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AgPart 925 - JV
AgPart 925 - JV
AgPart 925 - JV
JOINT VENTURES
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1. Introduction
It is fitting that a course in Philippine Partnership Law should end
with the section on joint ventures, for it is in this field where
Supreme Court decisions have become truly transcendent when it
comes to protection of national interests or upholding the sanctity of
contractual commitments, and consequently where the essence of
partnership principles has become more lucent.
Discussions on joint ventures first appeared as a sort-of esoteric
medium of doing business in Philippine jurisprudence, with an
original impression that they were a commercial association
different from partnerships. The tendency has therefore been to
ascribe to joint venture arrangements certain legal allowances that
would never been accepted in the case of strict partnership
arrangements. This partiality for joint venture arrangements,
which still has remnants in sprinkling statutory provisions, may be
attributed to the perception that the joint venture is a more projectoriented medium when compared to the partnership which tends to
be branded with the attributes of primarily being contractual
relationship bounded by the doctrine of delectus personae, and
Primarily
Governed
by
There was a time when joint ventures were treated separately from
partnerships. Take the 1954 decision of Tuason v. Bolaos, 95 Phil.
106 (1954), where the Supreme Court upheld as applicable the old
venture
Characteristics
of
Joint
Venture
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Pursued
under
Formal
Partnership
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litigants who relied on the joint venture agreement rather than the
litigants who relied on the orthodox principles of corporation law.
x x x. (at pp. 142-144).
The provisions of the Corporation Code on close corporations, which
provides for informal management of its affairs, binding effect of
written agreements among stockholders, etc., should be deemed to
be available to resolve issues pertaining to joint venture
corporations.
(4) Right of First Refusal as a Delectus Personae Feature in
JV Company Scheme
Another reported case of a joint venture company arrangement
would be inJG Summit Holdings, Inc. v. Court of Appeals, 412 SCRA
10 (2003), where the National Investment and Development
Corporation (NIDC), a government corporation, entered into a Joint
Venture Agreement (JVA) with Kawasaki Heavy Industries, Ltd. of
Kobe, Japan, forming the Philippine Shipyard and Engineering
Corporation (PHILSECO) to engage in operation and management of
shipyard. The JVA provided for a 60% Filipino-40% Japanese equity,
and provided a right of first refusal on the equity shares should
either of the co-venturer decide to sell, assign or transfer its
interest in the joint venture. When later on the government shares
in PHILSECO were bidded out, one of the issues that had to be
resolved was the validity of the right of first refusal clause found in
the JVA.
The
Court
matter-of-factly
recognized
the
partnership
arrangement between the original parties in the joint venture
company, and characterized the right of first refusal clause in the
JVA as a protective mechanisms to preserve their respective
interests in the partnership in the event that (a) one party decides
to sell its shares to third parties; and (b) new Philseco shares are
issued. (at p. 29). The Court further held
. . . The right of first refusal is meant to protect the original or
remaining joint venturer(s) or shareholder(s) from the entry of third
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persons who are not acceptable to it as co-venturer(s) or coshareholder(s). The joint venture between the Philippine
Government and KAWASAKI is in the nature of a partnership which,
unlike an ordinary corporation, is based on delectus personae. No
one can become a member of the partnership association without
the consent of all the other associates. The right of first refusal thus
ensures that the parties are given control over who may become a
new partner in substitution of or in addition to the original partners.
Should the selling partner decide to dispose all its shares, the nonselling partner may acquire all these shares and terminate the
partnership. No person or corporation can be compelled to remain
or to continue the partnership . . . (at p. 31).
What one notices clearly extant in JG Summit Holdings is that
although what was bidded were shares of stock is a duly registered
corporation, and the right of first refusal was not found expressed in
any provision of the articles of incorporation and by-laws,
nonetheless, the Court applied its enforceability to a third party
bidder who was not privy to the terms of the private JVA between
the Government and the foreign investor.
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