Mergers and acquisitions are defined as the consolidation of companies. These are modes by which different business entities combine. Joint ventures,<\/strong> on the other hand, are the way for two business entities to build a contractual arrangement and work together to achieve the common goal of growth and profits. Here we will discuss Mergers and Acquisitions<\/strong><\/a> and Joint Ventures.<\/p>\n Parties looking for an appropriate business vehicle that shall reap maximum benefits often turn to a Joint venture arrangement.<\/p>\n The term ‘merger’ was not defined under the Companies Act, 1956 (“CA 1956”), and under Income Tax Act, 1961 (“ITA”). The Companies Act, 2013<\/a><\/strong> (“CA 2013”) without providing a definition of the term has explained the concept. According to the Act, a ‘merger’ is a combination of two or more entities into one single entity. The resultant entity is not just the accumulation of assets and liabilities of the distinct entities, but the organization of the two entities into one single business. In a merger, one or more parties to the Mergers and Acquisitions cease to exist and merge into one single entity that survives, i.e. one of the parties to the merger survives and retains its identity.<\/p>\n The Income Tax Act defines a similar term ‘amalgamation’ as the fusion of one or more companies to form another entity. Thus, in amalgamation, two or more companies Mergers and Acquisitions into a third new company while the existing companies lose their existence.<\/p>\n The Companies Act 1956 in Sections 390 to 394 and The Companies Act 2013 in Sections 230 to 234 deal with the schemes of arrangement or compromise between a company, its shareholders and\/or its creditors. Depending on the requirements of the merging entities, several different types of mergers have been identified:<\/p>\n An ‘acquisition’ or ‘takeover’ is a term to define buying of another company and gain its ownership. Such process may be friendly or hostile and may be processed through agreements between the two or more parties or purchase of shares from the open market or by presenting an offer for acquisition to the entire body of shareholders. Key<\/strong> features of the acquisition are<\/strong>:<\/p>\n The Companies Amendment<\/a> Act 2017 explains the <\/strong>expression of Joint Venture<\/strong> as “a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement”.<\/p>\n Mergers & Acquisitions and Joint Ventures is a commercial enterprise formed as an arrangement between two or more parties who hold a joint control over it. India does not have any exclusive or specific regulations and laws relating to Joint Venture and the enterprise is subject to the regulations specific to the business form it takes and the sector it desires to operate. A joint venture is made for a specific purpose, whereas the time duration may or may not be limited.<\/p>\n Joint Venture in India is not regulated by any specific Legislation or rules but follow the regulations as per the business structure it forms as and the market it operates in.<\/p>\n Mergers & Acquisitions and Joint Ventures which forms as a Company shall be governed by the provisions of the Companies Act. 2013; A Joint Venture which forms as an LLP shall be governed by the provisions of The Limited Liability Partnership<\/a><\/strong><\/em> Act<\/em>, 2008.<\/p>\n Also, Mergers & Acquisitions and Joint Ventures must be in accordance with the provisions of the Indian Contract Act<\/strong>. Thus the execution of a Joint Venture Agreement<\/a> is of utmost importance. A wisely drafted Joint Venture Agreement shall mitigate the risk with respect to the control, operations, management, and cost and profit-sharing of the Venture and also regard the exit and termination of the Joint Venture. It protects the interest of the parties by foreseeing the possibility of disputes in the future. It thus aids in the development of a smoother relationship between the parties to the Joint Venture.<\/p>\n Mergers & Acquisitions<\/a> and Joint Ventures with a foreign partner or an NRI or PIO partner, require government approvals in India. Also, FDI<\/a> is sector specific. There are some sectors which have been prohibited for foreign companies and investments in permitted sectors\/activities can be made through the Automatic route<\/strong> or Approval route. The extent of FDI permitted is different for all sectors and must be thoroughly researched for.<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":" What are Mergers & Acquisitions and Joint Ventures? Mergers and acquisitions are defined as the consolidation of companies. These are modes by which different business entities combine. Joint ventures, on the other hand, are the way for two business entities to build a contractual arrangement and work together to achieve the common goal of growth […]<\/p>\n","protected":false},"author":4,"featured_media":9775,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[1610],"tags":[2042,1035],"acf":{"service_id":"219"},"yoast_head":"\nPrimary Difference:<\/h2>\n
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What are the Reasons for Companies Taking Steps for Mergers and Acquisitions?<\/h2>\n
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What are the Reasons for Entering Into a Joint Venture?<\/h2>\n
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What are Mergers and Amalgamations?<\/h2>\n
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What Does The Term Acquisitions Denote?<\/h2>\n
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Following are the two types of Acquisitions:<\/h2>\n
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\n<\/strong>The acquirer chooses the assets or liabilities to be purchased and buys some or all of the target’s assets and\/ or liabilities directly from the seller. If all the assets are acquired, the target stands liquidated.
\nThe acquirer decides judiciously to avoid any unwanted asset. This makes the whole process is tedious and pricey.<\/li>\n
\nIt is where all of the assets and liabilities of the seller are sold upon the transfer to the acquirer. It is a much simpler and less tedious process.<\/li>\n<\/ol>\nWhat is a Joint Venture?
\n<\/strong><\/h2>\nWhat are the Advantages of a Joint Venture?<\/strong><\/h2>\n
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What is a Joint Venture Agreement?<\/h2>\n
What is the Procedure of Joint Ventures With Foreign Companies?<\/h2>\n