Re : Legal Opinion regarding formation of a Joint Venture Partnership namely Company 1, opening and operation of their CD Account.
We refer to your letter dated 03 September 2006 and our letter dated 04.09.2006 on the above subject. Upon detail perusal of the papers, we find that the documents submitted to us are enough to give our opinion. As such you may not need to collect the information as requested in our letter.
On perusal of your letter and the provided documents, it is appears that Company 1 (“COMPANY 1”) and A B & E Ltd, being represented by their respective Managing Directors have entered into a partnership agreement (“AGREEMENT”) on 08.08.2006 whereby they have agreed to form a Joint Venture in the name of COMPANY 1.
The partners of COMPANY 1 on 20.08.2006 passed a Resolution signed by both partners, whereby they agreed to maintain a current account to be opened with Bank 1(“BANK 1”) in the name of “COMPANY 1”. They also agreed that the account would be operated with the joint signatures of both partners.
In these circumstances, you have requested our legal opinion regarding the formation of the Joint Venture Partnership i.e. COMPANY 1, the opening and operation of their account and steps to protect the interest of BANK 1, as COMPANY 1 will seek for sizable amount of financial assistance from BANK 1.
A Joint Venture is in effect a Partnership formed by more than one Partner. The Partners could be legal as well as natural persons. A Joint Venture is usually formed to undertake a particular project and after completion of the Project the Joint Venture is dissolved. So in order to open an account of a Joint Venture and allow operation of the same the Bank needs to look at the Joint Venture Agreement, which creates the Joint Venture itself. The Bank Account must be opened in strict accordance of the terms of the Joint Venture Agreement. Any deviation will jeopardize the Bank’s interest.
In this instance, the Joint Venture (JV) has submitted Joint Venture Agreement dated 08.08.2006 which shows that the signatories are COMPANY 1 (“COMPANY 1”) and COMPANY 2. We however have been provided with the Memorandum & Articles of Associations of (a) COMPANY 1. and (b) COMPANY 3. COMPANY 2 and COMPANY 3. are not necessarily the same legal entities. COMPANY 2 can stand for many things. Therefore the parties need to have a proper Joint Venture Agreement where the two Companies joining together forming the Joint Venture are properly identified. So you will request the Parties to submit a proper agreement giving correct description of the Parties. In addition both the companies also will furnish Board Resolution agreeing to form the JV.
Clause 4 of the Joint Venture agreement states that the cheques in the name of the JV shall be deposited in a joint account. Clause 8 stipulates that all transaction shall be done through cheques. Clause 6 stipulates that in case of any financial difficulties both partners shall be liable. The Agreement is silent as to how this account shall be opened and who shall operate the account. A copy of the minutes of the meeting dated 20.08.2006 of the Partners has been submitted along with other papers. Although two Limited Companies are the partners of the Joint Venture, two individuals (Managing Directors of the respective Companies) have been shown in the minutes as partners attending the meeting.
The Resolution states that a current account shall be opened with BANK 1 BL and “shall be operated with the joint signatures of partners behalf of the Company”. As we stated earlier the partners are two limited Companies. Therefore, the Resolution should mention by name the persons representing the two partners who shall operate the account. Since you indicated in your letter that the Bank is contemplating providing financial assistance the Resolution should also clearly cover the situation when the JV can approach for financial assistance and the persons representing the Joint Venture Partners authorised to sign and execute various charge documents.
The above anomalies should be addressed to before opening the account. If you have any further inquiries please do not hesitate to contact us.
For: “The Lawyers & Jurists”