Last edited 14 Sep 2020

Joint venture for construction

A joint venture (JV) is a commercial alliance between two or more separate entities that enables them to share risk and reward. A new business is created to which each party contributes resources such as land, capital, intellectual property, skills, credentials or equipment.

Joint ventures are commonly used to:

Joint ventures are becoming more common, encouraged by initiatives such as PF2 (the most recent iteration of the private finance initiative) and the emergence of very large projects in the Middle East and Asia.

The structure of a joint venture will depend on the degree to which the parties wish to integrate. Typical structures for joint ventures are:

It is important in structuring a joint venture to properly consider tax issues, particularly on a project such as an institutional Public Private Partnership (PPP) where a joint venture is established by a public authority and a private company which will have very different tax profiles.

A joint venture may be funded by equity funding, debt funding or loans from shareholders.

In 2012, a report by EC Harris warned that one in five UK construction joint ventures ends in a dispute between the parties. This was mainly as a result of:

For joint ventures to function effectively, it is important that:

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my concern is how jv parteners share risks of bussiness. can these be clarified in its agreement?

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