Supremacy of the Companies Act

• The Companies Act, 2013 is a central legislation that governs the incorporation, regulation, and dissolution of companies in India.
  
• Any JV company formed as a private or public limited company must comply with its mandatory provisions.
  
• Provisions of a JV agreement that conflict with the Companies Act are considered void to the extent of the inconsistency.
  
• Statutory requirements such as board composition, filing obligations, audit, and shareholder rights cannot be altered by private agreement.
  

Permissible Scope of a JV Agreement

• JV agreements may define operational roles, profit-sharing, dispute resolution, and exit mechanisms.
  
• They can supplement the Companies Act, but cannot contradict or override its provisions.
  
• Agreements can provide additional rights to partners, as long as these do not infringe on statutory obligations.
  
• Matters such as reserved rights, management participation, and veto powers are enforceable if legally consistent.
  

Common Areas Where Conflicts Are Not Permitted

• Provisions related to director disqualification, shareholder rights, and financial disclosures must follow the Act.
  
• Share transfer restrictions or limitations must not contravene Section 58 of the Act.
  
• Dividend distribution must comply with the prescribed rules under Section 123.
  
• Corporate governance practices such as board meetings, AGM, and filing of returns are regulated strictly.
  
• Insolvency and winding-up provisions must align with the Act and the Insolvency and Bankruptcy Code.
  

Judicial Interpretation and Enforceability

• Indian courts have consistently ruled that private contracts cannot override statutory law.
  
• In case of a dispute, the provisions of the Companies Act will take precedence over conflicting clauses in the JV agreement.
  
• The JV agreement must be read in harmony with the company’s Memorandum and Articles of Association (MoA & AoA).
  
• Clauses inconsistent with the MoA or AoA may also be declared unenforceable.
  

Best Practices to Ensure Compliance

• Draft the JV agreement concerning the Companies Act and other applicable laws.
  
• Ensure alignment with the MoA and AoA of the JV company.
  
• Include a clause that states the agreement shall be subject to Indian laws and the Companies Act.
  
• Review and update the agreement periodically in line with legal amendments.
  
• Obtain professional legal advice before finalizing or amending key terms.