Strange bedfellows | Archive Titles

Delivery vehicles: the legal mechanisms%3Cbr /%3E
The article on the previous pages looks at practical ways to achieve progress between partners. The lessons can be bolstered through relevant delivery vehicles/legal mechanisms for tying in partners to the process. It is important that personal trust is backed up through comprehensive and understandable legal frameworks between all parties. These range from informal partnership arrangements governed via a development agreement, through limited partnerships (LPs) and limited liability partnerships (LLPs) through to highly structured joint venture (JV) companies. %3Cbr /%3E%3Cbr /%3EJohn Rice and Paul Mountain, partners at Birmingham and London law firm Martineau Johnson, have set out the advantages and disadvantages of the various legal framework options below. They have examined four different structures and assessed each against the following factors: duration, constitution, taxation implications, liability, management, filing/accounts, procurement rules and security.
	Corporate joint venture	Limited partnership	Limited liability partnership	Development agreement
1. Duration	Duration of project until disposal of assets to end users and solvent liquidation	Duration of project, until disposal of assets to end users: partnership dissolved in accordance with partnership agreement	Duration of project, until disposal of assets to end users: partnership dissolved in accordance with members’ agreement%3Cbr /%3E	There is no entity to dissolve: termination governed by development agreement
2. Constitution	Memorandum/articles establish powers and shareholders’ agreement establishes the decision-making process	Partnership agreement (and will also need shareholders’ agreement and memorandum and articles for the general partner)%3Cbr /%3E	Members’ agreement	N/A%3Cbr /%3E
3. Taxation	Not tax transparent : potential charges to corporation tax, tax on dividend payments and income tax at source on directors’ salaries	Tax transparent: single tax charge on partnership profits	Tax transparent – similar to limited partnership	Parties receive payments direct so no double taxation to consider%3Cbr /%3E
4. Participants’ Liability%3Cbr /%3E	Shareholders’ liability limited to the value of nominal capital	Limited liability for limited partners and unlimited liability for general partner. Limited partners must not be involved in the management of the partnership	Liability of members limited (in effect) to the value of individual contributions.	Depends on the status of the parties to the development agreement.%3Cbr /%3E
5. Management	Governed by shareholders’ agreement and articles	Management must be carried out by general partner. In practice, he will be governed by own articles and shareholders’ agreement%3Cbr /%3E	Determined by members’ agreement.	Dependent on contractual arrangements
6. Filing/accounts	Required	Not required%3Cbr /%3E	Required%3Cbr /%3E	Not required
7. Procurement rules	A company that is 51% owned/controlled by public or quasi-public bodies is a contracting authority, so it must advertise contracts above value thresholds and generally comply with principles of open competition. Does not apply to a company 20%-50% owned by a local authority but such a company will be LA “influenced” and will be regulated in other ways.	As left	Similar principles apply.%3Cbr /%3E	Development partnership will not engage with contractors/ providers, but the development partnership itself (assuming it is public/private) will be the subject of an OJEU competition%3Cbr /%3E%3Cbr /%3E
8. Security%3Cbr /%3E	Fixed and floating charges over all assets can be given	As limited partnership does not have its own separate legal identity, greater care needs to be given as to how its assets are charged (but when property is the major asset/item of security this is not a major issue).	Similar principles apply.%3Cbr /%3E	Not directly applicable%3Cbr /%3E