A joint venture (JV) is an association of 2 or more individuals or business entities, who combine their financial resources, expertise, skills, knowledge and experience in the furtherance of a specific undertaking, so as to achieve a common goal.
Types of Joint Ventures
Equity JV and contractual JV are 2 fundamental types of JV. Under equity JV a separate legal entity is established by 2 or more parties, in accordance with the agreed terms and conditions. Normally, this legal entity is a limited liability company which is distinct from either of the parties. This company thus becomes the owner of the resources brought in by the parties. A contractual JV is an agreement entered into by the parties to achieve some goal, by bringing their resources together. It has legal characteristics of a partnership.
Drafting a Joint Venture Agreement
Drafting a JV agreement is a very meticulous task as it determines the rights and liabilities of either party.
Things to keep in mind while formulating a joint venture
Few important points to be kept in mind are:-
1. Requirements by each party should be clearly indicated.
2. All technical terms should be clearly defined.
3. Specify whether the product would be manufactured/ sold on exclusive/ non-exclusive basis.
4. All terms and conditions relating to technical know-how, disclosure of specifications, drawings, documents etc. should be specifically provided for.
5. Always include provisions regarding making available of engineers/ skilled workers, payment of their expenses.
6. Clause regarding quality of product to be manufactured.
7. Provisions relating to trademark and Quality check.
8. Clause on force majeure.
9. Clause relating to use of intellectual property rights.
10. Comprehensive clause on arbitration so as to clearly indicate the name/ kind of arbitrator and place of arbitration.
11. Provision for payments, their mode and interest in case of delayed payments.
Corporate Concepts simplified.
*the author Megha Sharma is a Delhi based Corporate Lawyer and can be reached at firstname.lastname@example.org
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