Foreign collaboration and JV

is an alliance (union or an association) incorporated to carry on the agreed tasks collectively with the participation of the resident and non-resident entities. The central concept of foreign collaboration is joint participation between host and foreign countries for the establishment of an organic form of enterprise in the host country involving profit-seeking relationships. It is an inflow of foreign capital and technology for the host country which is backed by commercial considerations of profit and private expectations.

Important points to convey the meaning of foreign collaboration:

1. Strategic alliance between one or more resident and non-resident entities.
2. Before starting collaboration both entities must seek prior permission from the governmental authority of the domestic country.
3. During the ongoing process of seeking permission, collaboration entities prepare a preliminary agreement.
4. After obtaining necessary permission, individual representatives of resident and non-resident entities sign the preliminary agreement. A signature acts as a written acceptance of each other’s expectations, terms, and conditions.
5. After establishing foreign collaboration entities start a business together in the domestic country.
6. The term of the foreign collaboration is specified in written form.

CLASSIFICATION OF FOREIGN COLLABORATION

As no country is self-sufficient, all countries are reliant on one another to satisfy their needs. Interdependence between countries is a common phenomenon. A foreign partnership is extremely beneficial in addressing resource shortages and obtaining advanced technology at a low cost.
Due to the consequences of liberalization, privatization, and globalization, foreign participation in the Indian market is rapidly rising. Indian companies are interested in foreign counterparts since the foreign market may provide them with technical and market expertise.

1. Financial Collaboration: The in-flow of foreign investment takes place in the host country. The foreign company lends finance by:
• Purchasing ownership shares
• Giving long-term loans
• Giving credit facility

2. Technical Collaboration: The inflow of foreign technology takes place in a foreign country. Integration of foreign technology with domestic technology. Various services are provided by the foreign company such as professional services and expertise, installation of automated machinery in developing countries, and many more. Helps to remove the existing technological gap and inflow of modern technology in the domestic country.

3. Marketing Collaboration: The in-flow of foreign goods and services takes place in the host country. Integration of the foreign and the domestic market. The foreign country agrees to take part in the sale of goods by the domestic country.

4. Management Consultancy Collaboration: The in-flow of foreign management consultancy takes place in the domestic country. Provide training or teaches various management skills for production, financing, marketing, and personnel management.

FOREIGN COLLABORATION IN INDIA

In India, foreign collaboration agreements are being made between Indian and foreign companies through the sale of technology, spare parts, and the use of foreign brand names for its final products. Foreign capital in India is governed by the Foreign Exchange Management Act, 1999 and rules and regulations made by RBI.

FOREIGN COMPANIES MAY TAKE PLACE IN THREE FORMS:

1. Collaboration between the Indian and Foreign private companies.
2. Collaboration between the Indian government companies and foreign private companies.
3. Collaboration between the Indian Government and a foreign government.

AREAS FOR FOREIGN COLLABORATION
The Government of India periodically publishes a list of industries in which foreign investment is authorized.
Foreign Investment Promotion Board (FIPB) of the Government of India also considers technology imports in industries listed in Annexure A and Annexure B of Schedule 1 of the Foreign Exchange Management Regulations, 2000, subject to compliance with the provisions of Industrial Policy and Procedure as notified by the Ministry of Commerce and Industry Secretariat for Industrial Assistance (SIA) from time to time.

FOREIGN DIRECT INVESTMENT (FDI):

A type of cross-border investment in which an investor from one country has a long-term stake in and considerable influence over a company from another country. FDI is an important component of international economic integration because it establishes solid and long-term linkages between economies.
FDI is an important component of international economic integration because it develops stable and long-term ties between economies.

International investors can invest in India through a variety of strategies:
1. Merger / Amalgamation
2. Purchase of shares from the Indian Residents
3. Subscription to Memorandum of Association
4. Right/bonus issue

Routes Under Which Foreign Investors Can Invest in India:
1. Automatic Route: Foreign entities or Non-Resident do not need the approval of the Government of India or RBI.
2. Government Route: Foreign entity compulsorily needs the approval of the Government of India. Should file an application through the Foreign Investment Facilitation Portal.