A foreign company can invest in an Indian company through a joint venture agreement in the areas which are otherwise not reserved exclusively for the public sector or which are not under the prohibited categories such as real estate, insurance, agriculture and plantation.
Foreign Companies can set their operations in India by forming a joint venture company with one or more than one Indian partner. As it seems from its name a joint venture is a new enterprise owned by two or more participants to share markets / intellectual property and its knowledge and its profit too.
It is essentially a medium to long-term contract which is specific and flexible. Though, the joint venture a newly created business enterprise can be represented and its participants can continue to exist as separate firms. It can also be organized as a partnership firm, a corporation or any other form of business organisation which the participating firms choose to select.
Advantages of Joint Venture Company:
- Contribution by partners of money, property, effort, knowledge, skill or other assets to the common undertaking.
- Joint property interest in the subject matter of the venture.
- Right of mutual control or management of the enterprise.
- Right to share in the property.
- Joint ventures are of limited scope and duration.
- They involve only a small fraction of each participant’s total activities.
- Each partner must have something unique and important to offer the venture and simultaneously provide a source of gain to the other participants.