USA Law and Practice Contributed by: Olesya Bakar, William “Bill” Jackson, Daniel E. Levisohn and Steven D. Lear, Holland & Knight LLP
Securities and Exchange Commission (SEC) and State Securities Laws An equity interest in a JV may be considered a security under federal and/or state securities laws. Accord - ingly, the structuring of any JV needs to consider applicable federal securities laws (and any applicable exemptions), as well as the state security statutes in the jurisdiction in which each of the venturers reside. If a JV is making investments, rules governing invest - ment companies and investment advisers may also be implicated. Applicable federal securities statutes include, without limitation, the Securities Act of 1933 and Regulation D thereunder, the Investment Com - pany Act of 1940 and the Investment Advisers Act of 1940. The application of securities laws to JVs can be nuanced and depends highly on the structure of the transaction and the governance of the vehicle. FinCEN The CTA, promulgated by the Financial Crimes Enforcement Network (FinCEN), went into effect on 1 January 2024 and, subject to certain exemptions, was originally applicable to most entities formed both in the USA (“domestic” entities) and those formed out - side of the USA that are registered to do business therein (“foreign” entities). On 21 March 2025, FinCEN issued an interim final rule that exempted domestic entities (including JVs) and made the CTA solely appli - cable to foreign entities (including JVs). FTC The Federal Trade Commission (FTC) and the Depart - ment of Justice (DOJ) have the authority to review certain JV transactions and may enforce competi - tion laws against the venturers and the JV if they are engaged in certain anti-competitive practices. 3.2 Anti-Money Laundering Compliance The AML regulations applicable in the USA include: • the Foreign Corrupt Practices Act of 1977, as amended; • the USA Patriot Act, as amended, and various executive orders thereunder; • the US Department of the Treasury’s Office of For - eign Assets Control (OFAC), including the Specially Designated Nationals and Blocked Persons List and Sectoral Sanctions Identification List;
protection for the owners. Through expansive non- waivable provisions, many jurisdictions take a pater - nalistic approach to protect unsophisticated investors from fraud or grossly unfair operating agreement pro - visions. The scope of the non-waivable provisions var - ies from jurisdiction to jurisdiction. Corporate statutes are binding on corporate JVs, except for provisions that are expressly permitted to be modified through the corporation’s governance documents. If the JV conducts business in any jurisdiction other than its jurisdiction of formation, it will usually need to register with the secretary of state in each such jurisdiction as a “foreign” entity. Certain affairs of the JV will be governed by its jurisdiction of formation and each jurisdiction in which the JV is registered to do business. As there is an annual fee and reporting requirements for registering to conduct business in a foreign jurisdiction, the venturers may desire to form the JV in the jurisdiction in which it will conduct busi - ness. This is often the case for smaller, less sophisti - cated JVs doing business in a single jurisdiction. To choose the jurisdiction of formation, the venturers should have a good understanding of the applicable statutory provisions governing the JV, including the non-waivable provisions, and evaluate whether the applicable statutes are attractive for the particular JV. For most sophisticated JVs, Delaware generally is the jurisdiction of choice for formation, regardless of where the JV will do business. For LLCs and LPs, the Delaware entity statutes expressly recognise the ven - turers’ right to contract as they please, with very few non-waivable provisions. It is one of the only states that permits the complete waiver of fiduciary duties, other than the implied contractual covenants of good faith and fair dealing. To compete with Delaware and attract business for - mations, on 1 September 2024, Texas opened its first “business court”, becoming the 32nd state to have a specialised court to handle complex business liti - gation. With no state income tax and state business statutes that offer similar protections to businesses formed in Delaware, Texas, Nevada, Wyoming and Florida are vying to be attractive alternatives as JV jurisdictions of formation.
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