What is A Joint Venture Agreement?
A joint venture is widely regarded to be a technical and financial partnership that takes the shape of initiatives, acquisitions, or partnerships with already established businesses. Indian joint ventures typically involve two or more parties, one of whom may not be a resident, forming an Indian private or public limited company and holding predetermined shares of its capital. The main provisions of a joint venture agreement relating to the shareholders’ rights to transfer or sell their stock in the joint venture company. Company, partnership, or joint operating agreements are all examples of joint ventures.
When two or more entities join forces to do business or engage in an economic activity together, a joint venture agreement is a legal instrument. The parties concur to contribute equity to a new corporation and to divide the profits, costs, and control of the new company in proportion to their capital contributions. The partnership may be for an ongoing corporate relationship or just one particular endeavour. JVs could be contractual, structural, or perhaps both.
Creating a distinct legal entity in conformity with the agreement of two or more parties is the process used in corporate joint ventures. The parties agree to contribute funds or other resources to the assets or other capital of that legal body as their share of the contribution. The best JVs for this structure are those with a wide scope and duration.
The contractual JV may be utilized in situations where the creation of a separate legal entity is not necessary or is not practical. This contract may be signed for a brief project with a specific activity or for a temporary joint venture.
Documents required in the formation of JV
There are three primary documents required for creating JVs: –
1.Memorandum of Undertaking (MoU) or Letter of Intent (LoI)
It is a non-binding agreement that the parties use to set out their responsibilities and sketch out a plan for the future in the initial phases of negotiation.
2.The definitive agreement essentially lays out the parties’ respective rights and obligations with regard to the JV and specifies how they will behave themselves when running and managing the JV. Another goal is to predict, as much as feasible, what will happen in the event of difficulties or deadlocks.
3.Other Agreements like Technology transfer Agreements etc.
The agreements that effectuate the transfer of whatever the JV members are donating to the joint venture for the fulfilment of the joint venture’s objectives will be among other agreements that are equally crucial.
By Ananya Bhat