A Joint Venture is generally understood as technical and financial collaboration either in the form of projects, take-overs or alliances with existing companies. There are instances where companies, big or small, consider collaborating on projects wherein they share their resources while preserving their individual identities and interests. Such a joint venture helps businesses grow faster, increase productivity and generate greater profits. It gives access to new markets and distribution networks, increased capacity, sharing of risks and costs (i.e. liability) with a partner and access to greater resources, including specialized staff, technology, and finance. Joint Venture Agreement comes into play to straighten out the relationship in these situations. Such an agreement is legally binding and clearly lays down the details about profit sharing, operations and the area of cooperation and divergence.
At IPLF, our team of professionals are well versed with all factual and legal scenarios that are primarily required to engage in drafting a sound Joint Venture Agreement.
1. Understanding requirement
The first step is to understand \requirements of contracting parties, including companies that pool resources and projects for which they are doing so.
After this, a detailed discussion occurs between the participating companies in the venture to finalize the terms of the contract.
3. Drafting and finalization
After a detailed discussion between the parties, our experts would draft the contract and give the clients for their reviews. Once the clients give a green signal, the Joint Venture Agreement is finalized.
- Governance structure of the Joint Venture.
- Contribution of each party.
- How profits, losses, and liabilities will be shared.
- Dispute resolution provisions.
- Exit and termination procedures.
1. Can a joint venture agreement be oral?
A joint venture agreement can be oral or written, but it is recommended to go for a written agreement to avoid confusion and dispute at a later stage.
2. What are the alternatives to Joint Venture Agreements?
Partnerships, Mergers, and Acquisitions are some of the alternatives to a joint venture, but each alternative comes with its own set of advantages and disadvantages, wherein a joint venture stands out as the best structure for 2 companies that wish to collaborate only for the purposes for a single/few projects.
3. Do you need to register a joint venture agreement? If so, what is the registration process?
If the Joint Venture is just a document specifying the terms and conditions between the parties, registration is not mandatory though advisable. But if the Joint Venture is formed as a Company, it is mandatory.
4. What is the duration of a joint venture agreement?
Joint ventures being non-transferable do not involve the creation of a new entity unless the parties go for LLC, and hence, it usually lasts for 5-7 years.
5. What are the basic features of entering into Joint Venture Agreement?
- Contribution by partners of money, property, effort, knowledge, skill, or other assets to the common undertaking.
- Right of mutual control or management of the property in the enterprise.
- Right to share in the profit and loss of the property