Have you ever heard the term joint venture? Joint venture is a term to describe a joint venture that runs a business together. In Indonesia, this type of venture is quite common.
Although it has often been applied, if KH Friend is a beginner in the business field, this term may still be unfamiliar. Well, to understand it, let’s see a complete review of joint ventures, ranging from understanding, types, to the benefits for business in the following article.
Definition of Joint Venture
In general, a joint venture is a business or venture established by two or more business entities within a certain period of time. Usually, the time period is a pre-agreed period of time.
Generally, cooperation between two business entities is created to provide specific objectives in accordance with mutually agreed terms.
The joint venture system ends when the targets of all parties have been met. Unless one of the parties decides to continue the cooperation.
Meanwhile, according to the Legal Information Institute Cornell Law School, the scheme of a joint venture is a legal organization in the form of a short-term partnership, where there are several parties who work together to carry out transactions to obtain profits.
Usually, each party will contribute its assets and risks to the partnership. So, it can be said that a joint venture is a form of capital joint venture between two or more companies, either from within or outside the country.
As mentioned, although it is a form of cooperation, a joint venture is an agreement that has certain time limits. Both in the process, and in the parts where the company can maintain their identity.
Difference between Joint Venture and Partnership
In general, people still cannot distinguish between joint ventures and partnerships. Broadly speaking, the two do have something in common, namely conducting cooperation consisting of several companies.
But systemically, these two types of cooperation are not the same. Partnerships are made by two or more entities that then form a single business entity. Meanwhile, a joint venture is a merger of several business entities into a new entity.
In essence, a partnership is a cooperation between several parties without any merger, be it in the form of company resources or capital. Whereas a joint venture, cooperation that occurs between several parties by combining several aspects of the company, such as resources, expertise, budget funds, and so on.
Legal Basis of Joint Venture
Regulations on joint ventures are set out in Laws, Government Regulations, and Ministerial Decrees. The following is a summary of the legal basis regarding joint ventures in Indonesia:
Law No. 11 of 2020 on Job Creation, which amends Law No. 25 of 2007 on Investment, joint ventures can be categorized as foreign investment
Government Regulation No. 83 of 2001 on the Amendment to Government Regulation No. 20 of 1994 on Share Ownership in companies established in the context of foreign investment
Decree of the Minister of State for Investment Funds/Chairman of the Investment Coordinating Board No. 15/SK/1994 on the provisions for the implementation of share ownership in companies established in the framework of foreign investment.
Types of Joint Venture
After knowing the definition of joint venture and how it differs from partnership, you also need to understand what types there are. Based on the contract, joint ventures can be divided into two, namely domestic and international.
This is in accordance with the provisions in the Decree of the Minister of State for Investment Funds or Chairman of the Investment Coordinating Board No. 15/SK/1904 regarding the provisions for the implementation of share ownership in companies established in the context of foreign investment.
The businesses that must establish agencies with joint ventures are:
Production, distribution and transmission of electricity for public use
Services
Port
Telecommunications
Train.
Publishing
Atomic power plant
Drinking water
Mass media
Meanwhile, industries or business fields that are prohibited for joint ventures are industries related to national defense, such as:
Weapon production
War machine
Blasting tools
War equipment
Example of a Joint Venture Company
The following are some examples of large companies that are members of the joint venture system. Some of them are companies in Indonesia.
Asus and Gigabyte
The business competition in the production of hardware for computer products has encouraged many companies to innovate and cooperate with other companies. This is also what two well-known technology companies from Taiwan, ASUS and Gigabyte, are doing.
The companies have been competing fiercely to produce motherboards, graphics cards, and more. But in 2007, the two have agreed to cooperate to create a new strategy in producing and marketing products.
Nestle and Indofood
The two companies decided to merge and establish PT Nestle Indofood Citarasa Indonesia. The purpose of this joint venture system is to produce food seasonings and increase market reach.
PT Kimia Farma and PT Tigaraksa Perkasa
Another example comes from the two companies that have worked together by collaborating to form a company called PT Sari Husada. The purpose of the cooperation is to increase capital.
Benefits and Purpose of Joint Venture for Business
Of course, there are specific considerations or benefits to establishing a joint venture. It is these reasons and benefits that make this business model increasingly attractive. The objectives and benefits of establishing a joint venture are as follows:
Resource Pooling
Joint ventures allow the new business entity created to reach a wider market. This is because the companies involved can reach the market of the other partner company with greater resources.
Skill Merger
Through the merging of two or more business entities, joint venture businesses are made even better because of their different ideas and expertise.
Save Money
Once two or more business entities merge, each company can save on its own expenses. This is because the costs that must be incurred are not charged to one company but to the other entities involved.
Product and Service Innovation
As explained, the parties involved will merge ideas, skills, and assets that allow the new business entity to achieve better business growth.
In addition, the involved parties will also offer new product or service innovations in order to reach out to new customers and a wider target market.
Foreign Market Expansion
Currently, joint ventures are also one of the methods used to expand product distribution networks to foreign target markets.
This is an explanation of joint ventures, starting from the definition, legal basis, types, examples, to the benefits for business.
Joint venture can be one of the business model options for KH friends who want to reach a wider market, innovate products or services, as well as increase capital. The most important thing is that the parties involved in the joint venture system are regulated in a mutually agreed contract agreement.
This agreement has an important role because it will be the basis and guidelines for the parties in forming and running the operations of the joint venture company concerned.
Imagine if a cooperation is not bound in a clear contract, the relationship between KH Friend and coworkers, friends, and relatives can be detrimental to all parties. Therefore, it is recommended that joint venture cooperative relationships are always outlined in a written agreement so that the legal relationship and rights and obligations are clear.
The joint venture agreement itself contains the determination of various matters, ranging from obligations, profit and loss sharing, as well as the rights and obligations of each party. The preparation of this agreement must also be such as to provide a consensus and understanding that will have a good impact in the future.
Well, to facilitate the establishment of a joint venture more safely, KH Friend can leave the making of the agreement contract to Kontrak Hukum. We can help you to create and review a joint venture agreement contract that suits your business cooperation needs.
Needless to say, because our services have been trusted by more than dozens of large corporate partners in Indonesia in resolving their legal issues. For more information, visit https://kontrakhukum.com/kontrak/
If you have further questions about joint ventures or other business needs, KH Friends can also consult with us through the following link Ask KH or via Direct Message (DM) to Instagram @kontrakhukum.
