Joint Venture Agreement In South Africa

South African companies do most of their business by a simple majority vote on the board of directors or by a majority vote of shareholders. In the absence of a contrary agreement, minority investors therefore have the opportunity, through their legal action, to exercise control over the decision-making of a joint venture, particularly in the case of a registered joint venture, in which a majority shareholder with a stake of more than 50% will be able to effectively control the joint venture. , also by the power to appoint and remove directors. Therefore, it is customary for minority investors in these circumstances to seek additional means of blocking controls by a majority shareholder and for this additional protection to be included in the constitution agreement. Here, too, there are general tax considerations that vary depending on the nature of the joint venture. As a general rule, distributions in the event of termination of the joint venture are subject to tax, unless the distributions are structured in such a way as to be covered by the provisions of the Income Tax Act, such as .B exemption from distributions in anticipation of the liquidation of a company, such as the exemption from distributions. In the case of a company, the parties to the joint venture, as shareholders, generally exercise control of the joint venture through reserved cases for which the company cannot be implemented without a certain majority of the shareholders who authorize this matter. Shareholders have the option of appointing directors to the board of directors, but directors owe fiduciary duties to the company when making decisions and generally cannot act on the instruction of the shareholder who appointed that director. However, it is also possible to anticipate that certain decisions of the Board of Directors can only be made with the agreement of all directors. Deadlock`s rules depend on the extent of the interests of the joint venture partners. If their interests in participation are the same, it is customary for a stalemate to lead to the liquidation of the company. This is sometimes preceded by a kind of mediation, usually a referral to high-ranking members of the board of directors of the parties to the joint venture (for example. B of the president).

A transaction in which two or more companies create a new entity through which they exercise joint control and, for example, resources and know-how, is unlikely to require a merger authorization unless there is a transfer of interest, assets or all or part of a business to the joint venture. The founding memorandum is to be filed with the Intellectual Property Commission and the Intellectual Property Commission. It is not necessary for the shareholders` pact to be registered, but sometimes the parties submit the shareholders` pact at the same time as the constitution agreement and take their mandate by reference in order to avoid any inconsistency between them that could lead to the nullity of the shareholders` pact.