:: ZAFAR & ASSOCIATES

Dr. Ilyas Zafar

DR. ILYAS ZAFAR

Founder & Sr. Partner

South Asia

Rana Munir Hussain

MUNIR HUSSAIN

Senior Partner

Lahore, Pakistan

Shagufta Jabeen

SHAGUFTA JABEEN

Business Law Consultant

Durban, South Africa

Verda Hussain

VERDA HUSSAIN

Business Law Consultant

Karachi, Pakistan

Waseem Akram Bhatti

WASEEM AKRAM

Business Law Consultant

Manchester, UK

Imran-ul-Haq Khan

IMRAN-UL-HAQ KHAN

Senior Litigator

Quetta, Pakistan

M. Ilyas Mian

M. ILYAS MIAN

Senior Litigator

Rawalpindi, Pakistan

M. Nadeem Qureshi

M. NADEEM QURESHI

Senior Litigator

Karachi, Pakistan

Zafar-ullah Khan Khakhwani

ZAFAR KHAKHWANI

Senior Litigator

Multan, Pakistan

Waseem Ashfaq

WASEEM ASHFAQ

Chartered Accountant

Lahore, Pakistan

Muneeb Zafar

MUNEEB ZAFAR

Business Law Consultant

Lahore, Pakistan

Syed Nasir Ali Gilani

NASIR ALI GILANI

Business Law Associate

Lahore, Pakistan

Iram Fatima

IRAM FATIMA

Business Law Associate

Lahore, Pakistan

Sana Hassan Tariq

SANA HASSAN TARIQ

Business Law Associate

Lahore, Pakistan

:: Core Competencies

  • Commercial Law
  • Company Law
  • Contract Enforcement
  • Corporate Governance
  • Corporate Law
  • E-Commerce
  • Franchising
  • Investment Law
  • Joint Ventures

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:: Joint Ventures in Pakistan

Joint Ventures

Here you may find information about joint ventures in Pakistan. Our dedicated team of professional lawyers best assists their clients as joint venture setup in Pakistan.

Joint Venture is a legal entity in the nature of a partnership engaged in the joint prosecution of a particular transaction for mutual profit. An association of persons jointly undertaking some commercial enterprise, it requires a community of interest in the performance of the subject matter, a right to direct and govern the policy in connection therewith, and duty, which may be altered by agreement, to share both in profit and loses. Unlike a partnership, a Joint Venture does not entail a continuing relationship among the parties.

A Joint Venture is a legal organisation that takes the form of a short term partnership in which the persons jointly undertake a transaction for mutual profit. Generally each person contributes assets and share risks. Like a partnership, joint ventures can involve any type of business transaction and the "Persons" involved can be Individuals, Groups of Individuals, Companies or Corporations.

:: Scope of Practice

Joint ventures are also widely used by companies to gain entrance into foreign markets. Foreign companies form joint ventures with domestic companies already present in markets. The foreign companies generally bring new technologies and business practices into the joint venture, while the domestic companies already have the relationships and requisite governmental documents within the country along with being entrenched in the domestic industry.

Joint Ventures are governed by state Partnership, Contracts, and Commercial Transactions Law. A Joint Venture is also treated like a Partnership for Federal Income Tax purposes. A joint venture corporation involves the same type of activity as above but within a corporate framework. Foreign joint ventures are subject to the International Trade Laws and the laws within the foreign countries.

REASONS FOR FORMING A JOINT VENTURE

Internal Reasons

  • Build on Company's strengths;

  • Spreading costs and risks;

  • Improving access to financial resources;

  • Economies of scale and advantages of size;

  • Access to new technologies and customers; and

  • Access to innovative managerial practices.

Competitive Goals

  • Influencing structural evolution of the industry;

  • Pre-empting competition;

  • Defensive response to blurring industry boundaries;

  • Creation of stronger competitive units;

  • Speed of market; and

  • Improved agility.

Strategic Goals

  • Synergies;

  • Transfer of technology / skills; and

  • Diversification.

WHY JOINT VENTURES?

As there are good business and accounting reasons to create a joint venture (JV) with a company that has complementary capabilities and resources, such as distribution channels, technology, or finance. Joint ventures are becoming an increasingly common way for companies to form strategic alliances. In a joint venture, two or more "parent" companies agree to share capital, technology, human resources, risks and rewards in a formation of a new entity under shared control.

IMPORTANT FACTORS TO BE CONSIDERED BEFORE A JOINT VENTURE IS FORMED

  • Screening of prospective partners;

  • Joint development of a detailed business plan and short listing a set of prospective partners based on their contribution to developing a business plan;

  • Due Diligence - checking the credentials of the other party ("trust and verify" - trust the information you receive from the prospective partner, but it's good business practice to verify the facts through interviews with third parties);

  • Development of an exit strategy and terms of dissolution of the Joint Venture;

  • Most appropriate structure (e.g. most joint ventures involving fast growing companies are structured as strategic corporate partnerships);

  • Availability of appreciated or depreciated property being contributed to the joint venture; by misunderstanding the significance of appreciated property, companies can fundamentally weaken the economics of the deal for themselves and their partners;

  • Special allocations of income, gain, loss or deduction to be made among the partners; and

  • Compensation to the members that provide services.

:: Joint Ventures Planner
Joint Ventures Planner

TYPES OF JOINT VENTURES

How you set up a joint venture depends on what you are trying to achieve. One option is to agree to co-operate with another business in a limited and specific way. For example, a small business with an exciting new product might want to sell it through a larger company's distribution network. The two partners could agree a contract setting out the terms and conditions of how this would work.

Alternatively, you might want to set up a separate joint venture business, possibly a new company, to handle a particular contract. A joint venture company like this can be a very flexible option. The partners each own shares in the company and agree how it should be managed.

In some circumstances, other options may work better than a limited company. For example, you could form a business partnership or a limited liability partnership. You might even decide to completely merge your two businesses.

Businesses of any size can use joint ventures to strengthen long-term relationships or to collaborate on short-term projects. A successful joint venture can offer:

  • Access to new markets and distribution networks;

  • Increased capacity;

  • Sharing of risks and costs with a partner; and

  • Access to greater resources, including specialised staff, technology and finance.

A joint venture can also be very flexible. For example, a joint venture can have a limited life span and only cover part of what you do, thus limiting the commitment for both parties and the business' exposure.

RISKS INVOLVED IN JOINT VENTURES

Partnering with another business can be complex. It takes time and effort to build the right relationship. Problems are likely to arise if:

  • The objectives of the venture are not hundred per cent clear and communicated to everyone involved;

  • Partners have different objectives for the joint venture;

  • There is an imbalance in levels of expertise, investment or assets brought into the venture by different partners;

  • Different cultures and management styles result in poor integration and co-operation; and

  • Partners don't provide sufficient leadership and support in early stages.

Success in a joint venture depends on thorough research and analysis of aims and objectives. This should be followed up with effective communication of the business plan to everyone involved.

Setting up a joint venture can represent a major change to your business. However beneficial it may be to your potential for growth, it needs to fit with your overall business strategy. It’s important to review your business strategy before committing to a joint venture. This should help you define what you can realistically expect. In fact, you might decide that there are better ways to achieve your business aims. If you do decide to form a joint venture, it may well help your business to grow faster, increase productivity and generate greater profits. Joint ventures often enable growth without having to borrow funds or look for outside investors. You may also be able to use your joint venture partner's customer database to market your product, or offer your partner's services and products to your existing customers. Joint venture partners also benefit from being able to join forces in purchasing, research and development.

RELATIONSHIP OF PARTIES IN EXISTING JOINT VENTURE

Before starting a joint venture, the parties involved need to understand what they each want from the relationship.

Smaller businesses often want to access a larger partner's resources, such as a strong distribution network, specialist employees and financial resources. The larger business might benefit from working with a more flexible, innovative partner or simply from access to new products or intellectual property.

Similarly, you might decide to build a stronger relationship with a supplier. You might benefit from their knowledge of new technologies and get a better quality of service. The supplier's aim might be to strengthen their business from a guaranteed volume of sales to you.

Whatever your aims, the arrangement needs to be fair to both parties. Any deal should:

  • Recognize what you each contribute;

  • Ensure that you both understand what the agreement is expected to achieve; and

  • Set realistic expectations and allow success to be measured.

The objectives you agree should be turned into a working relationship that encourages teamwork and trust.

CHOOSING A RIGHT JOINT VENTURE PARTNER

The ideal partner in a joint venture is one that has resources, skills and assets that complement your own. The joint venture has to work contractually, but there should also be a good fit between the cultures of the two organizations.

A good starting place is to assess the suitability of existing customers and suppliers with whom you already have a long-term relationship. You could also think about your competitors or other professional associates. Broadly, you need to consider the following:

  • How well do they perform?

  • What is their attitude to collaboration and do they share your level of commitment?

  • Do you share the same business objectives?

  • Can you trust them?

  • Do their brand values complement yours?

  • What kind of reputation do they have?

If you opt to assess a new potential partner, you need to carry out some basic checks

  • Are they financially secure?

  • Do they have any credit problems?

  • Do they already have joint venture partnerships with other businesses?

  • What kind of management team do they have in place?

  • How are they performing in terms of production, marketing and personnel?

  • What do their customers and suppliers say about their trustworthiness and reputation?

HOW TO ENTER INTO A JOINT VENTURE AGREEMENT?

Selection of a good local partner is the key to the success of any joint venture. Once a partner is selected generally a Memorandum of Understanding or a Letter of Intent is signed by the parties highlighting the basis of the future joint venture agreement.

A Memorandum of Understanding and a Joint Venture Agreement must be signed after consulting lawyers well versed in International Laws and Multi-jurisdictional Laws and Procedures.

Before signing the joint venture agreement, the terms should be thoroughly discussed and negotiated to avoid any misunderstanding at a later stage. Negotiations require an understanding of the cultural and legal background of the parties.

Before signing a Joint Venture Agreement the following must be properly addressed:

  • Dispute Resolution Agreements

  • Applicable Law

  • Force Majeure

  • Holding Shares

  • Transfer of Shares

  • Board of Directors

  • General Meeting

  • CEO/MD

  • Management Committee

  • Important Decisions with Consent of Partners

  • Dividend Policy

  • Funding

  • Access

  • Change of Control

  • Non-Compete

  • Confidentiality

  • Indemnity

  • Assignment

  • Break of Deadlock

  • Termination

The Joint Venture agreement should be subject to obtaining all necessary governmental approvals and licenses within specified period.

CREATING A JOINT VENTURE AGREEMENT

When you decide to create a joint venture, you should set out the terms and conditions in a written agreement. This will help in preventing any misunderstandings once the joint venture is up and running.

A written agreement should cover:

  • The structure of the joint venture, e.g. whether it will be a separate business in its own right;

  • The objectives of the joint venture;

  • The financial contributions you each will make;

  • Whether you will transfer any assets or employees to the joint venture;

  • Ownership of intellectual property created by the joint venture;

  • Management and control, e.g. respective responsibilities and processes to be followed;

  • How liabilities, profits and losses are shared;

  • How any disputes between the partners will be resolved; and

  • An exit strategy.

You may also need other agreements, such as a confidentiality agreement to protect any commercial secrets you disclose.

It is essential to get independent expert advice before any final decisions are taken - contact your local Business Link as a starting point for advice.

JOINT VENTURE RELATIONSHIP

A clear agreement is an essential part of building a good relationship. Consider these ideas:

  • Get your relationship off to a good start. For example, you might include a project that you know will be a success so that the team working on the joint venture can start well, even if you could have completed it on your own;

  • Communication is a key part of building the relationship. It's usually a good idea to arrange regular, face-to-face meetings for all the key people involved in the joint venture. For ideas on ways to improve communication;

  • Sharing information openly, particularly on financial matters, also helps avoid partners becoming suspicious of each other. The more trust there is, the better the chances that your relationship will work;

  • It's essential that everyone knows what you are trying to achieve and works towards the same goals. Establishing clear performance indicators lets you measure performance and can give you early warning of potential problems;

  • At the same time, you should aim for a flexible relationship. Regularly review how you could improve the way things work and whether you should change your objectives; and

  • Even in the best relationship, you'll almost certainly have problems from time to time. Approach any disagreement positively, looking for solutions rather than trying to score points off each other. Your original joint venture agreement should set out agreed dispute resolution procedures in case you are unable to resolve your differences yourselves.

ENDING A JOINT VENTURE

Your business, your partner's business and your markets all change over time. A joint venture may be able to adapt to the new circumstances, but sooner or later most partnering arrangements come to an end. If your joint venture was set up to handle a particular project, it will naturally come to an end when the project is finished.

Ending a joint venture is always easiest if you have addressed the key issues in advance. A contractual joint venture, such as a distribution agreement, can include termination conditions. For example, you might each be allowed to give three months' notice to end the agreement. Alternatively, if you have set up a joint venture company, one option can be for one partner to buy the other out. The original agreement may typically require one partner to buy out the other.

The original agreement should also set out what will happen when the joint venture comes to an end. For example:

  • How shared intellectual property will be unbundled;

  • How confidential information will continue to be protected;

  • Who will be entitled to any future income arising from the joint venture's activities; and

  • Who will be responsible for any continuing liabilities, e.g. debts and guarantees given to customers?

Even with a well-planned agreement, there are still likely to be issues to resolve. For example, you might need to agree who will continue to deal with a particular customer. Good planning and a positive approach to negotiation will help you to arrange a friendly separation. This improves the chances that you can continue to trust each other and work together afterwards. It can also raise your profile in the business community as a reliable and productive partner.

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CONTRACT FOR JOINT VENTURE COMPANY

Chapter 1 :: GENERAL PRINCIPLE

In accordance with the Law of the _________________________ on Joint Ventures Using Pakistani and Foreign Investment (the “Joint Venture Law”) and other relevant _________________ laws and regulations, the _______________________________ hereinafter referred to as Party A and _________________________, hereinafter referred to as Party B in accordance with the principle of equality and mutual benefit and through friendly consultations, agree to jointly invest to set up a joint venture enterprise_______________________., LTD (WHAS or JV) in ______________ ,Islamic Republic of Pakistan.

Chapter 2 :: PARTIES TO THE JOINT VENTURE

Article 2.1 Parties to this contract are as follows:

_______________________ Co., Ltd. (hereinafter referred to as Party A), registered in _____________________ , with its legal address being: _____________________________________________________________________________ and legal representative: Name:__________, Position: Chairman of Board, Nationality: ______________________________________________ (hereinafter referred to as Party B), registered in _______________ with its legal address being: _____________________________________________________________________ legal representative: Name: ___________________, Position: Chairman of Board, Nationality: _____________________.

Chapter 3 :: ESTABLISHMENT OF THE JOINT VENTURE COMPANY

Article 3.1 Establishment of Joint Venture

Both Party A and Party B agree to set up a joint venture enterprise, ___________________________________________________ , LTD (hereinafter referred to as the Joint Venture or JV). Legal address of the Joint Venture: ____________________________________________________________________ The Joint Venture, upon the approval of the board and the relevant authorities, may establish branch offices in any city of Pakistan or any other country or district when it’s necessary.

Article 3.2 Limited Liability Company

The organisation form of the JV is a Limited Liability Company. Each party to the joint venture company is liable to the joint venture company within the limit of the capital subscribed by it. The profits, risks and losses of the joint venture company shall be shared by the parties in proportion to their contributions to the registered capital.

Article 3.3 Governing Laws

The Joint Venture, a Pakistani company, registered in __________________________ and its all legitimate management rights are protected by the Islamic Republic of Pakistan. All the activities of the Joint Venture should abide by the stipulations of the laws, rules and related regulations of the Islamic Republic of Pakistan and share the preferential conditions and policies as well.

Article 3.4 Commencement Date

The Joint Venture shall be established on the Business License Issuance Date of the Joint Venture.

Chapter 4 :: PURPOSE, SCOPE AND SCALE OF OPERATION

Article 4.1 Business Objectives

To achieve satisfactory financial returns through competitive products in terms of quality and price with advanced technology and equipment.

Article 4.2 Operation Scopes

Development, production and sale ____________________________ (description of products) and related products. The operation scopes of the Joint Venture shall be finally ratified by the Industrial and Commercial Administration Office.

Article 4.3 Production Capacity

The production capacity of the Joint Venture shall be ______________ and related products per year; _________________________ shall be manufactured by Joint Venture particularly for the medium/high end products of____________ ; Within one month from the date the Joint Venture is capable of manufacturing products, Party B shall transfer its production of products supplied to _______ to the Joint Venture. The Joint Venture should set up ________________ team for _________ application.

Chapter 5 :: TOTAL INVESTMENT, REGISTERED CAPITAL, INCREASE INVESTMENT, LOANS AND DEBTS

Article 5.1 Investment

The total investment of the Joint Venture shall be ________________. The investment shall be paid into two phases as follows: the first payment, that is ________________ , shall be paid in 20__ and the second part of total investment, _________________ shall be paid in 20__.

Article 5.2 Registered Capital

The registered capital of the Joint Venture shall be ___________________.

  • Party A’s contribution to the registered capital of the Joint Venture shall be __________________ , representing ______% of the registered capital of the Joint Venture.

  • Party B’s contribution to the registered capital of the Joint Venture shall be ___________________ , representing ______% of the registered capital of the Joint Venture. If Party B paid in foreign currency, the payment shall be exchange to Pak Rupees as the published exchange rate by the State Bank of Pakistan on the issue date of Business Registration Certificate of the Joint Venture.

Article 5.3 Payment of Registered Capital

Both parties shall simultaneously pay up the registered capital in one time within one month from the effective date of the contract. Before the registered capital wired into the account, the Joint Venture shall not borrow any loans from any banks.

Article 5.4 Verification from Accountant

When either Party has made its contribution to the registered capital of the Joint Venture, a Pakistani registered accountant shall verify such contribution and issue a Capital Contribution Verification Report in the form required under applicable laws. The Joint Venture shall issue an Investment Certificate to each Party within fifteen (15) days of receipt of such report.

Article 5.5 Subscription to a Third Party

In case any party to the joint venture intends to assign all or part of its investment subscribed to a third party, written consent shall be obtained from the other party to the joint venture, and approval from the examination and approval authority shall be required.

If any Party proposes to transfer all or any part of its interest of the Joint Venture, the Party shall notify the other Party in writing of the terms and conditions of the proposed transfer at least thirty (30) days in advance.

If a Party proposes to transfer all or any part of its interest of the Joint Venture to a third party, the other Party shall have a pre-emptive right to purchase such interest.

If the other Party does not exercise its pre-emptive right of purchase within ninety (90) days after delivery of such notice, such other Party shall be deemed to have consented to such transfer.

Neither Party can sell its ownership to the third Party with terms and conditions better than the offer to the other Party to the Joint Venture.

Article 5.6 Right to subscribe the increase

If the Board of Directors decides to increase the registered capital of the Joint Venture, either Party shall have the right to subscribe the increase in proportion to their contributions to the registered capital.

If within sixty (60) days of the notice of increase in the registered capital, any Party (“Declining Party”) for any reason declines to contribute all or part of its proportionate share of any required increase, such Declining Party hereby agrees that the other Party shall have the pre-emptive right to contribute to the extent of the increase not subscribed in the registered capital unilaterally. The resulting changes in the Parties’ relative shares of the registered capital shall be approved and registered by the Approval Authority.

Article 5.7 Guarantee for Debts

If a guarantee is required for debts of the Joint Venture and both Parties deem they may provide, such guarantee shall be provided by both Parties in proportion to their contributions to the registered capital.

Chapter 6 :: SALES AND MARKETING

Article 6.1 Sale of Manufactured Goods

Products manufactured by the Joint Venture will be sold primarily in the Pakistani market, with the remainder sold overseas.

Article 6.2 Export of Products

The Joint Venture may either export its products directly, or sign sales contracts with Chinese foreign trade companies, entrusting them to be the sales agencies for overseas market.

Article 6.3 Approval of Brand

The brand used by the Joint Venture shall be approved by the Board and ratified by the Pakistani Brand Registration Authority.

Chapter 7 :: BOARD OF DIRECTORS

Article 7.1 Date of Registration

The date of registration of the joint venture shall be the date of the establishment of the board of directors of the joint venture.

Article 7.2 Number and Appointment of Directors

The Board shall consist of five directors, of which, two (2) shall be appointed by Party A and three (3) by Party B. Each director shall be appointed for a term of four (4) years and may serve consecutive terms if re-appointed by the nominating Party. The Chairman of the Board shall be appointed by Party B.

If any director on the Board is removed by the nominating Party, a successor shall serve out such director’s term.

When a director served out his or her term or be removed on his or her term by the nominating Party, the Party shall submit a written notice of the new director’s candidate to the Joint Venture within fifteen (15) days.

Article 7.3 Powers of the Board

The Board shall be the highest authority of the Joint Venture and entitled to decide all major issues.

Chairman shall be the legal representative of the Joint Venture. Whenever the Chairman is unable to perform his responsibilities for any reason, the Chairman shall designate another director to perform his responsibilities.

More than two third (2/3) of total number of directors present shall constitute a quorum necessary for the conduct of business at a meeting of the Board. If a Board member is unable to attend a Board meeting, he or she may issue a written proxy and entrust a representative to attend the meeting on his or her behalf.

Article 7.4 Holding of Board’s Meetings

The Board meeting shall be held at least once each year. The Chairman shall be responsible for calling on and presiding over Board meetings. Initiated by more than one third (1/3) of directors, the Chairman can call on a temporary board meeting.

When the Board meeting finished, eight copies of approved minutes with all directors’ signatures shall be delivered to the each Party, the Joint Venture and all directors.

The meeting shall be held at the legal address of the Joint Venture or other place designated by the Parties.The Joint Venture shall pay for the expenses of Board meetings.

The Board may invite relevant person to present the meeting of the Board.

The Joint Venture shall not pay any salary to a director who is not in the management team of the Joint Venture.

Article 7.5 Unanimous Approval of Directors

The unanimous approval of all directors shall be required in connection with the following issues:

  • Amendment in the Articles of Association of the Joint Venture;

  • Termination or Dissolution of the Joint Venture;

  • Increase, decrease or transfer of the Joint Venture’s registered capital;

  • Merge, separation or association with other economic organization;

  • Acquisition of any other enterprise;

  • Pledge of JV’s assets; and

  • Any other matter requires unanimous approval by the Board.

Article 7.6 Approval by 2/3rd of Directors

The following issues require approval by at least two third (2/3) of Directors present at the meeting:

  • Middle and long-term plans;

  • Annual budgets, financial reports and annual report;

  • Appointment of the General Manager, Deputy General Manager;

  • Major contracts;

  • Profit distribution;

  • Establishment or evacuation of branch or liaison offices abroad;

  • Material changes of the organisation of the Joint Venture;

  • Single investment or purchase with a value in excess of ______________ provided, such investment or purchase is not in operating budget; and

  • Any other matter the Board deems substantial.

Article 7.7 Board’s First Meeting

The first Board meeting shall be held at an appropriate time after the Business License issued.

Chapter 8 :: OPERATING AND MANAGEMENT

Article 8.1 Appointment of GM, VGM, FM and AFM

General Manager for the preparation and construction of the first phase investment shall be appointed by Party B. After the conclusion of the construction, the GM shall be selected and hired by the Board inside and outside the JV. A Vice General Manager shall be appointed by Party A. A Finance Manager shall be appointed by Party B, and an Assistant Finance Manager shall appointed by Party A.

Article 8.2 Responsibilities of GM and Vice GM

  • General Manager shall be responsible for JV’s daily operating and management, under the direction of the Board of Directors.

  • General Manager is to execute all the resolutions of the Board meeting, organize and guide daily operating activities and management. Vice General Manager is to assist the General Manger. The structure can set a few department managers to be in charge of all departments and handle the matters required by the GM and Vice GM and responsible to the GM and Vice GM.

  • The General Manager and Deputy General Manager shall not concurrently serve in other economic organizations and shall not participate in any commercial competition activities of other economic organizations against JV.

Article 8.3 Removal of GM, VGM, FM, AFM

The GM, Vice GM, Finance Manager and Assistant Finance Manager may be removed at any time by resolution of the Board of Directors for his or her malpractice or dereliction of duty.

Chapter 9 :: OBLIGATIONS OF BOTH PARTIES

Party A and Party B shall be respectively responsible for matters related as follows:

Article 9.1 Obligations of Party A:

  • Contribute cash pursuant to the Contract;

  • To assist the JV in premises matters;

  • To assist the JV to apply for Hi-Tech Enterprise and tax and other preferential treatment;

  • To assist the JV in customs clearance of the equipment, raw material and parts and their transportation within Pakistan;

  • To assist the JV to purchase equipment, raw material, office stuff and transportation means and communications utilities in the Pakistan;

  • To assist the JV to complete infrastructure facilities of water, electricity and traffic;

  • Assistance in hiring personnel of Pakistani nationality including administrators, technicians, workers and foreign staff needed by the JV; and

  • To assist the foreign staff in handling visa, work certificate and travel formalities.

Article 9.2 Obligations of Party B

  • To contribute cash according to the stipulation of the Contract;

  • To procure the advanced and applicable machinery and equipment and materials from the international market entrusted by Joint Venture;

  • To provide the required technical personnel for the installation, adjustment and trial production of the machinery and equipment; and for manufacturing and inspection;

  • To train administrators and technical personnel and workers for the Joint Venture;

  • To be responsible for stable production upon the designed capacity and production of quality product over the license term;

  • To help the JV to develop overseas market;

  • Other matters entrusted by the Joint Venture.

Chapter 10 :: LABOR MANAGEMENT AND COMPOSITION OF LABOR UNION

Article 10.1 Labor Management

All issues such as recruitment, employment, dismissal, resignation, wages, welfare, labor insurance, labor protection, labor safety and labor discipline shall be handled in accordance with stipulations and provisions of labor and social issuance laws of the Islamic Republic of Pakistan.

Article 10.2 Employment Contract

JV shall sign employment contract with the employees recruited, in accordance with the related laws and regulations stipulated by Pakistan _______ City.

The salaries, social insurance, welfare and standards of traveling allowance of the senior administrators recommended by Party A and Party B, shall be discussed and decided at the Board meeting. The other Employee’s salary, reward and welfare shall be proposed by the general manager by reference to the level of other auto parts JV in city _______ and approved by the Board.

Article 10.3 Establishment of Labor Unions

The employees of the Joint Venture are authorized to establish the basic labor union and to engage in labor activities according to the Labor Law of the Islamic Republic of Pakistan. The Joint Venture will provide the essential activity necessities for its labor union.

Chapter 11 :: EQUIPMENT, RAW MATERIAL PURCHASE, COMMODITY INSPECTION

Article 11.1 Purchasing of Raw Material, Equipments and Vehicles

All of the production equipments, vehicles, raw materials, fuel and office supplies and so on which are needed by the Joint Venture may be purchased both in Pakistan and overseas at the discretion of the Joint Venture.

Article 11.2 Inspection of import equipments

All import equipments, raw materials must be submitted to the relevant authority for inspection in accordance with the rules and regulations of Islamic Republic of Pakistan.

Chapter 12 :: FINANCING, TAXING, AUDITING AND PROFIT DISTRIBUTION

Article 12.1 Taxes

The Joint Venture should pay all the taxes required according to the related laws and stipulations of the Islamic Republic of Pakistan.

The staff members of the Joint Venture should pay individual income tax according to Individual Income Tax Law of the Islamic Republic of Pakistan.

Article 12.2 Commencement of Fiscal Year

The fiscal year of the Joint Venture starts from the 1st day of January and ends on the 31st day of December of each year.

Article 12.3 Bookkeeping Currency

JV shall adopt _______ as the standard bookkeeping currency.

Article 12.4 Language

All the accounting certificates, documents, reports and account books should be written in English.

Article 12.5 Appointment of Accountants and Auditors

For accounting and auditing, the Joint Venture should hire accountants and auditors registered in the Islamic Republic of Pakistan, and report these results to the Board of Directors and the General Manager.

Article 12.6 Employ a Foreign Auditor

In case a Party considers it is necessary to employ a foreign auditor registered in another country to undertake annual financial checking and examination, the other Party shall give its consent. All the expenses thereof shall be borne by such Party.

Article 12.7 Submission of Balance Sheet

Within 90 days of a fiscal year end, General Manager shall submit the previous year’s balance sheet, profit and loss statement and cash flow statement reviewed and signed by a CPA to the Board of Directors for review and approval.

Article 12.8 Profit Distribution

JV shall set aside reserve fund, expansion fund of JV and welfare funds and bonuses for employee from the JV’s after-tax profit, the ratio of which shall be determined by the Board. The ratio of reserve fund to the JV’s after-tax profit shall not be lower than 10%.

The distributable profit, which is the profit after above three funds have been allocated, shall be distributed to the Parties in proportion to their contributions to the registered capital.

The profit shall be distributed to the Parties within 30 days after the distribution plan approved by the Board.

Article 12.10 Undistributed Profits

Current year profits shall not be distributed before losses from previous year have been made up. Undistributed profits of previous year may be carried over to and distributed in current year.

Chapter 13 :: MANAGEMENT OF FOREIGN EXCHANGE

All foreign exchange matters of the Joint Venture will follow the regulations of the relevant department.

Chapter 14 :: TERM OF THE JOINT VENTURE

The term of this Joint Venture is 10 years, from the date of the business license issued.

The term of this Contract may be extended with the approval of all parties before the expiration of this agreement.

Chapter 15 :: INSURANCE

Each item of insurance of the Joint Venture shall be sourced from the People’s Insurance Company of Pakistan. The insurance category; value and term shall be handled in accordance with the insurance laws and regulations of Islamic Republic of Pakistan.

Chapter 16 :: AMENDMENT, TERMINATION AND DISSOLUTION OF JV

Article 16.1 Amendment of Contract

The amendment of the contract or its appendices shall come into force only after a written agreement has been signed by both Parties and approved by the original examination and approval authority.

Article 16.2 Termination of JV

With the unanimous agreement of the Board of Directors and approval of the original inspection department, the Joint Venture can be terminated prior to the initial term or the contract be terminated in advance if the contract cannot be executed for reason of force majeure or the Joint Venture suffers losses in consecutive years and is incapable of going on with the business for certain reasons.

If one party not execute the obligations stipulated by the contract and the Article of Association, or gravely breach the contract and the Article resulting in the JV unable to operate or unable to achieve the targeted objective in the contract, it shall be considered single-party termination of the contract by the breaching party. Except the right to reclaim penalty from the breaching party, the other party has the right to terminate the contract upon report to and approved by the original approver according to the stipulation in the contract. If the parties agree to continue the operating, the breaching party shall compensate the JV’s losses.

Chapter 17 :: LIQUIDATION

Article 17.1 Establishment of Liquidation Committee

If this Contract is terminated for any reason, the Board of Directors shall present liquidation principle, liquidation procedure and establish a Liquidation Committee to liquidate the Joint Venture.

Article 17.2 Duties of Liquidation Committee

The Liquidation Committee shall determine the reasonable dispose price of the assets of the Joint Venture by reference to the fair market value.

Article 17.3 Distribution of Assets of JV

After the discharge of all debts of JV, the remaining assets of JV shall be distributed as follows:

  • Distributions to the Parties to JV shall be in proportion to the capital contribution they subscribe in the registered capital;

  • Party A shall have the right of first refusal to purchase the fixed assets such as premises, land of JV, pricing at liquidation;

  • Party B shall have the right of first refusal to purchase cash, equipment, die etc, pricing at the price of liquidation; and

  • Reserve fund and expansion fund shall be distributed to the Parties in proportion to the capital contribution they subscribe in the registered capital; Welfares and bonuses fund shall be distributed to the employees on list.

Article 17.4 Issuance of Final Report

After the completion of all liquidation proceedings, the Liquidation Committee shall issue a final report, which shall be approved by the Board of Directors, undertake the cancellation of registration and submit the business license to the original registration authorities. The liquidation accounting books and other documents shall be kept by Party A.

Chapter 18 :: OBLIGATION OF THE PARTY BREACHING THE CONTRACT

Article 18.1 Failure in Contribution

If either Party fails to contribute the amount of the contribution committed by the time stipulated in Article 5 of the contract, the Party breaching the contract shall pay the JV ___% for each day of the total amount of its contribution overdue. Should the Party breaching the contract fail to contribute the amount of capital it committed for 60 days, the Party observing the contract has the right to terminate the contract according to article 19.3 item of contract and demand the Party breaching the contract to compensate for its losses.

Article 18.2 Entitlement to Damages

Should the Joint Venture be unable to operate or to achieve the operating objectives thereof due to either Party’s failure to perform the obligations or its material breach hereof, provided such failure or breach can not be corrected, or such breach has not been corrected within 60 days upon a written notice, the complying Party shall be entitled to damages and terminate the Contract.

Even though the complying Party agrees to continue to operate, the Party in breach shall compensate the losses that the Joint Venture and the complying Party suffered.

Article 18.3 Liability of Defaulting Party

Should all or part of the contract and its appendices unable to be fulfilled owing to the fault of any party, the party in breach shall bear the liability thereof. Should it be the fault of both parties, they shall bear their respective liabilities according to the actual situation.

Chapter 19 :: FORCE MAJEURE

As the consequence of force majeure, such as earthquakes, typhoons, floods, fires, wars or other natural calamities, which can not be predicted, or the happening or consequence of which can not be prevented or avoided, and directly affects the execution of the contract, or execution of the contract according to the terms stipulated in the contract, the Party that encounters the force majeure should notify the other Party by cable of the actual situation of the accident, and valid documents to certify the detailed happenings of the accident, and valid documents to certify the reasons of its inability to fulfill or completely fulfill, or the necessity to postpone the fulfillment of the contract , should be submitted to the other Party within 15 days of the accident, and should be certified by the notarization department of the region where the accident took place. Disputes arising out of cases of force majeure shall be resolved through negotiations between the two Parties as to whether to terminate the contract or partially release the obligations of the affected party, or postpone the fulfillment of the contract according to the effect of the accident on the fulfillment of the contract.

Chapter 20 :: LAWS APPLICABLE

The signing, validity, explanation and implementation of this contract should be governed by the Laws of the Islamic Republic of Pakistan.

Chapter 21 :: METHODS OF DISPUTE SOLUTION

Should any dispute arise from the contract or relating to the contract, shall be submitted to Chinese International Economic and Trade Arbitration Committee, and be arbitrated according to the valid and current arbitration rule upon the application time, whose decision shall be final and legally binding upon both Parties. Should any dispute arise from the implementation of or relating to the contract, both Parties shall resolve them through friendly negotiations. If the discrepancies cannot be solved by negotiations, they should be submitted for arbitration.

During the process of arbitration, the contract should be executed with no interruption, except for those parts relating to discrepancies under arbitration.

Chapter 22 :: LANGUAGE OF THE TEXT

This contract is written in English.

Chapter 23 :: VALIDITY OF THE CONTRACT

Article 23.1 Indispensable Parts of the Contract

The contract and its appendices shall have the same force. All the articles of the contract including its appendixes stipulated under the Contract are indispensable parts of this contract.

The contract and its appendices shall come into force commencing from the date of approval of the administration department of the Islamic Republic of Pakistan.

Article 23.2 Notices

Any notices, if sent by fax or email and relating to the rights and obligations of the two Parties, should be notified by written letter later.

Correspondence

Party A: _____________________________________

Address:

Telephone:

Facsimile:

Party B: ______________________________________

Address:

Telephone:

Fax:

Any changes of the statutory address should be notified to the other Party in time and confirmed by written form, the confirm letter has legal effect.

IN WITNESS WHEREOF, this Contract is signed by the Parties to the Joint Venture on July 1, 2009.


By: _____________________________________

Chairman


By: _____________________________________

Chairman

We, at Zafar & Associates deal all work pertaining to the Joint Ventures i.e. its formation, Joint Venture Agreements, its registration with BOI / SECP etc. We can give an extraordinary good outcome as we have tremendous faculty here to deal with this.

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