Joint Venture (JV) Agreements: Legal Foundations of Partnership
A Joint Venture (JV) is a business alliance where two or more parties pool resources to execute a specific project or start a new business. JVs are particularly popular in Georgia in real estate development, infrastructure projects, and foreign investments, where a local partner provides market knowledge and a foreign partner provides capital and technology. However, statistically, a large portion of JVs fail due to disagreements between parties. The key to a successful partnership is a detailed JV agreement (and often a Shareholders' Agreement) that pre-defines governance rules, profit distribution, and, most importantly, "divorce" (Exit) mechanisms.
Legal.ge offers professional services in structuring joint ventures and drafting agreements. Our lawyers will help you create a balanced document that protects your interests and ensures the sustainability of the partnership.
What Does JV Agreements Service Cover?
The service includes the full legal design of the partnership:
- Structure Selection: Corporate JV (incorporating a new LLC) or Contractual JV (partnership without creating a legal entity).
- Defining Contributions: Who puts what into the venture — money, land, intellectual property, or "know-how." Mechanisms for valuing non-monetary contributions.
- Governance and Control: Rights to appoint directors, veto rights on Reserved Matters, and allocation of operational management.
- Deadlock Resolution: Mechanisms for when partners cannot agree (e.g., Russian Roulette, Texas Shootout, Mediation).
- Profit Distribution: Dividend policy and reinvestment obligations.
- Exit Strategy: What happens upon project completion or if a partner wishes to leave (Drag-along, Tag-along rights).
Common Scenarios When a JV is Created
Joint ventures are relevant in the following cases:
- Construction Development: A landowner contributes land, while a developer/investor contributes money and expertise.
- International Expansion: A foreign brand enters Georgia with a local partner who knows the market specifics.
- Tenders: Two companies join forces to meet the requirements of a large government tender (Consortium).
- Tech Startups: A technical founder (CTO) and a business founder (CEO) create a joint product.
Georgian Legal Framework
Regulation of Joint Ventures depends on the chosen form. If a new legal entity (SPV - Special Purpose Vehicle) is created, the Law on Entrepreneurs applies, where the main documents are the Charter and Shareholders' Agreement. If a contractual form is chosen, the norms of the Civil Code regarding "Partnership" (Joint Activity) apply. In the case of a partnership, it is particularly important to consider joint liability. Also, if a JV is created between competitors, it is necessary to comply with the Law on Competition to avoid cartel agreements.
Service Process Stages
The process includes:
- Negotiation (Term Sheet): Agreeing on key commercial terms before legal drafting.
- Drafting: Preparing the JV agreement or Charter/Shareholders' Agreement.
- Contribution Valuation: Engaging an auditor to value non-monetary contributions (if necessary).
- Registration: Registering the new company in the Public Registry or signing the partnership agreement.
- Execution: Transferring assets and forming management bodies.
Why Legal.ge?
A JV is a "marriage" in business, which is often complicated by conflicts of interest. A poorly drafted agreement is a guarantee of partnership dissolution and litigation. Legal.ge connects you with lawyers who know how to maintain balance between partners and create mechanisms for resolving crisis situations. Build your partnership on a solid legal foundation.
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