated joint ventures, highlighting their respective characteristics. The report then delves into the legal definition of a joint venture, emphasizing the responsibilities and contributions of each participant. Different forms of joint ventures, such as limited co-operation, separate joint venture businesses, and business partnerships, are explored, noting the importance of selecting the appropriate form based on business objectives. Finally, the report addresses the legal aspects of joint ventures in Australia, noting the absence of specific laws governing them and their subjection to general legal rules and legislation, including corporate and competition laws. The role of nominee directors and the termination of corporate joint ventures are also discussed. Desklib offers this and many more solved assignments for students.

RUNNING HEAD: Joint Venture
Joint Venture

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Contents
Mining Joint Venture.......................................................................................................................2
Legal Definition of a Joint Venture.................................................................................................3
Forms of Joint Venture....................................................................................................................4
Legal Aspects of a Joint Venture in Australia.................................................................................5
Bibliography....................................................................................................................................7

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Mining Joint Venture
Mining Joint Venture can be defined as the joint venture agreements used for the purpose of
exploring and developing the mining sites by the joint venture partners. It is one of the most
popular forms for small minors for raising funds for developing green and brownfield mining
projects1. Mining joint ventures requires the incoming party to farm- in along with making the
payment of pre- agreed exploration expenditure for its ownership interest. It provides the owner
of the mining tenements with expertise, valuable capital along with guaranteed market for
products in few cases2.
Nowadays, the falling prices of the commodities, lack of competitive finance along with the
sufferings of mining companies from high levels of debt has resulted in the financial struggle for
the mining companies. However, in order to fight with non- availability of credit and high costs,
joint ventures are considered by the miners for the purpose of developing the projects3.
In case of incorporated joint venture, the project is undertaken by an association of participants
for a separate legal entity. Therefore, all the characteristics of an incorporated entity are born by
incorporated joint venture. The participants of the joint venture i.e. the shareholders, receive
dividends as a result of sale of the mining products and not from the sale of the product itself. In
the same way, unincorporated joint venture is based on the contractual relationship among the
participants of the joint venture. No separate legal identity is possessed by an unincorporated
joint venture. Only some of the mining expenditures are offered tax deductibility along with the
potential for the offsetting of tax losses against assessable income in the starting stages of
mining.
1 Charltons, Mining Joint Venture Agreements, <https://charltonsnaturalresources.com/en/joint-venture-
agreements>.
2 Richard W. Roeder, Foreign Mining Investment Law: The Cases of Australia, South Africa and Colombia
(Springer, 2016) 37.
3 G. Jaenickle, A Joint Venture Agreement for Seabed Mining (Springer Science & Business Media,
2013) 36.

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Legal Definition of a Joint Venture
A joint venture can be defined as a legal organization in which transactions are undertaken by
persons jointly for mutual profit where such an organization is in the form of short term
partnership4. In case of a joint venture, each person is responsible for the purpose of contributing
towards the assets along with the sharing of risks. The “persons” involved in a joint venture can
be companies, corporations, individuals and even group of individuals. All the types of business
transactions are involved in a joint venture just like in the case of partnerships. Entrance into the
foreign markets are gained by the companies by entering into joint ventures with the domestic
companies already present in those markets where the foreign companies are planning to enter.
New technologies and business practices are generally brought about by the foreign companies
into the joint venture5. At the same time, the domestic companies make the use of its already
established relationships and the required governmental documents.
The existence of a joint venture is for a limited period typically for 5- 7 years. It enables the
organizations to share all the costs and risks thereby making it an attractive option. The
companies are provided with opportunities for the purpose of obtaining new capacity and
expertise thereby resulting in the development of new products. Specific projects are kept in
mind before creating joint ventures and are dissolved once the purpose for which it is created is
completed. Exposure to complete legal liability is faced by the members of the joint venture.
Joint ventures are treated in the same way partnerships are treated for the purpose of federal
income tax6.
Legal procedures are required to be completed for the formation of joint ventures by creating a
joint venture agreement, memorandum of understanding, obtaining regulatory approval and other
ancillary agreements.
4 WD Duncan, Joint Ventures Law in Australia: 3rd Edition (Federation Press, 2012) 2.
5 Australasian Legal Information Institute, Joint Ventures,
<http://www5.austlii.edu.au/au/journals/AURELawJl/2003/52.pdf>.
6 Not-for-profit Law, Joint Ventures and Partnerships, https://www.nfplaw.org.au/partnerships>.

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Forms of Joint Venture
A joint venture can take any of the three forms. The form of joint venture is dependent upon the
objectives to be achieved by the business through the joint venture. Following are the common
forms of joint venture:
Limited Co- operation- when one business co- operate with other business in a specific and
limited way then it is known as limited co- operation. For example, the new products of a small
business can be sold by utilizing the larger distribution network of a company. The terms and
conditions of a contract can be agreed upon by the two partners regarding the working of the
joint venture.
Separate Joint Venture Business- In case of a separate joint venture business, new company is
established for the purpose of handling a particular contract. Such a joint venture company works
as a very flexible option. The shares are held by all the partners in the company and its
management is agreed upon by all of them.
Business Partnerships- in some cases, limited company may not proof to be a suitable option
while the other options appear to be favorable. Limited liability partnerships or business
partnerships can be formed. Even decision regarding the merging of two businesses can proof to
be a good option.
Therefore, selection regarding the right form of business is essential for the purpose of managing
the business along with the associated risks. The selection is based on the desire for getting
involved in the management of the business.
The identification of the suitable option should be made by obtaining appropriate legal advice7.
Such legal advice assists in identifying the ways of running business along with the sharing of
profits and taxation.
Legal Aspects of a Joint Venture in Australia
In Australia, there is no specific law that governs the Joint Ventures. Therefore, the joint
ventures are subject to a mixture of general rules and legislation of law with regard to the
7 Legal Vision, What Are The Legal Considerations For A Joint Venture?, (15 September 2015)
https://legalvision.com.au/legal-considerations-for-a-joint-venture/.

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contract and agency law, corporate law, commercial and trade law, competition, taxation and
other regulatory aspects8.
There is no settled meaning of the term “joint venture” in the Australian law, however, the term
has been defined in some Commonwealth statutes. Joint venture can be briefly defined as a
commercial arrangement among economically independent entities which executes the business
undertaking by taking a number of legal forms.
All the corporate laws of Australia are applicable to the incorporated joint ventures including
Corporations Act 2001, Competition and Consumer Act 2010, Foreign Acquisitions and
Takeovers Act 1975, Australian Securities and Investments Commissions Act 2001 and Listing
rules of the Australian Securities Exchange (ASX Listing Rules).
Corporate and contractual joint ventures can be used depending upon the legal, commercial and
taxation requirements of the participants. Australian Joint Venture projects can obtain foreign
participation by making the participants notify FIRB in case of certain transactions thereby
obtaining clearance before proceeding further.
The legality and enforceability of some anti- competitive provisions creates some issues, for
example, primary and secondary boycotting requirements/ provisions and joint marketing.
Unless the clauses regarding joint decisions on acquisition, price or output are permitted under
the Competition and Consumer Act 2010 (CCA) or otherwise authorized by the Australian
Competition and Consumer Commission (ACCC), they are strictly illegal. The defenses for the
conduct of joint venture are provided by CCA but the joint venture clause is required to comply
with the requirements of defense9.
The directors are appointed in the joint venture company for the purpose of representing the
interests of the participants. This leads to the legal requirement for the nominee directors to act in
the interests of the company as a whole and not in the interests of their nominator.
8 Giamatteo Nunziante, Joint Ventures (Sweet & Maxwell, 2012) 15.
9 Luis Morals, Joint Ventures and EU Competition Law (Bloomsbury Publishing, 2013) 133.

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Moreover, the termination of a corporate joint venture includes the circumstances and manner
covered in detail in the joint venture shareholders’ agreement. Cessation of the business and the
winding up of the joint venture company is not included in the termination of joint venture10.
10 Practical Law, Joint ventures in Australia: overview , https://uk.practicallaw.thomsonreuters.com/0-616-8149?
transitionType=Default&contextData=(sc.Default)&firstPage=true&bhcp=1.

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Bibliography
Australasian Legal Information Institute, Joint Ventures,
http://www5.austlii.edu.au/au/journals/AURELawJl/2003/52.pdf
Charltons, Mining Joint Venture Agreements, <https://charltonsnaturalresources.com/en/joint-
venture-agreements>
G. Jaenickle, A Joint Venture Agreement for Seabed Mining (Springer Science & Business
Media, 2013)
Giamatteo Nunziante, Joint Ventures (Sweet & Maxwell, 2012)
Legal Vision, What Are The Legal Considerations For A Joint Venture?, (15 September 2015)
https://legalvision.com.au/legal-considerations-for-a-joint-venture/
Luis Morals, Joint Ventures and EU Competition Law (Bloomsbury Publishing, 2013)
Not-for-profit Law, Joint Ventures and Partnerships, https://www.nfplaw.org.au/partnerships>
Practical Law, Joint ventures in Australia: overview ,
<https://uk.practicallaw.thomsonreuters.com/0-616-8149?
transitionType=Default&contextData=(sc.Default)&firstPage=true&bhcp=1>
Richard W. Roeder, Foreign Mining Investment Law: The Cases of Australia, South Africa and
Colombia (Springer, 2016)
WD Duncan, Joint Ventures Law in Australia: 3rd Edition (Federation Press, 2012)