We were recently advising a foreign client whose joint venture in India was on the brink of collapse.
On paper, the partnership looked strong: an experienced Indian partner, approvals in place, and a promising market strategy. Yet within months, the relationship was under strain.
Key issues had emerged:
Financial statements were delayed or withheld
Compliance filings were not being made on time
Strategic decisions were taken unilaterally
Litigation loomed. But as we explained to the client, litigation in India is a slow and costly process, often stretching for years. More importantly, it would not have resolved the core challenge, the absence of enforceable governance mechanisms.
The Middle Ground
Instead of litigation, we worked with both sides to restructure the JV, building in checks and balances that created confidence.
Key measures included:
• Board Representation – Foreign investors can (and should) appoint a director in the Indian JV entity. This provides visibility.
• Auditor of Repute – A jointly appointed, independent auditor to ensure credibility of financials. For SMEs, mid-tier firms often work well.
• Monthly Compliance Tracker – Covering all statutory filings and financial reporting obligations. Simple, transparent, and easy to operationalise.
• Banking & Maker-Checker Systems – Dual signature requirements and ERP access for oversight.
• Exit & Dispute Rights – Clear, enforceable clauses for when relationships break down.
Importantly, these were not just contractual provisions. They were supported by practical mechanisms — dashboards, reporting templates, and structured reviews — designed to be cost-effective and workable in practice.
The Indian partner accepted these safeguards as fair. The foreign investor regained trust. The JV was stabilised and placed on firmer footing.
JV Practice Pointer
For foreign investors entering India, the lesson is clear:
Don’t stop at drafting governance provisions. Put in place mechanisms that make them enforceable and effective without disrupting operations.
The Larger Lesson
Corporate governance in joint ventures is often misunderstood as red tape. In reality, it is the opposite.
Governance provides clarity, ensures compliance and creates the discipline that allows partnerships to grow. It reduces disputes and enables both parties to focus on the business itself.
In India, oral assurances mean little. What matters is what is written, and implemented.
The Bottom Line
India offers immense opportunities for foreign investors. Joint ventures remain an effective entry strategy, but success depends on structuring them with the right balance of trust and protection.
At End to End Advisors LLP, we have seen time and again that robust governance frameworks do not weaken partnerships, they strengthen them.
