At times, companies, big or small, consider collaborating on projects wherein they share their resources while preserving their individual identities. Such a joint venture helps businesses grow faster, increase productivity and generate greater profits. It gives access to new markets and distribution networks, increased capacity, sharing of risks and costs (i.e liability) with a partner and access to greater resources, including specialized staff, technology, and finance. A joint venture agreement comes into play to straighten out the relationship in these situations. Such an agreement is legally binding and clearly lays down the details about profit sharing, operations and the area of cooperation and divergence.
1) Understanding the requirement of both the companies which are collaborating and the project for which collaboration is being done.
2) After this, a detailed discussion will take place between the companies participating in the joint venture to finalize the terms of the contract.
3) After the discussion between the parties, a contract will be drafted by the experts. Then it will be given to the parties to review it and once the parties approve it the contract is finalized.
As it can be appreciated, time taken for contract drafting depend largely on the complexities of the subject matter covered. But on an average, we conclude the process within 05 to 07 working days.
A joint venture can be written or oral but it is highly recommended, however, that a complete written agreement is created to avoid confusion and dispute at a later stage.
Partnerships, Mergers and Acquisitions are some alternatives to a joint venture, but each alternative comes with its own set of advantages and disadvantages wherein a joint venture stands out as the best structure for 2 companies that wish to collaborate only for the purposes for a single/few projects.
If the Joint Venture is just a document specifying the terms and conditions between the parties, registration is not mandatory though advisable. But if the Joint Venture is formed as a Company it is mandatory.