A joint venture is generally understood as technical and financial collaboration for the purpose of some projects fulfillment with existing companies. Companies lacking in some aspects such as technology, knowledge, assets or reach to the market are generally involved in joint ventures with other company because they are not able to achieve its goal on its own. Collaboration allows the first party to have an access to the resources of the other party without any expenditure for obtaining it.
Indian joint ventures are usually formed by two or more individuals/companies, one of whom may be non-resident, who collaborate to form an Indian private/public limited company with mutual contribution in the share capital.
Joint ventures exist in the form of companies, partnerships or joint working agreements.
FDI upto 100% or certain percentage is allowed under automatic route in those sectors which are not defined in the FDI policy of Indian Government
There are also some other sectors in which approval from the concerned Industry Ministry is required for investment. Before 24th May, 2017 all the approvals were handled by the Foreign Investment Promotion Board (FIPB)
A Joint Venture Agreement is a legal document where two or more entities combine to do business or undertake an economic activity together. The parties either agree to form an agreement without incorporation of new entity but with the common intention of running a business or create a new entity by contributing equity and share the revenues, expenses and control of the enterprise in the proportion of their capital contribution.
There is no legally prescribed format for a Joint Venture Agreement in India. However, it is advisable for a joint venture agreement to have the following clauses:
The above list is not exhaustive. Company may vary the agreement according to the business they are involved in.
This article cannot be construed as legal opinion and writer will not be liable for any claim. Any suggestions are welcome to increase the effectiveness of the article.