FORMATION OF JOINT VENTURES IN NIGERIA
A joint venture typically involves shared ownership, control, profit returns, and risk.
FORMATION OF JOINT VENTURES IN NIGERIA
A corporate entity or agreement known as a joint venture is one that two or more parties enter into or construct in order to carry out a specific activity or achieve a particular business goal while still maintaining their individual identities. Companies enter into joint venture agreements for a number of different reasons. They may do so to gain access to a new, emerging market, to increase their profit margins by combining their operations and assets, to gain access to skills and capabilities, or to split the risk associated with significant investments or projects. Given that all risks, costs, and rewards are shared, this idea makes it resemble a partnership. A joint venture agreement's duration differentiates it from a partnership. A joint venture is dissolved once its original purpose has been fulfilled or put to rest, but a partnership continues as long as it can.
A joint venture typically involves shared ownership, control, profit returns, and risk. When two or more people join forces temporarily to form a partnership or joint enterprise with the aim of carrying out a specific project, that partnership may be referred to as a joint venture contract for individuals.
The steps to a joint venture contract in Nigeria generally include defining the business strategy to be employed, choosing the partners after conducting due diligence and verifying their credentials, developing a joint venture deal that negotiates all terms and conditions, planning, and execution of the joint venture contract The fact that a joint venture is only in place for a limited time is one of its distinguishing features. For instance, in the oil and gas supply industry, the partnership is dissolved once its goals have been met, liabilities have been paid off, and profits have been split.
The goal of a joint venture is to promote economic ties by ensuring that each company or individual has the capability, advantage, and strength to provide what is necessary for the efficient supply of a good or service to the market. In Nigeria, joint venture contracts may be formed in the following circumstances:
A foreign investor buying an interest in a local company in Nigeria
A local company buying an interest in an existing foreign company
Both local and foreign companies joining to form a new enterprise
RELEVANT PROVISIONS OR TERMS OF THE JOINT VENTURE AGREEMENT
When a joint venture has been decided upon, a contract is appropriately required. This is necessary for the business to operate smoothly. It ensures transparency on the joint venture's goal, the parties, their rights, and the obligations expected of each party. The Joint Venture contract's terms are listed in the table below.
Name in which the joint venture business is to be conducted
The principal office of business which most often is the registered address of a company
The term duration of the contract is the date of commencement of the agreement and its duration which is subject to the disposal of the venture and satisfaction of all debts.
The purpose of which the business is formed, it also restricts the joint venture to just that business except there is consent to do otherwise.
The initial capital to be contributed by each partner according to his percentage interest, loans etc.
Interest owned by each partner in the joint venture should also be clearly stated to avoid disagreements Profits and expenses- the net distribution of profits, losses and disbursement to be borne out of the joint venture.
The powers to be exercised with the consent of the partners such as the power to borrow, third-party obligations, the power to acquire property and the power to sell or mortgage.
Transfer of interest, where the parties agree that the joint venture is precluded from selling, assigning transferring any interest in the joint venture without the consent of parties, it should be clearly expressed in the contract.
Legal Title to the Joint Venture assets usually remains in the name of the joint venture where applicable
A confidentiality agreement, which is one of the most important clauses in a Joint venture Contract in Nigeria. In a Joint venture, ideas, knowledge, information and resources are shared that are confidential and not privy to a third party. This information is assets to parties concerned. So it is important to protect ones’ ideas/information by an agreement stating that during and after the duration of the Joint Venture, all confidential information be treated as a secret and not disclosed to any person except under very strict terms and conditions.
Arbitration clause: this is also an important clause that must be found in a Joint venture Contract, especially where a business transaction is to be brokered. There are expectations of disputes likely to arise and arbitration should be provided for, upon agreement on the arbitrator or an arbitration panel, country, place and who would constitute the arbitration.
Termination of a Joint venture: it is also an important element found in the contract stating the liquidation of the Venture and the manner of distributing proceeds upon determination of the contract. Governing law: this is important since a joint venture may involve parties from different countries and jurisdictions. The need to know the law applicable and the court to have jurisdiction over the agreement is sacrosanct.
It is crucial that each of the aforementioned factors be meticulously documented. Before the business is incorporated, a joint venture agreement is made. It describes the conditions of the Joint Venture, which serves as the foundation for the proposed company's memorandum and articles of organisation.
NB: This article is not a legal advice, and under no circumstance should you take it as such. All information provided are for general purpose only. For information, please contact chamanlawfirm@gmail.com
WRITTEN BY CHAMAN LAW FIRM TEAM
EMAIL: chamanlawfirm@gmail.com
TEL: 08065553671, 08024230080