Despite the profit potential of joint ventures, parties should always be cautious when reviewing and thorough in preparing for a joint venture. It is often very advantageous for the parties to obtain legal advice at an early stage of the negotiation process, since even the choice between different types of joint ventures and the suitability of each type of joint venture for their business objectives and intentions can mean the difference between success and failure. Negotiations between parties to a proposed joint venture can be quick or lengthy, but a well-negotiated and comprehensive joint venture agreement will certainly help minimize risk in any joint venture. Unregistered joint ventures are more often referred to as contractual joint ventures. The main difference between a registered joint venture and an unregistered joint venture is that there is no separate legal person in the case of an unregistered joint venture. A non-legally competent joint venture is created by an agreement, for example. B a joint venture contract, a partnership contract or a cooperation agreement. The parties to an unregistered joint venture will fulfil and fulfil their respective roles, obligations and obligations under the Joint Undertaking, in accordance with the terms agreed in the Agreement. A joint venture is a strategic enterprise agreement or cooperation between two or more parties, in which those parties agree to share their expertise, experience and resources in order to carry out a common activity, objective or project. Joint ventures are typically created in circumstances where firms do not have the resources, capital or knowledge to enter a proposed market or sector. One of the most fundamental conditions of a joint venture agreement is the purpose and volume of the joint venture. The objective of a joint venture is to carry out a joint activity or project between the parties involved. These common objectives should be defined in the Joint Undertaking Agreement in order to avoid disputes between the parties.
If the objectives and scope of the Joint Undertaking cannot be agreed between the parties, it is very likely that the Joint Undertaking will not succeed. In most cases, the profit-bearing agreement between the parties to a non-legally viable joint venture shall be structured on the basis of the contributions of their respective partners to the joint venture. Similarly, each partner is responsible for debt and liabilities on the basis of its share of contributions. A tempting advantage for an unregistered joint venture is that the unregistered joint venture may be a short-term agreement between the parties, unlike a registered joint venture, which is usually structured in the longer term between the parties to achieve the objectives of the registered joint venture. The parties should consider appointing an agent to execute the parts of a joint venture prior to interim due diligence in order to avoid the possibility of future setbacks. This essentially minimises future risks and promotes transparency between all parts of the joint venture. In the event of the creation of a SPV as a company under the Companies Act 2016, SPV shareholders will conclude a joint venture agreement and a shareholders` agreement. The shareholders` agreement includes, among other things, shareholder participation, the composition of the SPV Board of Directors, the Management Committee, the transferability of shares, voting rights and the appointment of key personnel. An example of an unregistered joint venture in Malaysia is the joint venture between Ho Hup Construction Co Berhad and DSE Construction Sdn Bhd, in which Ho Hup Construction Co Berhad holds an 80.7% stake in the profits of the unregistered joint venture. In the context of the Sungai Besut rehabilitation project in Terengganu, the unregistered joint venture was awarded a contract for RM221.4 million.
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