Joint Venture Agreement Drafting
A joint venture agreement records how two or more businesses will work together on a project or through a new company. We help you choose between a contractual and an equity JV, draft the agreement for your review, and mirror its control terms in the JV company’s articles.
What it is
A joint venture (JV) is two or more independent businesses pooling resources for a shared goal while keeping their own identities. The joint venture agreement records who brings what and who decides what. It also fixes the profit share and the way out.
There are two forms. In a contractual JV, the partners work together under the agreement alone, with no new entity. In an equity JV, they set up or invest in a company or LLP and hold its shares. The Companies Act, 2013, in the Explanation to Section 2(6), describes a joint venture as a joint arrangement where the parties with joint control have rights to its net assets.
Who it applies to
You are bidding for a tender with a partner
Two construction or EPC firms combine their experience to qualify for a tender neither could win alone.
You are bringing in a foreign partner
The foreign side brings technology; the Indian side brings the market and the plant. This is usually an equity JV company with FDI.
You own land and a developer will build
The landowner brings the land, the developer builds, and the two share built-up area or revenue.
Why it matters
Value every contribution up front
Every contribution, from cash to know-how, is valued and dated in writing.
Settle control before the first board meeting
Board seats, reserved matters and the casting vote are agreed while relations are good.
Plan the exit on day one
Exit routes and a deadlock ladder give a split somewhere to go other than court.
Documents required
From each partner
- Incorporation certificate, MOA and AOA, or firm deed
- PAN, GSTIN and registered address
- Board resolution approving the JV and naming signatories
About the venture
- Term sheet or MoU, if signed
- Business plan and capital requirement
- Details of assets, IP or land being contributed
For a foreign partner
- Constitutional documents and KYC of the foreign entity
- Beneficial ownership details
- Valuation report for the share price
Contractual JV vs equity JV
| Point | Contractual JV | Equity JV |
|---|---|---|
| Vehicle | None; the agreement alone | A new or existing company or LLP |
| Liability | Each partner for its own work, as the agreement sets | Limited to the capital in the JV entity |
| Best for | One project or tender with a fixed end | A long-term business with its own staff and assets |
| Income tax | Risk of assessment as an association of persons (AOP) | The company or LLP is taxed separately |
| Set-up | Agreement, stamp duty, signatures | Incorporation, share issue, ROC filings, FEMA filings if foreign |
| Exit | Ends with the project or by notice | Share transfer, buy-out or winding up |
For a contractual JV, CBDT Circular No. 7/2016 (7 March 2016) lists when a consortium is not treated as an AOP: each member does its own scope with its own resources and bears its own risk, earns profit or loss only on its own scope, and control is not joint. Here is the catch: calling it a consortium does not decide the question; the facts do.
Picture two Faridabad fabrication firms bidding together for a railway tender. If they run one bank account and split the final profit, the tax officer may see an AOP. If each executes and bills its own scope, the circular’s tests are easier to meet.
How it works
Pick the vehicle
We compare a contractual JV, a private limited JV company and an LLP on tax, liability, FDI and exit.
Draft the agreement for your review
We draft the JV agreement for your review and revise it after the partners’ comments. Each party is free to take independent legal advice. Any legal notice or court filing under it must be signed by a practising advocate.
Clear each partner’s approvals
In practice, approvals come before signatures. An investing company checks its Section 186 limit; a foreign partner checks the FDI route and pricing.
Stamp, sign and set up the JV
We arrange e-stamp paper before signing; in Haryana it is generated against a GRN on the e-GRAS portal. For an equity JV, we incorporate or issue shares and align the articles.
File with the ROC and RBI
We file MGT-14 for altered articles within 30 days and FC-GPR within 30 days of issuing shares to a foreign partner.
Timelines
Stamp before or at signing
Section 17 of the Indian Stamp Act, 1899 requires every instrument chargeable with duty and executed in India to be stamped before or at the time of execution.
MGT-14 within 30 days
A special resolution altering the JV company’s articles must reach the ROC within 30 days under Section 117(1).
FC-GPR within 30 days
When the JV company issues shares to a foreign partner, Form FC-GPR goes on RBI’s FIRMS portal within 30 days of issue.
What happens if the articles don’t match
Transfer restrictions may not bind
In V.B. Rangaraj v. V.B. Gopalakrishnan, (1992) 1 SCC 160, the Supreme Court held that a share-transfer restriction not in the articles binds neither the company nor its shareholders.
The Act overrides the agreement
Section 6 of the Companies Act, 2013 makes any clause repugnant to the Act void to that extent.
Late filings cost money
A late MGT-14 attracts a penalty under Section 117(2) of ₹10,000 plus ₹100 a day, up to ₹2 lakh for the company.
Say a Faridabad component maker and a foreign partner form a 51:49 JV company. The JV agreement gives the foreign partner a veto on new share issues, but nobody amends the articles. At the next allotment, the company’s own rulebook says nothing about that veto. The partner is left with a contract claim, not a block.
Frequently asked questions
What is the difference between a contractual and an equity joint venture?
A contractual JV has no separate entity; the partners cooperate under the agreement alone. An equity JV creates or uses a company or LLP in which the partners hold shares or contribution. Contractual JVs suit one project with a fixed end, such as a tender. Equity JVs suit a long-term business with its own staff, assets and bank account. The tax and FEMA result often decides the choice.
Is a joint venture agreement legally binding in India?
Yes. A JV agreement is a contract under the Indian Contract Act, 1872 and binds the parties who sign it. For an equity JV, the company is bound only by what its articles say, so key terms must also go into the articles. The Supreme Court made this clear in V.B. Rangaraj (1992). Once the agreement and the articles match, both the partners and the company are held to them.
Can a contractual JV be taxed as an association of persons?
Yes, it can. Under CBDT Circular No. 7/2016, a consortium is not treated as an AOP only if each member executes its own scope with its own resources, bears its own risk, earns profit or loss on its own scope, and control is not joint. If the partners pool money and share profit, AOP treatment is likely. We draft the work split so the tax result matches what you intend.
What are the key clauses in a joint venture agreement?
The core clauses are capital contribution, shareholding or profit share, board composition, reserved matters, transfer restrictions, deadlock and exit. Add non-compete during the term, IP ownership, confidentiality, funding of future needs and dispute resolution. For a foreign partner, add FEMA pricing for exit. Each clause should name a number, a date or a process.
Can a foreign company form a JV in India?
Yes, subject to FDI rules. Many sectors allow foreign investment under the automatic route; some need government approval. Shares issued to a non-resident must be priced at or above fair value under Rule 21 of the NDI Rules, 2019, and Form FC-GPR is due within 30 days. Investors from countries sharing a land border with India face extra approval rules. We check the route before the agreement is signed.
How much can a company invest in a JV company?
Up to the Section 186 limit without a special resolution. The cap is 60% of paid-up share capital, free reserves and securities premium, or 100% of free reserves and securities premium, whichever is more, counting all loans, guarantees and investments. Beyond that, a special resolution is needed first. We check the limit from the latest balance sheet before the money moves.
How is a 50:50 JV deadlock resolved?
Through a ladder written into the agreement. Disputes go to senior management, then mediation or arbitration, and finally a buy-sell clause where one side names a price and the other must buy or sell. If that fails, a member holding at least one-tenth of the issued share capital can approach the NCLT under Sections 241 and 244. Agreed early, it gives both sides a way out short of the tribunal.
Can a JV partner be stopped from competing?
During the JV, yes; after it, mostly not. Section 27 of the Indian Contract Act, 1872 voids restraints of trade, and courts have refused to enforce restraints that run past the contract term. An exception covers a seller of goodwill who agrees to reasonable local limits. So we pair a term-time non-compete with confidentiality and IP clauses that keep protecting the JV after a partner leaves.
What it costs
Our fee plus the government fee that applies to your case, quoted before you commit. Tell us the situation and we will price it exactly.
Government costs are stamp duty at your state’s rate and, for an equity JV, ROC fees. MGT-14 for altered articles costs:
| Authorised capital | MGT-14 normal fee |
|---|---|
| Below ₹1 lakh | ₹200 |
| ₹1 lakh to below ₹5 lakh | ₹300 |
| ₹5 lakh to below ₹25 lakh | ₹400 |
| ₹25 lakh to below ₹1 crore | ₹500 |
| ₹1 crore and above | ₹600 |
Filed late, the fee is multiplied 2× to 12× depending on the delay.
Ready to begin?
Tell us who your partner is and what each side brings; we will propose the structure and draft the JV agreement.