JOINT VENTURE: AN INTRODUCTION  

JOINT VENTURE

The growth of India’s economy  is alluring business organizations  from across the world.

In layman’s term a Joint Venture could be characterized as a method wherein at least two parties meet up for the sole point of working  out a specific project. It is for the most part decided on when a foreign organization puts resources (invests) into a project along with an Indian organization.

For example : “A” which is a foreign company wants to invest in company “ B” which is a domestic company and start their business together, they will be working on the same project together and it will be called a  Joint Venture.

There is no such thing as a “Consolidated Law” in India that governs joint venture operations. Multiple statutes govern it, including the Companies Act of 2013, the Indian Partnership Act of 1932, and the Limited Liability Partnership Act of 2008. The Indian Accounting Standards were developed by the Institute of Chartered Accountants of India, and they must be followed by every business in India. In the case of joint ventures, IAS 27 includes both combined and separate financial statements.

Types of Joint Ventures

  • Contractual joint venture
  • Equity based joint venture
    • A contractual joint venture does not result in the formation of a new jointly-owned entity. There is an agreement to collaborate, but there is no agreement to create a company that is owned by the collaborators. Although the two parties do not share ownership of the corporate entity, each of them has some authority over the joint venture.
    • An equity joint venture agreement, on the other hand, is one in which two or more parties agree to construct a separate corporate organization that is jointly owned by them. In such a circumstance, the essential operative factor is joint ownership by two or more people.

 EXAMPLES OF TOP JOINT VENTURES

While some companies are joint ventures between Indian and foreign partners, others are fantastic examples of Indian companies partnering with global giants to establish world-class businesses that sell goods and services both inside and outside of India.

1. Hindustan Aeronautics Ltd

HAL is one of India’s Navratna corporations, which means it is one of the country’s economic generators while also providing critical services to the country. HAL has the most joint ventures in India. JVs for fixed-wing fighter and civilian aircraft, aircraft engines, helicopters, defence systems and aerostructures, and a slew of other aerospace and aeronautics products are among them.

 HAL has joint ventures with Russian companies Rosoboronexport, Aviazapchast, and Mikoyan-Gurevich (MiG), British Aerospace and Rolls-Royce Holdings Ltd, Elbit Systems, Israel, Merlin-Hawk and Edgewood Ventures of the United States, Snecma of France, Canadian Aerospace, and Tata Technologies, Infotech Enterprises, and Samtel, as well as Indian companies Tata Technologies, Infotech Enterprises etc.

2. Vistara

A great example of Indian Joint Venture with a foreign company is the airline, Vistara, a Full-ServiceCarrier. Vistara is the brand name of Tata SIA Airlines Ltd, a JV between India’s corporate giant Tata Sons and Singapore Airlines (SIA).

3. Birla Sun Life Insurance Company Limited (BSLI) is a joint venture between the Aditya Birla Group, an Indian conglomerate and the Sun Life Financial Inc, which is a leading international financial services organization of Canada.

4. Mahindra-Renault Ltd

Another good example of a Joint venture is between Mahindra-Renault, founded in 2007 brings together India’s largest automobile manufacturer Mahindra & Mahindra and world-renowned vehicle maker, Renault SA of France.

INFERENCE

Joint ventures are the greatest alternative for organizations looking to pursue a certain project, whether it’s with similar products or to start a new company with core business activities. Companies engage in joint ventures within the terms of a proper contractual agreement between the parties engaged, in which profit and loss are shared by the venture’s participants. It aids in acquiring a tactical and strategic advantage over competitors in the market. However, each country has its own set of rules and regulations that joint venture partners must follow and comply with in order to meet the reporting obligations imposed by various laws and regulations.

Aishwarya Says:

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