Joint venture company (Shariekat Al Mahasa) is one of the types of companies governed by the company law.
Reference to joint ventures means that the type of company agreed upon between two or more partners to share profit or loss, in a commercial activity run by one partner in his private name.
The company shall be confined to the relationship between the partners only and shall have no effect towards third parties.
Existence of the company can be proved by all means of evidence. The main feature in this joint venture is running the company by one of the partners in his private name.
This is not possible in other types of companies wherein everything is undertaken in the name of the company.
Another important feature, the venture is closed to the partners only and ineffective in relation to third parties.
This principle of ineffectiveness signifies a major distinction from other companies.
The relationship between partners is governed by the contract (memorandum of understanding) establishing the joint venture.
Each partner owns the shares agreed upon at the time of establishment unless agreed otherwise between the parties concerned.
The contract establishing the venture is neither subject to registration in the Commercial Register nor disclosure to the public.
Whereas in other types of companies registration and disclosure are mandatory.
The aggrieved party shall have the right to sue the partner who deals with him only.
Other partners, in all cases are not responsible unless they disclose the existence of the joint venture company.
A partner in such companies shall not be regarded or dealt with as a trader or merchant unless he performs the commercial activities, related to the joint venture, by himself.
All decisions regarding the management of the joint venture shall be unanimous and agreed upon by all parties unless the partners concerned agreed otherwise.
In other words, the partners could agree that certain issues to be passed by majority of votes and such cases must be clearly mentioned in the memorandum of understanding.
The characteristics of joint ventures indicate that they possess a unique legal structure.
This uniqueness cannot be easily identified unless we look very closely at the legal definition of joint ventures.
However, due to this uniqueness some opt to go for this type of companies.
The author is a legal consultant