Despite the fact that the term “joint venture” has exposed the basic solution for the cooperation need of humanity throughout the history, in today’s business world joint ventures purports a specific business organisation. In Turkey, following the developments in international business, particularly post 1980’s; there has been considerable amount of increasing interest on joint ventures in business life.
Regarding with business life in Turkey, joint ventures have been preferred in wide range of business sectors, substantially as a penetration strategy for foreign investors in Turkish markets and major infrastructure and construction projects.
Considering with the legal definition of joint venture, it can be claimed that it has not specifically been defined by Turkish Code of Obligations or Turkish Code of Commerce. Despite the stated fact above, regarding with court decisions and scholars, the term joint venture can be defined as follows; a joint venture is a joint enterprise whereby at least two separate individual legal entities or natural persons gathered for common cooperation and profit interest and governed by jointly for accomplishment of common aim.
Regarding with the definition stated above, joint ventures have six main elements.
- Partnership Element
Partnership element mainly represents the requirement of at least two or more legal entity or natural persons for establishing a joint venture.
- Contractual Relationship Between Partners
Contractual relationship element represents necessity of contractual relationship between partners who establish a joint venture. Therefore, mainly starting point of establishing a successful joint venture is a contractual agreement between partners.
- Profit Motive Element
In principle it has been deemed that seeking profit is the main motivation behind establishing a joint venture. Hence, it should be agreed upon the percentages of profits and losses.
- Mutual Interest Element
Partners of joint ventures gather for accomplishment of common aim. In scope of this common aim, partners should provide what they obliged to do jointly in joint venture agreement in order to establish a successful joint venture.
- Joint Governance Element
Despite the fact that partners of joint ventures are separate legal personalities, they are engaged with joint governance of joint ventures. Partners of joint ventures are primarily subject to contractual obligations and secondarily general principles of laws.
- Time Element
As a general principle it has generally been deemed that joint ventures establish for particular period of time. Joint ventures may be established for either a specific period of time or may be established permanently.
According to Turkish Laws, in a structural manner joint ventures can be divided into two subheadings; Contractual Joint Ventures and Equity Joint Ventures.
- Contractual Joint Ventures
Contractual Joint ventures is a basic form of business organisation by which partnership of joint ventures solely depends on a contract which is agreed upon by partners. This form of business organisation is regulated in Turkish Code of Obligations as ordinary partnership. The term partnership has regulated in section 620. of Turkish Code of Obligations. According to section 620, an ordinary partnership agreement is defined as an agreement whereby two or more persons undertake to join efforts and/or goods to reach a common goal, which ultimately is to generate a profit.
Contractual joint ventures are kind of partnerships which have not been provided a partnership capital, instead, partners obliged to contribute jointly or proportionally to expenses of business. On contractual joint ventures, splitting the profit or losses evenly is the main principle unless otherwise agreed upon by partners. Therefore, as a partner of joint venture have rights on profits jointly, likewise partner is responsible for losses jointly.
In time, regarding with the technological difficulties and major projects in globalised world, requirement of cooperation increased ever before. Because of the stated fact, joint ventures were the perfect form of organisation as a solution for their cooperation requirement. Hence, in general practice, contractual joint ventures are forms of business organisations by which provide cooperation for major projects such as infrastructure, construction, mining etc. At this point it can easily be stated that contractual joint ventures are form of business organisation which is most suitable form for major project which needs cooperation to accomplish. As a matter of fact, in Turkey most of major infrastructure and construction projects got over with contractual joint ventures.
- Equity Joint Ventures
Equity joint ventures are legal entities whereby partners form a company in order to accomplish their mutual interests. Regarding with the nature of equity joint ventures it can be explicitly asserted that this form of joint ventures are organisations where there is more complex project which needs wider period of time.
Equity joint ventures, similarly with contractual joint ventures are based on a contractual agreement between partners for mutual interest and additionally for equity joint ventures, partners form a legal entity to accomplish their common goals. Therefore, apart from contractual obligations among partners, partners bounded by additional obligations which arise from corporate law. Hence it can be concluded that equity joint ventures brings a combination of contractual and corporate obligations for partners in a wider sense of business organisation.
In practice of Turkey, corporate law needs to be taken into consideration additionally to law of obligation in order to form a successful equity joint venture.
