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:
- Project based JV
- Function based JV
- A JV incorporated in the form of an LLP
- Both the foreign and Indian entities (hereafter called entities) jointly forming a new enterprise
- A JV formed in a partnership
- A JV formed in the form of cooperation agreement/ strategic alliances
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:
- 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.
- 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.
- 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.
- Capital requirement: There is no minimum capital (authorised or paid up capital) requirement for registering a JV.
- Registered office: It is the principal place of business of the proposed company from where it can control its operations.
- 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.
- Certificate of Incorporation:After scrutiny, the Central Registration Centre (CRC) issues a Certificate of Incorporation.
Generally, it takes 7-10 days from the date of application to get the Certificate of Incorporation from CRC.
- 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