Joint activity agreement
What is a joint activity agreement?
A joint activity agreement (hereinafter referred to as a JIA) is a type of civil law agreement. According to the provisions of Article 1131 of the Civil Code of Ukraine (CCU), under the terms of this agreement, the counterparties undertake to act within the framework of the legislation to achieve a certain goal on the basis of (without) contributions, without creating a separate legal entity (company, partnership).
Such an agreement must be concluded in writing, with a preliminary check of the availability of all essential conditions and settlement of the obligations of the counterparties. Most often, a JIA is concluded in the following areas of society: construction, agriculture, cooperation with a non-resident investor.
By concluding such an agreement, the parties acquire a number of opportunities in relation to each other. First, there is a legal opportunity to jointly use the property of one of the parties. Second, to have partial ownership of the fruits, products from the use of the property within the framework of carrying out the relevant activity in accordance with the terms of the DSP. Finally, there is the possibility of distributing the income received as a result by the parties between them in accordance with the shares previously agreed in the essential terms of the JIA.
Who can be parties to a joint activity agreement?
Based on the legal analysis of the terms of a joint activity agreement, the lawyer of our law firm emphasizes that counterparties can be:
- legal entities of private and public law (simple partnerships, LLCs, JSCs, non-profit organizations, state-owned enterprises, and others), individual entrepreneurs - in the case when the goal is to make a profit and there is a pooling of contributions of participants;
- individuals, including non-residents (foreign investors, without company registration) - in the case when there is no goal to receive and distribute income.
Essential terms of a joint activity agreement
Current national legislation determines the mandatory consideration of the following terms when concluding a joint activity agreement:
- subject (clearly defined purpose of the joint activity). Such a goal should be real and finite in time (if possible), for example, “the agreement is concluded for the purpose of joint production and further sale of finished products”;
term of validity. Practice shows that the term of validity should be clearly defined and also have a certain final limit, - which is expressed by the moment of achieving the goal of such activity;
- the procedure for distributing contributions, profits and obligations of the parties.
Types of agreements on joint activities
As already noted earlier, a joint venture may provide for the pooling of contributions of its participants and the receipt of income, respectively, or the absence of a condition for such a pooling. We will consider each of the types in more detail with references to specific examples in practice.
First, JIA with pooling of contributions. It provides for activities to obtain profit or other material assets. As a rule, the contributions of the participants become the common property of each of them and can be used equally between them (if this is provided for by the terms of the agreement) to conduct joint activities. Yes, in theory and in practice, a party, if it is necessary for the fulfillment of a common goal, can rent premises from the other party without paying the latter an appropriate fee for this. There is a nuance regarding this type of agreement - it may require registration with tax authorities, if this is specified in the Tax Code of Ukraine.
Secondly, a JIA without pooling of contributions. As a rule, such civil law agreements provide for the conduct of activities to obtain a certain intangible result. Most often, they are concluded between individuals in such areas as education or consulting (for example, an agreement for joint development of software, creation of a bulk program or other intellectual property object).
Lawyers at “Prikhodko & Partners” recommend checking the future counterparty before directly concluding one of the types of joint ventures, primarily to be sure of his reputation and to avoid possible illegal encroachments or violations of the terms of the agreement.
Legal service for developing a draft agreement on joint activities
The importance of concluding this agreement cannot be overestimated. It is necessary to responsibly approach the development of the project, taking into account all the essential conditions, rights, and obligations of the parties in order to avoid violating the legitimate interests of each of them.
The law firm “Prikhodko & Partners” provides high-quality legal services, including the development of a draft of such an agreement. Such a service includes:
- professional legal advice: analysis of the situation, assessment of legal risks, determination of the feasibility of registering with tax authorities;
- high-quality project development taking into account all the specifics of the client's request: clear selection of the optimal form, definition of joint activities and goals, formulation of the rights and obligations of each party, regulation of the profit distribution mechanism, determination of the method of activity management, fixing the liability of the parties for failure to fulfill obligations, etc.;
- legal analysis of the project terms to verify compliance with current national legislation and optimization of the agreement to minimize risks.
Conclusions. A joint activity agreement is a civil law agreement that provides for cooperation between the parties to achieve a common goal. The law firm “Prikhodko & Partners” provides comprehensive services for the development of joint activity agreements, including legal advice, contract preparation, legal analysis and optimization of provisions.
A properly drafted contract will help to effectively regulate legal relations, minimize risks and ensure successful implementation of joint projects. To receive a lawyer’s consultation, please fill out the form below.
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