Normally, opening a JV in the South African Republic takes the form of a registered company (private or public). It’s also possible to register unincorporated partnerships in the South African Republic but it entails some risks for the partners. For instance, they bear joint & separate liability for the debts of their partnership. Establishing LLPs as JVs isn't allowed.
It’s possible to establish a JV in the South African Republic in all industries & sectors. Normally, JVs are established in sectors that require substantial investments.
Partners in a JV mustn’t abide by any particular rules or regulations. JVs formed as companies get regulated by company law; JVs formed as unincorporated partnerships get governed by the provisions of common law. Participation of foreign partners also depends on adherence to the strict currency regulations. Typically, they require getting consent of currency control agencies for bringing in/out property or funds.
Opening a JV in the SAR requires paying close attention to taxation. Besides income tax & capital gains tax, JV partners must also pay a tax on dividends.
Those interested in registering a JV in the SAR should keep in mind that contributions to them normally take the form of share subscriptions, while rewards for them include property, funds or labor. For JVs established as partnerships contributions include money, know-how, expertise, labor or their equivalent.
Exercise of control is normally done via reserved issues; however, that requires getting consent of the majority of stakeholders. Stakeholders have a right to appoint BoD members who bear fiduciary responsibility before their companies. In JVs established as partnerships, partners exercise full control; no reserved issues may be launched unless the majority of stakeholders agrees to it.
Conclusion of an M&A deal in the SAR implies that JVs are going to bear responsibility for ensuring protection of its employees before and during the transfer of personnel.
South Africa: JV Financing
Financing of combined JVs is done by their stakeholders who can either extend loans or subscribe to JVs’ shares. JV partners can also resort to external bank financing to establish a JV in the SAR. Financing for JVs established as partnerships is usually provided in the form of contributions & capital accounts. External financing from banks or other financial establishments is also available. Affiliate fees get governed by affiliate agreements. Financing of JVs from abroad is governed by foreign exchange legislation, which means that money may be transferred to a JV's foreign partners.
For more information on JV regulation in the South African Republic or advice on establishment of JVs in the South African Republic, please contact IQ Decision UK.