NPM 129-2014

Requesting Entity: LRCA Trading, Inc. (LTI)

Issues Concern: Requirements for a Valid Joint Venture



Whether two companies having the same majority incorporators can validly enter into a joint venture agreement under Republic Act (RA) No. 9184 or the Government Procurement Reform Act.

It is a well-settled doctrine that a corporation is invested by law with a personality separate and distinct from those of the persons composing it as well as from that of any other legal entity to which it may be related. Since MDSP and LTI have been organized as separate corporate entities, it does not matter whether both corporations have the same majority incorporators because they have separate juridical personalities. Further, the fact that the majority of the incorporators of MDSP are the same with LTI does not mean that the two (2) corporations are adjunct and conduit. In fact, there is no express provision under the Corporation Law prohibiting stockholders or incorporators of a corporation from being a stockholder or incorporator of another corporation. Thus, MDSP and LTI may validly enter into and execute a JVA for purposes of participating in procurement opportunities with government, provided that they possess all the required eligibility requirements under RA 9184 and its revised Implementing Rules and Regulations (IRR).

Whether the legal documents, sans Tax Clearance, of one of the partners in a joint venture suffice the requirements for purposes of joint venture under RA 9184.

ITB Clause 12.1(a)(i) provides for the submission of the Registration Certificate from the Securities and Exchange Commission (SEC) in case of corporations, while ITB Clause 12.1(a)(ii) provides for the Mayor’s Permit issued by the city or municipality where the principal place of business of the prospective bidder is located. Both these legal documents are required for submission by each partner in the joint venture. In addition, a Tax Clearance is now included as part of the Class +A" legal eligibility documents. Thus, although MDSP and LTI may validly execute a JVA, non-submission of the required legal eligibility requirement by LTI is a ground for ineligibility, and the eventual disqualification of the joint venture.

What are the specified implementing procedures for joint venture agreement (JVA)?

There is no specific guideline in the execution of JVAs. However, a JVA involves a contractual relation between or among the members of the association, where "[t]he contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order or public policy." Thus, taking into consideration the endeavor, service or work to be undertaken, the parties may agree and stipulate on any arrangements, terms, conditions and limitations towards the successful execution and implementation of the identified project.