Joint venture

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Joint Business ( JV ) is a business entity created by two or more parties, generally characterized by common ownership, return and joint risk, and joint governance. Companies usually pursue joint ventures for one of four reasons: to access new markets, especially emerging markets; to gain scale efficiency by combining assets and operations; to share risks for investments or large projects; or to access skills and abilities.

According to Gerard Baynham of Water Street Partners, there are a lot of negative press about joint ventures, but objective data shows that they can actually outperform affiliates that are owned and controlled completely. He wrote, "A different narrative emerged from our recent analysis of US Department of Commerce (DOC) data, collected from more than 20,000 entities.According to DOC data, foreign joint ventures of US corporations are aware of an average return of 5.5 percent of assets (ROAs), while wholly owned and controlled affiliated companies (most of which are wholly owned) are aware of a slightly lower 5.2 percent ROA.The same story applies to investments by foreign companies in the US, but the difference is more clearly US-based joint ventures are aware of an average ROA of 2.2 percent, while fully owned and controlled affiliates in the US only realize 0.7 percent ROA. "

Most joint ventures are combined, though some, such as in the oil and gas industry, are "unrelated" joint ventures that mimic corporate entities. With individuals, when two or more people come together to form a temporary partnership for the purpose of carrying out a particular project, the partnership may also be called a joint venture in which the parties are " co-venturers ".

The business may be a JV business (for example, Dow Corning), a JV project/asset intended to pursue a single project, or a JV that aims to define a standard or serve as an "industrial utility" that provides a narrow set of services to industry participants.

Some of the major joint ventures include MillerCoors, Sony Ericsson, Vevo, Hulu, Penske Truck Leasing, and Owens-Corning - and in the past, Dow Corning.

Video Joint venture

Definisi hukum

In European law, the term "joint venture" (or joint effort ) is an elusive concept of law, better defined under the rules of corporate law. In France, the term "joint ventures" is variously translated "association d'corporation", "entreprise conjointe", "coentreprise" or "entreprise commune".

Maps Joint venture

JV design elements

The key elements of the joint venture design include:

1. the number of parties;
2. the geographic scope, product, technology, and value chain in which the JV will operate;
3. the contributions of the parties;
4. structural form (each country has special options, eg in the US the main options are C Corporation or LLC/partnership structure);
5. assessment of initial contributions and distribution of ownership among the parties;
6. economic arrangements, post-deals (eg Whether a joint venture intended to generate profit vs. operate as a cost-sharing or production sharing; if a nonprofit entity, the parties will share profits in proportion to the equity of ownership, or other means ?);
7. governance and control;
8. Talent/HR model; Will the JV have its own staff with its own salary vs. staff supported by the parent company;
9. contract arrangements with the parent company for input, output or service;
10. out and the provisions of evolution?

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JV Process

Overall, the JV process has a series of steps:

• Define a business strategy.
• Determine if the JV is the right vehicle. This requires comparing JV options to acquisitions, non-equity partnerships, contractual alliances, or self-running approaches. Generally JVs are best suited when 1) they focus on combining complementary capabilities (eg product and market access), sharing risk, or 2) combining businesses where direct transactions and transactions are impossible or where premiums involved in acquisitions can not restored through operational synergy and 3) when go-own is too risky or too slow, and 4) simpler vehicles such as contractual agreements are not enough.
• Playlists.
• Develop a JV deal concept.
• Negotiate detailed terms and conditions.
• Plan and launch a JV.
• Expand, or end, JV.

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Partner options

While the following offer some insight into the process of joining partners who are committed to establishing a JV, it is often difficult to determine whether commitments come from a distinguished and distinguished party or intermediary. This is especially true when language barriers exist and one is unfamiliar with local customs, especially in approaches to government, often the deciding body for JV establishment or dispute settlement.

The ideal process of selecting a JV partner comes from:

• filtering of potential partners
• a short list of a set of potential partners and a sort of ranking
• due diligence - checks the credentials of others
• the availability of properties that are valued or depreciated contribute to the joint venture
• the most appropriate structure and invitation/bid
• foreign investors interested in local companies

Companies are also called JVs in cases where there are dominant partners along with public participation. There may also be cases where public ownership is substantial but founding partners retain their identities. These companies may be "public" or "private" companies.

Further consideration relates to starting a new legal entity below. Such companies are sometimes called "Integrated JV", which is "bundled" with technology contracts (knowhow, patent, trademark and copyright), technical services, and supply-relief arrangements.

The JV consortium (also known as a cooperative agreement) is formed in which one party seeks technology expertise or technical service arrangements, franchise agreements and brand usage, management contracts, lease agreements, for "one-time" contracts, for example, for construction projects. They disperse the JV when that goal is reached.

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Corporate merger

JV can be done in the following main ways:

• Foreign investors who buy shares of local companies
• Local companies acquire existing foreign companies
• Both foreign and local entrepreneurs together form a new company
• Together with public capital and/or bank debt

In the United Kingdom, India, and in many Common Law countries, a joint venture (or company formed by a group of individuals) must file with authority in accordance with the Memorandum of Association. This is a legal document that informs the outside public about its whereabouts. This can be seen by the public in the office where it was filed. Examples can be found at wikimedia.org. Together with the Articles of Association, it forms the "constitution" of a company in these countries.

The Articles of Association govern interactions between shareholders and company directors and can be long documents of up to 700,000 pages. This relates to powers delegated by shareholders to directors and those held by them, requiring approval of ordinary resolutions, special resolutions and the holding of an Extraordinary General Meeting to bring the director's decision to bear it.

The Certificate of Establishment or Articles of Association is a document necessary to establish a company in the US (in fact, the country in which it is incorporated) and in the countries that follow the practice. In the US, "constitution" is a single document. The budget of re-establishment is a regulation of directors by shareholders in a company.

With its formation, the JV becomes a new entity with implications:

• that it was officially separated from its Founder, which may be a giant company, even among developing countries
• The JV may contract its own name, acquire rights (such as the right to purchase a new company), and
• it has a separate liability from its founder, except for invested capital
• may sue (and sue) in court in defense or to achieve its objectives.

At the time of receipt of Certificate of Establishment the company can start its business.

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Shareholder agreement

This is a jurisdiction and filled with difficulties because the laws of different countries, especially on the "head" or shareholder agreement. For some legal reason may be called a Memorandum of Understanding. This is done in parallel with other activities in forming a JV. Although handled briefly for shareholder agreements, several issues must be addressed here as the opening of the following discussion. There are also many problems that are not in the article when the company started or never attended. Also, the JV may choose to remain as a JV alone in a "false partnership" to avoid unnecessary disclosure to the government or the public.

Some issues in shareholder agreement are:

• An intellectual property assessment, say, an assessment of one partner's IPR and, say, real estate from another
• control of the company either by the number of directors or "funding" it
• The number of directors and rights of the founders for their director of appointments that indicate whether shareholders dominate or share equations.
• management decisions - whether the board manages or a founder
• share transfer - founder assignment rights to other members of the company
• dividend policy - the percentage of earnings to be declared when there is a profit
• closing - conditions, notifications to members
• the confidentiality of the founder's knowledge and consent and the penalty for disclosure
• First right of rejection - right of purchase and counter offer by founder.

There are many features that should be included in shareholder agreements that are personal enough for the parties when they start. Usually, no need to submit to any authority.

Another basic document to be articulated is the Budget, which is a document published and known to members. This repeats the shareholder agreement on the number of directors that each founder can appoint to the board of directors; whether the control council or the founders; decision making by a simple majority (50% 1) of those present or 51% or 75% majority with all directors present (their alternatives/proxies); distribution of corporate funds; debt level; proportion of earnings which may be expressed as dividends; etc. Also important is what will happen if the company is disbanded, if one of the partners dies, or if the company is sold.

Often the most successful JVs are those who have a 50:50 partnership with each side having the same number of directors but spin control of the company, or the right to appoint the Chairman and Vice Chairman of the company. Sometimes a party may grant a person who is trusted separately to vote at the voting venue of the Founder at a council meeting.

Recently, in one big case the Indian Supreme Court has stated that the Memorandum of Understanding (which details are not in the Articles of Association) is "unconstitutional" which gives more transparency to business actors.

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Dissolution

JV is not a permanent structure. This can be dissolved when:

• Aim genuine business meet
• Original business purpose not fulfilled
• Either or both sides develop new goals
• Either or both parties no longer agree to the objectives of the joint venture
• The time agreed for the joint venture has expired
• Legal or financial issues
• Emerging market conditions mean that joint ventures are no longer appropriate or relevant
• One party acquires another

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Joint ventures in various jurisdictions

Joint venture in China

According to the 2003 United Nations Conference on Trade and Development report, China is a recipient of US $ 53.5 billion in foreign direct investment, making it the largest recipient of foreign direct investment in the world for the first time, surpassing the US. Also, approved the establishment of nearly 500,000 foreign investment companies. The US has 45,000 projects (in 2004) with investments in place of over 48 billion.

To date, there are no guidelines on how foreign investment should be dealt with due to China's limited nature to foreign investors. Following the death of Mao Zedong in 1976, initiatives in foreign trade came into force, and the laws applicable to foreign direct investment were made clear in 1979, while the first Sino-foreign equity business took place in 2001. The legal corpus has increased since that.

Companies with foreign partners can conduct manufacturing and sales operations in China and can sell through their own sales network. The Sino-Foreign Company has export rights that are not available to Chinese companies completely, because China wants to import foreign technology by encouraging JV and the latest technology.

Under Chinese law, foreign companies are divided into several basic categories. Of these, five will be described or mentioned here: three relate to industry and services and two as vehicles for foreign investment. The five categories of Chinese foreign companies are: Sino-Foreign Joint Ventures (EJV), Sino-Foreign Cooperative Joint Ventures (CJVs), Foreign-Owned Enterprises (WFOE), though they do not fully belong to Joint Ventures, plus foreign investment companies limited by stock (FICLBS), and Investment Companies through Foreign Investors (ICFI). Each category is described below.

Equity joint venture

The EJV Act is between Chinese partners and foreign companies. It is entered in Chinese (official) and in English (with equivalent validity), with limited liability. Before entering China into the WTO - and thus WFOEs - EJVs dominate. In EJV mode, partners share the advantages, disadvantages, and risks with equal proportion to their respective contributions to venture registered capital. This rises upward in the same proportion as the increase in registered capital.

The JV contracts that are accompanied by the Articles of Association for the EJV are the two most basic legal documents of the project. The articles reflect the many provisions of the JV contract. In case of conflict, JV documents take precedence. These documents are prepared at the same time as the feasibility report. There are also additional documents (called "offsets" in the US) that include knowledge and trademarks and equipment-supply agreements.

Minimum equity is determined for investment (cut), where foreign equity and debt levels are:

• less than US $ 3 million, equity should be 70% of the investment;
• between US $ 3 million and US $ 10 million, minimum equity should be US $ 2.1 million and at least 50% of the investment;
• between US $ 10 million and US $ 30 million, minimum equity should be US $ 5 million and at least 40% of the investment;
• more than US $ 30 million, minimum equity should be US $ 12 million and at least 1/3 of the investment.

There is also an intermediate level.

Foreign investment in total projects must be at least 25%. No minimum investment is set for Chinese partners. The investment time should be mentioned in the Agreement and the failure to invest within the stipulated time, withdrawing the penalty.

Cooperative joint venture

Co-operative Joint Ventures (CJVs) are allowed under the Sino-Foreign Joint Venture Cooperation. Cooperative companies are also referred to as Contractual Operating Enterprises.

The CJVs may have a finite or infinite structure - therefore, there are two versions. The limited liability version is similar to the EJV in permit status - foreign investors provide most of the funds and technology and the Chinese side provides land, buildings, equipment, etc. However, there are no minimum restrictions on foreign partners that allow him to become a minority shareholder.

The other format of CJV is similar to a partnership in which parties jointly assume unlimited liability for corporate debt without a separate legal person being created. In both cases, the status of the company formed is a legitimate Chinese who can hire labor directly, for example, a Chinese national contactor. Minimum capital is registered at different levels of investment.

Another difference from EJV should be noted:

• Cooperative JV does not have to be a legal entity.
• Partners in the CJV are allowed to share earnings on an agreed basis, not necessarily worth the capital contribution . This proportion also determines the control and risk of the company in equal proportions.
• It is possible to operate within CJV in a restricted area
• The CJV may enable negotiated levels of financial management and control, as well as transfer methods related to equipment leases and service contracts. In EJV management control is through the allocation of Council seats.
• During the venture period, a foreign participant may recover his investment, provided that the contract governing it and all fixed assets will become the property of the Chinese participant at the time of termination of the JV.
• Foreign partners can often gain the desired level of control by negotiating management, voting, and employment rights into the CJV article; because the control should not be allocated in accordance with equity shares.

Comfort and flexibility are characteristics of this type of investment. It is therefore easier to find cooperative partners and to reach agreement.

With changes in the law, it becomes possible to join Chinese companies to get started quickly. Foreign investors do not need to set up a new company in China. Instead, investors use Chinese partner business licenses, under contractual arrangements. Under the CJV, however, the land remains in possession of Chinese partners.

There are other advantages: the percentage of CJV owned by each partner may change throughout the life of the JV, giving options to foreign investors, holding higher equity, gaining a faster rate of return to the Chinese partner's mutual interest of a larger role later maintain long-term control.

The parties in one of the enterprises, EJV, CJV or WFOE prepare the feasibility study described above. This is a non-binding document - the parties are still free to choose not to continue the project. The feasibility study should cover the fundamental technical and commercial aspects of the project, before the parties can proceed to formalize the required legal documentation. The study should contain the details referred to earlier under the Feasibility Study (delivery by a Chinese partner).

Foreign Business Entities (WFOE)

There is a PRC basic law on companies with a single foreign investment control, WFOEs. The introduction of China into the World Trade Organization (WTO) around 2001 had a profound effect on foreign investment. Not being a JV, they are considered here only as a comparison or contrast.

To implement the WTO commitments, China publish from time to time the latest version of its "Catalog Catalog" (affecting business) is prohibited, restricted.

WFOE is a Chinese legal person and must comply with all Chinese laws. Thus, it is permissible to enter into contracts with the appropriate governmental authority to obtain tenure, renting a building, and receiving utility services. In this case it is more similar to CJV than EJV.

WFOEs are expected by the PRC to use the most modern technology and to export at least 50% of their production, with all investments must be fully provided by foreign investors and the company is in total control.

WFOEs are usually limited companies (as with EJVs) but the responsibilities of Directors, Managers, Advisors and Suppliers depend on rules governing Departments or Ministries that control product liability, worker safety or environmental protection.

The advantage WFOE enjoys from its alternatives is increasing its protection of knowledge but its main disadvantage is the absence of interested and influential Chinese parties.

Until the third quarter of 2004, WFOE has replaced EJV and CJV as follows:

(*) = Financial Ventures oleh EJVs/CJVs (**) = JVs Disetujui

Perusahaan Investasi Asing Dibatasi Oleh Saham (FICLBS)

These companies are formed under the Sino-Foreign Investment Law. Capital consists of the value of shares in exchange for property values ​​granted to the company. Liabilities of shareholders, including debt, equal to the number of shares purchased by each partner.

The company's registered capital is part of paid up capital. The minimum amount of registered capital of the company should be RMB 30 million. These companies can be listed on only two China Stock Exchange - Shanghai Stock Exchange and Shenzhen. Shares of the two types are allowed on this Exchange - Type "A" and Type "B" shares.

Type A is only for use by Chinese nationals and can only be traded in RMB. Type "B" shares in Remembi currency but can be traded in foreign currency and by Chinese citizens having foreign exchange. Furthermore, the state enterprise that has been approved for corporatization may trade in Hong Kong in "H" shares and on the NYSE exchange.

"A" is distributed to and traded by Chinese nationals. They are published and traded in Renminbi. "B" shares in the Renminbi currency but traded in foreign currency. From March 2001, in addition to foreign investors, Chinese nationals with foreign currency can also trade the stock "B".

Investment Company by Foreign Investor (ICFI)

Investment Companies are those established in China by foreign-funded businesses or together with Chinese partners involved in direct investment. It should be included as a company with limited liability.

The total amount of investor assets during the year before the application to conduct business in China should be no less than US $ 400 million in the territory of China. The paid capital contribution must exceed $ 10 million. In addition, more than 3 project proposals of investment projects targeted by investors should be approved. Shares taken and held by Foreign Investment Company by Foreign Investors (ICFI) shall be 25%. Investment companies can be defined as EJV

Joint ventures in India

JV companies are the preferred form of corporate investment but there are no separate laws for joint ventures. Companies established in India are treated equally as domestic companies.

• The two parties above subscribe to JV's share of the company in agreed proportion, in cash, and start a new business.
• Two parties, (individuals or companies), incorporate companies in India. Business from one party is transferred to the company and in consideration for such transfer, the shares are issued by the company and subscribed by that party. The other party subscribes to shares in cash.
• The promoter shareholder of an existing Indian company and a third party, an individual/company, one of which is not a resident or resident of the two, collaborates to jointly run the business of the enterprise and its shares are taken by such third party by payment in cash.

Private companies (only about $ 2,500 is the lower limit of capital, no upper limit) are allowed in India along with public and limited companies or not, as well as partnerships. sole proprietorship is also permitted. However, the latter is reserved for NRI.

Through capital market operations, foreign companies can trade on two exchanges without prior permission from RBI but they can not own more than 10 per cent of equity in the paid-in capital of Indian companies, while the aggregate foreign institutional investment (FII) in a company is limited to 24 per cent.

Establishment of wholly owned subsidiaries (WOS) and project offices and branch offices, established in India or not. Sometimes, it can be understood, that branches start testing the market and get the taste. Equity transfers from residents to non-residents in mergers and acquisitions (M & A; A) are normally permitted under automated routes. However, if M & amp; As existing in sectors and activities that require prior government permission (Appendix 1 of the Policy), transfers may be continued only after the permit.

Joint ventures with trading companies are allowed along with imports of used factories and machinery.

It is expected that in the JV, foreign partners provide technical collaboration and pricing including foreign exchange components, while Indian partners provide factory or building locations and machine components and locally made products. Many JVs are formed as public limited companies (LLCs) because of the advantages of limited liability.

Joint ventures in Ukraine

In Ukraine most joint ventures are operated in the form of limited liability companies, as there is no legal entity in the form of joint ventures. Protection of the rights of foreign investors is guaranteed by the Law of Ukraine "On Foreign Investment". In Ukraine, the JV can be established without the formation of a legal entity and act under the so-called Cooperation Agreement (Dogovir pro spilnu diyalnist; Ukr. ????????????????????? ). Under the civil code of Ukraine, CA may be formed by two or more parties; the rights and obligations of the parties are governed by the agreement. The cooperation agreement has been widespread in Ukraine, especially in the field of oil and gas production.

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See also

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References

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External links

• Cornell Law School Joint Venture Information page Contains relevant legal and definition information about joint venture partnerships

• Joint Ventures Staged a Quiet Comeback An article written by Gerard Baynham, published in Chief Executive, evaluates the performance of the joint venture.

Source of the article : Wikipedia