What is a Joint Venture?
A joint venture, in simple terms, refers to a strategic partnership between two or more enterprises. These enterprises will typically combine their skills, infrastructure, and knowledge to attain a particular objective, which they normally would not be able to attain. This enterprise type is also commonly referred to as a “JV”.
The objective of a joint venture could be based on a specific project or tender, for a specific period of time or a combination of both.
Why will you opt for a Joint Venture?
The ownership structure of a JV allows new entrants to compete with established competitors to access new markets or to upscale their existing businesses. Joint Ventures are ideal for attaining the required Broad-Based Black Economic Empowerment Status to procure government tenders, etc.
Joint Ventures subsequently allow enterprises to combine their assets, operations, and knowledge only in respect of a specific project without having to share ownership in their existing enterprises or businesses.
Another advantage of Joint Ventures is that participants may enter into as many joint ventures as they like, increasing their market share within a specific industry or even various industries.
The formation of Joint Ventures within heavily regulated industries, such as the Private Security Industry may prove to be more problematic due to the specific compliance requirements for such industries, for instance, registration with PSIRA.
Proper due diligence investigations should be conducted on any potential partners to establish whether they possess the required characteristics for a successful business relationship.
How do you establish a Joint Venture?
Once you have established your willingness to enter into a business relationship with a specific person or enterprise, you should obtain an expert to assist you to choose the most suited Joint Venture type and to draft a Joint Venture Agreement.
The formation and operation of a Joint Venture may create various tax obligations for its participants, and it is highly advisable to also obtain specialised tax advice in advance, as it will influence your choice in respect of which type of joint venture you will choose.
