International Joint
Ventures
What is a Joint Venture?
A typical
International Joint Venture is between:
Two
international parties, (individuals or
companies), incorporate a company.
Business of one party is transferred to
the company and as consideration for such
transfer, shares are issued by the
company and subscribed by that party. The
other party subscribes for the shares in
cash.
The
above two parties subscribe to the shares
of the joint venture company in agreed
proportion, in cash, and start a new
business.
Promoter
shareholder of an existing company and a
third party, who/which may be
individual/company, one of them
non-resident or both residents,
collaborate to jointly carry on the
business of that company and its shares
are taken by the said third party through
payment in cash.
Some
practical aspects of formation of international
joint venture companies and the prerequisites
which the parties should take into account are
enumerated herein after.
In some countries joint ventures
are a separate legal entity, whereas in others
they cold any of the available corporate
entities.
How to Enter into a Joint
Venture Agreement?
Selection of
a good local partner is the key to the success of
any joint venture. Once a partner is selected
generally a Memorandum of Understanding or
a Letter of Intent is signed by
the parties highlighting the basis of the future
joint venture agreement.
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International joint ventures should be carefully drafted to avoid
complications later on. Lawyers from all jurisdictions involved should
be consulted early on.
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A Memorandum
of Understanding and a Joint Venture Agreement
must be signed after consulting lawyers well
versed in international laws and
multi-jurisdictional laws and procedures.
Before
signing the joint venture agreement, the terms
should be thoroughly discussed and negotiated to
avoid any misunderstanding at a later stage.
Negotiations require an understanding of the
cultural and legal background of the parties.
Before
signing a Joint Venture Agreement
the following must be properly addressed:
The Joint
Venture agreement should be subject to obtaining
all necessary governmental approvals and licenses
within specified period.
For
Setting up Joint ventures click here
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