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TECHNOLOGY TRANSFER & JOINT VENTURE LAW IN INDIA

 
COMPETITION LAW
LAW RELATING TO START UPS
FOOD LAWS
INFORMATION TECHNOLOGY LAW
REAL ESTATE LAW
COMPANY FORMATION LAW
GOODS SERVICE TAX
FDI LAW
TECHNOLOGY TRANSFER & JOINT VENTURE LAW
COMMERCIAL AGREEMENTS & CONTRACTS LAW
LAWS RELATING TO INSURANCE
LEGAL METROLOGY
LABOUR LAW
SPORTS LAW
MEDIA & COMMUNICATION LAW
TELECOMMUNICATION LAW
ECOMMERCE BUSINESS LAW
CORPORATE LAW FIRM
COMMERCIAL LAW FIRM
ENVIRONMENT LAW
GAMBLING LAWS
INDIAN STANDARD'S LAW (BIS)
 

I. OVERVIEW

 

A joint venture (JV) is an arrangement where two or more parties collaborate their resources for a specific project. Joint Venture is a business alliance between two or more entities wherein the resources are mutually combined to achieve desired goals.

 

In the Indian law there are no specific laws for formation and operation of joint ventures.It is a general belief that the formation of a joint venture entity reduces the risk factors involved in incorporation of a company and is also cost-effective.

 

II. FORMS OF JOINT VENTURE

 

Joint ventures may be equity-based or contractual JVs

 

1. Equity Based Joint Ventures (Incorporated) may be of the following types-  

  1. Company

  2. Partnership

  3. Limited Liability Partnership

2. Unincorporated Joint Ventures may be of the following types-  

  1. Co-operation Agreements/Strategic Alliances

III. ROLE OF GOVERNMENT

 

Government approvals for formation of Joint Venture in India- For formation of a JV requires approval either from RBI (Reserve Bank of India) or FIPB (Foreign Investment Promotion Board) in case one of the partners is an Non- Resident Indian (NRI), foreigner or PIO (Person of Indian Origin).The Government of India and its agencies counsel guidelines, which distinguish joint ventures from other entities. Indian joint ventures usually comprise two or more individuals/companies, one of whom may be non-resident, who come together to form an Indian private/public limited company, holding agreed portions of its share capital.  

 

IV. REGULATORY COMPLIANCES

 

1. Agreement

 

In order to constitute a joint venture agreement, the requirements prescribed under the Indian Contract Act and the Companies Act need to be fulfilled.

 

According to Reserve Bank of India, an Indian company may receive Foreign Direct Investment under the two routes as given under:

 

a. Automatic Route

 

FDI is allowed under the automatic route without prior approval either of the Government or the Reserve Bank of India in all activities/sectors as specified in the consolidated FDI Policy, issued by the Government of India from time to time.

 

b. Government Route

 

FDI in activities not covered under the automatic route requires prior approval of the Government which are considered by the Foreign Investment Promotion Board (FIPB), Department of Economic Affairs, Ministry of Finance.

 

The Indian company having received FDI either under the Automatic route or the Government route is required to comply with provisions of the FDI policy including reporting the FDI to the Reserve Bank.

 

All joint venture proposals not falling within the Reserve Bank of India’s automatic route require approval of the Reserve Bank of India, The Foreign Investment Promotion Board(FIPB) or the concerned industry ministry, depending upon the quantum and nature of foreign investment.

 

Joint venture agreements have to be registered either with the RBI or Secretariat of Industrial Assistance (SIA), Department of Industrial Policy and Promotion (DIPP),

 

2. Incorporation

 

A Joint venture is classified into – unincorporated joint venture and incorporated joint venture. An unincorporated joint venture is a contractual joint venture and does not involve the incorporation process. Such a type of joint venture is generally like a partnership and is typically entered for a particular purpose. A joint venture formed by way of partnership is governed by the Partnership Act, 1932. An incorporated joint venture is one that uses a company established for the purpose of the joint venture, with the parties acquiring shares in the company. Incorporated Joint Venture Company is governed by the Companies Act, 1956.

 

V. INTELLECTUAL PROPERTY

 

Clauses concerning IP are considered as deemed as essential in a joint venture agreement as protection of IP, transferring of an IP right, protection to trademarks or tradenames are significant. Some recently formed JV companies in India are Tata Starbucks, Tata SIA Airlines, Bajaj Finserv Limited etc.

 

Parties consistently cite the loss of background IP rights as a major risk in joint venture collaborations, and dealing with IP that is generated in the course of a joint venture or collaboration can also present particular problems, particularly if it is to be used or owned jointly by more than one party.

 

In view thereof it is essential to conduct an IP Audit before establishing a JV.

 

VI. FDI

 

FDI in activities not covered under the automatic route requires prior approval of the Government which are considered by the Foreign Investment Promotion Board (FIPB), Department of Economic Affairs, Ministry of Finance.

 

The Indian company having received FDI either under the Automatic route or the Government route is required to comply with provisions of the FDI policy including reporting the FDI to the Reserve Bank.

 

For further information on FDI, you may refer to our article on Foreign Direct Investment here

 

For more information on Technology Transfer & Joint Venture Law in India, please write to us at info@ssrana.com

 

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