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CS Executive · Setting Up of Business, Industrial and Labour Laws · Business Collaborations

Asha Textiles Ltd and Bergmann GmbH agree to set up a new company, Asha-Bergmann Fabrics Pvt Ltd, in which each holds 50% equity, shares control and appoints equal directors. Which description best fits this arrangement?

This is an equity or incorporated joint venture, because two parties create a separate company and hold shares in it, sharing control. A contractual venture involves no new entity, and a wholly owned subsidiary would need 100% ownership by one party.

  1. AAn equity (incorporated) joint ventureCorrect
  2. BA contractual joint venture with no separate entity
  3. CA franchise arrangement
  4. DA wholly owned subsidiary of Asha Textiles

Explanation

A joint venture where the parties form a separate company and hold its equity is an equity or incorporated joint venture. Here a new legal entity exists, so it is not a purely contractual venture. Neither party owns 100%, so it is not a wholly owned subsidiary.

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