contractual joint ventures have few advantages over equity joint ventures which are greater flexibility, greater exposure of the party¶s liability, and avoidance of double taxation.
: The contractual joint venture is regulate by contact law which givesdifferent parties total freedom to regulate contractual relationships, but on other hand in case of equity joint ventures which are regulated by more stringent company law and regulations. Socause of this structure of the contractual joint ventures can be design according to particular needof parties.
As we know in case of contractual joint ventures there is no creation of new legal business entity so the parties can¶t be shield to the joint venture contact from being directly liablefor losses of the joint venture. All the parties are jointly and separately liable.
: In contractual joint ventures we can avoid double taxation this is because in this kindof joint ventures we don¶t create new entity. But in equity joint venture we create a new businessentity which is taxed separately. This is because the tax is imposed on the basis of entity. Equity joint venture prepares the ground for double taxation: 1
on joint venture corporate profits and2
on the dividends transferred to joint venture parties. But nothing like that is in case of contractual joint venture. So we can conclude from all the above point it¶s better to go withcontractual joint venture.
Most of the businesses are regulation free inGermany, what you need to do is just notify the local government and tax authorities¶. But for some businesses you need prior authorization including, inter alia, banking, insurance andinvestment. If the founder of the business is already authorized and operative in some any other European country then no need of authorization. Gesetz gegen Wettbewerbsbeschrankungen-GWB is a German Act against Restraints on Competition do not differentiate joint ventures. The joint venture which comes under the merger control provisions are called concentrative jointventures and the other which comes under the restrictive practices provisions is called co-operation joint ventures. All the joint venture arrangements are send to German Federal CartelOffice (FCO) for clearance under the merger control procedures and a joint venture can bechallenged under the restrictive practices provisions.For joint venture arrangements clearance, there are few stapes.(1)Filling requirements:- You had to go through the filling requirement if the acquisition of 25%or more of a joint venture. The cetrative joint venture and co-operative joint venture are veryhard to distinguish. So there are few tests. 1
the combined over all worldwide turnover of allthe parties at least ¼ 500m. 2
out of all the parties¶ one party has a turnover of ¼ 50m.(2) Timetable for clearance: The clearance time vary from one to four months. The transactioncan¶t be proceed until after the waiting time has expired or decision for clearance has beenreceived. Violation of the rule is in very limited cases.(3) Test for clearance: The German Federal Cartel Office (FCO) will have a look on the jointventure agreement and try to figure out the affects of this joint venture on the domestic market