Joint Venture Agreement
Do you have a business idea and you want to be involved in joint ventures? But creating a joint venture is nothing new. The real trick is to do so in such a way that it protects each venturer so that both partners are free to put their best creative foot forward.
Best teamwork can only be done when all parties feel that they’re in a safe space to build an empire. Joint Venture Agreement is the solution to your problem.
A joint venture is a type of business arrangement where two or more business entities make an agreement to pool all of their resources for the purpose of accomplishing a specific task.
All the parties in a joint venture are responsible for all the costs, profits, and losses associated with it. The reason for a joint venture is usually some specific project or some task which can be a new project or any other business activity.
A Joint Venture Agreement is a legal contract where two or more parties combine to do business or undertake an economic activity together.
The entities involved agree to form a contract with the common intention of running a business or create a new entity by contributing equity and share the revenues, expenses, and control of the company in the proportion of their capital contribution.
In India, there is no legally prescribed format for a Joint Venture Agreement. However, it is advisable to have the following clauses:
- Objective and scope of the Joint Venture.
- If both the parties in a joint venture are equity-based by local and foreign investors and agreement to a future issue of capital then an equity participation clause is included.
- Financial arrangements between both the parties.
- The composition of the board and management agreements.
- Specific obligations.
- Provisions for distribution of profits.
- Transferability of shares in certain circumstances
- Discontinuing of the agreement by the exit of the parties.
- Restrictive covenants on the company and the participants.
- Appointment of CEO/MD.
- Anti-compete clause.
- Duration of the Agreement
- Dispute Resolution
- Applicable law
Before entering into the Joint venture Agreement there are some concerns which both parties should agree like the contribution of money, property, effort, knowledge, skill, or other assets to the common undertaking by each partner. The right of mutual control or management of the property in an enterprise and the right to share in the profit and loss of the property.