Joint Ventures

When two or more parties (individuals/companies) undertake economic activity together by contributing equity is known as Joint Venture. Joint ventures are very popular in corporate finance but less popular in the oil and gas industry. These parties bear risk and share profits together. Joint Ventures can be for one specific project only or a continuing business relationship. Business Joint Ventures and International Joint Ventures are also very popular terms. International Joint Venture is a hottest and famous type of Joint Venture. There are number of Joint Venture companies in India doing business. A joint venture is when-:

Two parties, could be individuals or companies, incorporated a company in India. These two could be residents of India or else one of them is allowed to be non resident of India. Business of one party is transferred to the company. As the consideration for such shares, shares are issued by that company and subscribed by that party.
The above mentioned two parties, in agreed proportion, in cash subscribe to the shares of the joint venture company, start a new business.
Promoter of an existing Indian company and a third party (individual/company), both residents and one of them non-resident, join to carry on the business of that company. After payment in cash, its shares are taken by the said third company.

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In India there is no separate law for Joint Ventures but certain approvals and filing of documents are mandatory. If in the Joint Venture any foreign partner or NRI or PIO partner is involved then it is mandatory to take government approval. Approval is required to obtain from Reserve Bank of India If the Joint Ventures are covered under automatic route while if not covered under the automatic route then approval of FIPB is required. Joint Venture agreement or International Joint Venture agreement for the successful business. Joint Venture agreement should be properly signed.

Advantages of Joint Ventures

There are several advantages of Joint Ventures such as-:

It helps in saving money and reducing risk through capital and resource sharing
It play an important role in building company's strength with the access to new technology and customers
Improves financial resources
Helps in creation of stronger competitive units

Apart from above all mentioned points there are many advantages of Joint Ventures because of which they are becoming very popular.