Joint Venture Agreement

What is a Joint Venture?

A short term partnership formed for a specific purpose (project) and a specific time period.

What is the need for Joint Venture?

In the present scenario, many projects are too large for any company to undertake solely as it may involve huge financial resources. This situation truly comes into the picture in the infrastructure sector. Market access is a very crucial reason for the international proliferation of joint ventures. Therefore, Joint Ventures are needed.

Examples of Joint Venture Agreement.

Thanks to India’s vibrant economy, there are several JVs that are flourishing in this country. While some companies are JVs between Indian and foreign partners, others are excellent examples of Indian firms combining forces with international majors.

A great example of Indian Joint Venture with a foreign company is the airline, Vistara, a Full-Service Carrier. Vistara is the brand name of Tata SIA Airlines Ltd, a JV between India’s corporate giant TTata Sons holds 51 percent stake while SIA controls the remaining 49 percent in the airline. 

Bharti AXA General Insurance Co Ltd is a JV between India’s leading business group Bharti Enterprises and insurance major from France, AXA.

Another good example of a Joint venture is between Mahindra-Renault, founded in 2007 brings together India’s largest automobile manufacturer Mahindra & Mahindra and world-renowned vehicle maker, Renault SA of France.

Real Estate Joint Venture Agreement

A joint venture agreement is typically used by companies or individuals (like real estate investors) who are entering into a onetime project, investment, or business opportunity

What is the nature of a Joint Venture?

Joint ventures are either contractual or structural or rather both. The victory of the Joint Venture depends upon the following factors:

• Common vision and mission of the Parties;
• A commitment of the parties towards each other and the strong commitment to each other and the joint venture.

Establishing a Joint Venture

Selection of Partner

Negotiation Phrase

Execution Phase

Documentation (Joint Venture Agreement)

What is a Joint Venture Partnership Agreement?

While documentation of a Joint Venture the most crucial document is a Joint Venture Agreement which is widely known as Shareholders Agreement. Basically, a Joint venture Agreement specifies the method which shall be followed for the formation of the Joint Venture Company and also declares the mutual rights and obligations of the parties for the purposes of conducting the Joint Venture and also the mode in which the parties will conduct themselves in operating and managing the Joint Venture Company. The Joint Venture Agreement is between partners and it does not bind the company until and unless it is included in the Articles of Association.

What are the basic clauses of a Joint Venture Agreement?

• The date on which the agreement is established and has to be executed;
• Name of the joint venture under which the business will be carried on;
• The principal place where the business of the joint venture would be operated;
• Parties to Joint Venture Agreement;
• Business objects and products of the Joint Venture;
• Formation of Joint Venture Company;
• Registered office;
• Equity participation by local and foreign investors;
• Finance arrangements;
• Specific obligations;
  o   Grant of technical assistance and know-how;
  o   Grant of license for the use of the trademark, patent, copyright, etc.;
  o   Providing the facility of established distribution channels;
  o   Access to research, innovation, and product improvements;
  o   Providing marketing expertise;
  o   Providing management services.
  Agreement as to the future issue of capital;
  Appointment of directors;
  Conduct of the affairs of the Joint Venture Company;
  o   The frequency of Board meetings;
  o   Notice;
  o   Agenda;
  o   Quorum;
  o   General Meetings;
  o   Circular Resolutions;
  o   Accounting;
  o   Audit
  Transfer pricing and buy/sell Agreements;
  Share transfers;
  Distribution / Dividend Policy;
  Name/ Brand licensing Agreement;
  Research and Development – Improvement and Innovation;
  Non-competition provisions;
  Confidentiality/ Secrecy;
  Period of the agreement;
  Termination;
• Force Majeure;
• Bearing of pre-operative expenses/costs;
• Arbitration;
• Governing Law;
• Indemnification;
• Assignment;
• Precondition;
• Supremacy

Why a Joint Venture Agreement is Important?

At the first place, it is very important to get your deals documented so that in future if a need arises you must have the capacity of taking the matter to the court. Joint Venture Agreement lays down every minute detail about the business and thus also specifies the benefits and responsibilities of each party. This avoids confusions. Joint Venture is generally formed for a specific purpose and time period and this agreement specifies it. Even if you wish to wind up the joint venture before the specified period this joint venture agreement would also specify the manner in which the winding-up of this Joint Venture can take place.