Contributed By Bennett Jones LLP
Co-ownership structures are quintessential features of the Canadian legal landscape, widely used for co-investors to allocate risks and responsibilities in a variety of prominent sectors including energy, mining, and advanced technology. Noteworthy trends in 2023 include:
Joint venture (JV) formation remains broad-based. Mining has been particularly active, given market interest in mineral commodities and tax incentives. With the increase in the cost of capital for both junior venture mining companies as well as senior mining producers being much more selective in completing M&A transactions, mining companies are looking to joint venture transactions to finance the development of their projects, with joint venture transactions providing an attractive opportunity for large-cap companies looking to diversify and/or secure their supply of commodities, especially with respect to critical minerals.
In Canada, co-ownership is typically established using one of the following types of vehicles:
There are various considerations driving the appropriate choice of JV vehicle. These include:
Ultimately, given the unique circumstances that will apply to the joint-venture parties, the proposed business arrangement and project-specific requirements, the determination of the optimal legal structure must be assessed on a case-by-case basis. Project- (and party-) specific advice is advised.
Each JV structure has advantages and disadvantages, the importance of which will depend on the parties, industry, tax considerations, and project.
The regulator of incorporated JVs will depend on registration location. Federally, the regulator is Corporations Canada, who oversees compliance under the Canadian Business Corporations Act (the CBCA). All Canadian provinces and territories have their own laws and regulators. Though similar, there are differences between each of the provincial, territorial and federal jurisdictions that impact applicable requirements.
Partnership JVs are regulated by the provincial and territorial laws where the partnership is formed.
Contractual JVs are not regulated in terms of their formation and existence.
Beyond general corporate regulations, JVs are subject to a myriad of environmental, labour, and securities legislation and other regulation (potentially both at the federal and provincial/territorial level), and depending on the industry, the JV will also be subject to industry specific regulations, that apply, for example to banks and securities dealers, railways, telecommunications, airlines, medical and defence, respectively.
Canada has robust AML regulations, notably under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (the PCMLTFA), that impact JV obligations, particularly in money laundering susceptible industries. Obligations may include:
On 20 June 2024 the Canadian government introduced various amendments to the PCMLTFA and the Canadian Criminal Code in support of ongoing efforts to combat financial crime and prevent sanctions evasion. On 19 August 2024, certain notable sections of the Amendments came into force that broaden the suspicious transaction reporting requirements under the PCMLTFA.
Businesses should be aware that these new requirements will place greater demands on their compliance policies and procedures and increase the amount of risk and exposure to which they are subject, with possible civil charges up to CAD500,000 and criminal penalties from fines of CAD250,000 to CAD2 million and/or imprisonment from two years less a day to five years. In light of these Amendments, businesses should review and update their AML policies to integrate the new reporting requirements for sanctions evasion offences.
Sanction law in Canada is primarily governed by the United Nations Act, Special Economic Measures Act, and Justice for Victims of Corrupt Foreign Officials. The regulations prohibit Canadians from engaging in business with identified persons and entities listed in the sanctions schedule in addition to those from specified countries.
Recent legislative amendments have expanded how sanctions may be applied by introducing deemed ownership rules. Where a person controls an entity, any property owned – or that is held or controlled, directly or indirectly – by the entity is deemed to be owned by that person and may be subject to the same sanctions as the listed person. A person controls an entity if:
(a) the person holds, directly or indirectly, 50% or more of the shares or ownership interests in the entity or 50% or more of the voting rights in the entity;
(b) the person is able, directly or indirectly, to change the composition or powers of the entity’s board of directors; or
(c) it is reasonable to conclude, having regard to all the circumstances, that the person is able, directly or indirectly and through any means, to direct the entity’s activities (Canadian Government Introduces Legislation to Add Sanctions 50% Rule and Update Rules on Ownership and Control).
The Investment Canada Act (ICA) governs foreign investment into Canada. There are three distinct processes applicable to foreign investment in Canada: (i) ICA notifications, (ii) “net benefit” reviews, and (iii) national security reviews, which could apply to the formation of joint ventures depending on how they are structured and the parties involved.
1. An ICA notification is a form-based filing that is often made after closing, when a non-Canadian investor acquires control of a Canadian business or commences a new Canadian business.
2. A “net benefit” review is an economic review required in certain cases when a non-Canadian investor acquires control of a Canadian business, and certain thresholds are exceeded. For example, a direct acquisition of control of a Canadian business by a non-Canadian that is controlled by nationals of a specified trade agreement state (the EU, the US, Mexico, Australia, Brunei, Chile, Colombia, Honduras, Japan, Malaysia, New Zealand, Panama, Peru, Singapore, South Korea, the United Kingdom or Vietnam) is subject to mandatory pre-closing “net benefit” review if the enterprise value of the Canadian business is CAD1.989 billion or more (in 2024; indexed annually). This threshold is CAD1.326 billion (in 2024; indexed annually) for investors from most other countries. Different review thresholds apply if the investor and seller are not World Trade Organization nationals, if the investor is a state-owned enterprise, or if there is an acquisition of a Canadian cultural business. In these situations, much lower thresholds apply and are based on the total worldwide book value assets of the Canadian business, rather than its enterprise value.
If a proposed acquisition is reviewable, the responsible Minister will assess whether the investment is “likely to be of net benefit” to Canada. The review process starts when the investor files an Application for Review, which describes the investor’s plans for the Canadian business. There is no filing fee. The responsible Minister has up to 75 days to review the Application, but he or she can extend this period with the consent of the foreign investor.
3. The Canadian government also has the discretion to review virtually any investment, including the formation of a joint venture, on the grounds that it could be “injurious to Canada’s national security”, regardless of whether it is “net benefit” reviewable. Risk assessments consider the nature of the assets or businesses subject to the investment as well as the nature of the foreign investors, including the potential for third-party influence, and examine, inter alia, whether the investment would increase Canadian dependence on foreign suppliers and impact the availability of critical goods or services, result in the transfer of technology or expertise contrary to Canadian interests, or create a risk of espionage or sabotage. The maximum review timeframe is 200 days (or longer with the consent of an investor). A number of transactions have been blocked or required divestitures on national security grounds; most cases have involved Chinese or Russian investors and/or investments in the high-tech, telecommunications and critical minerals sectors.
The Competition Act is a federal statute and is the primary legislation governing antitrust law in Canada. Several parts of the Competition Act are applicable to joint ventures.
Merger Provisions
As a general matter, the substantive jurisdiction of the Competition Act extends to all mergers, including joint ventures with a nexus to Canada. Therefore, joint ventures may be subject to review by the Commissioner of Competition to determine if they could result in a substantial prevention or lessening of competition.
Joint ventures may also trigger the Competitions Act’s pre-merger notification requirements, depending on how they are structured and if they exceed the relevant thresholds. This regime only applies in respect of specific types of transactions, namely:
Accordingly, to be caught by this regime, at least one of the steps in structuring the joint venture would need to fall into one of these categories and the relevant financial thresholds must also be exceeded. For example, for the acquisition of voting shares of a corporation, pre-merger notification is required when each of three thresholds is exceeded.
1. The Size-of-Parties Threshold: The parties to the transaction, together with their legal affiliates, must have assets in Canada, or gross revenue from sales in, from or into Canada, that in the aggregate exceed CAD400 million.
2. The Size-of-Target Threshold: The aggregate value of the assets in Canada owned by the target, including entities controlled by the target, or the gross revenues from sales in, from or into Canada, must exceed CAD93 million.
3. The Percentage of Share-Ownership Threshold: The acquiror must, as a result of the transaction, own more than 20% of the target’s voting shares (if the target is publicly traded) or more than 35% of the voting shares (if the target is privately-owned). (If the acquiror already owns between 20% or 35% and 50% of the target, notification would also be required in connection with a transaction which would result in the acquiror owning more than 50% of the target’s voting shares.)
Similar thresholds apply to acquisitions of partnership units, amalgamations and other forms of business combination. For the acquisition of assets, only the first two thresholds would apply.
The Competition Act includes an exemption to the pre-merger notification regime for certain joint ventures that are structured as unincorporated “combinations” (eg, partnerships). Specifically, the formation of an unincorporated joint venture is exempt from pre-merger notification where:
Strategic Alliances Provisions
In addition to the merger provisions, the Competition Act also provides for the review of agreements and arrangements between competitors that are likely to substantially prevent or lessen competition. This includes a contractual joint venture that neither triggers pre-merger notification nor meets the substantive definition of a merger. The scope of these provisions will expand on 15 December 2024, to include agreements between non-competitors where a “significant purpose” of the agreement, or part of the agreement, is to harm competition.
If an agreement is found to contravene these provisions, the Competition Tribunal can issue a prohibition or behavioural order; it may also make structural orders, such as the divestiture of assets or shares, or impose administrative monetary penalties (AMPs). The Tribunal is able to award AMPs of up to CAD10 million (or CAD15 million for subsequent infringements), or fines of up to “three times the value of the benefit derived from the agreement or arrangement” or, if that amount cannot be reasonably determined, up to “3% of the person’s annual worldwide gross revenues”.
Starting in 20 June 2025, private litigants will have the ability to challenge such agreements with leave from the Competition Tribunal, and will be able to seek remedial orders under Section 90.1, as well as monetary relief under.
Criminal Conspiracy Provisions
Theoretically, joint ventures between competitors could be subject to the Competition Act’s criminal conspiracy provisions. These provisions prohibit, among other things, agreements between competitors to fix prices, restrict output, or allocate markets. Notably, a conviction under these provisions can result in significant penalties; those convicted may face imprisonment for up to 14 years, an uncapped fine at the court’s discretion, or both.
The Competition Bureau has issued enforcement guidelines which state that the criminal conspiracy provision is reserved for agreements between competitors to fix prices, allocate markets or restrict output that constitute “naked restraints” on competition. Accordingly, competitor collaborations such as joint ventures are not intended to be reviewed under these provisions, unless they are in essence bare agreements to fix prices, not compete or restrict output, with limited or no other pro-competitive rationales for the joint venture other than to reduce some key aspect of competition. Certainly, if a “joint venture” is in essence a sham to facilitate an agreement to fix prices, restrict output or allocate markets, it could fall within the purview of the criminal conspiracy provisions under the Competition Act.
The concept of listed party participants is not applicable in Canada.
JVs incorporated under the CBCA, that are not reporting issuers, are required to maintain a register of individuals with significant control, meaning shares carrying 25% or more of an entities voting rights or fair market value outstanding shares. Two or more individuals are deemed to have significant control over a corporation if they jointly hold or agree to exercise a significant number of shares or related rights.
Recent amendments require a broader scope of information to be added to the register, and significant individual information must be provided to Corporations Canada at regular intervals. Some of the information will be published in a publicly available register. Penalties may be imposed for non-compliance.
JVs incorporated or otherwise formed under provincial corporate legislation will be subject to the disclosure requirements of the applicable jurisdiction. Certain provincial corporate legislation (eg, British Columbia and Ontario) contains similar transparency register maintenance requirements to the CBCA.
In Bhasin v Hrynew, 2014 SCC 71, the Supreme Court of Canada recognised a common law contractual duty of honest performance, which requires that parties not lie or knowingly mislead other parties regarding matters that are directly linked to their contractual performance. In 2020, in C.M. Callow Inc. v Zollinger, 2020 SCC 45, the Supreme Court expanded the scope of that duty, establishing that the duty of honest performance can also prohibit half-truths, omissions, and silence in certain circumstances. The duty applies to the performance of all contracts. This development requires parties to a contract to exercise caution when discussing material matters with counterparties. However, the duty does not amount to a positive obligation of disclosure. (C.M. Callow Inc. v Zollinger, 2020 SCC 45.)
See 3.3 Restrictions and National Security Considerations for a discussion of the recently passed amendments sanctions law in Canada.
At the initial stages of establishing the JV, typically in Canada the participants will enter into a confidentiality agreement, and then may subsequently choose to negotiate a letter of intent, memorandum of understanding and/or term sheet. The participants may choose to bypass this stage, particularly if one of the participants is a reporting issuer, as any such agreement may trigger a disclosure obligation depending on the jurisdiction in which they report and whether such agreement is binding. An exclusivity agreement may secure the positions of the participants during negotiations.
While a letter of intent or similar is not necessary as a preliminary step, it can assist parties to agree on the most significant commercial terms before negotiating the more substantial aspectsof the definitive documents later. This approach, which is very commonly used in Canada, can also avoid the risk of wasting time and resources negotiating a JV where the parties are later unable to agree on key material terms that hinder the establishment of the JV. In Canada, letters of intent or similar agreements relating to JV transactions are typically drafted as non-binding other than in respect of limited terms relating to confidentiality, exclusivity and certain other general provisions.
If one of the parties is a reporting issuer, a preliminary document such as a letter of intent or memorandum of understanding may create a disclosure obligation under applicable securities and stock exchange rules. Additionally, where such documents involve the exchange of personal information, certain obligations may be triggered under applicable privacy legislation.
There are no standard disclosure requirements that apply to JVs generally. However, where the JV is of a sufficiently high valuation, the transaction will trigger a referral under antitrust regulations. Where one or more of the participants is a reporting issuer, the disclosure requirements will be governed by the requirements of applicable securities laws and the rules of the relevant stock exchange . Where one or more of the participants are foreign entities, a notification requirement may be triggered under the Investment Canada Act. Depending on the choice of JV vehicle the regulator of the JV will additionally require corporate or partnership filings containing certain governance and ownership related disclosures. Finally, the participants must be cautious of potential referral to the relevant provincial securities administrators under the applicable securities regulations.
Tax treatment is a particularly significant factor in choosing what form of vehicle to adopt for the JV. Each form of vehicle will have differing set-up requirements.
Where a corporate JV entity is envisaged, a new company must be created with shares issued to the JV participants. The participants may negotiate the constating documents and a shareholder agreement to delineate their relationship and the intended governance of the JV, and to formalise how they will manage their relationship going forward including the initial contribution by each of the partners and funding mechanics. This approach may be preferable where limited liability is of particular importance, profits of the JV are to be distributed in accordance with ownership percentages or one of the participants is a foreign person or corporation for income tax purposes.
Where a partnership is used as the JV vehicle (whether a limited partnership or a general partnership), the participants negotiate a partnership agreement to set out their respective rights and responsibilities in the JV. Under Canadian law, a partnership has no separate legal personality (although it may sue and be sued in its own name). However, there are certain registration requirements for both partnerships and business names which vary between provinces. Using a partnership as the JV vehicle can provide flow through tax benefits and greater flexibility in the distribution of profits to the partners but potentially provides less liability protection than a corporate structured JV (particularly in the case where a general partnership is utilised, rather than a limited partnership). If a limited partnership is the chosen JV structure, it will typically require a corporation to act as its general partner (see the above paragraph on the set-up of a corporate JV entity).
Where the JV is formed with a limited scope, it may be sufficient to use a contractual structure. This approach has fewer set-up requirements and is solely dependent on the negotiation of the contractual relationship between the participants and any ancillary agreements (such as service agreements, confidentiality agreements, and licences). Typically, one of the JV parties is established as the operator or manager to take on the administrative functions for the business, and in some case, be solely responsible for the construction (if applicable) and operation of the project.
The choice of JV structure will dictate the documents required and the relevant terms. Where a separate corporate entity is established for the purpose of the JV in which the parties become shareholders, the rights and powers of the parties will be set out in the corporate statute governing the JV entity, the JV entity’s constating documents and in any shareholders’ agreement entered into by them with respect to the JV.
Main terms that each of these documents will generally address include:
In the case of a JV structured as a partnership, the terms of the JV will be contained in a partnership agreement or limited partnership agreement, as applicable. For an unincorporated JV, the terms of the JV will be contained in a joint-venture agreement, a joint-operating agreement, or an ownership and operation agreement. In each case, these governance agreements will contain many of the same concepts noted above in respect of a shareholders’ agreement.
There are many potential ancillary documents which the participants may choose to enter into to better protect their respective positions, including, but not limited to:
Regardless of the structure adopted, management of the JV will typically be delegated to a management board or committee, which may be comprised of senior officers and employees of the participants, as well as any specialists appointed specifically for the JV. JVs involving natural resource projects will typically appoint one of the JV partners as the operator of the projects that are subject to the JV. The powers and decision-making process of the board/committee and the operator, if applicable, should be negotiated and clearly set in the relevant agreement(s) (shareholder agreement, partnership agreement or joint venture agreement). The parties may wish to retain powers in respect of material decision-making (as discussed further below). Decision-making as between the parties will typically be decided in the formation documents of the JV, with the decision-making powers of the parties often weighted depending on the respective investments or other contributions of the parties.
Minority parties may wish to negotiate individual protections in respect of decision-making, such as the requirement of a super-majority or unanimous approval for certain types of decisions, or the negotiation of put or tag-along rights which may be triggered where certain decisions are taken as well as specific information and access rights. Conversely, majority parties may negotiate drag-along rights and any party may seek to obtain rights of first offer or refusal. Such rights will dictate decision-making with regards to ownership of the JV, as well as providing stability and predictability to the parties in the event of disputes or upon the occurrence of certain transactions or circumstances.
Where a corporate JV entity is established, under the statutes of most provinces in Canada, shares may only be issued in exchange for the cash or non-cash assets, or for services already provided. Shares may not be issued in exchange for future or unperformed services.
As the JV develops, the parties may raise further funding either by capital contributions or by debt or equity financing. Debt financing is most often provided by banks or financial institutions in the form of an operating or term loan (or a combination of both). To a lesser extent, debt financing may be secured from parent companies, shareholders or related persons, or by offering debt securities to the public. Where the initial parties to a JV agree, equity financing can be sought, either from the initial parties themselves or from third parties, potentially resulting in a dilution of the equity of the initial parties in the JV. JVs involving natural resource projects will typically include provisions relating to project financing which include matters relating to the pledging of each party's JV interest and the JV property as security for the project financing.
The parties may negotiate pre-emptive or veto rights at the outset of the JV which they may choose to exercise prior to any future rounds of funding. Such rights would likely be set out in the JV agreement, shareholders’ agreement or partnership agreement as applicable. Additionally, the participants may wish at the outset to make provisions for the possibility of accessing the public equity or debt markets as a means of raising capital and for going-pubic transactions.
Unincorporated joint ventures are generally not used where debt financing is expected to be obtained at the project or JV entity-level.
The structure of the JV and the allocation of interest between the participants involved will determine powers of the participants and their respective negotiating positions.
Deadlock is significantly more likely where ownership is split equally between two participants or where a minority party holds veto rights for key decisions. The formation agreements should include mechanisms for resolving disputes between the participants. These can include tie breaking votes being granted to the chair of the board or one participant, mediation and arbitration, consultation with parent companies or with third-party consultants, the exercise of buy-sell rights of the respective participants or, in the event that the dispute cannot be satisfactorily resolved, the termination of the JV and the distribution of its assets among the participants or the forced sale of one participants JV interest.
In a contractual JV, the decision-making process is strictly contractual and is determined by what has been expressly agreed between the participants. Various options are available to parties seeking to allow for greater influence in decision-making, including vote weighting between parties, assignment of specific activities as requiring specific forms of approval, or granting a power of veto to one or several parties in certain matters.
All provincial and territorial statutes provide shareholder rights and protection against certain oppressive conduct and other issues that may arise in decision-making.
Where the participants are contributing non-cash assets in exchange for ownership rights, this will require transfer agreements or bills of sale, depending on the nature of such assets. Tax advice should be sought on contributing non-cash assets in a tax efficient manner.
Where the JV will rely on the use of the IP of one or more of the participants, licence agreements will be necessary to grant the necessary rights for such use, which will need to address ownership rights on any future jointly developed IP. The participants may envisage a high degree of confidentiality, and as such may wish to negotiate NDAs to protect the interest both during the lifespan of the JV and following the termination of the involvement of some or all of the participants. A variety of other considerations may necessitate additional documentation, such as employment issues, tax treatment, securities laws, non-competition agreements and any industry-specific regulations. JVs relating to base metals where one of the partners is a senior producing entity or a mineral processor will typically involve an offtake agreement between the JV and producing entity/mineral processor as one of the many objectives for such parties is to secure a supply of the minerals that are subject to the JV for processing.
Boards are typically structured based on the ownership of interests in the JV entity, though a significant degree of variability exists. Board composition and nomination rights are typically contained in a shareholders’ agreement, rather than utilising weighted voting rights. It is common for agreements to envisage a tiered system of decision-making, whereby executive decision-making is largely delegated to management or one of the partners as the operator, with major decisions requiring approval by the JV entity’s board or by the shareholders themselves. Such approval might be required for more consequential decisions such as borrowing, issuance of equity, material acquisitions or expenditure, approval of budgets, changes to constating documents of a JV entity or significant personnel changes within the JV. It is recommended that parties clearly set out at the outset any governance procedures and requirements for board meetings and decision-making, as well as establishing the rights of the parties to receive information regarding the operations of the JV and any material issues arising.
The following are the principle duties owed by a director in Canada:
Although the specific contents of such duties vary between provinces, Canadian courts typically defer to any decision in good faith made by a director. Directors owe their duties exclusively to the company on whose board they serve, although they may legitimately consider the interests of shareholders, creditors and other stakeholders as well as the public interest when exercising their powers. Directors can delegate their functions but retain a duty of oversight, as delegation does not absolve them from responsibility for ensuring that decisions are being taken in a prudent manner.
Where a director or other employee of a JV entity also holds a position with one of the JV parties, conflicts of interest may arise between the best interest of the JV and the best interests of the party with whom they are otherwise employed. While this can clearly be prevented by avoiding the existence of such dual roles, the parties can also expressly limit the fiduciary duties owed by such individuals either to the JV or to the relevant JV participant. Whether the participants wish to appoint their own directors or employees to the JV will depend on the degree of control and oversight which they wish to retain over the operation of the JV, and the extent to which they anticipate the JV becoming independent of their principal business.
Conflicts of interest are generally required to be disclosed by directors to the board and for the conflicted director to abstain from voting on any resolution to approve a transaction in which the director has a conflict.
There are numerous key IP issues that must be considered when setting up a JV, whether contractually or through a separate corporate entity. They include, for example:
Whether IP rights should be licensed or assigned to a JV depends on various factors, such as the following.
1. Scope of the JV – for ventures with a limited scope (in terms of purpose, size, and geography), licensing might be more suitable.
2. Duration of the JV – for short-term ventures, licensing may better align with the JV’s goals. For long-term or permanent ventures, assignment may better do so.
3. Value of the IP to the JV participant – if the IP is critical to the core business of the JV participant, licensing may be preferred (ie, to protect the JV participant’s interests).
4. Solvency of JV participant – an assignment of IP may be appropriate where a JV participant may not have the ability (or desire) to make a capital contribution to the JV.
5. Nature of the IP – if, for example, the name of the JV incorporates the name of a JV participant, a licence may be more appropriate.
6. Tax Implications – the tax treatment of licensing versus assignment can differ, and this should be considered in the decision-making process.
7. Exit – licensing may allow for easier termination of the JV’s ability to use the applicable IP, while an assignment may require a more complex unwinding process.
ESG concerns are prominent the Canadian legal landscape. The trend is toward more complete disclosure, stronger compliance obligations and more significant remedial ramifications.
Canada recently introduced the Fighting Against Forced Labour and Child Labour in Supply Chains Act (the “Supply Chains Act”) in the interest of increased supply chain transparency. The Supply Chains Act requires public reporting outlining steps taken to prevent and reduce forced and child labour throughout the production process of Canadian goods within and outside of Canada. JVs need to be aware if they have any reporting obligations under the new regulation.
An anti-greenwashing provision in the Competition Act recently came into effect that requires all environmental claims made to promote a product or business interest be based “on adequate and proper substantiation in accordance with internationally recognised methodology”. Entities putting out statements regarding their commitment to the environment should be prepared to substantiate such claims, even where the claims are not made to promote a specific product or service. If a statement cannot be substantiated entities risk exposure which could include a fine of up to 3% of the company’s annual worldwide gross revenues.
With the evolving ESG legal landscape, JVs need to take additional care. Entities need to be aware of the full scope of legal obligations and take care with compliance.
Corporate JVs
The procedures for the dissolution of corporations are set out by the statute under which the corporation was incorporated. A corporate JV can be incorporated under the CBCA or under provincial/territorial statute. For corporations incorporated under the CBCA, a special resolution of the shareholders of each class of shares is required if shares have been issued.
If a corporate JV is incorporated under provincial/territory statute, the relevant province’s or territory’s legislation should be reviewed to ensure compliance but will generally require a special resolution of the shareholders of the corporation.
Unincorporated Contractual JVs
Unincorporated contractual JVs terminate based on the terms of the joint-venture agreement.
Partnership
Partnerships are generally dissolved based on the terms specified by the applicable partnership agreement. Partners can set a fixed term for the partnership, expiry at which the partnership will be dissolved, or it could be agreed that the partnership terminates at the end of the project for which the partnership was created. Otherwise, if permitted by the governing province’s partnership legislation, the partnership may be dissolved by notice of intention to dissolve.
In most provinces, partnership legislation provides that a partnership is dissolved automatically upon the death, bankruptcy or dissolution of a partner. Such provisions are typically altered by agreement between the partners so that in such an event the partnership continues between the remaining partners so that a new partnership agreement is not required.
Otherwise, in certain circumstances a partnership might be terminated by court order.
In each case, general matters that should be dealt with on termination of a JV include:
Depending on the industry, specific restrictions or processes may be at play with respect to exit, transfer, and termination of joint ventures.
With regard to the transfer of assets between participants of the joint venture, the following should be considered.
In dealing with transfer of assets between participants, there may be differences between assets originally contributed to the JV by a participant and assets originating from the joint venture itself. Specific considerations will depend on the particular JV vehicle chosen to carry out the joint venture project, as well as individual circumstances of the joint venture or contract that governs the joint venture.
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