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7/27/2019 Tuason Report

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BUSINESS ORGANIZATIONS I

JOINT VENTURES

I. NATURE

Joint Venture Partnership

1. No specific statutory provision.- It is governed primarily by laws on

contracts, as well as the laws on

partnership.

1. Governed by the laws on partnership.

2. Contribution among persons or

companies.

- The prevailing school of thought in

our country is that JV is a species

of partnership. By specific

statutory provision when two or

more persons bind themselves to

contribute money, property, or

industry to a common fund, with

the intention of divising the profits

among themselves, then a

partnership is created by

definition of law.

2. Contribution among persons.

3. Organized for specific purpose

- JV are usually for a single

transaction.

3. Organized for general or specific

purpose

4. There is division of profits and losses. 4. There is division of profits and losses.

Joint venture: as defined under Blacks dictionary is an association of persons or companies jointly undertaking

some commercial enterprise generally all contribute assets and share risks. It requires a community of

interest in the performance of the subject matter, a right to direct and govern the policy connected

therewith, and duty, which may be altered by agreement to share both in profit and losses.

II. ELEMENTS:

1. Consent

2. Subject Matter the parties would jointly undertake some commercial enterprise with the

intent of sharing the profits or losses

3. Consideration the parties contribute assets either money, property, efforts, skills, knowledge

and experience4. Purpose is to engage in the execution of a single transaction this element is what usually

distinguished a joint venture from a partnership. The JV is organized for a specific or single

transaction.

5. There is community of interestthe contribution of the parties assets is in order to prosecute

their common interest.

6. Joint Control each co-venturer has a right to manage the joint venture according to the

agreement entered upon.

III. DISTINCTION


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The main distinction between an ordinary partnership and a joint venture is that:

Joint Venture Partnership

1. Has for its object an undertaking of

a single transaction, although it may

entail a series of transactions and

may last for a considerable period of

time.

1. Has for its object a general business

of a particular kind, although there

may be a partnership for a single

transaction. (particular partnership)

2. Corporations may enter into joint

ventures.* General rule: A joint venture

agreement of two corporations

need not be registered with the SEC,

provided it will not result in the

formation of a new partnership or

corporation.

2. Corporations are not eligible for a

membership in a partnership.- The SEC has provided an

exception to the foregoing

ruling, and allowed corporations

to enter into partnership

arrangement, provided it had

met the conditions imposed by

the SEC.

The articles of incorporation or its

charter expressly conferred the

authority to enter into a partnership

relation and the nature of the

business venture by the is in line

with the business authorized by the

charter or AOI

The agreement on the articles of

partnership must provide that all

partners shall manage the

partnership and must stipulate that

all partners shall be liable for all

obligations of the partnership

If it is a foreign corporation, it must

obtain a licence to transact business

in the country in accordance with

the corporation code.

IV. TYPES

A.Equity Joint Ventures

1. Formation of a New Company; Creation of a new company possessing a separate and distinct

legal personality where each partner owns a certain portion of the equity.

2. Equity participation in Existing Company; Equity in existing company is shared with andtransferred to the other party in the joint venture.

B. Contractual Joint Ventures

There is no equity participation between the partners and their relations, rights and liabilities, as

among themselves and in respect of third parties, are principally governed by contract or agreement

V. FORMS


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A. Informal or Contractual Joint Venture Arrangement

A Joint Venture Agreement is executed by the co-venturers to provide for the terms of

arrangement but the business enterprise will be pursued in the names of the co-venturers through

their duly authorized representatives. No separate company office is set up, no separate books of

accounts are kept, and no formal registration of the enterprise is made with the appropriate

government agencies. The co-venturers therefore intend their relationship to be primarily governed

by the contractual terms agreement upon them in the joint venture agreement.- basically this form of joint venture does not create a separate and distinct juridical

personality of each co-venturers.

B. Partnership Arrangement

A second type of joint venture arrangement is to formally operate the joint venture set-up as a

partnership, with a separate and distinct juridical personality. Under such an arrangement, the co-

venturers execute formal Articles of Partnership, which may also be denominated as a Joint Venture

Agreement embodying their arrangements as well as the firm name and structure of the company

that they are forming and register the same with the SEC. Such joint venture arrangement would be

operated as and governed by the legal rules and principles pertaining to particular partnerships.

- This form of JV sets better protection for the parties since they have set their laws that

will govern them.

C. Joint Venture Corporation

Equity joint ventures are also available in the Philippine setting, which may cover the

formation of a new joint venture company, with each co-venturer being allocated proportionate

shareholdings in the outstanding capital stock of the joint venture corporation. An equity joint

venture may also be pursued where a co-venturer is allocated the agreed shares of stock in an

existing corporation either from new issuances of the capital stock of the existing corporation or

sold shares from those already issued in the names of the other co-venturers.

TUASON VS. BOLANOSGR. No. L-4935. May 28, 1954

95 Phil. 106

CASE DIGEST

Facts:

Plaintiffs complaint against defendant was to recover possession of a registered land. In thecomplaint, the plaintiff is represented by its Managing Partner, Gregorio Araneta, Inc., anothercorporation. Defendant, in his answer, sets up prescription and title in himself thru "open, continuous,exclusive and public and notorious possession under claim of ownership, adverse to the entire world bydefendant and his predecessors in interest" from "time immemorial". After trial, the lower court rendered

judgment for plaintiff, declaring defendant to be without any right to the land in question and orderinghim to restore possession thereof to plaintiff and to pay the latter a monthly rent. Defendant appealeddirectly to the Supreme Court and contended, among others, that Gregorio Araneta, Inc. can not act asmanaging partner for plaintiff on the theory that it is illegal for two corporations to enter into apartnership


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Issue:

Whether or not a corporation may enter into a joint venture with another corporation.

Ruling:

It is true that the complaint states that the plaintiff is "represented herein by its ManagingPartner Gregorio Araneta, Inc.", another corporation, but there is nothing against one corporation being

represented by another person, natural or juridical, in a suit in court. The contention that GregorioAraneta, Inc. cannot act as managing partner for plaintiff on the theory that it is illegal for twocorporations to enter into a partnership is without merit, for the true rule is that "though a corporationhas no power to enter into a partnership, it may nevertheless enter into a joint venture with anotherwhere the nature of that venture is in line with the business authorized by its charter." (Wyoming-Indiana Oil Gas Co. vs. Weston, 80 A. L. R., 1043, citing 2. Fletcher Cyc. of Corp., 1082.). There isnothing in the record to indicate that the venture in which plaintiff is represented by Gregorio Araneta,Inc. as "its managing partner" is not in line with the corporate business of either of them.

BELLINGAN, GRACELYN E.

YUSUP, JHENILYN N.

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