Approved by the Federal Executive Council in July 2017, the National Petroleum (Oil) Policy (the ‘Policy’) highlights the Nigerian government’s intention to move the Nigerian economy away from dependence on crude oil as its major source of income. An overhaul of the governance and industry structure is one of the main features of the Policy. In this manner, the government planned to exit from cash call arrangements by December 2017 and, among others, change its existing unincorporated joint venture (JV) arrangements to incorporated JV arrangements.
A JV is a business undertaking by two or more persons engaged in a single defined project’. Companies typically enter into JV agreements when a project is too large or costly to be managed by one company.
In Nigeria, the trend has been for petroleum companies to operate by means of unincorporated JVs rather than incorporated JVs. The relative flexibility offered by using unincorporated JVs has been a major attraction in this regard. With the publication of the Policy, however, certain questions become relevant: What steps need to be taken to transition an unincorporated JV to an incorporated JV? What are the corporate governance considerations?
