Indian joint ventures abroad

What is a joint venture in India? Are corporate joint ventures regulated in India? Joint Venture in india As the proliferation of global markets is incessant, International Joint Ventures became fundamental for commercial objectives.

In India , Joint Venture is becoming a traditional model of running a business as most of the foreign investments are made through Joint Venture arrangement only. Balakrishnan is a faculty member at the Asian Institute of Management , Manila.

The Birlas established a textile mill in Ethiopia. All companies registered in India, even those with up to 1percent overseas equity, are considered the same as local companies. A JV may be formed with any of the business entities existing in India.

See full list on india-briefing. Choosing a good home partner is the most important tool to the success of any joint venture. Once an associate is selecte normally a memorandum of understanding (MoU) or a letter of intent is signed by the parties – stressing the foundation of the future joint venture agreement. Terms and conditions should be properly assessed before signing the contract.

Negotiations need an understanding of the cultural and legal background of all the involved parties.

The JV union should obtain all the required governmental approvals and licenses within a specified period. Equity joint venture This is an understanding whereby an independent legal entity is created in accordance with the agreement of two or more parties. The associated parties undertake to provide money or other resources as their contribution to the capital or assets of the corporate entity.

This structure is ideal for long-term, broad-based joint ventures, and include joint venture companies and joint venture limited liability partnerships (LLPs). Contractual joint venture This type of joint venture might be used where the organization of a detached legal entity is not needed or the creation of such a separate legal entity is not feasible. This type of agreement is preferred in situations that involve a temporary task or a limited activity, or the JV needs to be established for a limited term. Though a joint venture in the form of an incorporated company is the most popular recourse among foreign investors in India, other types of JVs are also available: Incorporated 1. Limited Liability Partnership. In case of a company JV, the parties to the arrangement may either incorporate a new company or collaborate with the promoters of an existing company.

Setting up a new companyprovides the most flexibility as the entity can be structured according to the specifications, intentions, and obligations of the associated parties. A private limited company must have at least two shareholders, while a public company should have at least seven shareholders. The following are the main advantages for a foreign investor choosing a JV structure when entering India: 1. A JV also offers the associated parties an opportunity to jointly manage the risksassociated with new ventures. Through a JV, they can limit their individual exposure by sharing the liabilities.

JVs offer many flexible business diversification opportunities to the partners. Certain market sectors remain restricted for foreign investment and a local partner with a certain shareholding in the company is a regulatory necessity for commencing business and making investments.

It is important to have the same opinion over the proposed management structure and to categorize which party has to organize early in the joint venture procedure. The management constitution, control, and safeguards should be agreed upon when preparing the memorandum of understanding (MoU). Foreign investors should note that in India, the JV agreement between the partners will not bind the JV company unless its terms are included in the AoA of the JV company. Further, to avoid future conflicts, the JV parties should include a provision in the JV agreement stating that if the AoA is inconsistent with the provisions of the JV agreement, then the parties will amend the MoA and AoA accordingly.

Earlier there were monetary caps on remittances (both lump sum fees and royalties) made for technology collaborations and license or use of trademark or brand name. Now, these restrictions and caps have been removed. India allows free of charge repatriation of profits once the entire domestic and federal (tax) liabilities are met. Historically, there has never been an occurrence that India has failed to provide foreign exchange for repatriation.

Investment exit processes are also fairly simple, and profits can be repatriated once all the tax debt and other compulsions are fulfilled. Troubles only arise when people escape or dodge these liabilities, or do so out of ignorance. Joint ventures in India are normally planned for a particular perio and overseas companies should take the length of such a lifespan seriously. It is therefore advisable to have a clear exit plan in place from the beginning.

Any of those options can be used independently or in combination with each other. The exit strategy depends on the type of entity that was constituted. T he company came into existence as a joint venture.

T he guideline, -are clear and seek to protect the interests of both the home and the host country. Historically speaking, it aprears that the first attempt at setting up joint ventures abroad from India , was made by the Birlas in t'he 'fifties'. Starbucks decided to offer coffee from India on its drinks list, while at. Joint Venture In India : A Critical Analysis Aklanta Kalita.

This is a legal concept found between many companies in India. Indian joint ventures usually comprise two or.