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.
