Where Joint Ventures Fail
In times of economic uncertainty, joint ventures are often considered an attractive vehicle to combining the skills and resources of multiple businesses without the risks and costs associated with an acquisition.
Although joint ventures offer many advantages. Disputes and failed arrangements are a common occurrence.
Usually, joint venture breakdowns are due to lack of due diligence, joint venture agreement breaches and/or a lack of understanding between the parties.
Where joint ventures fail, the costs of resolving disputes or unwinding arrangements can be significant. Representation by an experienced legal professional is therefore imperative.
What is a joint venture?
A joint venture involves the combination of two or more businesses knowledge and skills to achieve a common goal or objective, usually for a specified project.
Joint venture arrangements are common in property development, mining and other large-scale projects. Some benefits for businesses to enter into a joint venture arrangement include;
- greater diversification;
- transfer of technology and skills;
- access to new markets and consumers;
- economies of scale;
- access to finance; and
- an ability to share capital and costs of an operation.
Regulation of the joint venture occurs through the establishing document, usually a joint venture agreement. In addition, common law and legislation such as Competition and Consumer Act 2010 (Cth) govern the way in which joint ventures operate.
Why do joint ventures fail?
Despite many perceived advantages, joint venture arrangements often fail. Although not all joint venture arrangements are destined for failure, joint ventures are inherently misunderstood and disputes are common.
Disputes can arise at almost any stage of the joint venture arrangement. A number of factors can cause the failure of the joint venture including;
- parties committing a serious breach of the joint venture agreement;
- parties engaging in misleading and deceptive conduct in relation to representations about the business (i.e making false statements about projected sales or growth);
- lack of proper due diligence procedures to determine the requirements of combining the businesses and the likelihood of success; and
- where one party misunderstands the objectives, goals and motivations of the other party and ultimately fall out.
Resolution of a joint venture dispute
Where a dispute arises, solutions must be strategically formulated with a particular outcome or remedy in mind. It is therefore imperative that the chosen course of action is tailored specifically to your circumstances by an experienced professional.
At Ramsden Lawyers, we have extensive experience in acting for the parties of joint venture disputes. If you are involved in a joint venture dispute, we are able to deliver solutions including;
- advising on your rights and obligations as set out in any joint venture agreement;
- negotiating an exit from the arrangement;
- representing you during negotiation or drafting further documentation to formalise the desired outcome;
- assisting you through mediation or alternate dispute resolution;
- appearing on your behalf in any court proceeding to resolve the dispute.