Joint Ventures 2024 Comparisons

Despite inflation, interest rate fluctuations and global geopolitical events, recent joint venture (JV) activity in Guinea has been buoyant, particularly in capital-intensive sectors such as mining. The Simandou project is an emblematic example of this, with the formation of the JV company, Compagnie du TransGuineen (CTG), to take forward plans to co-develop the rail and port infrastructure for the Simandou iron ore project. There has also been a noticeable shift towards JVs in renewable energy and infrastructure, driven by Guinea’s focus on sustainable development. Regulatory scrutiny, particularly in the mining sector, has intensified, requiring more comprehensive compliance strategies, especially in relation to ESG standards.

The mining and renewable energy sectors have been particularly active in Guinea. The surge in activity within these sectors can be attributed to Guinea’s vast natural resources and the global shift towards sustainable energy solutions. The government’s strategic focus on infrastructure development has also played a significant role in attracting JVs in these industries.

Under Guinean law, JVs may be structured as partnerships or as corporations.

Partnerships consist of a JV company (société en participation), which is a company without legal personality, not registered with the trade and companies register and not subject to publication. Although this form of company is permitted under Guinean law, from a practical standpoint, JV partners rarely use it.

In contrast, JVs most often take the form of corporations, with a greater movement towards public limited companies (société anonyme, SA).

Where partnerships are concerned, it is the personality of the partners that is of primary importance, rather than the capital they contribute. The partners generally have unlimited personal liability.

The advantage of a partnership lies in the discretion it is afforded by third parties, since the absence of publicity (no obligation to publish a legal notice) means that the company is formed solely with regard to the partners, enabling them to carry out projects that do not need to be made known to everyone, particularly to competing companies.

However, in the context of limited companies, the consideration of the individual is relegated to second place. It is the capital aspect that dominates.

Corporations are companies in which the partners are only liable for the company’s debts up to the amount of their contributions.

The choice of JV vehicle in Guinea is primarily driven by factors such as risk sharing, management structure and control. Pooling of profits and losses, entitlement to assets and revenue, and accounting and tax treatment also play crucial roles. Corporate entities like the SA are preferred for their clear governance and limited liability, while simpler contractual JVs may be chosen for less complex ventures.

JV partners focus on key factors when choosing the appropriate JV vehicle. The most common factors are:

• flexibility in governance and risk management;
• distribution of profits and losses, and allocation of assets and revenues; and
• tax optimisation and regulatory compliance.

In this context, the simplified joint stock company (sociétés par actions simplifiée, SAS) and the SA are the most commonly used JV vehicles.

Governance Flexibility and Risk Management

The SAS is often the preferred vehicle due to its flexible governance. The SAS allows JV partners to tailor the management structure to their specific needs, which is particularly beneficial in JVs involving both local and foreign partners. This flexibility includes the ability to appoint directors, deputy directors, and even establish an executive committee or supervisory board. On the other hand, the SA requires a more rigid governance structure, including a board of directors for companies with more than three shareholders, which may appeal to institutional investors seeking stability and a more formalised management approach.

Entitlements to Assets and Revenues

The SAS stands out for its exceptional flexibility in the distribution of profits and losses, as well as in the allocation of assets and revenues. In an SAS, the shareholders have considerable freedom to tailor these arrangements in the company’s statutes, allowing them to align the financial distribution with the evolving needs and contributions of the JV partners. This flexibility is particularly beneficial in dynamic JVs where the roles, investments and expectations of each partner may change over time. For instance, if one partner provides more capital upfront while another contributes strategic expertise, the SAS structure can accommodate varying profit-sharing ratios or deferred revenue entitlements that reflect these differences. Moreover, this adaptability extends to the management of assets, where the SAS can easily reassign asset entitlements as the JV progresses, ensuring that all partners are fairly compensated for their contributions.

On the other hand, the SA offers a more structured and transparent approach to the distribution of profits and losses, governed by clear, predefined rules. These rules dictate how profits and assets are allocated among shareholders, which is particularly appealing in scenarios where the protection of minority shareholders is a key concern. In an SA, profit distribution is generally proportional to the shareholding, ensuring that all shareholders, including minorities, receive a fair share relative to their investment. This level of predictability and legal protection is crucial in attracting institutional investors or when the JV involves a large number of stakeholders with varying degrees of influence. The structured approach of the SA also ensures that any changes in asset ownership or revenue entitlements are conducted transparently and with the necessary shareholder approvals, thereby minimising disputes and fostering trust among the partners.

Tax treatment and Compliance

The exceptional flexibility of the SAS allows for the structuring of tax arrangements that can be tailored to the specific needs of the JV partners. For instance, the SAS permits the allocation of profits and losses in a manner that aligns with the financial strategies of the shareholders, potentially leading to favourable tax outcomes. This can include the timing of distributions, the application of tax credits, and the ability to reinvest profits into the company to defer tax liabilities. Additionally, the SAS can facilitate the use of tax-efficient financing structures, such as shareholder loans, which may provide deductible interest payments, further optimising the tax burden for investors. Conversely, the SA provides a more standardised and transparent tax regime, which, while less flexible, is often preferred in environments where regulatory compliance and financial transparency are critical. The SA’s structure imposes stricter accounting and financial reporting requirements, ensuring that all financial activities are thoroughly documented and reported in accordance with the relevant tax laws and regulations. This can be particularly important for JVs that involve public companies, institutional investors or operations in highly regulated industries, where maintaining a high level of transparency and adherence to regulatory standards is paramount. The SA’s rigorous compliance framework includes regular audits, detailed financial disclosures and strict adherence to corporate governance principles, all of which contribute to a robust and transparent tax environment. This level of transparency and accountability provides reassurance to investors, particularly those concerned about reputational risks and the need to demonstrate robust compliance to stakeholders and regulators.

There is no specific primary regulator for JVs in Guinea. However, several regulators are involved depending on the JV’s sector of activity. Key regulators include the Private Investment Promotion Agency (APIP) for company registration and investment facilitation.

Depending on the specific activity of the JV, other regulators may be involved, such as:

• the Ministry of Mines and Geology for activities related to the mining sector, the most dynamic sector in Guinea;
• the Ministry of the Economy and Finance for tax and financial matters; and
• the Post and Telecommunications Regulatory Authority (ARPT) if the activity involves telecommunications.

Guinea’s AML and CFT framework is anchored in the Law L/2021/024/AN of 17 August 2021 on the fight against money laundering and the financing of terrorism. This Law imposes stringent obligations on financial institutions and designated non-financial businesses and professions, ensuring that they implement rigorous customer due diligence (CDD) procedures, maintain extensive records, and continuously monitor client activities to detect and report any suspicious transactions to the National Financial Intelligence Unit (CENTIF), which serves as the central authority for receiving, analysing and processing reports of suspicious activities.

The Law applies across various sectors, including banking, real estate, mining and virtual asset services. Institutions must adopt a risk-based approach to AML/CFT compliance, ensuring that measures are proportional to the level of risk identified. The legislation also includes specific provisions for enhanced due diligence in high-risk situations, particularly in sectors that are more vulnerable to money laundering activities.

Penalties for non-compliance with AML/CFT regulations in Guinea are severe and can include substantial fines, the revocation of operating licences and imprisonment. The CENTIF plays a central role in the enforcement of these regulations, working in conjunction with other national authorities to ensure that the financial system is not exploited for illicit purposes.

The 2015 Guinean Investment Code imposes certain sector-specific limitations.

Foreign investors are notably restricted from holding more than 40% of shares in companies operating in areas such as newspaper publication and the broadcasting of television or radio programmes. These restrictions are designed to safeguard national sovereignty in industries deemed critical. Furthermore, companies engaging in JVs must ensure full compliance with applicable international sanctions to which Guinea is a signatory. Failure to adhere to these sanctions, including partnerships with sanctioned entities or individuals, could result in significant legal consequences, such as the nullification of JV agreements or the imposition of severe financial penalties.

When it comes to national security considerations, Article 5 of the 2015 Investment Code provides that sectors such as electricity production and distribution, water distribution, banking and insurance, telecommunications, and the manufacture and sale of explosives, weapons and hazardous products are all subject to strict technical regulations. In this sense, private entities, whether domestic or foreign, are required to obtain the necessary authorisations before engaging in activities within these sectors. These regulatory measures are intended to protect the nation’s critical infrastructure and strategic interests, ensuring that foreign investments do not pose a threat to national security.

Competition should be considered with regards to the Law L/2022/0010/CNT on local content and Law L/L94/040/CTRN on competition and free pricing, which are the main regulations governing competition inn Guinea.

Similarly, approval from the relevant authorities may be required for JV entities in specific sectors such as mining, banking and telecoms.

There are no specific rules for listed party participants.

There are no specific rules in relation to ultimate beneficial owners (UBOs). However, in specific sectors, such as mining and telecoms, the disclosure  of the JV’s partners may be requested.

There have been important rulings affirming the enforceability of shareholders’ agreements within JVs. These decisions have highlighted the importance of clearly drafted agreements that outline the rights and obligations of JV partners, particularly regarding decision-making processes, profit-sharing and dispute resolution.

During the negotiation stage of a JV, several critical documents are typically used to structure the process, protect the interests of the parties involved and lay the groundwork for the eventual JV agreement. These documents include the following.

• Non-disclosure agreement (NDA): the NDA is typically the first document signed, ensuring that all confidential information shared during JV negotiations remains secure.
• Memorandum of understanding (MoU): the MoU outlines the preliminary terms and mutual intentions for the JV, providing a framework for further negotiations. While not legally binding, it may include binding clauses on exclusivity or timelines to guide the process.​
• Term sheet: the term sheet sets out the high-level terms, such as governance and financial contributions, forming the basis for more detailed agreements. It ensures that all parties agree on key aspects before committing further resources​.
• Shareholder agreement (SHA): this document formalises the rights and obligations of each party within the JV, covering profit-sharing, voting rights and dispute resolution. It is a legally binding agreement that helps prevent conflicts by clearly defining roles​.
• Articles of association (AoA): if creating a new entity, the articles of association govern its operations, including corporate governance and ownership distribution. The AoA works alongside the SHA to ensure compliance with local laws and smooth processes.

When creating a new JV entity, the disclosure of the identity of JV partners typically occurs during the administrative process of establishing the JV. This includes the registration process with the relevant authorities, where the identities of the partners and the details of their contributions or stakes in the JV are officially documented and made public as part of the new entity’s formation.

In sectors with specific regulatory requirements, if the JV involves using an existing company as the JV vehicle, the disclosure of the JV partners must happen before the signing of the JV agreement. This ensures transparency and compliance with sector-specific regulations that may govern the involvement of new partners, thereby maintaining proper governance and adhering to legal obligations specific to those industries.

The incorporation of a company as a JV vehicle, regardless of whether it is an SAS or an SA, involves the presence of a notary. The company’s AoA, which outline its structure, objectives and governance rules, must be drafted and signed by the shareholders.

The AoA in the SAS are highly flexible and allow the shareholders significant freedom in defining the governance structure. While in the SA, the AoA are more formalised and must comply with stringent legal requirements.

JV partners may transfer assets, liabilities or contracts to the new entity through business transfers or contributions in kind, requiring shareholder approval or court-appointed valuations in some cases.

Simultaneously, any required share capital, depending on the legal form, must be deposited in a bank account opened in the name of the company that is being established. An SA requires a minimum capital of GNF10,000,000 for non-public offerings or GNF100,000,000 for public offerings, making it appropriate for large-scale projects. Conversely, an SAS does not require a minimum share capital,

The notary further completes the registration formalities with the one-stop-shop (ie, APIP). After registration, the company receives a tax identification number (TIN) and is listed in the Commercial and Credit Register (RCCM), granting it legal personality.

Additional formalities, such as registering with social security and obtaining specific licences or permits, may be required depending on the company’s activities.

The terms of a JV will generally be set out in an SHA and the AoA, which each play a crucial role in defining the JV’s structure and operations.

The SHA is pivotal as it outlines the rights and obligations of each JV partner, including their financial contributions, profit-sharing arrangements, governance and dispute resolution mechanisms. It typically includes provisions related to the following.

• Governance structure: the SHA details how the JV will be managed, including the composition and powers of the board of directors (for an SA) or the roles of the president and any directors (for an SAS). This includes stipulations on how decisions will be made, quorum requirements and voting rights.
• Transfer of shares: procedures and restrictions related to the transfer of shares, which may include rights of first refusal and other mechanisms to maintain control over the ownership structure.
• Dispute resolution: mechanisms for resolving disputes, which could include arbitration clauses, mediation processes or specific buy-out provisions in case of irreconcilable disagreements.

Furthermore, the AoA govern the internal workings of the JV entity, including how it will be managed and how decisions will be made. The AoA must align with the OHADA Uniform Act on Commercial Companies and Economic Interest Groups and typically includes the following.

• Corporate governance: detailed provisions about the board of directors in an SA, including how directors are appointed, their terms and their powers. For an SAS, it would detail the role and powers of the president and any other officers, ensuring that the leadership structure aligns with the operational needs of the JV.
• Capital structure: information about the company’s share capital, including the types and classes of shares, their nominal value and any specific rights attached to them, such as voting or dividend rights. The AoA should also outline procedures for capital increases or decreases.
• Profit distribution: rules governing how profits are to be distributed among shareholders, typically in proportion to their shareholdings, unless otherwise specified in the SHA or AoA.
• Amendments to registered capital: provisions for how the registered capital structure may be modified, including the issuance of new shares or the redemption of existing ones, ensuring that any changes are conducted transparently and fairly.
• General meetings: procedures for convening and conducting general meetings, including quorum requirements, voting procedures, and the types of resolutions that require shareholder approval.
• Liability and obligations: clearly defined limits on the liability of shareholders, which is typically limited to their capital contributions in both SA and SAS structures.

In both SA and SAS structures, decision-making is governed by the SHA and the AoA, which define the mechanisms and responsible parties for decision-making. In an SA, the board of directors is responsible for setting the strategic direction and overseeing management, with the AoA detailing the appointment, terms and powers of directors. Major decisions, like budget approvals or significant contracts, typically require board approval with specific voting thresholds outlined in the AoA. In an SAS, the president often holds broad decision-making powers as specified in the AoA, with the possibility of appointing additional directors or managers as defined by the shareholders. Both SA and SAS structures require general meetings for decisions such as amending the AoA or approving major transactions, with procedures for these meetings ‒such as notice periods, quorum and voting thresholds ‒ set out in the AoA. The SHA and AoA may also delegate certain decision-making powers to specific individuals or committees to enable efficient operational decisions without requiring full board or shareholder approval.

Equity contributions are the most common method, where each partner invests resources (cash, assets, intellectual property) in exchange for ownership stakes, which determine voting rights and profit-sharing. Debt financing complements this by allowing the JV to borrow funds either from external lenders or through shareholder loans, often with more flexible repayment terms.

The combination of equity and debt helps balance financial risk and optimise the tax structure, as interest on loans is usually tax-deductible. Regarding future funding obligations, the SHA may require partners to contribute additional capital as needed, with mandatory capital calls based on ownership percentages. If no future funding obligations are established, any additional contributions are voluntary, which could lead to disparities if certain partners are unable or unwilling to invest more.

When a partner contributes additional equity, it is essential to address the potential ownership changes. Pre-emptive rights can prevent dilution by allowing existing partners to maintain their ownership percentages by purchasing new shares proportionally. If new shares are issued, the SHA and AoA should outline how these will be allocated and how ownership percentages will be adjusted accordingly. Such changes in ownership can impact governance, particularly if one partner’s stake increases significantly, altering decision-making power within the JV.

There is no general standard practice on how JV partners deal with deadlocks. However, the JV partners may decide on the dissolution of the JV if a deadlock cannot be resolved.

Depending on the specific nature and needs of the JV, other documents might also be negotiated and executed. Proper documentation of asset contributions is crucial for preventing disputes over ownership and valuation, particularly in complex sectors like mining and telecommunications. For example, when a telecommunications partner provides proprietary technology, a comprehensive IP licence agreement is necessary, ensuring that the JV can fully utilise the technology while safeguarding the intellectual property rights of the contributing partner.

Where employees are seconded to the JV by one of the partners, an employee secondment agreement is indispensable. This agreement must clearly outline the terms of secondment, including the duration, scope of responsibilities and reporting structures. In JVs that often integrate diverse expertise, agreements such as employee secondment agreements are vital for ensuring that all parties understand their roles and obligations, thus promoting smooth collaboration and minimising the risk of misunderstandings that could disrupt the venture’s operations.

In JV vehicle structured as an SA or SAS, the board’s composition and structure vary according to the chosen corporate form, each offering different governance models.

• SA with a board of directors: theboard typically consists of a minimum of three  and a maximum of 12 members, though this can extend to 15 if the company engages in public offerings. The board can be led by a chairperson and CEO assisted by a deputy CEO, or by a chairperson of the board of directors with a separate CEO. This structure allows for a clear division of governance and executive responsibilities. Directors serve an initial term of two years, with subsequent terms lasting up to six years, and can be dismissed by the shareholders’ general meeting at any time.
• SA with a managing director: the company is managed by a managing director, who may be supported by deputy managing directors. The first managing director is appointed in the AoA, while future appointments are made by the ordinary general meeting of shareholders. The managing director’s term is set by the AoA, not exceeding six years if appointed during the company’s existence or two years if appointed initially.
• SAS: the governance structure is more flexible and is determined by the AoA. The only mandatory corporate officer is the chairperson, who may be supported by a CEO and deputy CEOs, depending on the provisions of the articles. The chairperson is vested with the broadest powers to act on behalf of the company, within the corporate purpose. The flexibility of the SAS allows for customised governance structures tailored to the needs of the JV partners.

In all these structures, the board’s composition usually reflects the equity stakes of the JV participants, ensuring proportional representation. Weighted voting rights, where certain board members or officers have greater influence in decisions, can be employed to maintain control by specific partners, provided these rights are clearly articulated in the JV agreement and legally recognised.

Directors in both SA and SAS structures have a fiduciary duty to act in the best interests of the company. This duty includes acting with care, loyalty and in good faith, ensuring that their decisions are aligned with the company’s strategic objectives and comply with legal and regulatory requirements. In the context of a JV, directors appointed by specific participants may also have competing duties to those participants. Balancing these dual obligations requires transparency and careful management to avoid conflicts of interest.

In an SA with a board of directors, the board is responsible for determining the strategic direction of the company and ensuring its implementation. The board operates within the limits of the corporate purpose and the powers granted to shareholder meetings. The CEO, supported by any deputy CEOs, manages the day-to-day operations and represents the company in its dealings with third parties. The board may delegate specific functions to subcommittees to handle specialised tasks such as audit, finance or risk management, while retaining overall responsibility for governance.

In an SA with a managing director, the managing director holds broad powers to manage the company and act on its behalf, within the limits of the corporate purpose. The managing director’s actions are subject to the oversight of the shareholders, particularly concerning matters reserved for the general meetings.

In an SAS, the chairperson, possibly supported by a CEO and deputy CEOs, is entrusted with the broadest powers to act on behalf of the company, within the corporate purpose defined in the AoA. The articles can provide for additional governance structures, including subcommittees, tailored to the specific needs of the JV.

Conflicts of interest within a JV are managed through the regime of conventions réglementées (regulated agreements), providing a structured approach to ensure transparency and protect the JV’s interests.

Directors must fully disclose any personal or financial interest they have in a transaction with the JV. Particularly, they must detail the nature of the interest and its potential impact on their decision-making. The agreement must then be approved by the board of directors. The interested director is required to abstain from both the discussion and the vote to ensure impartiality. Moreover, shareholder approval is also required, for significant transactions, providing an additional layer of oversight and protecting the interests of minority shareholders. In addition, the statutory auditors must be informed of any convention réglementée and draft a special report assessing the agreement. This report is presented to shareholders at the general meeting.

All conventions réglementées must be transparently reported in the JV’s annual financial statements, ensuring ongoing accountability.

Agreements entered into without proper approval can be declared void and directors involved in unauthorised agreements may be held personally liable for damages caused to the JV.

Strong consideration of IP matters is essential to safeguard the interests of all JV participants. The SHA should clearly state who will own any new IP developed during the JV’s operation, with the JV entity typically holding ownership. Additionally, the agreement must detail the terms of any IP licences, including whether they are exclusive, the duration of the licence and the conditions under which it can be terminated, ensuring clarity on how the IP will be managed and used. Each partner should retain ownership of their pre-existing IP, often facilitated through a licensing agreement that permits the JV to utilise the IP without transferring ownership.

Also, it is crucial to consider any third-party rights tied to the contributed IP to prevent legal complications. The SHA should include robust confidentiality provisions to protect sensitive information and trade secrets during the JV’s lifespan and after its conclusion. Lastly, the agreement should clearly outline the handling of IP rights upon the JV's termination, specifying whether the licences will persist or if the IP will revert to the original owners.

Licensing is generally preferred when a partner wishes to retain ownership of their IP while granting the JV the right to use it.

However, assignment involves transferring ownership of the IP to the JV entity. This approach may be appropriate when the IP is central to the JV’s operations and both parties agree that the JV should own the IP outright. Assigning IP can simplify management within the JV, as the IP becomes a core asset of the entity. However, it also means that the original owner relinquishes control over the IP, which could limit their ability to use it in the future or leverage it in other ventures.

Importance of ESG

ESG considerations are increasingly vital for companies operating in Guinea, including JVs. Incorporating ESG principles into business operations is crucial not only for compliance with local and international regulations but also for enhancing the JV’s reputation, attracting investment and ensuring long-term sustainability. ESG factors influence how a company is perceived by stakeholders, including investors, customers and local communities, and can significantly impact its operational success and legal standing.

Recent Developments in ESG

While specific recent court decisions or legal developments relating directly to ESG or climate change in Guinea may be limited, the global trend towards stricter environmental regulations and heightened accountability for corporate actions is evident. Companies in Guinea, including JVs, are increasingly expected to demonstrate their commitment to sustainable practices, particularly in sectors such as mining, where environmental and social impacts are significant. International conventions and national laws are being more rigorously enforced, and non-compliance can result in legal penalties, reputational damage and loss of social licence to operate.

Measures to be Taken by JV Participants or by the JV Entity

To ensure compliance and mitigate risks, JV participants and the JV entity must take the lead in implementing comprehensive ESG measures. This involves conducting environmental impact assessments (EIAs), actively engaging with local communities, adhering to both national and international environmental laws, and consistently reporting on ESG performance. Equally important is the need for capacity building within local communities and continuous monitoring of environmental and social impacts. Such actions not only satisfy legal obligations but also fortify the JV’s relationships with stakeholders, ultimately contributing to its sustained success.

Key ESG Regulations in Guinea

The principal frameworks governing corporate governance and ESG-related obligations in Guinea are rooted in the OHADA Uniform Acts, with the AUSCGIE being particularly influential in regulating management and corporate governance practices. Additionally, national legislation, including the Law on local content and the Economic Activities Code, significantly influences the corporate governance landscape. These laws require businesses to incorporate local stakeholders and resources into their operations, while also underscoring the necessity of transparency and accountability. To effectively advance ESG goals, companies must align their internal governance structures with these regulatory requirements.

JVs generally come to an end through one of several common scenarios. These include:

• by the effect of a judgment ordering judicial liquidation or total transfer of assets;
• by court decision for just cause;
• the completion of the JV’s specific purpose or project;
• the expiry of the term defined in the JV agreement;
• early dissolution by decision of the JV partners; or
• certain triggering events such as (i) a material breach of the SHA, (ii) insolvency of one of the partners, or (iii) a significant change in ownership or control of a partner that impacts the JV’s operations.

Upon the termination of a JV, several critical matters must be addressed to ensure an orderly and legally compliant winding up, including:

• the liquidation and equitable distribution of the JV’s remaining assets;
• the settlement of debts and liabilities;
• the execution of the winding-up process;
• the resolution of employment matters; and
• completion of final reporting and compliance requirements.

The appointed liquidator(s) will be responsible for:

• conducting a thorough assessment of the company’s assets and liabilities to settle any outstanding debts; and
• identifying potential creditors and debtors.

Upon the completion of the liquidation process, the shareholders will review the final accounts, grant discharge to the liquidator(s) for the execution of their mandate, and formally acknowledge the dissolution of the company.