A joint venture can take any form, yet the ground condition on which it is based is a commercial collaboration amongst two or more corporations. The companies interchange their resources with an intention to attain maximum profits, yet remain independent. Every now and then companies registered within UAE enter into joint venture agreements as per the requirements set our in Commercial Companies Law of UAE. Nonetheless, most of these companies fail to understand the gravity of provisions entailed in such joint venture agreements, which later cause uninvited legal troubles or consequences.
I believe all such companies wish to amend their past mistakes, yet are stuck with the obligations under the agreement. Therefore, if you wish to not make the same mistakes, read this article from Corporate Lawyers of Dubai to have a better understanding and consider it as checklist before drafting or finalising any joint venture agreement in UAE.
The expression “joint venture” can have various meanings. The country draws in critical foreign investors so they might consider partnering with UAE nationals or local companies.
The joint venture will normally include the fuse of an organization to be independently considered as a joint venture vehicle. Having said that, the primary step for any organization is to consider is to opt between establishing a joint venture with a mainland UAE company or with a company registered in free zone. Wherein, free zones allow the shareholder to possess 100% ownership in the company as compared to 49% in mainland as a foreign investor and a 51% mandatory shareholding to the UAE local company or individual. Nonetheless, as per the new Foreign Direct Investment Law, the foreign investors are permitted to hold 100% shareholding in the company, subjected that it fulfils the criteria established by the government under the Law.
Every legal contract has boilerplate clauses which shall be entailed in any agreement to ensure the smooth progress of the commercial relationship. However, the legal consultants of Dubai will explicitly discuss the pertinent clauses for any joint venture agreement to be signed in the country. The following checklist will assist you in ascertaining the legalities of any joint venture agreement:
- The identification of the parties, type of business and identification of the signatories of the contract.
- The purpose of the joint venture and if it is specific a complete description of the project and its completion date shall be mentioned explicitly.
- A complete description of business affairs and how and by whom the daily activities will be handled. It shall include the meetings of the board, general authorities of manager, company’s obligations and day-to-day activities.
- The agreement shall entail the matters concerning shares that is transfer of shares, conditions on such transfers, prohibition on pledges and mortgages, unless specified and similar clauses.
- The clauses shall include provisions related to disposition and acquisition of shares in the company and the method of such disposition or acquisition.
- Another pertinent clause of the agreement should be the dispute resolution. The provision shall include the methods under which the companies or the parties can resolve their dispute if arises in future. The parties shall understand the difference in arbitration and litigation and should accordingly opt for the most suitable dispute resolution process.
Drafting of joint venture contract are not as easy as it may sound. The contract defines the lifecycle of a joint venture company and two or more companies associated to establish such venture. Therefore, it is important to appoint best Corporate Lawyers of Dubai for having the legally secured draft of a joint venture agreement.
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