|
|
Joint venture, commonly known as JV, is a contractual arrangement between two or more parties who agree to come together to undertake a business project. All the parties contribute capital and share profits and losses in a decided ratio. Joint ventures are a type of partnership that is always executed through a written contract known as a joint venture agreement (JVA). These contracts are registered and are legally binding on the parties. Moreover, they are temporary in nature because they are executed for a definite period of time to accomplish a specific purpose. The contract automatically dissolves after the expiry of the decided time period.
Joint ventures are typically used in high-risk business propositions that require considerable amount of investment and technical expertise. That is why all research and development activities are mainly undertaken through joint ventures. Overall, joint ventures help to safely penetrate untapped markets and create new distribution links. It increases the capacity and creates a larger pool of resources.
Such partnerships were increasingly formed during the initial stages of the IT boom in India. People were new to the virtual environment and were skeptical about its success. Therefore, many JVs were formed to enter online business or e-commerce. However, the success of any JV depends upon the coordination and understanding between the parties. They should prefer hiring a law firm to draft a detailed JVA to handle conflicting clauses.
|
