Joint Ventures In India

Joint venture Consultancy India

The Companies Act 2013 defines the expression ‘joint venture’ as a joint business arrangement through which the parties that have joint control of the business arrangement retain and exercise their rights upon the net assets of the business arrangement. To put it succinctly, in a joint venture two or more parties co-operate and enter into an arrangement in order to run a business or to achieve a commercial objective. Such arrangements are formed across sectors and are more prevalent in those which involve technology, capital investment, or technical skills.

A joint venture helps parties leverage their resources, to aid in reduction of cost individually involved, while enabling parties to combine their expertise, and initiating mutual assistance to entering foreign markets.

Types of Joint Ventures

Evidently, joint ventures are considered as a prevalent method of combining the business expertise, industry knowledge, and personnel of two unrelated companies to pursue a common business goal. As stated above, a partnership of this kind allows the parties an opportunity to scale and maximize the use of its resources to complete a specific project while reducing the total cost along with spreading out the risk and liabilities inherent to the project.

Given the benefits of forming a joint venture, keeping regulatory compliances for joint venture and joint venture legal compliance in mind following are the prevailing kinds of joint ventures:

Equity Based Joint Ventures: In an equity based joint venture, parties come together and establish a separate business entity, whether incorporated or not, to facilitate their strategic alliance and make requisite capital contributions and have ownership over the said entity.
Contractual Based Joint Ventures: In a contractual based joint venture, the parties align their interests and work closely together in a particular project for a limited time period only. In such a structure, the parties put in their resources individually to achieve the common goals in accordance with the terms of the agreement and do not form a separate business entity for the same purpose. To put it in simple terms, as a contractual entity the parties agree to collaborate as independent contractors.
Public-private partnerships: In cases where the central or state government collaborate, special joint ventures (SPV) are established with the private entities (domestic or international) and such private entities are offered concessions to construct, develop, and operate the projects (public sector undertakings).

Benefits of setting up a Joint Venture in India

India is an appealing jurisdiction for the purpose establishing joint ventures as it offers strategic advantages along with lucrative commercial incentives. With a population of 1.3 billion of people, India offers an enormous consumer market for different local as well as foreign companies. Further, it offers a vast pool of available skilled and unskilled human resources across most economic sectors along with access to native produces and raw materials thereby proving cost effective and an ideal destination for doing business.

Therefore, in the last decade, foreign companies have been exploring various opportunities of forming joint ventures with Indian entities as it benefits them in obtaining the inherent advantages being offered by an existing Indian partner in terms of connection with market access and local knowledge. Further, for Indian entities it is highly lucrative to enter into a joint venture arrangement with a foreign entity, as they largely benefit from exchange of edgy technologies and management processes, enhancement of brand recognition in the foreign markets and optimum utilization of resources by having shared costs and risks.

Overview of Joint Venture Consultancy Services by A&A

The structure of joint ventures varies depending upon the objectives of the parties, however, it generally involves structuring of a joint venture agreement to outline the terms and conditions of the said arrangement. Therefore, it becomes very crucial to draft and review the provisions of the said joint venture agreement carefully to ensure that they are fair and equitable to all the parties involved.

As an experienced law firm, with a clear and extensive understanding of the legal and regulatory implications in both domestic and foreign jurisdictions, we are adept in delivering end to end services in relation to joint ventures to various clients. Our services include:

Legal advisory in relation to business structuring suitable to the client’s requirements, in consonance with the applicable regulations and compliances with respect to the joint ventures in India;
Secretarial and legal services in relation to joint venture establishment once the structure has been materialized including but not limited to conducting due diligence requirements, assistance in incorporation of the joint venture entity;
Drafting and formulation of joint venture agreement and related documents and participating in negotiations with the parties;
Advisory in formulation of exit strategies in case of termination or dissolution of the joint venture.

FAQs

1. Is it mandatory to obtain legal advisory in India to prepare a joint venture?

Joint ventures in India require multiple legal and regulatory frameworks to be taken into consideration and therefore, it is advisable to involve a joint venture lawyer in India during the initial discussions before investing time and money with a prospective business partner, as it makes the process cost-effective, ensures success probability and compliance with the applicable laws.

2. How should joint ventures be structured?

There is no established legal structure for joint ventures in India. Ideally, business collaborators mutually decide upon the best suited corporate structure of the company and the project based on joint venture consultancy received in India.

3. Can the terms of a joint venture arrangement be modified?

The terms of a joint venture arrangement can be modified subject to the terms of the joint venture agreement. Therefore, it becomes crucial to involve an experienced joint venture lawyer who ensures covering every eventuality within the joint venture agreement so that the terms of the arrangement can be modified at any stage by way of amendment documents as per the applicable laws.

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