"Joint Venture"

                      A joint venture (JV) is a business agreement in which the parties agree to develop, for a finite time, a new entity and new assets by contributing equity. They exercise control over the enterprise and consequently share revenues, expenses and assets. There are other types of companies such as JV limited by guarantee, joint ventures limited by guarantee with partners holding shares.

                     In European law, the term 'joint-venture' (or joint undertaking) is an elusive legal concept, better defined under the rules of company law. In France, the term 'joint venture' is variously translated as 'association d'entreprises', 'entreprise conjointe', 'counterpoise' or 'entreprise commune'. But generally, the term societe anonyme loosely covers all foreign collaborations. In Germany, 'joint venture' is better represented as a 'combination of companies' (Konzern).

                     With individuals, when two or more persons come together to form a temporary partnership for the purpose of carrying out a particular project, such partnership can also be called a joint venture where the parties are "co-venturers".

                      The venture can be for one specific project only - when the JV is referred to more correctly as a consortium (as the building of the Channel Tunnel) - or a continuing business relationship. The consortium JV (also known as a cooperative agreement) is formed where one party seeks technological expertise or technical service arrangements, franchise and brand use agreements, management contracts, rental agreements, for one-time contracts. The JV is dissolved when that goal is reached.

                     

                     Some major joint ventures include Dow Corning, Miller Coors, Sony Ericsson, Penske Truck Leasing, Norampac, and Owens-Corning.

                     A joint venture takes place when two parties come together to take on one project. In a joint venture, both parties are equally invested in the project in terms of money, time, and effort to build on the original concept. While joint ventures are generally small projects, major corporations also use this method in order to diversify. A joint venture can ensure the success of smaller projects for those that are just starting in the business world or for established corporations. Since the cost of starting new projects is generally high, a joint venture allows both parties to share the burden of the project, as well as the resulting profits.

                    Since money is involved in a joint venture, it is necessary to have a strategic plan in place. In short, both parties must be committed to focusing on the future of the partnership, rather than just the immediate returns. Ultimately, short term and long term successes are both important. In order to achieve this success, honesty, integrity, and communication within the joint venture are necessary.

Partner Selection :-

          

                    While the following offers some insight to the process of joining up with a committed partner to form a JV, it is often difficult to determine whether the commitments come from a known and distinguishable party or an intermediary. This is particularly so when the language barrier exists and one is unfamiliar with local customs, especially in approaches to government, often the deciding body for the formation of a JV or dispute settlement.

The ideal process of selecting a JV partner emerges from:

• screening of prospective partners
• short listing a set of prospective partners and some sort of ranking
• due diligence – checking the credentials of the other party
• availability of appreciated or depreciated property contributed to the joint venture
• the most appropriate structure and invitation/bid
• foreign investor buying an interest in a local company

Companies are also called JVs in cases where there are dominant partners together with participation of the public. There may also be cases where the public shareholding is substantial but the founding partners retain their identity. These companies may be 'public' or 'private' companies. It would be out of place to describe them, except to say there are many in India.

Further consideration relates to starting a new legal entity ground up. Such an enterprise is sometimes called 'an incorporated JV', one 'packaged' with technology contracts (knowhow, patents, trademarks and copyright), technical services and assisted-supply arrangements.

Company Incorporation :-

A JV can be brought about in the following major ways:

• Foreign investor buying an interest in a local company
• Local firm acquiring an interest in an existing foreign firm
• Both the foreign and local entrepreneurs jointly forming a new enterprise
• Together with public capital and/or bank debt

In the U.K and India - and in many Common Law countries - a joint-venture (or else a company formed by a group of individuals) must file with the appropriate authority the Memorandum of Association. It is a statutory document which informs the outside public of its existence. It may be viewed by the public at the office in which it is filed. A sample can be seen at wikimedia.org. Together with the Articles of Association, it forms the 'constitution' of a company in these countries.

The Articles of Association regulate the interaction between shareholders and the directors of a company and can be a lengthy document of up to 700,000+ pages. It deals with the powers relegated by the stockholders to the Directors and those withheld by them, requiring the passing of ordinary resolutions, special resolutions and the holding of Extraordinary General Meetings to bring the Directors' decision to bear.

A Certificate of Incorporation or the Articles of Incorporation is a document required to form a corporation in the US (in actuality, the State where it is incorporated) and in countries following the practice. In the US, the 'constitution' is a single document. The Articles of Incorporation is again a regulation of the Directors by the stock-holders in a company.

By its formation the JV becomes a new entity with the implication:

• that it is officially separate from its Founders, who might otherwise be giant corporations, even amongst the emerging countries
• the JV can contract in its own name, acquire rights (such as the right to buy new companies), and
• it has a separate liability from that of its founders, except for invested capital
• it can sue (and be sued) in courts in defense or its pursuance of its objectives.

On the receipt of the Certificate of Incorporation a company can commence its business.