Joint Ventures in General
Several reasons may exist for setting up a joint venture. For instance, ajoint venture may be used to facilitate access to new markets, or to achieve a stronger financial position.
A joint venture is an undertaking, which has been set up by two or more companies to carry out a joint business activity on their behalf on a permanent basis. The definition of a joint venture varies, but it is generally held to be financially, although not legally, independent. This means that a joint venture does not need to be a separate legal entity, such as Joint Venture Ltd.
It is characteristic of a joint venture that its ownership is divided relatively equally between at least two of the parties. There are, however, often difficulties attributable to equal ownership, such as deadlock during voting. To prevent this, it is common for one party to own a little more than half of the joint venture company. Typically, all owners participate to some extent in the management and supervision of the joint venture company.
A joint venture is set up to operate either for a fixed term or until further notice. When setting up a joint venture, tax and competition law issues must be taken into account.