Joint venture

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Information of joint venture.

Information of joint venture.

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  • 1. pkb
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  • 3. IntroductionA joint venture (JV) is a business agreement in which partiesagree to develop, for a finite time, a new entity andnew assets by contributing equity. They exercise controlover the enterprise and consequently sharerevenues, expenses and assets. There are other types ofcompanies such as JV limited by guarantee, joint ventureslimited by guarantee with partners holding shares.In European law, the term joint-venture (or jointundertaking) is an elusive legal concept, better definedunder the rules of company law. In France, the term jointventure is variously translated as associationdentreprises, entreprise conjointe,coentreprise or entreprise commune. But generally, theterm societe anonyme loosely covers all foreigncollaborations. In Germany, joint venture is betterrepresented as a combination of companies (Konzern).With individuals, when two or more persons come together toform a temporary partnership for the purpose of carryingout a particular project, such partnership can also be pkb
  • 4.  Joint Venture is the cooperation of two or more individuals orbusinesses in which each agrees to share profit, loss andcontrol in a specific enterprise. A Joint Venture (JV) is a collaborative, regionalpartnership of government agencies, non-profitorganizations, corporations, tribes, and individuals thatconserves habitat for priority bird species, other wildlife, andpeople.Joint Ventures bring these diverse partners together underthe guidance of national and international bird conservationplans to design and implement landscape-scale conservationefforts. pkb
  • 5. Success in a joint venture depends on the choice of JV partner.Successful choice depends on:The partners sharing similar objectives the partners’ commitment to making the jv work A reward from the relationship, and An equal share in the risks and rewards.If there is a fit with your organisation and the prospectivepartner: Financially Operationally Legally, and from a Governance / regulatory perspectiveif you have researched your potential partner’s track record i Maintaining relationships Resources to commit to the venture, and History of long-term commitment pkb
  • 6. Some important feature of joint venture businessare as follows:•It is short duration special purpose partnership.Parties in venture are called co-ventures.•Co-ventures may contribute funds for running theventure or supply stock from their regularbusiness.•Co-ventures share profits/loss of the venture atan agreed ratio likewise partnership.•Generally profit or loss of the venture iscomputed on completion of the venture.•Going concern assumption of accounting is notappropriate for joint venture accounting. Theredoes not arise problem of distinction betweencapital and revenue expenditure. pkb
  • 7. A written Joint Venture Agreement should cover:•The parties involved•The objectives of the joint venture•Financial contributions you will each make whether you willtransfer any assets or employees to the joint venture•Intellectual property developed by the participants in the jointventure•Day to day management of finances, responsibilities and processesto be followed.•Dispute resolution, how any disagreements between the parties willbe resolved•How if necessary the joint venture can be terminated.•The use of confidentiality or non-disclosure agreements is alsorecommended to protect the parties when disclosing sensitivecommercial secrets or confidential information. pkb
  • 8. The following areas need to be consideredwhen forming a joint venture:•Capital•Branding•Expertise•Resources•Cultural•Legal•National/local government support pkb
  • 9. There are some advantage of joint venture, which isProvide companies with the opportunity to gain new capacityand expertiseAllow companies to enter related businesses or new geographicmarkets or gain new technological knowledgeaccess to greater resources, including specialized staff andtechnologysharing of risks with a venture partnerJoint ventures can be flexible. For example, a joint venture canhave a limited life span and only cover part of what you do, thuslimiting both your commitment and the business exposure.in the era of divestiture and consolidation, jv’s offer acreative way for companies to exit from non-core businesses.Companies can gradually separate a business from the rest ofthe organization, and eventually, sell it to the other parentcompany. Roughly 80% of all joint ventures end in a sale by onepartner to the other. pkb
  • 10. The Disadvantages of Joint VenturesIt takes time and effort to build the rightrelationship and partnering with anotherbusiness can be challenging. Problems are likelyto arise if:The objectives of the venture are not 100 percent clear and communicated to everyoneinvolved.There is an imbalance in levels of expertise,investment or assets brought into the venture bythe different partners.Different cultures and management stylesresult in poor integration and co-operation.The partners dont provide enough leadershipand support in the early stages.Success in a joint venture depends on thoroughresearch and analysis of the objectives. pkb
  • 11. The JV is not a permanent structure. It canbe dissolved when:Aims of original venture metAims of original venture not metEither or both parties develop new goalsEither or both parties no longer agreewith joint venture aimsTime agreed for joint venture has expiredLegal or financial issuesEvolving market conditions mean thatjoint venture is no longer appropriate orrelevant pkb
  • 12. A joint venture takes place when two parties come together totake on one project. In a joint venture, both parties areequally invested in the project in terms of money, time, andeffort to build on the original concept. While joint venturesare generally small projects, major corporations also usethis method in order to diversify. A joint venture can ensure thesuccess of smaller projects for those that are just starting inthe business world or for established corporations. Since thecost of starting new projects is generally high, a joint ventureallows both parties to share the burden of the project, aswell as the resulting profits.Since money is involved in a joint venture, it is necessary tohave a strategic plan in place. In short, both parties must becommitted to focusing on the future of the partnership, ratherthan just the immediate returns. Ultimately, short term andlong term successes are both important. In order to achievethis success, honesty, integrity, and communication within thejoint venture are necessary. pkb