Joint Venture Agreement
A joint venture agreement is a business agreement in which two or more parties agree to pool their resources for the purpose of accomplishing a specific task. In a joint venture agreement, each of the participants is responsible for profits, losses and costs associated with it.
A joint venture agreement also means that it is an arrangement where two companies develop a new entity to their mutual benefit.
Under joint venture agreement, each party contributes cash, property, assets or other resources to the business venture.
- Access to new markets
- Specialised expertise and resources
- Adding financial and purchasing power
- Beneficial to both the businesses
Clauses to be included in an agreement:
A joint venture agreement must be a written agreement. Some of the important points to be included in joint venture agreement are as follows:
- The business objectives of the joint venture cash, property, assets, etc.;
- The structure of the joint venture;
- Each party’s contributions to the venture;
- Dispute mechanism between the parties;
- Duration or procedure to terminate joint venture;
- A confidentiality clause
Ways to set up Joint Venture:
There are two ways in which a joint venture can be set up:
- One is for two businesses to agree to join forces and cooperate with each other in a limited and specific way.
- Two businesses either decide to set up a separate and independent business to handle joint venture.
Hence, a joint venture can give you:
- More resources
- Greater capacity
- Increase technical expertise