Joint ventures &
foreign collaboration.
Cross-border legal counsel for NRIs, businesses & families.
Joint ventures are one of the most common ways of doing business in India — and most foreign direct investment arrives through one. Well drafted, a joint venture is a platform for growth. Poorly drafted, it becomes a source of disputes long before the business has had time to succeed.
Many modern projects are too large for any one company to undertake alone. They involve substantial financial commitments, long horizons, and shared risk — nowhere more so than in infrastructure, where roads, highways, bridges, telecom, and large construction projects routinely require joint ventures to reach the scale they need.
Market access is another driver. A joint venture allows a foreign company to enter India with a local partner who knows the terrain; equally, it allows an Indian company to reach markets, technology, or capital that would not otherwise be available to it. A well-structured joint venture is not just a contract — it is a framework within which both parties can pursue their vision of the future and take advantage of unforeseen opportunities.
What a joint venture is
A joint venture is a business arrangement in which two or more parties agree to contribute to and cooperate in a business enterprise, with the intention of achieving a shared commercial objective. Joint ventures may be:
- Equity based — the parties hold shares in a new or existing company, and their rights and obligations are governed by the company's constitutional documents and a shareholders' agreement.
- Contractual — the parties cooperate under a contract, without forming a separate corporate entity.
A joint venture may involve an entirely new business, or the expansion of an existing one. It may be short-term and project-specific, or long-term and strategic.
The legal framework in India
Under Indian law, a joint venture is governed primarily by the Indian Contract Act, 1872. Because a joint venture typically involves corporate structuring, shareholder rights, and cross-border investment, a range of other Indian laws also apply — depending on the structure chosen and the sector involved. These commonly include:
- The Companies Act, 2013, where the joint venture is equity-based.
- The Foreign Exchange Management Act, 1999 (FEMA), and the rules and regulations made under it, for the foreign investment element.
- Sector-specific regulations, where the business operates in a regulated industry.
- Tax legislation, including on transfer pricing and on the treatment of cross-border payments.
- The Arbitration and Conciliation Act, 1996, where the parties choose arbitration as their dispute-resolution mechanism.
The shareholders' agreement
Every business with more than one shareholder should have a shareholders' agreement in place. It sets out the rules by which the ownership of the company is held and the powers of the shareholders are exercised. It is a legally binding document, and it is the single most powerful tool available to resolve disputes and to manage change at every stage of a business's life.
Where the shareholders are in different jurisdictions — as is common in cross-border joint ventures — the shareholders' agreement becomes even more important. Without it, the parties are left to rely on the default rules of Indian company law, which rarely match the commercial understanding they thought they had reached.
Planning for what happens if things change
Joint ventures are built on optimism. But the most carefully structured joint ventures are those that plan, in advance, for what happens if the relationship changes.
We build into joint venture and shareholders' agreements the mechanisms that will govern:
- Relationship breakdown. What happens if the commercial relationship between the shareholders deteriorates — the exit routes, the valuation mechanisms, and the sequence of events that follows.
- Future sale of the business. How the business may be sold, on what terms, and how the proceeds will be distributed between the shareholders.
- Deadlock. What happens when the shareholders cannot agree on a fundamental matter, and how the deadlock is to be broken.
- Termination. The circumstances in which the joint venture may be brought to an end, and what happens to the assets, contracts, and employees on termination.
- Change of control. How a change of control of a shareholder is treated — whether the new controller steps into the original shareholder's shoes, or whether the other shareholders have a right to buy out the departing party.
Building these mechanisms into the agreement at the outset is far less costly — in money, in time, and in relationship damage — than litigating them later.
Who we act for
We represent and advise shareholders from organisations of all sizes — from founders entering their first cross-border venture to established corporate groups restructuring long-standing joint ventures. Our work is directed at defining the legal relationship between shareholders, establishing the framework within which the business venture operates, and protecting the parties' positions at the points where those positions are most exposed.
Agreements we draft and advise on
Our international and corporate practice regularly drafts, reviews, and advises on the following classes of agreement:
- Joint venture agreements.
- Foreign collaboration agreements.
- Film screening rights agreements.
- Technology transfer agreements.
- Memoranda of understanding.
- Distribution rights agreements.
- Manufacturing rights agreements.
- Shareholders' agreements.
How Kavao Law can assist
We advise foreign companies, Indian promoters, and institutional shareholders on the full lifecycle of a joint venture. Our work typically includes:
- Discussing with shareholders their aims and objectives for the business venture, and translating those objectives into a legal framework.
- Preparing and negotiating shareholders' agreements, joint venture agreements, and foreign collaboration agreements.
- Advising shareholders on appropriate mechanisms for transferring shares and for extracting value from the company over time.
- Designing mechanisms to deal with deadlock, and setting out the routes by which deadlock can be resolved without litigation.
- Advising on the eventual sale of the business — including drag-along, tag-along, and pre-emption provisions — and on the distribution of proceeds.
- Advising on the termination of the business relationship where the venture does not work out, and on the consequences of termination.
- Advising on the regulatory and foreign-exchange aspects of cross-border investment into India.
- Coordinating with foreign counsel, tax advisers, and regulators where the joint venture spans multiple jurisdictions.
Note: The information on this page is provided for general understanding only. The correct structure, documentation, and regulatory pathway for a joint venture depend on the specific sector, the parties' jurisdictions, and the commercial terms. We strongly recommend case-specific advice before finalising any joint venture documentation.
Questions on joint ventures in India.
A joint venture agreement establishes the commercial arrangement between the parties — what the venture will do, how it will be funded, and how the parties will cooperate. A shareholders' agreement sits alongside it where the venture is equity-based, and governs the rights and obligations of the shareholders in the company itself: how shares are held, transferred, and voted, and what happens on a change of control, deadlock, or exit. In practice the two are often combined into a single document, or executed together.
No. A joint venture may be equity-based — where the parties hold shares in a company formed for the purpose — or purely contractual, where the parties cooperate under a contract without forming a separate corporate entity. The correct structure depends on the commercial objectives, the sector, and the regulatory environment.
What happens depends almost entirely on what the joint venture and shareholders' agreements provide. Well-drafted agreements set out — in advance — the exit routes, the valuation mechanisms, the deadlock-breaking procedures, and the sequence of events that follows a relationship breakdown. Where no such mechanisms exist, the parties are left with the default rules of Indian company law, which rarely match the commercial understanding the parties thought they had reached.
Yes. We regularly act for foreign companies, funds, and investors entering India through joint ventures, equity investments, and foreign collaboration arrangements. We advise on the Indian regulatory aspects, on FEMA compliance, and on the negotiation and drafting of the documentation, and we coordinate with the client's foreign counsel and tax advisers where required.
Yes. Exit is one of the most important matters to address at the outset, and we routinely draft and negotiate drag-along, tag-along, pre-emption, and put-and-call option provisions. We also advise on the practical steps required to give effect to an exit, including the transfer of shares, the release of warranties, and the distribution of proceeds.
Structuring or reviewing a joint venture?
Tell us about the parties, the sector, and the commercial terms. We will reply within one business day with a clear view of the structure and the documentation required.