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Joint Ventures

Joint ventures are increasingly common in foreign trade. A joint venture exists when two or more parties enter into a contract to carry out a particular business activity. Many businesses involved in international trade opt for joint ventures, since having a local partner can greatly facilitate the import/export process. Moreover, joint ventures help foreign companies to better understand local market conditions. Domestic partners usually have a better grasp of the local business environment and therefore, can provide invaluable assistance in distributing and marketing a foreign product.

According to the provisions of the Companies Law, a joint venture is simply an association, and therefore, no obligation exists to register it with the Superintendency of Companies. A business entity may give associates the right to participate in its business, but those rights are limited. Associates are not liable to third parties, and if the business enters bankruptcy, they are liable only for their share of the investment. All other matters are regulated by the terms of the contract entered into by the parties.

In Ecuador, joint ventures are common when foreign corporations are contracted, as associates, to carry out specific projects with government entities. Many foreign corporations entering into this type of agreement also set up branches. Another point of note is that joint ventures in the private sector often lead to the formation of corporations and partnerships.

 

 

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