Select Page

Most companies that contract joint ventures are incorporated as a limited liability company or company and work with an understanding of the liability risks associated with their chosen business types. A joint venture may take time or exist only until a short-term goal is achieved. While the creation of a joint venture is a viable business strategy for some companies that focus on a common goal, it has reservations. Companies considering a joint venture should compare the benefits of cost reduction through resource pooling with the disadvantages of such trade agreements. There are many features to include in the shareholder contract, which is quite private for the parties at the beginning. Normally, there is no need for submission to an authority. Most joint ventures are formed, although some, such as in the oil and gas industry, are “unincorporated” joint ventures that mimic a business unit. If two or more people come together to form a temporary partnership for a given project, such a partnership can also be described as a joint venture in which the parties are “co-investors”. Until recently, there were no guidelines on how foreign investment should be made because of China`s restrictive nature vis-à-vis foreign investors. Following Mao Zedong`s death in 1976, initiatives began to be implemented in foreign trade and existing foreign direct investment legislation was clarified in 1979, while the first Sino-foreign enterprise took place in 2001.

[13] The body of the law has improved since then. There are different ways to structure a joint venture. Before taking too many steps towards a joint venture, it is necessary to know whether it is a short-term or long-term agreement, whether a separate business should be created for this purpose, whether it is a purely loose cooperation agreement or whether it is a future merger or acquisition. Companies create joint ventures for many reasons, including the following reasons: in the case of such agreements, one company generally contributes more to operating costs, while the other company brings its know-how and operational experience. The share of the business held by each company depends largely on their individual contributions. But the most successful strategic joint ventures are those where each founding member ends with an equal share.