JOINT VENTURE

INTRODUCTION

A Joint Venture (JV) is a form of an India entry strategy. It is a collaboration of two or more companies to undertake financial activities together. The parties agree to contribute equity to form a new entity and share the ownership, revenues, expenses, losses, governance and control of the company.

It may be brought about in the following ways:

  1. Project based JV
  2. Function based JV
  3. A JV incorporated in the form of an LLP
  4. Both the foreign and Indian entities (hereafter called entities) jointly forming a new enterprise
  5. A JV formed in a partnership
  6. A JV formed in the form of cooperation agreement/ strategic alliances

DEFINITION

As per the Consolidated FDI Policy, JV means an Indian entity incorporated in accordance with the laws and regulations in India in whose capital a non-resident entity makes an investment.

WHY INCORPORATE A JV?

  • Foreign investors/ enterprises can use resources, such as man power, of the domestic companies
  • It creates synergies for economical benefits on large scale and gives cost advantage
  • It gives advantages to use technologies of each other
  • It provides access to new markets and distribution channels on large scale, etc.

PROCESS OF INCORPORATION OF A JV

A JV incorporated in the form of a company in India by both the entities.The process is same as company incorporation process:

  1. Obtain Digital Signature Certificate (DSC) for the proposed director(s): First of all, the basic requirement to incorporate a company is having a DSC as all the filings to the Registrar of Companies are made through an online application system which is appended with a valid DSC.
  2. Obtain Director Identification Number (DIN) of the proposed director(s):DIN is a unique Identification number allotted by the Central Government to any person intending to be a director of a company.
  3. Select suitable company name and make an application to the CRC for availability of name: The name of a section joint venture with the addition of the words “Private Limited” and the company name shall comply with the Company Name Availability Guidelines under the Companies Act, 2013.
  4. Capital requirement: There is no minimum capital (authorised or paid up capital) requirement for registering a JV.
  5. Registered office: It is the principal place of business of the proposed company from where it can control its operations.
  6. Documentation and filing: Documents, such as Memorandum of Association (MOA) and Articles of Association (AOA), need to be drafted, signed and filed electronically, along with the fees applicable.
  7. Certificate of Incorporation:After scrutiny, the Central Registration Centre (CRC) issues a Certificate of Incorporation.

TIME REQUIRED

Generally, it takes 7-10 days from the date of application to get the Certificate of Incorporation from CRC.

ADDITIONAL REQUIREMENTS

  • A copy of declaration, by each person making the application, in the prescribed format as per the Company (Incorporation) Rules, 2014, and a copy of board resolution and certificate of incorporation from both the entities.
  • A JV agreement between the partners will not bind the JV unless its terms and conditions are included in the AOA of the JV.
  • In case documents that are in languages other than English, it should be translated to English with the help of a professional translator, carrying his details (name, signature, address, and seal).

WHEN TO DISSOLVE A JV?

  • Objectives of joint venture are met, for which it was established
  • Both the parties are set new objectives other than existing objectives
  • They mutually decide to dissolve the JV
  • Agreed time to form a JV has been expired
  • Legal orfinancial issues
  • One party of a JV acquires the other party
  • Market conditions are unfavorable for it

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