A joint venture agreement is a contract between two or more parties to undertake a business venture together. The agreement sets out the terms and conditions of the relationship, including the roles and responsibilities of each party, the ownership structure of the venture, and the distribution of profits and losses.
Such agreements are typically used when parties want to pool their resources and expertise to pursue a project or opportunity that they could not undertake on their own. By entering into a joint venture, the parties can share the risks and rewards of the venture, and each party can contribute its own unique skills and assets.
An attorney will always suggest you to go ahead with a joint venture agreement, considering it has various benefits that can aid your business. The agreement works like a win-win for both the parties involved.
1.Statutory Protection: Foreign investors who are interested in doing business in India often prefer to incorporate their joint ventures as companies. These corporate joint ventures are regulated by the Companies Act, 2013 and the Limited Liability Partnership Act, 2008. The shareholders’ liability is limited under both of these Acts. In addition, these two Acts provide a governance regime with stringent checks and balances to safeguard the interests of investors even in the absence of contractually agreed protections.
2. Tax Benefits: With the payment of necessary taxes and fulfillment of other conditions, dividends on capital investments and profits made from a JV’s operations in India may be freely repatriated. JVs are also eligible for a variety of tax advantages and incentive programmes under the Foreign Trade Policy 2021–2026 and the Special Economic Zone Policy, where applicable.
3.Government Schemes: The government has launched various schemes that can be a benefit for your business, schemes are available for MSMEs, Startups, SMEs, having a joint venture agreement acts as an added benefit to avail the scheme.
4. Pool of Resources: with the joint venture agreement in place, both parties get a pool of resources for their benefit. There is access to manpower, intellectual property, ideas, research and development, and much more.
5. Increased Capacity: Having a joint venture agreement, the capacity of risk taking increases for both parties. As the revenue is shared, so are the liabilities. Hence, helping the business scale up.
These kinds of agreements can be complex documents, and it is important to consult with an experienced attorney to ensure that all of the key terms and conditions are properly addressed.
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