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    Definition - of Joint Venture (JV)

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    Shahid Akram
    A joint venture is a legal entity formed between two or more parties to undertake an economic activity together for a finite period of time. The parties contribute equity, share revenues, expenses, assets, and control of the new entity. Joint ventures can be for a single project or ongoing business relationship. They allow parties to combine strengths, access local resources, share risks and costs, and pursue opportunities together. Common reasons for forming a joint venture include gaining access to new markets, technology, expertise, or resources that one party lacks.

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    Definition - of Joint Venture (JV)

    Uploaded by

    Shahid Akram
    65 views2 pages
    A joint venture is a legal entity formed between two or more parties to undertake an economic activity together for a finite period of time. The parties contribute equity, share revenues, expenses, assets, and control of the new entity. Joint ventures can be for a single project or ongoing business relationship. They allow parties to combine strengths, access local resources, share risks and costs, and pursue opportunities together. Common reasons for forming a joint venture include gaining access to new markets, technology, expertise, or resources that one party lacks.

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    Definition - Of Joint Venture (JV)

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    Definition - Of Joint Venture (JV)

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    A joint venture is a legal entity formed between two or more parties to undertake an economic activity together for a finite period of time. The parties contribute equity, share revenues, expenses, assets, and control of the new entity. Joint ventures can be for a single project or ongoing business relationship. They allow parties to combine strengths, access local resources, share risks and costs, and pursue opportunities together. Common reasons for forming a joint venture include gaining access to new markets, technology, expertise, or resources that one party lacks.

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    © All Rights Reserved
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    65 views2 pages

    Definition - of Joint Venture (JV)

    Uploaded by

    Shahid Akram
    A joint venture is a legal entity formed between two or more parties to undertake an economic activity together for a finite period of time. The parties contribute equity, share revenues, expenses, assets, and control of the new entity. Joint ventures can be for a single project or ongoing business relationship. They allow parties to combine strengths, access local resources, share risks and costs, and pursue opportunities together. Common reasons for forming a joint venture include gaining access to new markets, technology, expertise, or resources that one party lacks.

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    Definition of Joint Venture

    Introduction
    A joint venture (JV) is a legal entity formed between two or more parties to undertake an economic
    activity together. The parties agree to create, for a finite time, a new entity and new assets by
    contributing equity. They then share in the revenues, expenses, and assets and the control of the
    enterprise.
    The venture can be for one specific project only - when the JV is referred, more correctly as a
    consortium (as the building of the Chunnel) - or a continuing business relationship. The consortium JV
    (also known as a cooperative agreement) is formed where one party seeks technological expertise or
    technical service arrangements, franchise and brand use agreements, management contracts, rental
    agreements, for one-time contracts. The JV is dissolved when that goal is reached.
    Defining the Joint-Venture
    A JV on a continuing basis is a contractual business undertaking. It is similar to a business partnership,
    with one key difference: a partnership generally involves an on-going, long-term business relationship,
    whereas an equity-based JV comprises a single business activity.
    The term JV refers to the purpose of the entity and not to a type of entity. Therefore, a joint venture may
    be a corporation, a limited liability enterprise, a partnership or other legal structure, depending on a
    number of considerations such as tax and tort liability.
    JVs are normally formed both inside one's own territory or it is between countries. Within one, JVs
    usually combine different strengths in a field or because of legal restrictions. JVs are also formed in a
    new territory, often a developing country, with different legal systems. They are so formed to minimize
    business, tax and political risks. The JV is an alternative to the parent-subsidiary business partnership
    in developing countries, disfavoured, on account of (a) ignoring national objectives (b) slow-growth c)
    parental control of funds and (d)disallowing competition.
    JVs can be in the travel space, banking, insurance, web-hosting, etc. though of greater concern here
    are the industrial JVs
    Today, the JV applies to more occasions than freewill; for example, one normally cannot legally carry
    out business without finding a national partner to form a JV as in many Arab countries [1] where it is
    mentioned that there are over 500 JVs in Saudi Arabia with Indians. Also, the JV may be an easier firststep to franchising, as McDonald's and other fast foods, found out in China in the early difficult stage of
    development.
    Other reasons for forming a JV are:

    reducing 'entry' risks by using the local partner's assets


    inadequate knowledge of local institutional or legal environment
    access to local borrowing powers
    perception that the goodwill of the local partner is carried forward
    in strategic sectors, the county's laws may not permit foreign nationals to operate
    alone
    access to local resources through participation of national partner

    access by one partner to foreign technology or expertise, often a key consideration of


    local parties (or through government incentives for the mechanism)
    again, through government incentives, job and skill growth through foreign investment,
    and
    incoming foreign exchange and investment.

    There may be strategic interests of one partner's alone:

    Build on company's strengths


    Economies of (international) scale and advantages of size
    'globalize' without size economies of scale
    Influencing structural evolution of the industry
    Pre-empting competition
    Defensive response to blurring industry boundaries
    Speed to market
    Market diversification
    Pathways into R&D
    Outsourcing

    JVs are formed by the parties entering into an agreement that specifies their mutual responsibilities
    and goals. The JV partners can form the capital of the company through injections of cash alone or
    cash together with assets like technology or land and buildings. Subsequent to its formation the JV can
    raise debt for additional capital. A written contract is crucial for legal provisions. All JVs also involve
    certain rights and duties. Each partner to the JV has a fiduciary responsibility, even to act on
    someones behalf, subordinating one's personal interests to those of the other person or is the sleeping
    partner. Upon its incorporation (see later) it becomes a company in most places or a corporation (in the
    US).
    A JV can terminate at a time specified in the contract, upon the death of an active member, or if a court
    so decides in a dispute taken to it. A joint ownership venture may be brought about in the following
    major ways.

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