A Joint Venture (JV) is a business arrangement between two or more entities where they agree to pool their resources for the purpose of accomplishing a specific task such as a new project or any other business activity. In a JV, each participant to the agreement is responsible for profits, losses and costs associated with it. However, a JV is its own entity – separate and apart from the participants to the agreement.
The reason behind forming a JV include business expansion, development of new products or moving into new markets.
Apart from having innovating ideas, products and strong potential growth, a JV can also give businesses more resources, greater capacity, increased technical expertise and access to established markets and distribution channels.
It is important to keep in mind that a JV will require its own Broad-Based Black Economic Empowerment (B-BBEE) certificate if they would like to tender or enter into a contract that requires a B-BBEE Certificate. The documents necessary to do the rating of a JV is the BEE certificates for all the parties entering into the JV as well as the JV agreement. Thus, all parties to the agreement needs to have a valid BEE certificate on day of the verification. If one of the parties to the agreement does not have a valid BEE certificate, a rating needs to be done in order to obtain one.
To determine which scorecard will be applicable to the JV all the turnovers of the parties in the JV needs to be added together. This will then determine whether the JV will be rated as a QSE or Generic Entity.
ABOUT THE AUTHOR
Dominique van Deventer is a SEESA BEE Legal Advisor. She obtained her LLB degree from the University of the Free State. She has been with SEESA since 2015.