Types of JV and consortium arrangements.doc

Types of JV and consortium arrangements As between the JV partners themselves, there are two main approaches to JVs: incorporated JV- is an alliance between two or more entities to undertake business activity together. The parties agree to incorporate a new entity (company) together by both contributing equity (gaining a shareholding), and they then share in the revenues, expenses, and control of the enterprise. The venture can be for one specific project only, or a continuing business relationship. Consortium (or titled unincorporated JV, contractual JV) - is an association of two or more entities with the objective of participating in a common activity or pooling their resources for achieving a common goal. Each party retains its separate legal status and the consortiums control over each party is generally limited to activities involving the joint endeavour, particularly the division of profits. A consortium is formed by contract, which delineates the rights and obligations of each member. This relationship is commonly called a contractual JV as opposed to a incorporated JV. Contractual JVs - integrated and non-integrated In any joint venture, the JV partners assume joint and several liability to the Employer for the performance of their obligations under the construction contract. However as between the JV partners themselves, there are two main approaches to contractual JVs: Integrated JV. Here the JV itself is a profit centre. Although the parties are jointly liable to the Employer, as between themselves, they each bear pre-agreed proportionate shares of any losses or liabilities. This is a true partnership in the legal sense of the word. Work may be carried out centrally on a pooled basis by the JV parties or, alternatively, by the placement of competitive subcontractors. Non-integrated JV. In contrast, in a typical non-integrated JV, the joint venture itself is not usually a profit making entity. Instead, the individual parties are each left to