After dissolution, a surviving joint venture is entitled to ownership of the community property and also has the right to co-operate. If no one is taken into possession, a joint venture and its property will be sold. However, for the racehorses of total blood, the sale will take place only after the question of whether a part of a joint venture had the power to sue the company after the termination. Sometimes the courts will also order the liquidation of the company. As the above shows, the impact of a termination event on the business of a joint venture can be significant. Parties to the joint venture should consider the wide range of commercial, operational, legal and practical issues that could result from the termination of a joint venture. Indeed, the parties to the joint venture would be well advised to carry out a thorough due diligence before any termination to ensure that, if the transaction is contemplated, (i) the joint venture is sustainable; (ii) the value of the joint operation is not significantly eroded and (iii) there are no unwanted surprises after the end of the operation. To terminate a joint venture, the following conditions must be met: a joint venture is a popular vehicle for commercial activity in the energy and natural resources sector, due to the inherent uncertainty and risk associated with many types of energy projects. The number of variables and the often large capital requirements, particularly for offshore projects, mean that it is often preferable to spread the risk among one or more parties. A well-developed JVA will include controls on the use of confidential information exchanged for the purposes of the joint venture, as well as restrictive agreements to protect the commercial will of the joint venture. It is likely that these provisions will continue beyond the termination of the joint venture, so that the parties will have to fully understand what they can and cannot do after termination. An existing party will not want to discover that its core business is in fact covered by competition restrictions within the AIC. In general, a joint enterprise agreement would include a termination date.
If a joint venture is set up for a specified period of time, such a joint venture would be terminated at the end of that period. But issues related to the liquidation of all receivables and obligations and accounting continue even after such termination. It is possible that due to an impasse, the parties may not be willing or unable to pursue the joint venture, resulting in an exit. Our second article in this series gives more details on this subject and highlights the different mechanisms available to deal with such a situation. Please click here to see. A joint venture may also be dissolved by judicial dissolution. Under the law, a court may grant a judicial dissolution for the following reasons[v]: The courts have, however, found that the judicial liquidation of a community company with two 50% shareholders has a margin of appreciation and must be decided according to the circumstances of the case.