In an arm’s-length business, it is essential to know how to exit without permanently damaging relationships and reputation. Since joint ventures are contractual relationships, that process is generally carefully spelled out in the joint venture or preliminary agreement. What you need to know, then, begins with the contract. Joint venture agreements tend to have common features, however, so it is possible to make some generalized statements, as long as all involved understand that the specific terms of the agreement will control. At Owen Hodge Lawyers, we are always happy to assist clients in understanding the full ramifications of joint ventureship, planning for success but preparing for less fortunate consequences, should they arise. Please feel free to call us at your earliest convenience to schedule a consultation at 1800 780 770.

1. Exiting from a Joint Venture:
What You Need to Know
At Owen Hodge Lawyers, we are always happy to assist clients in understanding the full
ramifications of joint ventureship, planning for success but preparing for less fortunate
consequences, should they arise. Please feel free to call us at your earliest convenience
to schedule a consultation at 1800 780 770.
CONTACT US NOW
Mining and energy projects throughout Australia are frequently conducted as
joint ventures. But these are highly speculative endeavours and, on occasion, a
participant may wish to voluntarily withdraw, sometimes to avoid on-going
financial obligations.
In an arm’s-length business, it is essential to know how to exit without
permanently damaging relationships and reputation. Since joint ventures are
contractual relationships, that process is generally carefully spelled out in
the joint venture or preliminary agreement. What you need to know, then,
begins with the contract.
Joint venture agreements tend to have common features, however, so it is
possible to make some generalized statements, as long as all involved
understand that the specific terms of the agreement will control. Reputation
Exploration vs Operating Project
At the earn-in or sole-funding stages of a project, a participant may
not be able to withdraw until the agreed-upon funding requirements
have been met or work completed.
When those requirements have been satisfied and participants hold
a percentage interest in the joint venture, they are often able to exit
simply on written notice to the other participants.
When the project advances beyond the exploratory stage,
however, participants in a joint venture may be prohibited from
exiting because of the financing demands of an ongoing project.
Where a participant in an operational venture may exit, he or she
may be required to provide security for obligations arising prior to
the withdrawal. Alternatively, the withdrawal may trigger the rights
of other venturers to exit and to wind up the project.
1
2
Earn-in/Sole-funding stage
EXIT
WRITTEN
NOTICE
Exploratory stage
EXIT
Exception:
Participant in an
operational venture
Payment of Duties
Transfer duty, applied by state and local jurisdictions will apply to a wide variety of
transactions including the transfer of an interest in a joint venture involving real
property, as would be the case with a mining enterprise. The joint venture agreement
will likely specify which party is to be responsible for the payment of costs, including
duties, associated with the exit and transfer.
Where the agreement is silent or the withdrawal takes place at a pre-operational
stage, the question of who bears the responsibility for the tax may be governed by
local legislation. In these situations, the calculation of the duty payable can be the
source of considerable contention.
Planning an Exit
It is often said that the planning for any new business venture should involve planning for an exit. The decision to withdraw early
from a joint venture should hardly be taken lightly, but it would be a mistake to view that step as rare.
It requires, above all, defining the terms of withdrawal in the joint venture agreement. All venturers should clearly understand
the circumstances and consequences of such a move. That kind of clarity from the outset may make it possible to preserve a
cordial business relationship and perhaps even the potential for future collaboration.