One of the exceptions to the general rule that the company can not have participated significantly in the design, or redesign, of the legal entity, is the “operating joint venture” exception. Simply stated, the general rule does not apply if the legal entity is an operating joint venture under joint control.
Joint control typically means joint control over major decisions of the legal entity. This joint control should be exercised through rights via each joint venturer’s equity investment. Control exercised through some other means, such as through a contract, is a strong indicator that the legal entity is not an operating joint venture. Yet another set of factors to be concerned are the arrangements between the parties, such as buyout rights, puts and other arrangements that would tend to place one party a position of strenghth relative to the other.