A joint venture involves share-holding in a business entity having the following characteristics; (i) the entity was established by a contractual arrangement (usually in writing) whereby two or more parties have contributed resources towards the business undertaking; (ii) the parties have joint control over one or more activities carried out according to the terms of the arrangements and none of the individual investors is in a position to control the venture unilaterally.
A joint venture may take one of the following three forms:
- Jointly controlled entity; the joining together of two or more enterprises resulting in the creation of a third enterprise in order to undertake a specific business venture. It is not a continuing relationship like a partnership. A jointly controlled entity is established under contractual agreement whereby the parties to the agreement contribute resources towards the business undertaking. Both parties have control over the activities carried out according to the terms of the agreement and no party can control the joint venture unilaterally.
- Jointly controlled assets: the coordinated use of parts of the investors´ enterprises in order to work on a common project which does not form separate entity, and which operates with a loose organizational structure. The assets and expertise of each partner remain under the direct control of that partner.
- Jointly controlled operation: the contribution of resources by investors to a joint venture project which is managed by either one of the investors or by a joint management team. In such a venture, a joint venture agreement defines the terms of the project, and each investor possesses an undivided interest in the assets of the project.