‘‘Amalgamation occurs went two or more companies are join to form a third entity one is absorbed into or blended with another’’_ that is explained and illustrate.
A general term used to refer to the consolidation of companies. A merger is a combination of two
companies to form a new company, while an acquisition is the purchase of one company by
another in which no new company. The terms company is used to describe an association of a
number of person, formed for some common purpose and registered according to the law
relating to companies. Lord Justice Lindley define: ‘By a company is mean an association of
many person who contribute money or money’s worth to a common stock and employ it for a
common purpose. ’The common stock so contribute is denoted in money and is the capital of the
company. The persons who contribute it or to whom it belongs are members. The proportion
of capital to which each member is entitled is his share.’’ (1)
An example of a major merger is the merging of JDS Fitel Inc. and Uniphase Corp. in 1999 to
form JDS Uniphase. An example of a major acquisition is Manulife Financial Corporation’s 2004
acquisition of John Hancock Financial Services Inc. A merger occurs when one firm assumes all the assets and all the liabilities of another. The acquiring firm retains its identity, while the acquired firm ceases to exist. A majority vote of shareholders is generally required to approve a merger. A merger is just one type of acquisition. One company can acquire another in several other ways, including purchasing some or all of the company’s assets or buying up its outstanding shares of stock.
Company object and purpose:
Encourage investments in companies by providing certain facilities, e.g., limitation of
liability, transferability of shares etc.
Ensure due and proper administration of the funds and assets of companies in the interest
of the investing public.
Present malpractices by directors and managers.
Arrange for investigation into the affairs of companies and provide for effective audit in
dealing with cases of dishonesty and fraud in the corporate sector.
The directives which contain regulations on board-level representation or information and consultation of employees, and so of particular significance for the legal position of employees, are documented in more detail. This section also contains information on other issues in European company law, such as the European Cooperative Society or the European Private Company (SPE). Both have significant implications for employees’ rights. Finally, some resolutions of the European Parliament in relation to company law are addressed separately. These are not binding, however, and the Parliament also lacks a right of initiative for legislative acts in the area of company law. Nevertheless, these resolutions indicate what is likely to obtain the (obligatory) agreement of the Parliament. (1) Furthermore, a number of other provisions give rise to problems. This is closely linked to the fact that the SPE draft statute will borrow its main features from the UK limited company (Ltd).
Rights & Liabilities after Mergers & Acquisitions:
A merger is when two or more companies combine into a single, new business, called the “survivor” corporation or business. The survivor typically issues new shares of stock in exchange for the shares held in the old company – the merged company – by its shareholders. An acquisition is when one business, usually called the “successor,” buys either another company’s stock or assets. The differences between mergers and acquisitions are perhaps most important when it comes to understanding the companies’ respective rights and liabilities after the merger or acquisition – which business is responsible for the debts and obligations of the company.
Company a property of the shareholders:
The traditional view that the company is the property of the shareholders is now an exploded myth. A company according to the new socioeconomic thinking is asocial institution having duties and responsibilities towards the community in which it functions. Maximization of social welfare should be the legitimate goal of a company and shareholders should be regarded not as proprietors of the company, but merely as suppliers of capital entitled to on more than reasonable return and the company should be responsible not only to share holders but also to workers.
Analyzing part (Body)
Barriers to growth: Companies that are not prepared for the transition from startup to growth company can get stuck. This is bad news for investors and employees, and worse news for our economy – growth companies create two out of every three jobs.(1)
Growth follows an S-curve: At first they grow exponentially, taking advantage of an abundance of early adopters, but then growth tapers off as the opportunity for the first generation product runs its course. To sustain growth the company needs to reach new markets with better products through more efficient channels…all while supporting customers of the first generation product. Unfortunately, entrepreneurs get blind-sided by this predictable speed bump. The financial forecasts of early growth companies assume that exponential growth will continue unabated – as though the Petri dish kept getting bigger. When the reality of the S-curve becomes apparent the company finds itself unprepared to drive the next wave of growth.
The importance of Venture Company:
The main target to get more benefits.
Companies when jointly works they have some strategic goals this is mandatory to maintain logically.
To support with each other’s and economically help them.
Focuses on the capital of the company financial parts.
To maintain the policy by helping the other companies.
Improving the company image, status, contribution and reputation.
By the joint venture policy both company want to improving them self and develop their economic status.
The Importance of Venture Capital for the Start-up Businesses:
Venture Capital is a finance that is furnished to start-up companies that have a high potential growth but are still too small to raise capital and are not yet capable of obtaining a bank loan. The ventures capital fund that is also called as seed capital makes money in exchange for an equity stake of the company it invests in. They generally get considerable control over company’s decisions, apart from owning a significant portion of the company.
The financial resources are very important for entrepreneurs who have projects such as product innovation or research development that require potential investors. Financial institutions such as banks offer loans to the entrepreneurs, but they demand the payment of interest on the invested capital. Angel investors, on the other hand, are mostly opulent retired individuals who are willing to venture capital in the early stages of a company or growing business, in exchange for shares and bonds of the company. This allows them to stay abreast with the development of the business sector even while enjoying their retirement. (1)
Venture Impact: The Economic Importance of Venture Capital Backed Companies:
Venture Impact: takes a look at the economic impact of venture backed companies. This study looks at the contribution venture backed companies have had on overall job creation, revenue creation and innovation over the last 30 years. (1) Employment and sales data conclusively show the importance of venture capital backed companies to the U.S. economy. Venture capital financed companies are found in all sectors of the American economy. Innovative venture capital backed businesses such as Genentech, Medtronic, Microsoft, Home Depot, and Intel are among the prominent and diverse American companies that received venture capital early in their development. By this study we can realize that the economic is related to the business process. When country over business is going up that make money inflation the country economic structure. S o this indicated economic increasing process is depend on the demand of the business of joint venture progress. The venture impact is internally related to the other indicant of the business present situation.
Benefits of joint venture:
Provides company with the opportunist to start up a new capacity and expertise.
Allow companies to enter into related businesses or new geographic markets or obtain new technological knowledge.
Make a good relationship with two companies and easy to reach their target of goals.
Organize a big or positive image.
Cooperative behave should be make by this relation.
Joint Venture: Joint Venture Companies are the most preferred module of corporate entities for doing business in India to achieve specific objectives of a partnership like temporary arrangement between two or more firms. JVs are advantageous as a risk reducing mechanism in new-market penetration, and in pooling of resource for large projects. The Companies incorporated in India, even up to 100% foreign equity, are at par at domestic companies. A Joint Venture may be any of the business modules available. There are no separate laws for joint ventures in India. They, however, present unique problems in equity ownership, operational control, and distribution of profits (or losses). (1)
Types of joint or merger business:
ü When two companies are agree to corporate with business in a limited and specific way wherein they incorporate a company in India. Business of one party is transferred to the company and as consideration for such transfer; shares are issued by the company and subscribed by that party. The other party subscribes for the shares in cash.(2)
ü Other option could be to setup a separate joint venture business, possibly a new company, to handle a particular contract. The partners own shares in agreed proportion in the company and agree how it should be managed.
ü Promoter shareholder of an existing Indian company and a third party, collaborate to jointly carry on the business of the company and its shares are taken by the said third party through payment in cash.(2)
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 Chartered Accountants Firm well versed in Foreign Exchange Management Act, Indian Income Tax Act, Indian Companies Act, international laws and applicable Indian Rules & Regulations 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:
- Applicable law
- Shareholding Pattern
- Composition of Board of Directors
- Management Committee
- Frequency of Board Meeting & its venue
- General Meeting & its venue
- Composition of quorum for important decision at Board Meeting
- Transfer of shares
- Dividend policy
- Employment of Funds in cash or kind
- Change of control
- Restriction /Prohibition on Assignment
- Non-Compete parameters
- Break of deadlock
- Jurisdiction for resolution of dispute
- Termination criteria & notice
- Force Majeure
The Joint Venture agreement should be subject to obtaining all necessary governmental approvals and licenses within specified period.
The joint venture companies have lot of advantage and disadvantage also. However all the system should comfortable if partners are making honest and fair relation. There are many of the examples where companies are joint together and make a strong bonds that make them difference from others. For example Sony Ericson and Marutisuzuki, this all are Indian company which apply venture policy and achieve their goals. Besides Miura International (BD) Ltd, a Japan-Bangladesh joint venture hotel.
Law of venture:
A joint venture is a general partnership typically formed to undertake a particular business transaction or project and is intended to exist for a limited time period. Joint ventures typically exist for 5-7 years. 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. A joint venture is created with a specific project in mind and generally dissolves once the project has been completed. Members of the joint venture are exposed to full legal liability. A joint venture is treated like a partnership for federal income tax purposes. Joint ventures may be formed for a vast variety of purposes. Joint ventures are commonly used in real estate matters where two or more persons undertake to develop a specific piece of real property. 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 would like to enter. The foreign companies generally contribute new technologies and business practices to the joint venture, while the domestic companies contribute their relationships and requisite governmental documents within the country, along with their established involvement in the domestic industry.(1)
Joint ventures are usually formed through the legal procedures of creating a memorandum of understanding, a joint venture agreement, any ancillary agreements, and obtaining regulatory approval.
Bangladesh law of venture:
If a joint venture appears the best way forward, the next choice to be made is between a joint venture vehicle and a contractual joint venture.
The contractual JV works by the parties acting as independent contractors under a joint venture agreement which sets out all of their rights and performance obligations, and their relationship is based solely on the terms of that contract. That contract might be termed a co-operation, collaboration or consortium agreement, as well as a joint venture agreement; these are not terms of art but simply reflect how the parties view the overall effect of their contractual arrangements.
For a joint venture vehicle, the basic choice is between a limited liability company or a partnership, with the choice often being tax driven. However it is important that, in considering the tax issues, the parties do not lose sight of the key legal distinction that a limited liability company is a separate legal entity which allows the parties to limit their liability to their equity contributions, whilst partners have unlimited liability for the debts and liabilities of their partnership. The choice of Limited Liability Company may extend to a consideration of the vehicles available in different jurisdictions and some of the ‘hybrid’ entities such as the UK’s limited liability partnership or the Dutch cooperative. The parties to the venture shall share the profits, risks and losses in proportion to their respective contribution to the registered capital. No assignment of the registered capital of a joint venture participant shall be made without the consent of the other parties to the venture. The board of directors is empowered, pursuant to the provisions of the articles of association of the joint venture, to discuss and decide all major problems of the joint venture: expansion programs, proposals for production and operating activities, the budget for revenues and expenditures, distribution of profits, plans concerning manpower and pay scales, the termination of business and the appointment or employment of the president, the vice-president(s), the chief engineer, the treasurer and the auditors, as well as their powers and periods of employment, etc. The offices of president and vice-president(s) (or factory manager and deputy manager(s)) shall be assumed by the respective parties to the venture. Matters such as the employment, dismissal, payment, welfare, labor protection and labor insurance of the staff and workers of joint ventures shall be provided for in contracts reached in accordance with the law.
1. Somebody who has been unwittingly tricked into acting in another’s interest – from Aesop’s fable in which a crafty monkey begs a cat to pull hot chestnuts from a fire; the cat singes his paw, and the monkey gobbles up the chestnuts leaving none for the cat.
6. Choi, Cheng-Bum, and Paul W. Beamish. “Split Management Control and International Joint Venture Performance.” Journal of International Business Studies. May 2004.
7. Johnson, Howard E. “Reducing the Risks in Joint Ventures.” CMA Management. December 2000.
8. Moeller, Bud. “Becoming a Corporate ‘Partner of Choice.'” Corporate Board. November 2000.
10. Penttila, Chris. “Stop, Thief! A Joint Venture with a Big Company Sounds Like a Dream—Until the Company Backs Out, Takes Your Idea With it and Leaves You in the Dust.” Entrepreneur. June 2005.
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