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Types of Joint Ventures

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What are Types of Joint Ventures

Different types of legal entities, partnerships, corporations and limited liability companies may congregate to form joint ventures. A joint venture can last for several years or may be existent for a temporary period of time. The rationale or the purpose behind creating a joint venture essentially shapes its nature and mode. You can get an insight into the different types of Indian joint ventures if you consider the following classification:

Unincorporated Joint Venture:

This is created through a contract and made possible through a legally binding agreement where there is no incorporation. No separate corporate entity or equity capital is formed in the process. It resembles a regular partnership and is typically resorted for a temporary period and for a specific purpose. It is not meant to unite the parties for perpetuity. Here, the contract is signed by both parties and explicitly states the terms of their relationship, highlighting their mutual rights and duties.

A partnership resulting in a joint venture is controlled by the 1932 Indian Partnership Act. This partnership does not imply that it is a separate independent body distinct from its members. The partnership can exist either as an expressed or implied contract. There is no legal criterion that the partnership must be registered; although when registered, it can enjoy certain benefits as well as exemptions in keeping with different laws and statutes. It allows partners to be able to initiate legal proceedings for enforcing their rights categorically mentioned in the agreement. Once registered, the partners are even empowered to sue any third party by way of enforcing their contractual rights.

Incorporated Joint Venture:

This basically employs a company that has been set up for the purpose of a joint venture together with the partners obtaining shares in this company. The incorporated joint venture may be either a private or a public company having limited liability wherein shareholders are partners in the joint venture. The shareholders however do not have rights relating to assets of the company and although they can participate in the company profits which they get as dividends, they are not participants in the losses. Therefore, in a joint venture as this, the equity gets divided amongst shareholders.

All such joint ventures in the country are essentially domestic companies governed by the 1956 Companies Act. These hold a distinct entity by law and enjoy an independent status from their constituting parties.

Related Topics:

  • Joint Venture in India

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