CHAPTER 2
Legal and Regulatory Aspects of Joint Venture Activities will always need to consider the various laws and regulations that may be applicable to the business of the JV. The content of these laws and regulations will depend on the functional activities of the JV, as well as the countries where the JV will be operating. The most common areas of concern are the laws, rules, and regulations governing enterprises, commercial transactions, property rights, foreign investment, competition, labor, health, environment, capital markets, and securities. Understanding and complying with all these laws can be an expensive and time-consuming experience, and it is therefore important for each party to engage experienced professionals familiar with the legal requirements for each relevant country as a guide through the maze.
THE PARTIES TO A JV
Enterprise Laws While the success of any business arrangement generally turns on the compatibility of the persons and resources involved in the particular project, attention must be paid to the form of the legal entity selected for the conduct of the relationship. The characteristics of the organizational forms available for the conduct of a JV are determined by the relevant “enterprise law,” sometimes referred to as “company law” or the “law of business organizations.” Enterprise laws not only define the legal entities (i.e., organizational forms) or enterprises that can be used to conduct commercial activities, but also establish the rights and obligations of the enterprise, its governance process, and the rights and duties of its managers and owners. Also, enterprise laws set out the specific rules for forming, operating, and terminating business enterprises. The impact of enterprise laws on the selection of a form of business entity is discussed further in Chapter 8.
Commercial Laws Commercial laws are those that govern market-based transactions among independent contracting parties, including between a JV and each JV participant and between the JV and any third party. Commercial laws are particularly important for developing countries, not only because of the need to formulate rules for transactions between domestic parties, but also because a reliable and predictable set of rules for commercial transactions is required to induce foreign investors to deal with local firms in licensing, distribution, production, and sales arrangements.
13
