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

Two Indian firms, Aarav Textiles and Bhavani Mills, agree to combine their resources only to execute one export order of garments and to share its profit, after which their association will end. Which form of business collaboration does this arrangement best describe?

This is a project-based contractual joint venture. The two firms pool resources for one specific export order, share its profit, and part ways afterwards. A merger, franchise or holding-subsidiary structure would involve permanent combination, royalty or control, none of which is present here.

  1. AA project-based (contractual) joint venture limited to a single ventureCorrect
  2. BA permanent merger of the two firms into one company
  3. CA franchise arrangement with continuing royalty
  4. DA holding-subsidiary relationship through share acquisition

Explanation

A joint venture is typically formed for a specific project or limited purpose, and the parties' association ends when that purpose is achieved. Here the firms pool resources for one export order only. A merger and a holding-subsidiary relationship imply continuing combination or control, which is absent.

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