3. The process of creating joint ventures.

The process of creation of joint ventures passes a number of stages. The formation of an international joint venture can be an extremely complex process. The goals of the enterprise must be defined, the structure must be negotiated, numerous legal issues must be recognized and resolved, and potential areas of conflict between the JVPs must be identified and reconciled. Careful planning is required at all stages.

Choosing a foreign partner. In some cases, the foreign company itself may offer its services to attend the joint venture; sometimes our partner is seeking a foreign partner. The final selection of the foreign partner is necessary to evaluate its financial situation, ask the card of company registration and bank card, indicating the presence of an account of this firm, It is necessary to assess the competitiveness of the potential partner, goals and intentions in a joint partnership to make technical and economic assessment of its proposals, negotiate terms and conditions of making a share in the statutory fund in foreign currency.

Identifying objectives. At the outset of every proposed joint venture, it is necessary to have an understanding of the basic objectives of the proposed enterprise. This includes identification of the nature and scope of the proposed undertaking, as well as the company's expectations and goals. For example, if a company is seeking a short-term arrangement to measure the potential market for a product in a foreign country, a licensing or straightforward contractual arrangement might be preferable to a joint venture, which generally contemplates a longer term and more substantial commitment.

Negotiations between the partners to sign protocol of intentions to create joint ventures. After the negotiations production volumes in the range, the location of the joint venture, and the sources of logistics, business channels, the involvement of partners in the creation of authorized capital, sources of financing and lending should be indicated. At the same time, the protocol of intentions may be shown for the different views of partners on specific issues (volumes of supplies of products to domestic and foreign markets, the level of contributions to the charter capital, credit conditions, the participation of foreign experts in the joint venture, product quality).

Clarification of issues raised in the letter of intent, the analysis of technical and economic information and a feasibility study on establishing the joint venture. In developing the feasibility study addresses the following questions: assesses the effectiveness of the establishment and operation of joint venture, defined benefits, which can be obtained on the national economic level, the estimated economic interests of a foreign partner.

Choosing the Business Form. The next step is to choose the basic structure of the business venture. A variety of complex legal and practical considerations are involved at this stage. It is necessary to identify the respective contributions of the parties and the proposed financing arrangements in order to measure the compatibility of the potential JVPs and to determine the appropriate organizational form. Frequently, one JVP looks to a capital infusion and, in return, shares its technology expertise, and know-how.

Identifying Legal Problems. At the beginning of the process, counsel must identify and resolve major legal issues and potential problem areas, including governmental regulatory matters.

Identifying conflicts between partners. It is also important to identify potential areas of conflict between the JVPs so that they can be reconciled prior to making an irrevocable commitment. For example, the parties may have to deal with differing tax objectives resulting from fundamentally different business goals or, more commonly, from different constraints of the tax laws and accounting practices of the home country. Early recognition of these issues may allow the parties sufficient flexibility to structure the joint venture to avoid these problems.

Drafting the Joint Venture Agreement. Finally, after the goals, structure, and legal issues have been identified, it is necessary to draft the joint venture agreement. As will be seen in later chapters of this book, international joint ventures often involve unique features, and careful draftsman ship is required.

Joint Ventures versus Partnerships.

The main difference between a joint venture and a partnership is that the members of a joint venture have teamed together for a particular purpose or project, while the members of a partnership have joined together to run "a business in common".

Each member of the joint venture retains ownership of his or her property.

And each member of the joint venture shares only the expenses of the particular project or venture.

Tax-wise, there are also differences between joint ventures and partnerships. As a member of a joint venture, you will receive a share of the profits which will be taxed according to whatever business structure you have set up. So, for instance, if you operate a sole proprietorship, your joint venture profits will be taxed just as any other business income would.

Above you can see the graph of Kazakhstani joint ventures (with international partners):

Regardless of the motives, the joint venture is a tool to achieve business and economic goals, the potential to go beyond the capabilities of each participant separately. When you create a joint venture you must solve two sets of issues: whether it makes sense to create a joint venture in the country? (Analysis of the country and the project itself), with whom in a given country a joint venture may be organized? (Choice of partner). Then, the parties sign letters of intent (Memorandum and Articles of Association), which contain more detailed parts of the joint venture project: goals, objectives, functions of the future organization, the scope of its activities, the basic principles of cooperation in a joint venture, the choice for her best legal form, etc. Joint ventures are operating in the internal market. Of greatest interest among foreign investors are investing in the commodity sector of Kazakhstan's economy and especially in the mining, fuel and energy complexes.

The purpose of creation of joint ventures - the implementation of agreements on specialization and co-production, the construction of large industrial and other facilities, especially requiring complex and expensive equipment, large capital investments, pay off only in the production of a large scale, the agreement on setting up production of new products, which is associated with a known risk and large expenditures for development of new technological methods. The joint venture is widely used for scientific and technical cooperation, including joint use of patents and licenses, and technological expertise. The creation of joint companies usually serves any particular purpose, and has certain motivations. Most often these motivations are: the elimination of direct competition between the founders, joint efforts in specific areas of business, receives certain benefits and privileges (for taxation purposes, the award) in the country of residence, etc. So often, the joint company by the nature of its operations is highly specialized. Founders are often "refuse" in favour of the joint venture from the issue of one or more overlapping products, send it with relevant research base, manufacturing capacity, distribution network, and personnel. Such joint efforts can increase the production of specialized serialization merged products, their quality and originality. On the other hand, the reduced range of products from firms-founders of the joint venture because of the transfer of part of the mix and it is those products, and sometimes expanding it, get an opportunity to deepen specialization of its activities.