A joint venture is a tactical partnership where two or more people or companies agree to put in goods, services and/or capital to a uniform commercial project.

In sectors where 100 percent FDI is not allowed in India, a joint venture is the best medium, offering a low risk option for companies wanting to enter into the vibrant Indian market. For any successful JV into India, compatibility is important for both the parties. To maintain a successful joint venture in India both of the associated parties should have a long term goal and conditions should be written in the clauses in JV.

Joint venture companies are mainly the chosen form of corporate houses for doing business in India. There are no separate laws for joint ventures in India. The companies registered in India, even with up to 100 percent overseas equity, are considered the same as local companies. A JV may be with any of the business entities existing in India.

Choosing of a good home partner is the most important tool to the success of any joint venture. Once an associate is selected, normally a memorandum of understanding (MoU) or a letter of intent is signed by the parties stressing the foundation of the future joint venture agreement.

An MoU and a joint venture agreement must be marked after consulting a chartered accountants firm well versed in the Foreign Exchange Management Act, Indian Income Tax Act, Indian Companies Act, international laws and applicable Indian rules, regulations and procedures.

Terms and conditions should be properly assessed before signing the contract. Negotiations need an understanding of the cultural and legal background of the parties. The JV union should be a subject matter to obtaining all required governmental approvals and licenses within specified period.

Methods of joint ventures in India

1. Equity joint venture

2. Contractual joint venture

The equity joint venture is an understanding whereby an independent legal entity is created in accordance with the agreement of two or more parties.

The contractual joint venture might be used where the organization of a detached legal entity is not needed or the creation of such a separate legal entity is not feasible.

Where one or more legal methods are used in the founding of the joint venture company to execute its operations is based on the partnership between the parties, the results of which reproduce in the joint venture agreement entered into between the parties.

The licensing agreement, know-how agreement, technical services or technical assistance agreement, royalty payment , franchise agreement and agreement including all other profit-making matters including use of intellectual property rights normally form annexes or attachments to the main joint venture agreement. They can be signed simultaneously or after the joint venture company is recognized.