In the era of globalization, the companies are drawing the leverage out of their online presence. But this leverage can be converted into financial benefits only when the firm is able to collaborate or is able to work with the company which is situated in the foreign territory. The LawDocs platform provides easy and readymade solutions to the companies where they not only create the agreement/document but also send it for the e-signature as a confirmation and acceptance. You can draft an agreement for the use of trademark, supply technical know-how. You can draft technical collaboration agreement, clause regarding rendering of services, joint venture agreements etc.
Important points to be noted before the joint venture agreement.
Before signing a joint venture contract, the below points must be properly assessed:
- Applicable law;
- Shareholding pattern;
- Composition of board of directors;
- Management committee;
- Frequency of board meetings and its venue;
- General meeting and its venue;
- Composition of quorum for important decision at board meeting;
- Transfer of shares;
- Dividend policy;
- Employment of funds in cash or kind;
- Change of control;
- Restriction/prohibition on assignment;
- Non-compete parameters;
- Break of deadlock;
- Jurisdiction for resolution of dispute; and,
- Termination criteria and notice.
Advantages of joint ventures
The following are the main advantages for a foreign investor choosing a JV structure when entering India:
- Access to the established distribution and marketing channels of the Indian partner;
- Access to the available financial resources of the Indian partners; and,
- Access to the established contacts of the Indian partners, which will help ease the process of setting up operations in India.
Advantages of Joint Venture.
- Cross-border business is more demanding and beneficial either it is outright acquired or shared through Joint Venture. Cooperation is a great way of reducing research as well as manufacturing cost without limiting exposure. This process reduces research and manufacturing costs while limiting exposure.
- There is a chance of risk reduction as the business activities of the Joint Venture can be expanded with smaller investment outlays independent.
- It is a mode of gaining good market access. Joint Venture agreements expand their business into other areas of the world as well as consumer segments and product markets. In the case of cross-border, the involvement of a local business party may be necessary or is desirable in countries in cases where the local laws limit the ownership structure by foreigners.
- There is the joint management of the risk associated with new ventures which Joint Ventures can offer. In Joint Venture when the liabilities and risks are shared the pressure on each individual partner is drastically reduced.
- There are many flexible business diversification opportunities to the partners. It provides full freedom to involve with the other company for a full merger or only for a part of the business. Companies can also choose Joint Ventures as a method to gradually dispersed a business from the rest of the organization and ultimately sell it further.
Important clauses of the Joint Venture Agreement
- Object and scope of the Joint Venture
- Equity participation by local and foreign investors and agreement to a future issue of capital
- Management Committee
- Financial arrangements
- The composition of the board and management agreements
- Specific obligations
- Provisions for distribution of profits
- Transferability of shares in different circumstances
- Remedying a deadlock
- Restrictive covenants on the company and the participants
- Casting vote provisions
- Appointment of CEO/MD
- Change of control/exit clauses
- Anti-compete clause
- Indemnity Clause
- Dispute Resolution
- Applicable law
- Force Majeure etc.
Transfer of shares
Transfer of shares means a transfer of ownership in whole or part from existing share holder to a new one with an purpose to change the structure of the company.
Process to Certificates for shares transfer
In case of a company which is required to hold shares in physical form and entire shares as mentioned on the certificate are being transferred to another person then name of the transferee is written at the back of the share certificate.
Mandatory to transfer the shares to an existing member of the company
No, it is not mandatory to transfer the shares only to the existing members instead transfer can be made to the third party also.
Time limit for issuing the share transfer certificate
The Company shall register & issue the share certificate in name of the transferee within one month of the receipt of the duly executed & stamped share transfer instrument along with original certificate of the shares being transferred.
The share transfer procedure for issuing or transferring shares for amount less than their worth
The directors of the company have the obligation to act in the finest interest of the shareholders. Thus selling shares at lower price would not be acting in the best faith. However, under certain circumstances and as per Companies Act, shares can be transfer for amount less than their worth.
Any stamp duty which is require to be pay on transfer of shares and who is liable to pay
Yes, transfer of shares attracts stamp duty at the rate as prescribed in stamp act for own state and the payment can be born either by the transferor or the transferee.
Any form which is require to be fill for transfer of shares
No, transfer of shares is an internal process that only gets record in minutes, and no further filing of the form with ROC is require.
The share certificate be transferred in case part of shares are being transfer
In case of part of shares being transfer, certificate needs to be cancel & fresh share certificates with split in shares will be require to be execute.
Fair value be establish for share transfer in a private limited company
The seller and buyer can negotiate the price if the shares are sold freely. The shareholder’s agreement or company’s article of association may have specific details about the valuation of the shares.