There are three common types of joint venture companies in India: 1) where one party transfers their business to a new company and receives shares, while the other party subscribes for shares in cash, 2) where both parties subscribe to shares in the new company in agreed proportions in cash to start a new business, 3) where an existing company collaborates with a third party who takes shares in the company through cash payment. Joint ventures are incorporated like private or public companies under Indian law. Key issues to address include foreign investment caps, agreement terms, director nominees, office location, and necessary approvals. The joint venture agreement should specify shareholding proportions, decision-making, management structure, funding, and dispute resolution

2.  Three most common types of joint venture
companies may be described as follows-
 Two parties, who/which may be individuals or companies,
one of them nonresident or both residents , incorporate a
company in India. Business of one party is transferred to the
company and as consideration for such transfer; shares are
issued by the company and subscribed by that party. The
other party subscribes for the shares in cash.
 Alternately, the above two parties subscribe to the shares of
the joint venture company in agreed proportion, in cash, and
start a new business.
 Promoter shareholder of an existing Indian company and a
third party, who/which may be individual/company, one of
them non-resident or both residents, collaborate to jointly
carry on the business of that company and its shares are
taken by the said third party through payment in cash.

3. There are no separate laws for incorporation of
joint venture Company in India. It is
incorporated or established like a private
limited company or a public limited company
under the Indian Companies Act, 1956.
However, the following key issued should be
addressed before establishment of Joint
Venture Company:

4. FORMALITIES
 Constitution of the joint venture Company – Private or
Public.
 To check sectoral cap for foreign direct investment in the
proposed joint venture.
 Drafting of Memorandum , Understanding and
Incorporating detailed terms & conditions.
 Selection of nominees / alternate directors on behalf of
nonresident shareholders / directors.
 Location of Registered office of the Joint Venture
 Proposed name of JV

5. ARTICLES
To avoid contradictions, the Articles of Association
should contain the stipulations mentioned in the
joint venture agreement and clearly delineate the
rights and obligations of the partners.
NON RESIDENT PARTNER
In case one of the partners of the joint venture
company is a non resident, approval of Reserve
bank of India {RBI} will be required for acquiring
shares of the company and establishing place of
business in India Foreign Exchange Regulation Act
1973 {FERA}.

6. The Joint Venture agreement should be conditional
upon obtaining all necessary approvals/ consents/
licenses /permissions of appropriate agencies of
Government of India like RBI/SIA etc within
specified period.
If any of the approvals are not received, or received
late, the agreement cannot be enforced and the
joint venture cannot proceed on the basis of the
Agreement.

7. Selection of a good local partner is the key to
the success of any joint venture. A Joint venture
Agreement requires dexterous legal drafting
and should incorporate clearly the relevant
clauses that specify the mutual understanding
arrived at between both parties as to the
formation and operations of the Joint venture
company.

8. A brief checklist of important clauses is as
follows-
 The proportion of shareholding in the joint
venture company
 Specify nature of shares, indicate their
transferability conditions.
 Composition of the Board of Directors,
Appointment of Chairman ,Quorum of Board
meetings ,Casting vote provisions.
 General meeting.
 Appointment of CEO/MD.
 Appointment of Management Committee.
 Important decisions with mutual consent of
partners.

9.  Dividend policy.
 Funding provisons.
 Access conditions.
 Change of control/exit clauses.
 Anti-compete clauses
 Maintaining Confidentiality
 Indemnity clauses.
 Assignment.
 Break of deadlock.
 Dispute Resolution.
 Applicable law.
 Force Majeure.
 Termination provisions.