What is a Joint Venture?
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Two parties, incorporate a company in India. Business of one party is transferred to the company and as consideration for such transfer; for more help visit to: www.easy-jv-manager.com. shares are issued by the company and subscribed by that party. The other party subscribes for the shares in cash.
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.
Some practical aspects of formation of joint venture companies in India and the prerequisites which the parties should take into account are enumerated herein after.
Foreign companies are also free to open branch offices in India. However, a branch of a foreign company attracts a higher rate of tax than a subsidiary or a joint venture company. The liability of the parent company is also greater in case of a branch office.
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All the joint ventures in India require governmental approvals, if a foreign partner or an NRI or PIO partner is involved. The approval can be obtained from either from RBI or FIPB. In case, a joint venture is covered under automatic route, then the approval of Reserve bank of India is required. In other special cases, not covered under the automatic route, a special approval of FIPB is required.
The Government has outlined high priority areas covering most of the industrial sectors. Investment proposals involving up to foreign equity in these areas receive automatic approval within two weeks. An application to the Reserve Bank of India is required. Please see Foreign Investment in India - Sector wise Guide for sector wise guidelines under automatic route. For more detail go to: www.joint-ventures-secret.com.Besides the high priority areas, automatic approval is available for 74% foreign equity holdings setting up international trading companies engaged primarily in export activities.
For major investment proposals or for those that do not fit within the existing policy parameters, there is the high-powered Foreign Investment Promotion Board ("FIPB"). The FIPB is located in the office of the Prime Minister and can provide single-window clearance to proposals in their totality without being restricted by any predetermined parameters.
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