What is a joint venture contract

joint venture

What is a joint venture?

A joint venture (Translation from English: joint venture) is under commercial law a merger of two or more companies that cooperate with each other to achieve a common goal. In more concrete terms, is a joint venture a project that at least two legally and economically independent companies are planning, whereby they share management tasks, responsibility and economic risk. With this in mind, the joint venture is founded, the companies involved will continue to exist independently and are shareholders of the joint venture.

The legal basis is the joint venture contract, in which the common goals are defined and the legal and economic points of the cooperation (e.g. choice of company form, financing, management and leadership, details of profit distribution, ...) are specified. In the case of cooperation across national borders, the respective country-specific legal bases and requirements must also be taken into account and complied with.

Reasons for a Joint Venture Company

The idea of ​​a joint venture came from the post-war period. US companies in particular used the links with foreign companies to expand their trade borders through joint ventures. Many developing and emerging countries also attach importance to the fact that regional partner companies are involved in direct investments, so that the establishment of joint venture companies can not always be purely cooperative, but sometimes also forced.

There are a number of reasons for setting up a joint venture voluntarily. In the amalgamation of several smaller companies, costs and risks are shared on the one hand, and skills, know-how, operating facilities and market access are brought together and shared on the other, which creates more reach and strength in the market.
This merger can mean a great competitive advantage for a newly founded joint venture, and the cooperation can even influence the development of an entire industry.

Possible disadvantages of a joint venture can be the considerable coordination effort (e.g. due to longer coordination and decision-making paths), as well as the possible hurdles due to language or cultural barriers and different legal bases if the cooperating companies come from different countries.

Joint venture legal forms

There are various legal forms of joint ventures. Often they are used as a corporation z. B. founded as a limited liability company (GmbH) or stock corporation (AG). For the bookkeeping of the joint venture, the legal form is decisive, because if it is a corporation or partnership, the provisions of the Commercial Code (HGB) are binding, while for a company under civil law (GbR) there are no express regulations on bookkeeping or Accounting there.