5/7/2023 0 Comments Joint venture definition![]() While each transaction will need to be considered on a case-by-case basis, there are two fundamental issues that must be considered in the joint venture agreement.Ĭontrol: who has control over the joint venture’s decision-making? The answer to this question will depend on the nature of the project. The terms of a joint venture agreement are pertinent in a lending situation, as the parties will need to avoid conflicting with the lender’s requirements. Once the type of joint venture has been determined, the parties will need to agree the key terms of the deed that regulates it these will be set out in a shareholders’ agreement, partnership agreement or a separate joint venture agreement depending on the type of arrangement. However, while this structure creates flexibility it can preclude the granting of certain security types such as floating charge, which covers assets such as bank accounts and debtors, and this may affect available finance. However, the limited nature of the vehicle's liability means that a lender will most likely request some form of personal guarantee to support the loan.Ĭontractual joint venture: in this arrangement, each party will control its own assets, making it easier to identify their respective obligations. Limited company or limited liability partnership (LLP) joint venture: this structure will most likely be a special purpose vehicle, which lenders prefer because the venture will be a clean entity, with no existing debt or security, making funding easier. In property transactions there are two common types of joint venture, both of which have advantages and disadvantages from a funding perspective. ![]() One of the fundamental issues for a lender in providing a loan facility to a joint venture is the structure of that venture, as this will determine the terms of the loan and the extent of the security required.
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