MINISTRY OF CORPORATE AFFAIRS (MCA)
CLARIFICATION ON DEFINITION OF “JOINT VENTURE” FOR THE PURPOSE OF EXEMPTION FROM APPOINTMENT OF INDEPENDENT DIRECTORS BY CERTAIN UNLISTED PUBLIC COMPANIES
The MCA vide its notification dated 5 July 2017 had inserted Rule 4(2) and amending Rule 4 of the Companies (Appointment and Qualification of Directors) Rules, 2014 to exempt the unlisted public company which is a joint venture, a wholly owned subsidiary or a dormant company from appointing independent directors.
Further for the purpose of availing exemption under Rule 4(2) as such a term is not defined in the Companies Act, 2013, stakeholders and other professional institutes had sought for clarifications with regard to the meaning of “Joint Venture”.
In view of the above, MCA vide its circular dated 05 September 2017 has clarified that the term “Joint venture” would mean a joint arrangement, entered into in writing, whereby parties that have joint control of the arrangement, have rights to the net assets of the arrangements. The usage of the term is similar to that under the Accounting Standards.