Joint venture with a foreign company - Today the topic is very relevant. Why? The fact is that in Russia, joint venture at the present stage of economic development was a successful result of certain economic transformations, because social sustainability in the socio-economic plan is closely related to the promotion of various forms of entrepreneurship, which in one way or another activates the process of attracting foreign direct investment. What is a joint venture?? Why is this direction so popular in Russia? How common is it? You can find answers to these and other equally interesting questions in the process of reading this article.
General Provisions
Economic joint venture activities today is a fairly significant subject of the economic process. In the course of the latter, innovative management and production technologies are developed, and new markets for resources and sales are created. In addition, the formation and further development of the economic sector under consideration is nothing but the key to solving a wide range of tasks of a socio-economic nature.
What is a joint venture?? Joint venture is nothing more than economic activity, determined by a general nature, which refers to several partners at the same time (including the relationship of the economic nature of partners from different states). Today, joint venture is an integral component of both the economic and socio-social order. It is characterized by certain standards, rules and procedures relating to the relationship between social groups and individual individuals. Establishment of a joint venture also means the elimination of social transfers and the formation of a rational management structure.
Thus, the category of social entrepreneurship, one way or another, involves strengthening and further developing an effective business environment, replenishing the budgets of regional and local levels, saturating markets with services and goods, increasing wages and employment, implying an increase in investment costs, and also strengthening positions in with respect to the middle class.
Mixed and joint ventures
Today, two similar definitions are known: “joint venture” and “mixed” enterprise. The latter should be understood as a domestic structure formed by two or more economic entities of one country. For example, municipal-private, public-private and other enterprises of a national nature are considered mixed.
On the contrary joint venture with a foreign company - This is an economic unit formed by owners from different countries. In addition to joint structures, economic entities appeared in the Russian Federation that are wholly owned by foreign owners (they are called IPAs), as well as companies with foreign investments (called such FDI). The latter concept may include and joint venture with a foreign company, and a company only with foreign investment.
The wide distribution of joint structures, relevant in the modern period of development of society, sharply raised the question about the establishment of their social essence.There are no difficulties in resolving it when a joint company combines the financial and material components of the owners, which are homogeneous in their social status. However when joint venture with a foreign company formed by adding the funds of different owners, then in this procedure two different forms of ownership are involved in terms of their content. So, their union is carried out. After this, a joint ownership form is formed on this basis.
It is important to add that the respective co-owners enterprises with foreign investment, one way or another, they retain their own rights both to the share of financial and material resources contributed by them to the general channel, and to the revenue part corresponding to this share, which is formed through the implementation of the services rendered and manufactured commodity products.
The need for joint ventures
The need to create social entrepreneurship in the Russian Federation is primarily due to the fact that it contributes to the entry of this country into the economic system of the whole world. Besides, enterprises with foreign investment play an important role in creating market infrastructure. It is important to note that social entrepreneurship has very positive features, among which there is a high level of labor productivity, the use of exclusively advanced technologies, a high degree of capital productivity, and also a decent salary for employees. Undoubtedly, the above factors positively affect the economy of the Russian Federation.
The development of economic relations of an international nature through the organization of production cooperation (including through joint venture) in the last ten years has gained the maximum distribution over the entire period of economic development. Why? A very serious circumstance that prompts this is the impossibility of resolving all issues related to the country's participation in international economic relations through the development of an appropriate division of labor (MRI).
Compared to MRI, social entrepreneurship is nothing more than a complex form related to international economic cooperation. One way or another, it implies the closest ties between business partners of different countries. Joint venture participants jointly bear risks and losses, distribute revenues, by combined efforts manage the implementation and production cycles, and quickly respond to changes in the political situation in the countries of incorporation. Nevertheless, regardless of the factors mentioned, both one and the second partner realize their own interests first of all.
Business objectives
Then when joint ventures they are created on a commercial basis with an eastern or western partner, the Russian side, in one way or another, is opposed by foreign capital, which has the ability of its own application to the case in relation to many parts of the globe. Wherever capital is located, its main purpose is the appropriation of profit. It is impossible to argue that he pursues a similar goal in the process of forming enterprises of joint ownership.
However, it is necessary to add that capital of foreign origin takes part in the creation of joint ventures in the territory of the Russian Federation not only because of the momentary desire to earn maximum profit. So, according to the Oxford Journal, the following facts are known:
- Forty-five percent of foreign participants in joint ventures in the Russian Federation intend to consolidate their own positions at the moment in anticipation of more significant activities in future periods.
- Twenty five percent of the participants forming joint ventures in Russiatend to use a fairly educated, but at the same time cheap labor.
- Twenty percent of participants are interested in the vast Russian market.
- Ten percent of foreign founders wish to have access to Russian energy resources.
Types of Joint Ventures
It is important to note that joint ventures can be formed in the form of joint-stock and other business partnerships and companies. Their creation and further functioning is provided for by the current legislation of the Russian Federation. International Joint Ventures include the following elements:
- Structures with equity participation of foreign investors (in other words, joint ventures), as well as their branches and subsidiaries.
- Structures that are wholly owned by foreign investors.
- Branches belonging to foreign legal entities.
Formation and operation of a joint venture
In this chapter it would be appropriate to consider examples of joint ventures, legal support of their creation and further functioning, methods of their formation and liquidation. It is important to note that the creation of a joint structure can be implemented through its establishment or the acquisition of a share (share, stake) by a foreign person in an enterprise established until the relevant moment without foreign investment. It must be added that foreign investors, one way or another, are vested with the right to acquire interests, shares and other securities of the enterprise, which are located on the territory of the Russian Federation.
In accordance with the current Law “On Foreign Investments in the Russian Federation”, when a foreign investor participates in a structure in a foreign currency, such an enterprise should be considered as FDI - an enterprise with foreign investment. Registration of a joint venture involves the adoption of constituent documentation: the charter and the contract of the joint venture. They must determine the subject and purpose of the company’s activities, the composition of its participants, the size of their shares, the procedure and size of the creation of the authorized capital, the procedure for making decisions, the structure, competence and composition of management bodies, the procedure for liquidating the structure, and a list of issues that require unanimity.
Practical component
It should be noted that contributions to the charter capital of the joint venture are evaluated in accordance with the agreement of the participants or as agreed between them on the basis of world market prices. It is important to add that the assessment can be made both in Russian rubles and in foreign currency. In the latter case, conversion to rubles is required, of course, at the official exchange rate.
As noted above, a joint venture must be registered. So, the State Registration Chamber under the Ministry of Economy of the Russian Federation implements a state policy in terms of accounting and registration of the structures in question, and also maintains an appropriate register. It must be added that it performs registration of the structures of the fuel and energy complex, which does not depend on the size of the authorized capital, as well as companies with a total investment of foreign origin of at least one hundred million rubles. The remaining types of joint ventures have the right to register through regional and local authorities.
It should be noted that the liquidation of the joint venture is based on relevant legislation in the Russian Federation for the legal forms of economic structures under consideration. So, if after a certain period of time after passing the registration procedure of the category of enterprises under consideration there is no official confirmation of the fact that each of the participants has made at least fifty percent of the contributions indicated in the relevant documentation to the authorized capital, state body that will register this enterprise, has the right to declare it insolvent and decide on liquidation.
Joint Venture Documents
The list of documentation required for submission to the state registration authority is established through Article 12 of the Federal Law “On the Registration of Individual Entrepreneurs and Legal Entities”. It includes the following components:
- An application for state registration, signed by the applicant, in a form approved by a federal authority authorized by the Government of the Russian Federation. It should be noted that the application paper confirms that the current constituent documentation fully complies with all the requirements established by Russian legislation.
- A decision on the formation of a legal entity issued in the form of an agreement, protocol or other paper in accordance with applicable Russian law.
- Constituent documentation of a legal entity (notarized copies or originals).
- An extract from the register of legal entities of foreign origin or other evidence of legal status in relation to the foreign founder of a legal entity, equal in legal force to the first document.
- Documents confirming the operation to pay the state fee.
Additional Joint Venture Documentation
In addition to the list of documentation provided for by the discussed legal norm, the following papers must be submitted to the state tax authorities of the Russian Federation:
- Copy of the Charter of the joint venture.
- Confirmation of payment of state duty for the issuance of a copy of the main charter document.
- Documentation that serves as a confirmation of the legality of applying a legal address. Usually its role is played by the lease agreement, as well as a letter of guarantee from the lessor on the provision of the corresponding service.
Activities
It should be noted that joint ventures, one way or another, are vested with the right on the part of the Russian state to develop absolutely any types of activities permitted by legislation in force in the Russian Federation. By the way, to promote mediation, insurance, banking, the founders of the joint structure are obliged to submit a permit document called a license to the relevant state body. It should be added that the taxation of social enterprises in Russia is regulated through existing legislative acts, as well as a number of additions that indicate tax benefits and restrictions that need to be analyzed from the point of view of economic support for the functioning of the joint venture.
It is important to note that both Russian citizens and foreigners can act as employees of the joint venture. The relevant labor relations, including categories such as working hours and holidays, hiring, remuneration, dismissal, compensation and a guarantee, are regulated through a collective agreement and individual labor contracts, called today contracts.
In order to attract foreign capital, advanced foreign equipment, technologies and managerial experience for the development of the export potential of the Russian Federation, free economic spaces are formed in the country. It is there that joint ventures install preferential treatment. It implies, for example, a simplified registration procedure, preferential treatment in terms of taxation (however, the corresponding rates should exceed fifty percent of the actual rates on the territory of the Russian Federation), a reduced rate for the use of land resources, the possibility of long-term leases (the term in this case often reaches seventy years), reduction of customs duties, as well as a significant simplification of the customs procedure related to border crossing. All this affects not only the development of joint business in the Russian Federation, but also the improvement of the country's economy as a whole.
