When two or more parties (individuals/companies) undertake economic activity together by contributing equity is known as Joint Venture. Joint ventures are very popular in corporate finance but less popular in the oil and gas industry. These parties bear risk and share profits together. Joint Ventures can be for one specific project only or a continuing business relationship. Business Joint Ventures and International Joint Ventures are also very popular terms. International Joint Venture is a hottest and famous type of joint venture. There are number of Joint Venture companies in India doing business.
A joint venture is when:
- Two parties, could be individuals or companies, incorporated a company in India. These two could be residents of India or else one of them is allowed to be non resident of India. Business of one party is transferred to the company. As the consideration for such shares, shares are issued by that company and subscribed by that party.
- The above mentioned two parties, in agreed proportion, in cash subscribe to the shares of the joint venture company, start a new business.
- Promoter of an existing Indian company and a third party (individual/company), both residents and one of them non-resident, join to carry on the business of that company. After payment in cash, its shares are taken by the said third company.
Joint Venture Internet partners are becoming an international demand, especially since the economy is down. The thought of Joint venture is due to rapid changes in technology standard, changeable marketing strategies, and intangible emphasis of services. If you are considering Joint Venture, legally plan your contracts, strategies, etc carefully, since Joint venture can effectively provide a vehicle for transporting tech business, especially those desiring to tap into intelligent properties asset. The focus is to reach innovative ventures, which can contribute to the businesses worth, especially to form entities that will manage the business. The formation and structure of the contract should focus on various aspects. The Joint venture contract structure and documents of governance commonly decide on goals to accomplish. The allotted for achieving these goals will also be outlined and defined in the agreement. You will also cover personal support to bringing up the company’s revenue and volume.
The Benefits of Joint Venture
Benefits of Joint Ventures
- Provide companies with the opportunity to obtain new capacity and proficiency.
- Allow companies to enter into new geographic markets or obtain new technological knowledge.
- Have a relatively short life span (5-7 years) and consequently do not represent a long-term commitment.
- In the era of divesture and consolidation, offer a creative way for companies to exit from non-core businesses. Companies can regularly separate a business from the rest of the organization, and ultimately, sell it to the other parent company.