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

Bharat Motors Ltd and a Japanese firm decide to jointly manufacture electric scooters in India by incorporating a new company, Bharat-Nippon EV Pvt Ltd, in which each holds 50% shares and shares control and profits. Which feature most clearly distinguishes this collaboration as an equity joint venture rather than a simple contractual alliance?

The formation of a separate, jointly owned company with shared equity is what makes it an equity joint venture. Partners invest capital, hold shares, and share control, risk and profit through the new entity. Licensing, co-marketing or supply contracts can exist without any new entity, so they are only contractual alliances.

  1. AFormation of a separate jointly owned entity with shared equityCorrect
  2. BSharing of technical know-how under a licence
  3. CAgreement to co-market products without any investment
  4. DExclusive supply contract between the parties

Explanation

An equity joint venture involves creating a separate entity in which the partners hold shares and share control, risks and profits. Know-how licensing, co-marketing and supply contracts can occur without any new entity, so they do not distinguish it. The jointly owned company is the key feature.

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