Joint Venture Agreement Investopedia

In most years, a company enters a joint venture because it does not have the knowledge, human capital, technology or access to a particular market necessary to carry out the project. Meeting with another company allows each party to access the resources of the other participating company without having to spend excessive amounts of capital to obtain it. Parties to EJV, CJV or WFOE establish a workable study that has been described above. It is a non-binding document – the parties have the freedom to choose not to proceed with the project. The feasibility study must cover the fundamental technical and economic aspects of the project before the parties are able to formalize the necessary legal documents. The study should provide the details that were previously discussed as part of the feasibility study [citation required] (submissions from the Chinese partner). A joint venture could include two companies from different disciplines, working together to develop a new product or offer a new service. Or a company wishing to enter a new geographic market could form a joint venture with a company established in the country or region or with an established presence. For example, BMW Group and Brilliance China Automotive Holdings Ltd.

have created a joint venture called BMW Brilliance Automotive Ltd. to produce and sell BMW vehicles in China. The joint enterprise contract with the AJE statutes are the two most fundamental legal documents of the project. The articles reflect many provisions of the Joint Enterprise Treaty. In the event of a conflict, priority is given to the JV document. These documents are prepared at the same time as the feasibility report. There are also ancillary documents (called offsets in the United States) on the know-how and supply agreements for brands and equipment. Joint ventures also have the advantage of spreading problems among participating companies. Creating a new product or providing a new service poses a high risk to a business and many companies are unable to cope with this risk on their own. In a joint venture, each company contributes some of the resources needed to market the product or service, which is less than a challenge to the high financial burden of research and development.

The risk of the project failing and having a negative impact on profitability is less, as project costs are distributed among participating companies. Frequent use of television involves working with a local company to enter a foreign market. A company wishing to expand its distribution network to new countries can validly enter into a joint enterprise agreement to supply products to a local company, thus taking advantage of an existing distribution network. Some countries also have restrictions for foreigners entering their market, so a JOINT with a local unit is almost the only way to do business in the country.