Joint Venture in India

What is a Joint Venture?

Joint Venture Companies are the most preferred module of corporate entities for doing business in India to achieve specific objectives of a partnership like temporary arrangement between two or more firms. JVs are advantageous as a risk reducing mechanism in new-market penetration, and in pooling of resource for large projects. The Companies incorporated in India, even up to 100% foreign equity, are at par at domestic companies. A Joint Venture may be any of the business modules available. There are no separate laws for joint ventures in India. They, however, present unique problems in equity ownership, operational control, and distribution of profits (or losses).

A typical Joint Venture is where:
Two parties agree to co-operate their business in a limited and specific way wherein they incorporate a company in India. Business of one party is transferred to the company and as consideration for such transfer, shares are issued by the company and subscribed by that party. The other party subscribes for the shares in cash.
Other option could be to setup a separate joint venture business, possibly a new company, to handle a particular contract. The partners own shares in agreed proportion in the company and agree how it should be managed.
1.Promoter shareholder of an existing Indian company and a third party, collaborate to jointly carry on the business of the company and its shares are taken by the said third party through payment in cash.

The shareholder of such company would be Individual or body corporate
The shareholder of such joint venture company may be one resident and one non resident or both residents.


Incorporation of Joint Venture Company (JV).

There are no separate laws for incorporation of joint venture Company in India. It is incorporated or established like a private limited company or a public limited company under the Indian Companies Act, 1956. However, the following key issued should be addressed before establishment of Joint Venture Company:
To check sectoral cap for foreign direct investment in the proposed joint venture.
Drafting of Memorandum

On January 8th, 2012, posted in: Uncategorized by