1.

INTRODUCTION
A joint venture (often abbreviated JV) is an entity formed between two or more parties to undertake economic activity together. The parties agree to create a new entity by both contributing equity, and they then share in the revenues, expenses, and control of the enterprise. The venture can be for one specific project only, or a continuing business relationship such as the Fuji Xerox joint venture. This is in contrast to a strategic alliance, which involves no equity stake by the participants, and is a much less rigid arrangement.1 The phrase generally refers to the purpose of the entity and not to a type of entity. Therefore, a joint venture may be a corporation, limited liability company, partnership or other legal structure, depending on a number of considerations such as tax and tort liability. Joint ventures are not uncommon in the oil and gas industry, and are often cooperations between a local and foreign company (about 3/4 are international). A joint venture is often seen as a very viable business alternative in this sector, as the companies can complement their skill sets while it offers the foreign company a geographic presence. Studies show a failure rate of 30-61%, and that 60% failed to start or faded away within 5 years. (Osborn, 2003) It is also known that joint ventures in low-developed countries show a greater instability, and that JVs involving government partners have higher incidence of failure (private firms seem to be better equipped to supply key skills, marketing networks etc.) Furthermore, JVs have shown to fail miserably under highly volatile demand and rapid changes in product technology.[citation needed] Some countries, such as the People's Republic of China and to some extent India, require foreign companies to form joint ventures with domestic firms in order to enter a market.

1.1 BROKERS
In addition, joint ventures are practiced by a joint venture broker, who are people that often put together the two parties that participate in a joint venture. A joint venture broker then often make a percentage of the profit that is made from the deal between the two parties.
1

http://en.wikipedia.org/wiki/Joint_venture

1.2 REASONS FOR FORMING A JOINT VENTURE

Internal reasons 1. Build on company's strengths 2. Spreading costs and risks 3. Improving access to financial resources 4. Economies of scale and advantages of size 5. Access to new technologies and customers 6. Access to innovative managerial practices Competitive goals 1. Influencing structural evolution of the industry 2. Pre-empting competition 3. Defensive response to blurring industry boundaries 4. Creation of stronger competitive units 5. Speed to market 6. Improved agility Strategic goals 1. Synergies 2. Transfer of technology/skills 3. Diversification

1.3 REASONS FOR DISSOLVING A JOINT VENTURE

1. Aims of original venture met 2. Aims of original venture not met 3. Either or both parties develop new goals 4. Either or both parties no longer agree with joint venture aims 5. Time agreed for joint venture has expired 6. Legal or financial issues

7. Evolving market conditions mean that joint venture is no longer appropriate or relevant

1.4 EXAMPLES

AutoAlliance International (Ford + Mazda) Brewers Retail Inc. (Inbev, Molson Coors + Sapporo Breweries) CW Television Network (CBS Corporation + Warner Bros.) Bank DnB NORD (DnB NOR + NORD/LB) Dow Corning (Dow Chemical Company + Corning Incorporated) Fujitsu Siemens Computers (Fujitsu + Siemens AG) GlobalFoundries (AMD + Advanced Technology Investment Co. (ATIC)) Huawei Symantec (Huawei + Symantec) Hulu (NBC Universal + Fox Entertainment Group + ABC, Inc.) INTO University Partnerships specialises in creating JVs with British universities LG.Philips Components (LG + Philips) MSNBC (Microsoft + NBC Universal) Nokia Siemens Networks (Nokia + Siemens AG) NUMMI (General Motors + Toyota) Penske Truck Leasing (GE + Penske) PetroAlam (Royal Dutch Shell + Vegas Oil and Gas + GDF Suez) Prime Time Entertainment Network from the Prime Time Consortium (Warner Bros. + the Chris-Craft group of independent stations.) Shell-Mex and BP (Royal Dutch Shell + British Petroleum, 1931-1975) Sony BMG Music Entertainment (Sony Music Entertainment [part of Sony] + Bertelsmann Music Group [part of Bertelsmann]) Sony Ericsson (Sony + Ericsson) Strategic Alliance (Northwest Airlines + KLM) The Balfour Beatty Skanska, construction contractors (Balfour Beatty + Skanska) The Baseball Network (ABC, NBC, + Major League Baseball) Tata DoCoMo (Tata Teleservices + NTT DoCoMo) TNK-BP (BP + TNK (Tyumen Oil Co.)) TriStar Pictures (Columbia Pictures, HBO, + CBS) 3

United Launch Alliance (ULA) (Boeing + Lockheed Martin) Uninor (Telenor + Unitech Group) Verizon Wireless (Verizon Communications + Vodafone) Virgin Mobile India (Virgin Group + Tata Teleservices) The XFL (NBC + World Wrestling Entertainment) NBC Universal (NBC [part of General Electric] + Vivendi Universal Entertainment [part of Vivendi]) Canara HSBC Oriental Bank of Commerce Life Insurance Company Limited. Canara Bank + HSBC + Oriental Bank of Commerce

In a joint venture, two or more "parent" companies agree to share capital, technology, human resources, risks and rewards in a formation of a new entity under shared control.

1.5 IMPORTANT FACTORS TO BE CONSIDERED BEFORE A JOINT VENTURE IS FORMED 2

screening of prospective partners joint development of a detailed business plan and shortlisting a set of prospective partners based on their contribution to developing a business plan

due diligence - checking the credentials of the other party ("trust and verify" trust the information you receive from from the prospective partner, but it's good business practice to verify the facts through interviews with third parties)

development of an exit strategy and terms of dissolution of the joint venture most appropriate structure (e.g. most joint ventures involving fast growing companies are structured as strategic corporate partnerships)

availability of appreciated or depreciated property being contributed to the joint venture; by misunderstanding the significance of appreciated property, companies can fundamentally weaken the economics of the deal for themselves and their partners.

special allocations of income, gain, loss or deduction to be made among the partners

http://www.1000ventures.com/business_guide/jv_main.html

compensation to the members that provide services

1.6 HUMAN RESOURCES (HR) ACTION STEPS TO PREPARE FOR A SUCCESSFUL JOINT VENTURES
Business Strategy. Begin with a sound, well-articulated strategy.

Before moving forward, determine and explain why you wish to enter into a joint venture, why you have chosen your partner(s), and what you hope to achieve. Define involvement (managerial, capital, etc) of the parent companies and how long the JV will last. Put in place strategies to define governance, accountability, decision-making process, and conflict- and issue-resolution procedures. Ensure buy-in and participation at the highest level. Consider outcomes: what could cause you to terminate the joint venture, and what is the preferred exit strategy.

Human Resources (HR) Strategy. Develop HR strategies that align and support the goals of the JV: develop a distinct identity and culture for the new organization; communicate aggressively to employees; and establish distinct career paths, management, and a means of return for employees transferred to the JV. Create compensation, incentive, and retention programs tied to the success of the JV. Maintain open communication between the HR departments of the parents and the JV.

Leadership. Define a process for leadership selection that's seen as fair and credible, and name top-tier leadership as soon as possible. Look for key indicators of leadership potentials such as behavior, past experience, and measurable outputs.

Communication. To engage and motivate your employees, communication should be frequent and used to create a common vision, establish a connection with leadership, explain the new rules, support the individual transition process, aid in retention, and ultimately, define the new organization in terms of "We" instead of an "It" or "They". Share as much information as you can, and never sugar-coat or make false promises. 5

Talent. Make the identification, retention, and motivation of the key talent a top priority. As times of uncertainty can lead to defections, take strong countermeasures to prevent them. Paying close attention to the specific skills, knowledge, and behavior that will be required to achieve the new organization's business objectives, identify the key players in both the parent companies who will be needed during the transition to a joint venture organization and beyond. Be aware of which employees are most at risk for recruitment by other organizations and collect data on the causes and costs or turnover that might influence which employees to target and which retention practices to implement. Conduct employee research to help the new organization determine what matters to employees and can serve as the foundation for all programs and incentives.

1.7 ADVANTAGES AND DISADVANTAGES

Advantages: Provide companies with the opportunity to gain new capacity and expertise. Allow companies to enter related businesses or new geographic markets or gain new technological knowledge. Access to greater resources, including specialised staff and technology. Sharing risks with a venture partner. Joint ventures can be flexible. For example, a joint venture can have a limited life span and only cover part of what you do, thus limiting both your commitment and the business' exposure. In the era of divestiture and consolidation, JVs offer a creative way for companies to exit from non-core businesses. Companies can gradually separate a business from the rest of the organisation, and eventually, sell it to the other parent company. Roughly 80% of all joint ventures end in a sale by one partner to the other.

Disadvantages:

It takes time and effort to build the right relationship and partnering with another business can be challenging. Problems are likely to arise if: The objectives of the venture are not 100 per cent clear and communicated to everyone involved. There is an imbalance in levels of expertise, investment or assets brought into the venture by the different partners. Different cultures and management styles result in poor integration and co-operation. The partners don't provide enough leadership and support in the early stages. Success in a joint venture depends on thorough research and analysis of the objectives. Not considering the benefits of all the stake holders especially the persons who are displaced for big manufacturing concerns.

2. JOINT VENTURES IN INDIA

Foreign investment for development has become a matter of necessity for most growing economies in the world. India is no different. An emerging market implies a market which is deregulated and has conditions favourable to foreign investment. Although India falls within this category, the term, "emerging market" has not been legally defined. In several industrial sectors, the Government of India has felt that the best way forward is to permit foreign investment. In 1991, the Indian Government amended the New Industrial Policy, whereby many industrial sectors, hithertofore closed, were opened up for investment. Since then, the Government has not looked back, and presently in many areas foreign corporations are allowed to incorporate wholly (100%) owned subsidiaries ("WOS") in India. Furthermore, the Indian capital markets have also been liberalised. Today, foreign institutional investors ("FIIs") operate in the Indian stock markets, providing a variety of services. A joint venture is generally understood as technical and financial collaboration either in the form of greenfield projects, take-overs or alliances with existing companies/ In India, no legal definition as such has been given to joint ventures. However, the Government of India and its agencies prescribe certain guidelines, which distinguish joint ventures from other entities. Indian joint ventures usually comprise two or more individuals/companies, one of whom may be non-resident, who come together to form an Indian private/public limited company, holding agreed portions of its share capital. A joint venture agreement, primarily provides for the manner in which the shareholders of the joint venture company may transfer or dispose of their shares. It is also commonly referred to as a shareholders agreement."

2.1 PRE-FORMATION CONSIDERATIONS

The key pre-formation considerations can be summarised as under: The industry in which investment is being made In certain areas such as telecommunications, drugs & pharmaceuticals, hotel & tourism, or advertising foreign investment up to 50%, 51% and/or 74% in the equity of a joint venture company is permitted without Reserve Banc of India (RBI) approval. However, 8

should the foreign investor seek to subscribe to more than 74% of the total equity in a joint venture company or establish a WOS, permission has to be obtained either from the Foreign Investment Promotion Board ("FIPB") or the Secretariat of Industrial Approvals ("SIA") depending upon the quantum of investment. Applications for large investments and WOSs are entertained only by the FIPB. Moreover, in case of FIIs, aggregate portfolio investments in the share capital of Indian companies is permitted to the extent of 24% of the issued and paid-up capital of the company. However, an Indian company may permit a FII to purchase up to 30% of its share capital by passing a special resolution (resolution required to be passed by shareholders having 75% shares with voting rights in the company)/" It should be highlighted that the aforesaid is applicable to foreign companies and individuals only. Should the investment be made by non-resident Indians (Indian citizens living abroad or persons of Indian origin living abroad and having foreign nationality), the investments laws are more relaxed. Since the focus of this paper is to describe joint ventures in India involving foreign companies and/or foreigners, investment laws relating to NRIs have not been discussed. Control in the joint venture company Under the Companies Act, 1956, ("CosAct") a company can carry on activities by passing either of two resolutions, special resolutions and ordinary resolutions. Ordinary resolutions can be passed by shareholders having 50.01% (rounded of to 51%) shares with voting rights in the company, whereas special resolutions can be passed only by shareholders having 75% shares with voting rights in the company. A special resolution is inter alia required to amend the Memorandum and Articles of Association of a company, to issue further shares through a rights issue, to give loans or guarantees to other companies, etc. 51% majority ensures control of the day to day working of the company. Therefore, much depends on the level of control the foreign investor seeks. Normally, Indian joint ventures have a 51%-49% equity break-up between the foreign and Indian partners, respectively. Indian partner's ability to invest 9

The investments (cash or otherwise) being made by the parties are also relevant. Generally, foreign companies are the main investors in joint ventures. Therefore, they seek higher equity percentages. However, larger Indian companies, who are in a position to make substantial investments, often seek quid pro quos. "Who brings what to the table," decides the equity ratio in many cases. Tax considerations In many instances, companies route their investments into an Indian joint venture company through an offshore destination. India has double taxation avoidance agreements ("DTAAs") with many countries. Many US companies route their investments through the Mauritius islands, because the Indo-Mauritius DTAA has reduced withholding tax rates applicable to capital gains, technical service fees earned in India, etc. Cyprus is another offshore destination gaining popularity. How do you protect confidential information at the negotiation stage? In order to protect sensitive business information from being divulged to others, confidentiality and non-disclosure agreements are entered into, prior to commencing negotiations. Indian courts enforce these agreements and grant injunctions on adequate proof of breach or proposed breach being adduced. However, due to systemic delays, suits for damages take a fairly long time to reach hearing. Therefore, although an injunction may be granted urgently, a decree awarding damages to the injured party may take some time.

2.2 FORMATION OF A JOINT VENTURE

India has inherited the English common law system. Under this system, unlike the civil law system, contracts are detailed. Shareholders' agreements and the articles of association (bylaws) of the joint venture company form the basis of the joint venture. The shareholders agreement prescribes share transfer restrictions, if any, which are then incorporated into the articles of association of the joint venture company.

10

In India, joint ventures can exist in the form of companies, partnerships or joint working agreements. The various companies that may be incorporated in India are as follows: 1. Companies limited by shares 2. Case Limited by Guarantee 3. Companies having unlimited liability Companies limited by shares are of two types - public and private. As regards companies limited by shares, members are liable only to the extent of the unpaid amount on their shares, if any. In a company limited by guarantee, the liability is limited to the amount pledged, being the contribution to be paid in case of winding-up of the company. In companies with unlimited liability, the liability of each member is unlimited. The most common form of joint ventures are Indian public or private companies, wherein share capital is issued to the joint venture partners. In this way, the risk of members is limited to the extent of the unpaid amount on their shares. The next step is to decide whether to have a public or a private company. Unless money is sought to be raised from the public, joint venture partners do not incorporate public companies.iv In India, partnerships are defined under section 4 of the Indian Partnership Act, as agreements to enter into a partnership business so as to share profits and to conduct such business for one or on behalf of all. Partnerships do not have any limitations on liability of the respective partners. Thus, the risk associated with this form of business is very high, and is not advocated for any type of joint venture. Joint working agreements are either customer or market oriented depending upon the needs of the partners. In joint working agreements, the domestic partner manufactures those components which are cost effective while the joint venture partner imports into India those components which are not cost effective to manufacture. The final product is a result of the melange. In case of joint working agreements, there may not be a complete transfer of technology. Technology transfer may proceed gradually in steps. There is no

11

payment of lump sum fee or royalty to the foreign company. There is a gradual sharing of revenue between the parties. Due to the limited liability advantages, most parties to a joint venture in India go in for legal entity, i.e., a public or private company.

Foreign companies not wanting to tie up with an Indian partner, may establish liaison, branch or project offices, or WOS. Indian law does not recognise the American limited liability companies and limited liability partnerships. Indian law affords parties to a joint venture agreement a high level of flexibility, and so long as a joint venture agreement is not contrary to public policy, it will be enforceable. In order to make the joint venture agreement valid in law, the requirements prescribed by the Indian Contract Actv and the CosAct need to be met. Some of the important criteria to be fulfilled are: a) b) c) d) Offer and acceptance, Consideration, The intention to form a company, and Signature of the parties

Other important provisions in joint venture agreement are: a) b) c) d) e) f) Constitution of the board of directors, Termination clause, The binding nature of the agreement, Share transfer provisions, Dilution clause, and Dispute resolution clause

For the joint venture agreement to be enforceable, parties have to pay a particular amount by way of stamp duty on the joint venture agreement" Joint venture agreements have to be registered either with the RBI or the SIA, depending on which authority gives 12

clearance for the project. No registration is required under the Indian Registration Act, unless the joint venture agreement deals with transfer of immovable property rights. There is no bar on the appointment of a trustee or nominee to hold shares on behalf of a foreign shareholder in the joint venture company. Sections 153, 153-A, 153-B and 187Bvii of the CosAct deal with trustees and their functioning. Section 49(2)of the CosAct deals with appointment of nominee shareholders.

2.3 DIVISION OF POWER

Under Indian law, it is possible to reach a perfect balance of power between the joint venture partners. Everything depends on the control sought to be exercised by the partners and capital being infused in the joint venture. Naturally, a joint venture partner bringing in proprietary technology or capital will seek control. The articles of association, incorporating the key provisions of shareholders agreement, provide for control of the joint venture company. The exercise of control is done at two levels: 1. 2. Board of directors Shareholders

The shareholders agreement prescribes the number of directors on the board, the quorum for board meetings and general meetings, the day to day management of the company, procedure to be followed on the death or bankruptcy of a joint venture partner, etc. In order to prevent deadlocks, the chairman of the board of directors can be given a casting vote in case of equality of votes on the board. Foreign companies usually retain the right to appoint the chairman per meeting of the board. If for some reason this does not work, deadlocks can be solved by resorting to alternate dispute resolution such as conciliation and/or arbitration.

13

Under Indian law, companies can perform various acts by passing resolutions (special or ordinary) as prescribed in the CosAct. As provided above, if a shareholder has 51% majority on the board and in the joint venture company, he can pass ordinary resolutions binding on the company. Most promoters strive for 75% equity which gives them full power to perform all activities. In case of bankruptcy of one of the partners, joint venture agreements commonly provide that the agreement may be terminated. On death of a partner, devolution of shares in a particular manner or termination are the two options. In ordinary circumstances, the joint venture is run by the board of directors upon whom powers are delegated by the articles of association.

2.4 DIVISION OF PROCEEDS

Except for section 205 of the CosAct, which provides for distribution of dividend, there is no codified law in India, which regulates the division of proceeds. Restrictions on profit sharing or payment of dividends are included in the shareholders agreement. Once Government of India permission is granted to the foreign investor to invest in an Indian joint venture company, the foreign investor can repatriate both, the principal as well as dividend or other income without any restrictions. Currently, dividends in India are not taxable in the hands of the shareholders. The company has to pay tax @ 12.5% (plus surcharge and education cess) on the dividend to be distributed to the shareholders. A sample clause in this regard is as follows: The Board of Directors shall have the right to determine the issuance of dividends, except that: (i) No dividends shall be paid during the first two (2) years of this Agreement; and

14

(ii)

Dividends will be paid only if the return on equity for the preceding fiscal year was

fifteen percent (15%) or greater. Such dividends will be limited to ten percent (10%) of after tax profit for the preceding fiscal year.

2.5 TRANSFER OF SHARES

There are no statutory rules to be followed as regards transfer of shares. The transfer conditions depend upon the joint venture agreement. However, to effect a transfer the shareholders must execute a share transfer form and furnish it along with the original share certificate to the company. It should be pointed out that under section 111 of the CosAct, a company has the power to refuse the registration of transfer of shares. Each refusal must be accompanied with specific reasons. Appeal against such refusals lie to the Company Law Board. This provision is often used for blocking share transfers. Therefore, care must be taken to contract out of this provision or to provide for detailed restrictions in the shareholders agreement, to be copied in the articles of association, verbatim. A sample clause is as follows: If X and/or Y desire to sell/transfer all or any part of their shares in the new company, they shall first offer such shares to the other, if only one of them seeks to sell/transfer their shares. In the event that neither wants to buy the shares offered by the other within 20 days of the offer being made or both want to sell simultaneously, they shall offer the shares to Z. In the event that Z does not want to buy the shares within 20 days of the offer being made to him, they shall offer the shares to a third party. If Z desires to sell or transfer all or any part of his shares in the new company, he shall first offer such shares to X and Y in proportion to their shareholding in the company. If X and/or Y decline to accept such a first offer in whole or in part, within 30 days from the making of the offer, then Z may offer the shares thus declined to his family members/relatives or other third parties at the same price. 15

The price for sale/transfer of shares will be arrived at by valuing the shares. The valuation of the shares will be done by an independent valuer to be appointed by the Board of Directors of the new company. An offer for transfer of shares provided in this Article shall be made in writing setting forth the number of shares to be transferred, time of transfer, price of the shares as determined by the valuer, and other conditions, if any. In case of termination of this Agreement, any party desirous of continuing the company independently has an option to purchase the shares owned by the other party within 5 days from the date of notice of termination or otherwise, at a price to be calculated in accordance the relevant paragraph stated above.

The context of this clause shall be incorporated in the Articles of Association of the new company to the extent that law permits. Any sale/transfer between/or to X and Y will be subject if applicable, to such terms, conditions and price as approved by the Government of India/Reserve Bank ofIndia. One can make out from this sample clause that no new member can be introduced into the company without the permission of the other partners. The articles may also provide for an absolute prohibition to transfer shares to other parties, which is very common in case of private companies. In order to prevent a major shareholder from leaving immediately, the shareholders agreement can provide for a lock-in period. A sample clause is as follows: Restriction Against Transfer. None of the parties shall transfer or otherwise dispose of [as defined in Section 16(c)] all or any Shares [other than to an affiliate {as defined in Section 16(d)}] during the first four (4) years of the term of this Agreement. Thereafter, 16

none of the parties shall transfer or otherwise dispose of all or any Shares without the written consent of 75% of the outstanding Shares of the Corporation, except as otherwise expressly provided in Section 2. A perusal of this clause shows us that a time period may be specified, only on completion whereof a joint venture partner can sell and transfer his/her shares.

2.6 REGULATORY RESTRICTIONS/APPROVALS

All joint venture proposals not falling within the Reserve Bank of India's automatic route require approval of the Reserve Bank of India, the FIPB or the concerned industry ministry, depending upon the quantum and nature of foreign investment. There is no way in which regulatory restrictions can be avoided. Having acted for several companies from industrialised jurisdictions, it is imperative to make a good written proposal of the project to be followed up with oral presentations. The FIPB can be complicated. If all else fails, the speed money approach may be attempted. Permissions granted by RBI and FIPB are valid for two years. Every six months, a statement is required to be submitted to the SIA as regards the status of the project and the amount of money invested. If the parties fail to take steps as per the permission letter, the permission may not be renewed on expiry of the two year period. Usually, joint venture partners cannot enter into activities competing with the joint venture. Shareholders agreements contain specific provisions in this regard. Non-compete provisions can be validly enforced even after a member leaves the joint venture so long as they are reasonable and not against public policy. A sample clause is as follows: During the term of this agreement, neither party shall have any ownership interest (of record or beneficial) in or have any interest as an employee, salesman, consultant, 17

officer or director in, or otherwise aid or assist in any manner, any person or company or firm that engages in Goa in a business which is similar to that undertaken by the parties in this agreement. During the term of this agreement and for a period of two years thereafter, no party shall solicit or assist any other Person to solicit any business (other than for the new company) from any present or past customer of the new company; or request or advise any present or future customer of the new company or any of its Affiliates, to withdraw, curtail or cancel its business dealings with the new company or any of its Affiliates; or commit any other act or assist others to commit any other act which might injure the business of the new company or any of its Affiliates. During the term of this agreement and for a period of two years thereafter, no party shall directly or indirectly (i) solicit or encourage any employee of the new company or any of its Affiliates to leave the employ of any such entity or (ii) hire any employee who has left the employment of the new company or any of its Affiliates if such hiring is to occur within one year after the termination of such employee's employment with the new company or any such Affiliate. During the term of this agreement, no party shall directly or indirectly solicit or encourage any consultant then under contract with the new company or any of its Affiliates to cease work with such entity. If any party breaches, or threatens to commit a breach of, any of the Restricted Covenants, the parties shall have the following rights and remedies, each of which rights and remedies shall be in addition to, and not in lieu of, any other rights and remedies available to the parties under law or in equity: (a) The right and remedy to have the Restrictive Covenants specifically enforced by

any court having equity jurisdiction, all without the need to post a bond or any other security or to prove any amount of actual damage or that money damages would not provide an adequate remedy, it being acknowledged and agreed that any such breach or

18

threatened breach will cause irreparable injury to the new company and that monetary damages will not provide adequate remedy to the new company; and (b) The right and remedy to require such party (i) to account for and pay over to the

new company all compensation, profits, monies, accruals, increments or other benefits derived or received by such Former Venturer or any associated party deriving such benefits as a result of any such breach of Restrictive Covenants; and (ii) to indemnify the new company and/or its nominees against any other losses, damages (including special and consequential damages), costs and expenses, including actual attorneys' fees and court costs, which may be incurred by them and which result from or arise out of any such breach or threatened breach of the Restrictive Covenants. If any court determines that any of the Restrictive Covenants, or any part thereof, is invalid or unenforceable, the remainder of the Restrictive Covenants shall not thereby be affected and shall be given full effect, without regard to the invalid portions. If any court determines that any of the Restrictive Covenants, or any part thereof, is unenforceable because of the duration of such provision or the area covered thereby, such court shall have the power to reduce the duration or area of such provision and, in its reduced form, such provision shall then be enforceable and shall be enforced. Each party hereby waives any and all right to attack the validity of the Restrictive Covenants on the grounds of the breadth of their geographic scope or the length of their term. Indian law is very strict as regards restrictions on an individual employee from obtaining similar employment on expiry of the term of the contract. Such a clause cannot be enforced. However, parties normally insert most restrictions, even though some may be held invalid at a later stage. Termination provisions are generally included in the shareholders agreement. India is moving along at a healthy pace in its reforms process and is unlikely to expropriate industries already liberalised. Therefore, it is unlikely that the Government will terminate a joint venture unless there is a breach in the conditions stipulated by the Government. The Monopolies and Restrictive Trade Practices Act deals with anti-trust matters and unfair trade practices. Normally, it comes into play when exclusive distribution agreements are being entered into or when goods are required to be sold subject to certain conditions. In addition, it prescribes certain practices as unfair trade practices. 19

2.7 TAX AND SUBSIDIES

Joint venture companies do not per se get advantageous tax treatment. However, the Indian Income Tax Act gives certain benefits to industries set up as 100% export oriented units, or in export processing zones. In addition, infrastructure industries in the areas of power, telecommunications, ports, etc., get tax breaks and rebates. Persons investing in the bonds of such companies do not pay tax on the interest received. Small scale industries, i.e., industries entailing an investment upto Rs. 10,000,000 (US$ 222,222), get direct and indirect tax benefits. As regards subsidies, the Government does offer the same to industries set up in backward or rural areas by way of actual cash disbursements, reduced rates for land, etc.

2.8 CONFLICTS AND TERMINATION OF A JOINT VENTURE

Most joint venture agreements contain clauses prescribing a course of action in case the joint venture fails. Alternate dispute resolution is resorted to on a regular basis. Conciliation/arbitration is common. Arbitration can be conducted outside India under ICC or other rules. However, RBI and FIPB provide that Indian law must govern the shareholders agreement, where prior approval is required. Therefore, litigation, if any, or enforcement of a foreign award are to be conducted under Indian law in Indian courts. If necessary, courts grant stay orders to prevent the opposite party from disposing of assets of the joint venture company, including intellectual property rights. Anton pillerviii injunctions are also given by Indian courts. A sample clause is as follows: Arbitration (i) Any controversy between the parties involving this Agreement shall, on the

written request of one party served on the other, be submitted to arbitration, and such arbitration shall comply with and be governed by the commercial arbitration rules of the American Arbitration Association in effect on the date of this Agreement. Each party hereby irrevocably agrees that service of process, summons, notice or other communications relating to the arbitration procedure 20

shall be deemed served and accepted by the other party if forwarded in accordance with Section 16(a). The demand for arbitration shall in no event be made after the date when institution of legal or equitable proceedings on such claim, dispute or other matter in question would be barred by the applicable contractual, or other, statute of limitations. The arbitration shall be conducted by three (3) arbitrators familiar with legal issues, to be selected by the parties. If the parties cannot agree on the three within ten (10) days of the service of the notice to arbitrate, then each Shareholder shall select one arbitrator. The arbitrators shall base the decision on the laws of India as reflected in statutes, cases and regulatory law. The procedural laws of the State of Georgia should be used in conducting the arbitral proceeding. (ii) Unless modified by the arbitrators in their discretion, the arbitration shall

proceed upon the following schedule; (i) within ten (10) days from the service of the notice of the demandfor arbitration, the parties shall select the arbitrators; (ii) within ten (10) days after selection of the arbitrators, the parties shall conduct apre-arbitration conference at which the pre-arbitration discovery andprearbitration motions shall be scheduled and any other necessary pre-arbitration procedural matters decided; (iii) all discovery shall be completed within twenty (20) days following the pre-arbitration conference; (iv) all pre-arbitration motions shall be filed and briefed so that they may be heard no later than fifteen (15) days following the discovery cut-off; (v) the arbitration shall be scheduled to commence no later than ten (10) days after the decision on allpre-arbitration motions, but in any event no later than three (3) months following the service of the demand for arbitration; and (vi) the arbitrators shall agree to hear the claim on successive days and shall render the written decision within fifteen (15) days following the submission of the matter. (iii) Any monetary award of an arbitrator shall include interest at the rate of ten

percent (10%) per annum, which interest shall accrue from and after the thirtieth (30 th) day after the initial claim is made until the date the award is paid to the prevailing party. The award rendered by the arbitrator shall be final and binding upon the parties andjudgement may be entered in any court having jurisdiction thereof in accordance with applicable law. The losing party shall bear the fees of its and the prevailing party's attorneys, expense of witnesses and all other expenses connected with the presentation of 21

the case. The costs of the arbitration, including the cost of the record or transcripts thereof, if any, administrative fees, and all other fees involved, shall be borne by the losing party, unless the arbitrator otherwise directs. (iv) All arbitrations conducted under this Agreement shall be held in Atlanta, Georgia.

All judicial proceedings to enforce any of the provisions of this Agreement shall take place in Mumbai, India. Each party hereby irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of venue of the arbitration or any action or proceeding arising out of or relating to this Agreement on the ground offorum non coveniens. In case one partner wants to opt out of the joint venture, it is common to give the other partners the option to buy the stake of the first partner at a price to be fixed after valuation of the shares of the joint venture company. Conclusion In conclusion, listed hereunder are the various modes in which a foreign company can do business in India. A liaison office can be set up in India. In this way, a foreigner can get a feel of the Indian markets. The actual business is done from the country of incorporation of the parent. A branch office can be set up in India. A branch has adverse tax consequences (i.e. 40% income tax plus surcharge at 2.5% and education cess at 2%) and is not the most preferred option. However, in areas where joint ventures are not permitted, a branch office is the best solution. If only one project is being performed in India, the foreign company may consider setting up a project office. A joint venture company can be set up if the foreign participant wants to collaborate with an Indian partner. Otherwise, a WOS can be set up. India is virtually a tax haven for those wishing to set up a manufacturing and export base in India. Therefore, 100% export oriented units either in the form of a WOS or a joint venture should be given due consideration. 22

3. EXAMPLES
India has emerged on the global business map and global giants are eager to enter India. In their rush to enter India, global companies are entering into a slew of joint ventures and strategic alliances. While some of these ventures are driven by government regulations, most are driven by their need to lower risks. In my previous article, I had mentioned that JV offers a lower risk option to enter newer markets for Indian companies venturing abroad. The same hold true for foreign firms entering Indian markets. Wal-Mart-Bharti Enterprises, Inc. If you're a business owner or entrepreneur who wants to find a way to increase sales and enter new business arenas, a joint venture is a great way to break into new horizons. An entrepreneur with savvy business acumen can research, find, and negotiate a JV deal with another business that can help achieve new business goals. And a few lessons from the world's largest retailer, Wal-Mart, may be helpful in finding creative JVs that will help expand your business. How Wal-Mart Entered India with a JV In 2009, Wal-Mart started doing business in India for the first time. However, the Indian Wal-Mart is not the typical Wal-Mart retail superstores you see in most every small, medium, and large city in America. Rather, the retail giant formed a joint venture in 2006 with Bharti Enterprises, Inc., one of India's leading business groups. For the last three years, they have found a way to do business in India that complies with the strict government foreign-business investment restrictions and does not compete with domestic retailers. Rather than be an everyday retail store, the new Indian Wal-Mart is a wholesale business catering to the specific needs of vegetable vendors, hospitals, restaurants, and hotels, operating under the name BestPrice Modern Wholesale. Wal-Mart is a world leader in consumer marketing and product logistics. Even you can take lessons from Wal-Mart's India presence. Here's how: Find The Right JV Partner

23

First, Wal-Mart had to find a retail leader in India with a good reputation. Through their combined efforts, Wal-Mart and Bharti Enterprises were able to form a working business entity. Your efforts to find the best JV partner with a high reputation for quality and service are vital. If your goal is to enter new markets and larger market segments, a JV with another reputable business can aid your efforts to succeed quickly and more efficiently. Jostle Your Paradigm Wal-Mart is known worldwide for its large retail stores with low prices on popular consumer products. However, that paradigm would not work in India due to strict government non-competing laws on foreign businesses. Therefore, a new wholesale business paradigm was designed to help Wal-Mart play into the non-retail sector of India's business economy. Your JV entity and structure may need to change the way it normally does business. If you're a retailer, you may need to work wholesale only. If you provide consumer services, you may need to change to a business-to-business format for your JV to succeed. Stay open to business paradigm changes. Beat Competition Through Stealth Of course, India is familiar with the Wal-Mart name, and it has a large controversy as a foreign business trying to steal customers from local retailers. Thus, along with changing to wholesale business, they changed their name to BestPrice Modern Wholesale. If you are looking to beat competition, you and your JV partner can work under a new business name and entity that can succeed at penetrating a higher market share. Of course, this requires market research and marketing strategies so make sure to carefully evaluate this decision. Your next JV may be the right formula to thrust your business into new heights. With the right JV partner and strategies, you can find ways to make your business work in new areas that were previously impenetrable. 24

Tata Motors & Fiat: The JV will manufacture cars from Tata & Fiat stables. Tata Motors will also buy diesel engines for it cars from Fiat, while Fiat will distribute Tata cars in Europe. Mahindra & Renault: This JV is the market entry strategy for Renault. The JV will manufacture Renaults Logan cars in India. Renault will gain market knowledge - while Mahindras will learn how to make good cars, and leverage its dealership network to additional profits. Tata-AIG: This JV was created to take advantage of the new government regulations on private insurance companies. Private insurance companies need foreign collaboration for technical know how. While the current regulations prevent foreign insurance companies setting up a green field venture in India. Similarly other JV in this field are: ICICI Lombard, ICICI Prudential, Bajaj- Allianze etc.

SUCCESSFUL CROSS BORDER JOINT VENTURES.

Indo Zambia Bank Limited, in Lusaka, Zambia. The Government of India contributed its share of 60% in the joint venture through its three largest public sector banks viz: Bank of Baroda, Bank of India and Central Bank of India, each contributing 20% to the share capital of the Bank, apart from seconding senior personnel from their banks. The Government of Republic of Zambia contributed the remaining 40% shares initially through Zambia Industrial and Mining Corporation (ZIMCO) which was subsequently transferred to Ministry of Finance and Planning, Government of Zambia. In an intensively competitive banking industry, Indo-Zambia Bank Ltd is proud to have made several significant contributions to the Zambian economy. Consistent with its founding principles and mission the bank is truly acting as a catalyst for the economic development of Zambia. The bank has designed innovative schemes and products that cater to the requirements of all sections of the Zambian economy/society whether it is Agriculture, Mining, Tourism, Trade, Manufacturing, SME, Real Estate etc. 25

Starting as a single branch bank in 1984, the bank has come a long way and has now twelve branches. The Bank is well represented at all the major business centres in Zambia. The bank is also planning to open more branches in future. The bank has attained a well deserved place in the banking industry in Zambia, and has become a household name as `The Bank You Can Trust. The bank has formulated transparent, progressive business oriented policies that are not only customer friendly, but also comply with the tenets of good corporate governance. This has helped the bank to emerge as a professionally run Institution The bank is a shining example of a successful joint venture that has emerged out of the friendly ties between the two Republics of Zambia and India. NOT SO SUCCESSFUL CROSS BORDER VENTURES Mahindra-Renault joint venture In a joint venture between the two companies, 51 per cent of the stake is held by Mahindra and Mahindra while the rest of 49 per cent is being held by French car maker Renault. But their first car Logan was a failure because of technical reasons as well as stiff competition from other makers. So this is the example of a not so successful joint venture FAILED JOINT VENTURES Chinese consumer electronics, IT and telecom products major TCL Corporation Baron international in Mumbai Loss of 40 cr. Reason without understanding the market and local aspirations.

TOP TEN JOINT VENTURES

10. A chain of "Bhaskar-RaoBins" ice cream stores all over the country, in collaboration with Baskin Robins. 9. Kraft will make "PARAMESAN CHEESE" at Madras, in collaboration with 26

Parameswaran & Co. 8. Kentucky Fried Chicken will open its chain of Indian version, to be named, "KARNATAKI FLY-ED CHICKEN" and will be headquartered at Bangalore. 7. Pizza Hut will open a chain, in the back alleys of all cities, its version, to be named:"PICHHE HUT". Headquarters: Kanpur. PICHHE = means back-alleys for the uneducated 6 . McDonalds will open its fast food restaurants to be named: "McDosalu". Hqs. Hyderabad. Main menu: Idli and Dosa. 5. Mr. Submarine will name its restaurants as "Mr. SUBRAMANI", to be headquartered at Madras. 4. Red Carpets colored with biodegradable (hence environmentally friendly) red PAAN. Juice extracts will enjoy duty-free status in US. 3. Dallas Cowboys will own a new franchise: Dilli's COW-BHAIS, to teach Indians how to play Football.... with hands. 2. Duty-free import of Ambassador cars into USA, as long as they are not used outside of Demolition Derby. 1. Internal Revenue Service will provide technology transfer of its Tax System software to Indian Income Tax Dept and to be named: "UNCLE SHYAM".

27

4. RECENT JOINT VENTURES

RUSSIA OFFERS INDIA JOINT VENTURES FOR URANIUM MINING

Russia has offered India to set up joint ventures for uranium mining on its territory and third countries as well as nuclear fuel facilities in the two nations, according to state corporation Rosatom. "We have offered the Indians participation in the uranium mining projects in the Russian Federation and thirds countries. The controlling stake in the joint projects must remain with Rosatom and the partners could get up to 49 percent share in the projects inside Russia," Rosatom spokesman Sergei Novikov was quoted as saying by RIA Novosti. He said the talks on the joint projects were held by Rosatom CEO Sergei Kiriyenko in New Delhi with the Uranium Corporation of India Ltd.(UCIL) during the 16th session of Indo-Russian Inter-Governmental Commission last week. Rosatom spokesman said that in Elkon project in Russia's South Yakutia, the Indian stake would be less than 49 percent as there were already some foreign stakeholders. He, however, did not identify them. During Prime Minister Vladimir Putin's India visit in March earlier this year, Kiriyenko had offered UCIL stake in Elkon project and setting up nuclear fuel JVs in Russia and India.

AGUSTAWESTLAND SETS UP INDIAN JOINT VENTURE

Italian helicopter firm AgustaWestland has signed to create a joint venture with India's Tata Sons to build a final assembly line in India, the Italian firm announced Feb. 16. The deal envisages assembly work being undertaken on the line on AgustaWestland's AW119 helicopter for the worldwide market, with a production rate of 30 a year and the 28

first aircraft potentially ready for delivery in 2011. AgustaWestland is proposing the AW119 for the Indian military Reconnaissance and Surveillance Helicopter program. In a separate deal, AgustaWestland announced that the Bangladesh Navy had ordered two AW109 Power maritime helicopters for missions including search and rescue, economic zone protection, surface surveillance and maritime security. The aircraft will be delivered in 2011 and will be able to operate from the frigate BNS Bangabandhu. Fellow Italian firm Fincantieri announced Feb. 12 that it had launched in Italy the first of two fleet tankers ordered by the Indian Navy, with delivery scheduled by the end of the year. The 27,500-ton, 20-knot tankers are 175 meters long, 25 meters wide and 19 meters high, and will carry up to 250 crew and passengers as well as helicopters.

VODAFONE OKAY WITH ESSAR IPO OF INDIAN JOINT VENTURE STAKE

British telecoms firm Vodafone said on Sunday it had not blocked Essar from conducting an initial public offer (IPO) of the latter's stake in Vodafone Essar, the country's thirdlargest telecoms company by subscribers. "We have no objection if Essar wishes to go for an IPO of its stake in Vodafone Essar," the British company said in a statement. Vodafone and Essar have locked horns in recent days over the Indian group's move to merge a firm that owns an indirect 11% in their mobile joint venture with another Essar group firm, India Securities Ltd (ISL).

29

Essar has said that last year it wanted to list Vodafone Essar by offering its shares through an initial public offer but Vodafone "ensured that the IPO did not go through and no market value could be established". Essar group also accused the British telecoms giant of trying to force it out of their joint venture. Shares in ISL, which is Essar group's financial arm, have risen more than tenfold in the past 12 months. Vodafone had objected to the merger between the two Essar group firms on January 18, saying ISL's value may be inaccurately used to calculate the value of its telecom joint venture Vodafone Essar. Vodafone continues to believe that material information has not been provided to the market regarding the merger scheme and it has raised objections with the Madras high court, the Bombay Stock Exchange and stock exchange regulator SEBI, it said in a statement. Vodafone paid $11.1 billion in 2007 for a 67% stake in the firm. The deal gave Essar the option to sell its entire 33% stake for $5 billion by May 2011, or part of it at a market-determined price. Vodafone has an agreement with Essar that gives it first option to buy out the latter's stake if some or all of the holding is put up for sale. The decision to exercise either put option on or before May 8, 2011, is entirely the choice of Essar, Vodafone said in a statement. Shares of India Securities closed at Rs63.35 on Friday, down 3.58% in a weak Mumbai market.

30

INDIAN JOINT VENTURE TARGETS 500 MW IN RENEWABLES

The Asian Development Bank (ADB) has signed a joint venture deal to develop and operate 500 MW of renewable energy projects in India in the next three years. ADB will invest $40 million to take a 25% stake in the company, along with India's NTPC Ltd (50%) and Japan's Kyushu Electric Power Company (25%). The bank aims to invest $2 billion a year in renewable-energy and energy-efficiency projects in Asia and the Pacific. The new joint venture company will help India achieve its goal of reducing the country's dependence on fossil fuels, will cut greenhouse gas emissions and improve its energy security. We hope this company will also provide an example to other foreign investors looking at Indias renewable energy sector. Indias electricity supply fails to meet demand, triggering regular blackouts, and is largely generated from increasingly uncertain domestic sources of coal or ever-moreexpensive imported coal. A National Action Plan on Climate Change targets 15% of Indias power coming from renewable sources by 2020 a rise from a current figure of 10%. About 65% comes from mostly coal-fired thermal power plants. Hydropower and nuclear power make up the remaining 25% of generation. India now has the capacity to generate just over 11,000 megawatts of wind power but, with the right investment, that could increase to almost 48,000 megawatts, said Don Purka, Senior Investment Specialist with ADBs PSOD. At the same time, small hydropower has the potential to generate about 15,000 megawatts of power and, whats more, is often the best way of providing electricity to low-income households in remote areas. NTPC is Indias largest power generating company, with a 33% market share. While majority-owned by the government, it operates on a commercial basis as an independent 31

company. NTPC aims to raise its current generating capacity of 32,694 MW to 75,000 MW by 2017. Kyushu Electric Power is an integrated private sector generation, transmission and distribution company. The company owns and operates about 20,024 megawatts of power generation capacity including hydroelectric, wind, solar and geothermal projects on Japans southwestern Kyushu Island. ADB, based in Manila, is dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth, and regional integration. Established in 1966, it is owned by 67 members 48 from the region. In 2009, it approved a total of $16.1 billion in financing operations through loans, grants, guarantees, a trade finance facilitation programme, equity investments, and technical assistance projects. ADB also mobilised cofinancing amounting to $3.2 billion.

32

5. REASONS
The main reasons for a JV has always been an entry strategy. JV provides a lower risk option of entering into a new country. For Fiat, Pepsi, Ford, Xerox, Suzuki, etc., the JV is an ideal way to enter Indian markets and establish itself as a leader ahead of other competition. The JV also provides an opportunity for both the partners to leverage their core strengths and increase the profits. For example, Modi-Xerox venture gave Xerox an early lead in the photocopier market and help secure a strong brand recognition. For the Modi group, this turned out to be a very profitable venture. JV also provides a learning opportunity for both the partners. A smart partner will learn a lot about other partners capability. For example, Xerox learnt about distribution channels and copier usage model from the JV. TVS learnt a lot about making motorbikes from Suzuki. Other reasons to form a JV in an Indian context are: Technology: When partners have mutually rights over exclusive technology, then JV forms an option to exploit the opportunity by combining these technologies. Alternatively, when a partner has identified a profitable market opportunity - but does not have the necessary technology, then a JV is an option to go. However both parties need to have a good understanding to protect each others IP. Lower Risk of Geographic Expansion: A JV with a local partner is an ideal way to minimize risks of cross-border expansions. For foreign firms a JV with a local partner lowers risks via: ability to hire the best talent, knowledge of local markets, connections with local government, pre-existing distribution networks etc. Government Regulations: In most emerging markets government rules and regulations prevent foreign players from establishing a wholly owned subsidiaries. For example, Indian government laws prevent foreign retailers, insurance companies from entering India directly. The current regulations force these companies to form JV with local partners

33

Access to Capital: Often times companies in emerging economies lack capital to expand. A JV or an strategic investment will infuse capital to the local operations and make it more profitable. In an emerging economy - the local partner provides the distribution network, human capital and government links as its investment in the JV, while the foreign partner provides the capital and technology.

34

6. BENEFITS AND FUTURE OF JOINT VENTURES

BENEFITS OF JOINT VENTURES
Among the most significant benefits derived from joint ventures is that partners save money and reduce their risks through capital and resource sharing. Joint ventures give smaller companies the chance to work with larger ones to develop, manufacture, and market new products. They also give companies of all sizes the opportunity to increase sales, gain access to wider markets, and enhance technological capabilities through research and development (R&D) underwritten by more than one party. In fact, funding for R&D today is often provided by government agencies in a myriad of countries operating under all types of economies, ranging from capitalist to socialist and hybrid. This is particularly true in the United States. Until recently, U.S. companies were reluctant to engage in research and development partnerships, and government agencies tried not to become involved in business development. However, with the emergence of countries that feature technologically advanced industries (such as electronics or computer microchips) supported extensively by government funding, American companies have become more willing to participate in joint ventures. Likewise, the U.S. government, along with state governments, has become more generous with its financial support. Government's increased involvement in the private business environment has created more opportunities for companies to engage in domestic and international joint ventures, although they are still legally limited in what they can do and where they can operate. Nonetheless, more and more companies are involving themselves in joint ventures, and the trend is to increase their participation, since the advantages outweigh the disadvantages.

THE FUTURE OF JOINT VENTURES

It is almost certain that the number of joint ventures will continue to increase in the near future. More and more companies are adopting the joint venture approach as a part of 35

their growth strategies, particularly in the international arena. Foreign companies can benefit mutually by combining their technological and monetary resources and taking advantage of respective market conditions. Thus, international joint ventures are becoming the norm rather than the exceptionand in more industries than ever before. Joint ventures may grow in importance so much in the next few years that many companies could lose their national identities. There could be a growth in the activities of multinational corporations to the point where joint ventures will be virtually unrecognizable. In fact, some companies, especially those in capital-intensive industries, have already lost sight of the fact that they engage constantly in joint ventures because they have become so commonplace. Finally, the wave of privatization, on a global scale, of state-owned industries and enterprises promised an added catapult for joint venture formations. The estimated worth of world-wide state-owned industry sales in 1995 reached $65 billion. This trend will make investment and inroads by companies into previously closed, and still relatively unfamiliar and structurally adverse, countries such as China and the former eastern bloc nations increasingly attractive.

36

CONCLUSION
All JVs have a definite life span. Oftentimes the end objectives and exit strategy will be negotiated during the formation of the JV itself. Despite the fact that everyone knows that a JV has a definite life span, most JV falls apart earlier than expected. The main reason why a JV falls apart is changes in partners strategy. Often either one of the partner changes their strategy which makes this JV redundant. For example FordMahindra JV. Ford wanted to expand the operations but Mahindra wanted to focus more on SUV segment and did not want to invest for the expansion. Thus forcing Ford to go alone. Often times the conditions which made a JV necessary change - like government regulations, access to technology or capital or the partner has gained sufficient confidence to go alone: All this causes the JV to fall apart. For example TVS-Suzuki JV fell apart when TVs learnt how to design motorbikes on its own. TVS designed "Victor" on its own and it was a success. This gave TVS the confidence to go alone. Another popular reason why a JV falls apart is when the JV is successful. The JV becomes a cash cow and both the parties now want greater control over it. This often results in a nasty fight for control - and in the process the JV falls apart. Alternatively, when a JV is not doing well, the partners start blaming each other and want to take over the control to prevent further deterioration. Joint Ventures are becoming a popular means to enter Indian markets for global giants. However, the risks of cross-border expansion are slightly lowered, but they still remain. To have a successful JV, both partners should have a good understanding of each others cultures, establish a good work collaboration and work towards a common objective. The risks of cultural integration still exist - often times management from both the sides often ignore the cultural integration issue assuming that they can take care of it - but cultural integration often falls between the cracks - and the JV ultimately fails.

37

BIBLIOGRAPHY
BOOKS AND JOURNALS: C P Chandrasekhar, New strains on the balance of payments, Peoples Democracy, (Weekly Organ of the Communist Party of India (Marxist), Vol. XXXII, No. 48, December 07, 2008 Shah, Ajay and Ila Patnaik (2007). Indias experience with capital flows: The elusive quest for a sustainable current account deficit. In Sebastian Edwards, editor, Capital controls and capital flows in emerging economies: Policies, practices and consequences, chapter 13, pages 609643. The University of Chicago Press, 2007 Virmani, Arvind (2006), The Dynamics of Competition: Phasing of Domestic and External Liberalisation in India, Working Paper No. 4/2006-PC, Planning Commission, April 2006.

INTERNET SOURCES:

http://en.wikipedia.org/wiki/Balance_of_payments http://www.indiaonestop.com/economy/balanceofpayments/gross_capital_inflows _and_outflo.htm http://www.bis.org/review/r061221d.pdf http://www.ibef.org/download/RNIndia_04_15_08.pdf http://www.commodityonline.com/news/India-confident-of-weathering-financialcrisis-12622-3-1.html http://ezinearticles.com/?Follow-Wal-Marts-Joint-VentureExample&id=3662900 http://arunkottolli.blogspot.com/2006/12/joint-ventures-is-preferred-way-to.html

38