{"id":1155,"date":"2020-12-13T03:02:13","date_gmt":"2020-12-13T03:02:13","guid":{"rendered":"http:\/\/nz.legalvision.com.au\/?p=1155"},"modified":"2024-05-08T16:39:43","modified_gmt":"2024-05-08T03:39:43","slug":"joint-venture-new-zealand","status":"publish","type":"post","link":"https:\/\/legalvision.co.nz\/corporations\/joint-venture-new-zealand\/","title":{"rendered":"What is a Joint Venture in New Zealand?"},"content":{"rendered":"<p><span style=\"font-weight: 400\">A joint venture (JV) is a business arrangement in which two or more parties agree to pool their resources to accomplish a specific task. This task can be a new project or any other business activity. <\/span><span style=\"font-weight: 400\">Running your\u00a0<\/span><a href=\"https:\/\/legalvision.co.nz\/business-structures\/operating-partnership-business-in-new-zealand\/\"><span style=\"font-weight: 400\">business with a partner<\/span><\/a><span style=\"font-weight: 400\">\u00a0can have many advantages, such as gaining access to your partner\u2019s technologies, patented processes or distribution network.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400\">If you are considering entering a foreign market, forming a <a href=\"https:\/\/legalvision.co.nz\/startups\/legal-considerations-strategic-partnerships\/\">strategic alliance<\/a> or joint venture can help you share the risks and opportunities in the market. This article explains the different types of joint ventures that you can set up in New Zealand and how to draft a joint venture agreement.<\/span><\/p>\n<h2><span style=\"font-weight: 400\">What is a Joint Venture?<\/span><\/h2>\n<p><span style=\"font-weight: 400\">A JV is a strategic alliance between two or more parties working to accomplish a specific task or project. For example, you may contribute goods, services or capital to a common commercial enterprise, which makes it appealing to small business owners.\u00a0\u00a0<\/span><\/p>\n<div class=\"box box--icon box--info\">\n<p><span style=\"font-weight: 400\">At first glance, a JV sounds similar to a <\/span><a href=\"https:\/\/legalvision.co.nz\/business-structures\/joint-venture-vs-partnership\/\"><span style=\"font-weight: 400\">partnership structure<\/span><\/a><span style=\"font-weight: 400\">. However, JVs typically have a more limited scope than partnership agreements and are more minor and temporary. While partnerships can last a prolonged period, participants generally collaborate to complete a specific project.\u00a0<\/span><\/p>\n<\/div>\n<p><span style=\"font-weight: 400\">Additionally, each partner retains their independence while contributing towards mutually shared goals. Some of the legal differences between these two structures include the following:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400\"><span style=\"font-weight: 400\">a JV is regulated only by the joint venture agreement (rather than a defined legal framework, which is why it is so important to set clear terms in your agreement);<\/span><\/li>\n<li style=\"font-weight: 400\"><span style=\"font-weight: 400\">each party can specify in their agreement whether they will share liabilities or not;\u00a0<\/span><\/li>\n<li style=\"font-weight: 400\"><span style=\"font-weight: 400\">the actions of each party are not binding to other participants without their consent; and\u00a0<\/span><\/li>\n<li style=\"font-weight: 400\"><span style=\"font-weight: 400\">each participant can make and claim their tax deductions.<\/span><\/li>\n<\/ul>\n<h2><span style=\"font-weight: 400\">Why Enter into a Joint Venture?<\/span><\/h2>\n<p><span style=\"font-weight: 400\">Each JV participant is responsible for\u00a0profits, losses, and costs associated with the business activity. However, the venture is its own entity, separate from the participants\u2019 other business interests. This protection is very beneficial, especially when your JV is experimenting with a new project or in a new market.<\/span><\/p>\n<p><span style=\"font-weight: 400\">You can form a JV for a number of reasons, and they provide several benefits.<\/span><\/p>\n<table class=\"lv-table lv-table--style-2\" style=\"border-collapse: collapse;width: 100%\" border=\"0\" cellspacing=\"0\" cellpadding=\"0\">\n<tbody>\n<tr>\n<td style=\"width: 23.8095%\"><strong>Benefit<\/strong><\/td>\n<td style=\"width: 76.1905%\"><strong>Explanation<\/strong><\/td>\n<\/tr>\n<tr>\n<td style=\"width: 23.8095%\">Leveraging of resources<\/td>\n<td style=\"width: 76.1905%\">A JV allows the parties to combine their resources to achieve the venture&#8217;s goal. For example, one party may have a well-connected distribution network, while the other party may have a successful manufacturing process.<\/td>\n<\/tr>\n<tr>\n<td style=\"width: 23.8095%\">Reduction of costs<\/td>\n<td style=\"width: 76.1905%\">Leveraging resources can allow for economies of scale, offering lower costs. A JV also offers savings as the parties share the costs, such as advertising or labour costs.<\/td>\n<\/tr>\n<tr>\n<td style=\"width: 23.8095%\">Combination of expertise<\/td>\n<td style=\"width: 76.1905%\">The parties forming a JV might have different backgrounds, skill sets, expertise, or experience in different markets or industries. All parties involved in a JV can benefit from each other\u2019s strengths.<\/td>\n<\/tr>\n<tr>\n<td style=\"width: 23.8095%\">Ability to enter foreign markets<\/td>\n<td style=\"width: 76.1905%\">JV\u2019s are common when entering into a foreign market. Entering into a JV with a party operating in another country can allow you to take advantage of an existing distribution network. Some countries have restrictions on foreigners entering their market, making a JV with a local entity almost the only way to do business in the country.<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n\n<a href=\"#content-next\"\n   class=\"block p-4 mt-10 text-xl font-bold text-center text-white no-underline bg-gray-800 rounded-t-xl\">\n    Continue reading this article below the form\n    <i class=\"text-xl fa-regular fa-arrow-down\"><\/i>\n<\/a>\n<div class=\"px-6 pt-10 pb-12 mb-10 text-center bg-gray-100 rounded-b-xl sm:px-12 test\">\n    <div class=\"mb-8 text-2xl font-bold text-orange\">\n        Need legal advice?\n        <br>\n        <span class=\"text-lg not-prose\">\n                            Call <a href=\"tel:+64800005570\" class=\"not-prose\">0800 005 570<\/a> for urgent assistance.\n                <br>\n                Otherwise, complete this form, and we will contact you within one business day.\n                    <\/span>\n    <\/div>\n\n    \n\n<div class=\"not-prose flex 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Like partnerships, you can choose to\u00a0incorporate a <\/span><a href=\"https:\/\/legalvision.co.nz\/business-structures\/limited-liability\/\"><span style=\"font-weight: 400\">limited liability company<\/span><\/a><span style=\"font-weight: 400\">\u00a0with the Companies Office to undertake your JV in New Zealand. This is known as an incorporated joint venture and:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400\"><span style=\"font-weight: 400\">each party holds shares in the company proportionate to their interest in the JV;\u00a0<\/span><\/li>\n<li style=\"font-weight: 400\"><span style=\"font-weight: 400\">they enter into a joint venture agreement following the incorporation of the company; and\u00a0<\/span><\/li>\n<li style=\"font-weight: 400\"><span style=\"font-weight: 400\">the agreement sets out how the venture will operate.<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400\">Being a separate legal entity, the JV company owns the venture&#8217;s assets, enters into contracts, incurs obligations and liabilities, and makes profits or losses. Under this structure, you can limit the liability for the venture\u2019s debts and obligations to the company, which protects you and your assets as a shareholder or director. When you run a JV company, you operate specifically for the venture. Therefore, when the venture ends, you should wind up the company.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400\">Conversely, in an unincorporated joint venture, each party makes a different contribution through their existing structures to create a business venture or achieve a common objective. There will typically be an agreement detailing each party\u2019s rights and obligations.<\/span><\/p>\n<div class=\"box box--icon box--info\">\n<p><span style=\"font-weight: 400\">Before choosing a JV structure, you should consider the associated tax consequences. This area can be complicated, so you should discuss your obligations under each structure with your tax lawyer.\u00a0\u00a0\u00a0\u00a0<\/span><\/p>\n<\/div>\n<h2><span style=\"font-weight: 400\">Standard Terms of a Joint Venture Agreement<\/span><\/h2>\n<p><span style=\"font-weight: 400\">Whether you incorporate your joint venture or not, you will need to create a <\/span><a href=\"https:\/\/legalvision.co.nz\/business-structures\/start-joint-venture\/\"><span style=\"font-weight: 400\">joint venture agreement<\/span><\/a><span style=\"font-weight: 400\"> to set out the terms of your relationship with the other parties. Certain clauses are standard to most agreements of this kind, such as:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400\"><span style=\"font-weight: 400\">the purpose of the venture;<\/span><\/li>\n<li style=\"font-weight: 400\"><span style=\"font-weight: 400\">the interest of each participant (expressed as a percentage of the total JV interest);<\/span><\/li>\n<li style=\"font-weight: 400\"><span style=\"font-weight: 400\">the contributions of funds to the venture from each participant;\u00a0<\/span><\/li>\n<li style=\"font-weight: 400\"><span style=\"font-weight: 400\">who comprises the JV committee;<\/span><\/li>\n<li style=\"font-weight: 400\"><span style=\"font-weight: 400\">a mechanism to break a deadlock (e.g. the party with the majority participating interest may have the right to a casting vote);<\/span><\/li>\n<li style=\"font-weight: 400\"><span style=\"font-weight: 400\">what circumstances amount to a default event (e.g. a breach of the terms of the agreement or failure to provide funding on a cash call);<\/span><\/li>\n<li style=\"font-weight: 400\"><span style=\"font-weight: 400\">the term (a fixed period of time or a specific termination event, e.g. mutual agreement or a default event); and<\/span><\/li>\n<li style=\"font-weight: 400\"><span style=\"font-weight: 400\">how you will distribute the property of the JV (typically in proportion to each participant\u2019s interest unless stated otherwise in the agreement), amongst other terms.<\/span><\/li>\n<\/ul>\n<h2><span style=\"font-weight: 400\">Alternative Structures to a Joint Venture<\/span><\/h2>\n<p><span style=\"font-weight: 400\">A joint venture may not be the best arrangement for every circumstance, and alternative arrangements may be more appropriate. For instance, a JV may not be required where a contract captures all of the arrangement&#8217;s key commercial terms and provides for both parties&#8217; mutual benefit. In this case, it is simpler to have the terms of the arrangement governed by a contract rather than a more complicated JV agreement.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400\">Additionally, where parties seek to establish a more ongoing relationship, a <\/span><a href=\"https:\/\/legalvision.co.nz\/corporations\/limited-partnership\/\"><span style=\"font-weight: 400\">limited partnership<\/span><\/a><span style=\"font-weight: 400\"> or company may be the preferred option. Where there are ongoing commercial operations with a business partner, it may be more sensible to carry out these operations under a limited partnership or company rather than having to draft a separate joint venture agreement for every separate project.\u00a0\u00a0\u00a0\u00a0<\/span><\/p>\n    <div class=\"my-7 lg:my-10 border-y-2 border-gray-100 py-7 lg:py-10 flex flex-col sm:flex-row items-start gap-10\">\n                    <img decoding=\"async\" class=\"w-52 mx-auto my-0! rounded\" src=\"https:\/\/img.legalvision.com.au\/wp-content\/uploads\/sites\/2\/2021\/10\/21140438\/NZ-Startup-Manual-251x360-2.png\" alt=\"Front page of publication\"\n                 loading=\"lazy\" width=\"208\" height=\"298\">\n                <section>\n            <div class=\"text-2xl font-bold\">NZ Startup Manual: A Legal Handbook For Founders<\/div>\n            <div class=\"body-text\">\n                <p>Essential reading for anyone building their startup. This free guide includes practical advice and seven real-life case studies.<\/p>\n            <\/div>\n            \n\n<a href=\"https:\/\/go.legalvision.co.nz\/NZ-Startup-Manual.html\" class=\" block px-5 py-3.5 max-w-fit bg-orange button__hover transition rounded text-white font-bold text-lg no-underline uppercase leading-tight text-center\" target=\"\" rel=\"\">Download Now<\/a>        <\/section>\n    <\/div>\n\n<h2><span style=\"font-weight: 400\">Key Takeaways\u00a0<\/span><\/h2>\n<p><span style=\"font-weight: 400\">When completing a specific business project, it may be beneficial to form a JV with a business partner. Likewise, you can choose to incorporate a new company with the Companies Office to undertake your JV in New Zealand. Under this structure, you can limit the liability for the venture\u2019s debts and obligations to the company, which protects you and your assets as a shareholder or director.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400\">Whether you choose to incorporate your JV or not, setting out each participant\u2019s rights and obligations in a JV agreement is essential. This will help you set a solid foundation for a clear business relationship and ensure that everyone understands the purpose, direction and eventual termination of the JV.<\/span><\/p>\n<p><span style=\"font-weight: 400\">If you need help deciding on the most appropriate structure to achieve your business goals, our experienced <\/span><a href=\"https:\/\/legalvision.co.nz\/business-lawyers-lp-new-zealand\"><span style=\"font-weight: 400\">business lawyers<\/span><\/a><span style=\"font-weight: 400\"> can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on <a href=\"tel:+64800005570\" class=\"AVANSERnumber dynamic-number\">0800 005 570<\/a> or visit our <\/span><a href=\"https:\/\/legalvision.co.nz\/membership\/\"><span style=\"font-weight: 400\">membership page<\/span><\/a><span style=\"font-weight: 400\">.<\/span><\/p>\n<h2><span style=\"font-weight: 400\">Frequently Asked Questions<\/span><\/h2>\n\n\n<div class=\"schema-faq wp-block-yoast-faq-block\"><div class=\"schema-faq-section\" id=\"faq-question-1606880228344\"><strong class=\"schema-faq-question\"><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong>Is a joint venture a legal entity?<\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong> <p class=\"schema-faq-answer\">A joint venture is a purely contractual relationship that does not create a separate legal entity. On the other hand, an incorporated joint venture is a separate legal entity as the operations of the JV are run through a limited liability company. As such, the company owns the joint venture&#8217;s assets, enters into contracts and incurs obligations and liabilities.<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1606880258379\"><strong class=\"schema-faq-question\"><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong>What are the benefits of a joint venture?<\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong> <p class=\"schema-faq-answer\">Some benefits of forming a joint venture include gaining access to your partner\u2019s technologies, patents and distribution networks. In addition, you can share the risks and opportunities of entering a new market with your partner. A joint venture can also give you access to more resources, including specialised staff and finance.<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1606989773267\"><strong class=\"schema-faq-question\"><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong>What is the difference between a partnership and a joint venture?<\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong> <p class=\"schema-faq-answer\">In a partnership, the parties involved are co-owners of a business venture with the goal of making a profit. In a joint venture, it does not just profit that binds the parties together. You can form a JV for specific purposes, such as research and development. Although a joint venture is very similar to a partnership, it is generally more limited in scope and duration.<\/p> <\/div> <\/div>\n<div class=\"not-prose m-feedback-prompt\">\n    <!-- Thumbs up\/down bar -->\n    <div class=\"m-feedback-prompt__main\">\n        <div class=\"m-feedback-prompt__title\">Was this article helpful?<\/div>\n        <div>\n            <!--span class=\"m-feedback-prompt__button--text\">Thanks!<\/span-->\n            <button type=\"button\" class=\"m-feedback-prompt__button m-feedback-prompt__button--yes\"\n                    data-analytics-link=\"feedback-prompt:yes\" aria-label=\"Agree\">\n                <i class=\"fa-regular fa-thumbs-up fa-3x\"><\/i>\n            <\/button>\n            <button type=\"button\" class=\"m-feedback-prompt__button m-feedback-prompt__button--no\"\n                    data-analytics-link=\"feedback-prompt:no\" aria-label=\"Disagree\">\n                <i class=\"fa-regular fa-thumbs-down fa-3x\"><\/i>\n            <\/button>\n        <\/div>\n    <\/div>\n\n    <!-- Feedback form -->\n    <div class=\"m-feedback-prompt__form\">\n        <div class=\"m-feedback-prompt__form--thanks \">\n            <div>Thanks!<\/div>\n            <p>\n                We appreciate your feedback \u2013 your submission has been successfully received.            <\/p>\n        <\/div>\n        <form id=\"contact-form\" class=\"m-feedback-prompt__form--form\" action=\"\" method=\"post\">\n            <input type=\"hidden\" id=\"authenticity_token\" name=\"authenticity_token\" value=\"3bc3beddae\" \/><input type=\"hidden\" name=\"_wp_http_referer\" value=\"\/api\/wp\/v2\/posts\/1155\" \/>            <input value=\"https:\/\/legalvision.co.nz\/corporations\/joint-venture-new-zealand\/\" type=\"hidden\" name=\"currenturl\"\n                   id=\"currenturl\">\n            <input value=\"What is a Joint Venture in New Zealand?\" type=\"hidden\" name=\"currenttitle\"\n                   id=\"currenttitle\">\n            <label>\n                <!-- display on thumbs-up -->\n                <span class=\"m-feedback-prompt__feedback m-feedback-prompt__feedback--yes\">\n                    Can you tell us <span class=\"font-semibold\">why<\/span> you found it helpful?\n                <\/span>\n\n                <!-- display on thumbs-down -->\n                <span class=\"m-feedback-prompt__feedback m-feedback-prompt__feedback--no text-lg\">\n                    How can we better improve this article?\n                <\/span>\n                <textarea name=\"feedbackmessage\" id=\"feedbackmessage\" required><\/textarea>\n            <\/label>\n\n            <div class=\"m-feedback-prompt__form--error\" id=\"form-submit-error\"><\/div>\n            <button id=\"submit-contact-form-button\" type=\"submit\" name=\"commit\" class=\"m-feedback-prompt__form--submit\"\n                    data-analytics-link=\"feedback-prompt:submit\">\n                Submit            <\/button>\n        <\/form>\n    <\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>A joint venture (JV) is a business arrangement in which two or more parties agree to pool their resources to accomplish a specific task. This task can be a new project or any other business activity. Running your\u00a0business with a partner\u00a0can have many advantages, such as gaining access to your partner\u2019s technologies, patented processes or<a href=\"https:\/\/legalvision.co.nz\/corporations\/joint-venture-new-zealand\/\">Continue reading <span class=\"sr-only\">&#8220;What is a Joint Venture in New Zealand?&#8221;<\/span><\/a><\/p>\n","protected":false},"author":13388,"featured_media":917,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_relevanssi_hide_post":"","_relevanssi_hide_content":"","_relevanssi_pin_for_all":"","_relevanssi_pin_keywords":"","_relevanssi_unpin_keywords":"","_relevanssi_related_keywords":"","_relevanssi_related_include_ids":"","_relevanssi_related_exclude_ids":"","_relevanssi_related_no_append":"","_relevanssi_related_not_related":"","_relevanssi_related_posts":"216884,210709,219097,219316,1639,208438","_relevanssi_noindex_reason":"","editor_notices":[],"footnotes":""},"categories":[4,14],"tags":[24,25,54,62,147],"class_list":["post-1155","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business-structures","category-corporations","tag-startup","tag-small-business","tag-medium-business","tag-business-structure","tag-joint-venture"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.1.1 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>What is a Joint Venture? | LegalVision New Zealand<\/title>\n<meta name=\"description\" content=\"Are you looking to set up a joint venture in New Zealand? 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