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Differences Joint Venture Consortium

Definition and Nature  `Joint venture’ is a business undertaking by two or more  A consortium is an association of two
persons engaged in a single defined project. The or more individuals, companies,
necessary elements are: organisations or governments (or any
 (1) an express or implied agreement; combination of these entities) with the
(2) a common purpose that the group intends to carry out; objective of participating in a common
(3) shared profits and losses; and activity or pooling their resources for
(4) each member’s equal voice in controlling the project. achieving a common goal. Each
Black’s Law Dictionary (10th Edition, page 417) participant retains its separate legal
status and the consortium’s control
 Joint venture (JV) is a business arrangement in which two over each participant is generally
or more parties agree to pool their resources for the limited to activities involving the joint
purpose of accomplishing a specific task. This task can be endeavour, particularly the division of
a new project or any other business activity. In a joint profits. A consortium is formed by an
venture (JV), each of the participants is responsible for agreement or MoU, which delineates
profits, losses and costs associated with it. However, the the rights and obligations of each
venture is its own entity, separate from the participants' member. A consortium is defined as a
other business interests. group of companies participating for
(Investopedia) mutual benefit. Companies in a
consortium co-operate with one
another, often sharing resources as
needed. A consortium allows the
companies to conduct operations that
they would not be able to do
individually. It is important to note,
however, that a consortium is not a
merger and the companies remain
independent.

 Entities participating in a consortium


will pool resources but otherwise are
only responsible to the group in
respect to the obligations that are set
out in the consortium's agreement.
Therefore, every entity that is under
the consortium remains independent
with regard to their normal business
operations and has no say over
another member's operations that are
not related to the consortium.
(Investopedia)

Nature of Entity  JV joins several different business entities (each of which  -A consortium is a looser arrangement
may be any type of legal entity) into a new entity, which between several different and distinct
may or may not be a partnership = New Entity business entities. A consortium
(TheBalanceSMD) doesn't create a new entity. =
 A JV may be incorporated as a new legal entity Separate entities
 This also means that a JV incorporated is optional. Once (TheBalanceSMD)
incorporated it becomes a new entity. However,  -Consortium is not incorporated as a
Contractual or unincorporated joint ventures exist. There legal entity.
is no separate legal entity formed. (Practical Law UK)
Effect:
When the Joint Venture is not registered it may not have
the legal backing to have management control of its affairs
nor can it own assets in its name. Hence an unregistered
joint venture and consortium will be having more or less
the same characteristic.
Legal Structure  A foreign company may set up a joint venture with a  A consortium is formed by a contract
Malaysian partner, in which case the local company will ie a Consortium agreement therefore
have at least 50% ownership over the respective governed by Contract Law.
company. (www.belfastcity.gov.uk)

In this particular case, the company should have a paid up


capital of at least RM 350,000, while the minimum
authorized capital should be RM 500,000.

Joint ventures in Malaysia can also be set up as


partnerships, in which the purpose will also be a common
business goal.
(companyincorporationmalaysia)
Management Control  Management control is exercised by JV itself  Management control rests with the
Consortium members
Management of Assets  Can acquire, own and dispose of assets in its name (when  Assets are generally held by
incorporated) Consortium members
Liabilities  Under Malaysian Law, a JV can be incorporated either as  As specified by its Consortium
i. A company limited by shares agreement
ii. Partnership
(www.companyincorporationmalaysia.com)
 For a CLBS, the liabilities for its members are provided in
s192 (2)(a) of the CA where the liability of a member of a
company limited by shares is limited to any amount unpaid
on a share held by the member
 Joint ventures in Malaysia can also be set up as
partnerships, in which the purpose will also be a common
business goal. All partnerships must be registered with the
Companies Commission of Malaysia (CCM) under the
Registration of Businesses Ordinance 1956. Partners are
both jointly and separately liable for the debts and
obligations of the partnership. Formal partnership deeds
may be drawn up governing the rights and obligations of
each partner, but this is not obligatory.
(export.gov)