Joint Ventures & Strategic Partnerships
Joint ventures are an increasingly sought-after commercial solution for many businesses. This commercial agreement between two or more independent companies may bring about various advantages for the parties involved. The simplest form of the joint venture is the one wherein all parties retain complete commercial independence and govern their relationship with a contract. Otherwise, the parties may also go for a more permanent relationship such as with an ad hoc partnership or a corporate joint venture and therefore the creation of a new company. In all instances, GMX may provide assistance with regards to advising on the best solution and the best tax- efficient structure for the entities in question, as well as drafting the necessary documentation from the contractual agreement, or the corporate documents for the creation of the new corporate entity, to shareholder agreements and other advice on any regulatory matters which may arise. Considering that such agreements may, most probably, deal with entities from different and foreign jurisdictions, jurisdictional and legal implications must also be kept in mind. Importantly, since a joint venture seeks to combine separate corporate entities there might be serious competition repercussions which need to be analysed.
Joint ventures must not breach the Maltese Competition Act (Chapter 379 of the Laws of Malta) which is based on European competition law, in particular Articles 5 and 9 of the same Act. Article 5 states that any agreement with the object or effect of preventing or restricting competition in Malta shall be null. Furthermore, any agreement which has the object or effect of abusing a dominant position within Malta is also prohibited. Therefore, such factors must be taken into consideration when proposing a joint venture agreement. In the case of a so-called full-function joint venture which is a joint venture performing on a lasting basis all the functions of an autonomous economic entity, Control of Concentration Regulations also apply. These were transposed into Maltese law and such a joint venture falls under the definition of a ‘concentration’. Therefore, such joint ventures or concentrations must, by law, be notified to the Director General of the Competition Authority prior to their implementation and following the conclusion of the agreement, within fifteen working days. The notification is examined and the Director General ensures that the concentration in question does not breach the regulations, or in general does not raise serious doubts about its lawfulness. Broadly, concentrations that might lead to a substantial lessening of competition in the
Maltese market or part thereof are prohibited. This underlines the particular importance of professional legal and corporate advice and guidance prior to the negotiation and conclusion of any joint venture agreement.
Different corporate entities may also enter into a strategic partnership which is generally a relationship between the two corporate entities governed by one or more business contracts. This falls short of a joint venture or any other wholly legal partnership. It is usually sought after in relationships with governmental or para-governmental entities. Such strategic partnerships still require adherence to general competition law as well as particular review of the agreements in question so as to protect the interests of the entities represented.
