Recently, equity joint ventures have increased particularly as a medium for cross border collaborations and investments. Equity is the bond, which binds the parties together and aligns their incentives where an ongoing business is to be conducted. An international equity joint venture
Equity joint ventures are the second term in which foreign companies enter the China market where the Chinese businesses and Chinese government are concerned. Joint ventures are generally established to exploit the market knowledge, preferential market treatment, and manufacturing capability of the Chinese side along with the technology, manufacturing know-how, and marketing experience of the foreign partner.
Generally, operation of a joint venture is limited to a fixed period of time from thirty to fifty years. In some cases an unlimited period of operation can be approved, mainly when the transfer of advanced technology is involved. Profit and risk sharing in a joint venture are balanced to the equity of each partner in the joint venture, except in cases of a breach of the joint venture contract.
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Equity Joint Venture is not legal term of the art, which has the following characteristics:-
- Each party has an ownership interest in a jointly owned business.
- Jointly owned business has a different management structure in which each party take parts.
- The parties share in the profits of the jointly owned business.
Equity Joint ventures cover a range of different business arrangements. For this purposes, a useful distinction can be made between the following broad categories.
- Merger type joint ventures
- Co-operative joint ventures
- Minority Equity Investments