Business for long has been one of the key areas of interest for economists around the world. With money at stake, people always are on the hunt for new ways through which profits can be boosted, whether it be the street side sole proprietor with 1 lakh worth of capital, or multibillion-dollar companies, business is most of the times, profit-driven.
In this day and age, when it is becoming more and more difficult to survive the stiff competition in the market individually, two or more people, driven by a common goal come often come together to realize their true potential. Such a coordinated operation can be referred to as a joint venture.

A joint venture initiative is basically a business arrangement in which two or more parties mutually consent to pool their resources to complete a specific task which most of the times is related to business[1]. Such a coming together forms a symbiotic relationship between the parties which benefits both of them. One might have the capital and the other the technical know-how. Individually working, they would never be able to reach the goal they strive for but in a healthy relationship, using each other’s expertise, joint-ventures often meet their targets.

UAE And India – An Overview

The Indian market is very wide and diverse. It gives the producers in the market, enough option to choose from and select other such producers with whom they want to enter into a Joint-venture agreement. The scope of a JV agreement with a foreign investor is limited in the Indian market especially now that some strict reforms have been put in place with regards to the Foreign Direct Investment policy. However, UAE offers a different dimension to this context. With its political stability, advanced infrastructure, investment-friendly policies, and a dynamic open market, foreign and local JV’s can be more easily formed in the UAE. Not only does this region show immense potential for growth, but it also offers all that is required for a sustainable and lasting Joint Venture.

A joint venture, like any other business, is goal-oriented. They seek to establish a clear goal in front of them and then strive to meet that finish line. The path they want to choose remains entirely in their own hands. In this regard, both India and UAE have the same policy. Whether the co-venturers want to make their business a mere contractual obligation that would cease to exist from the day their goal is met, or establish a new legal entity all together to ensure continuity in business activities, is left to the parties to decide. In either case, there are pros and cons. The principal advantage of a contractual agreement in this regard is that it can be terminated easily and is suitable for people who just want to meet a goal, whereas the creation of a new legal entity attracts those people who want a long-term relationship. In both these cases, the two countries follow a similar policy.

Joint Ventures in India are viable to a large extent for foreign companies especially in sectors where a hundred percent FDI isn’t permitted. However, in the United Arab Emirates, there are many share ownership restrictions. A company in that country must be at least 51% owned by the UAE nationals[2]. There are certain free zones in the UAE where the foreign company can have 100% ownership but they come with a lot of restrictions[3].

The capital introduction is another area of difference between the two countries. As far as Joint Ventures are concerned most of the capital in India for the same is raised by the way of share capital. However, in the UAE, this is done in a different manner. Here people tend to incline towards loans for the capital of a Joint Venture. Also, in desperate times, when injection of immediate capital is required a loan pops up as a better option than increasing finances through share capital.

Since a joint venture is a business endeavor, the agreement regarding the same must be immaculate so that both the parties don’t have any confusion and later disputes can be avoided. In this regard, joint venture agreements should contain a basic few points which is similar for both India and the UAE. These include, the proposed structure, the parties, and their whereabouts, the contribution, distribution, say in management, rights, duties, etc.

As far as disputes regarding the venture are concerned, the parties are free to choose which mode of dispute resolution they would like. However, there are certain qualifications that must be met. If both the parties to the dispute are Indian, then the dispute must be decided by Indian law. As far as Indian Courts are concerned, they will go ahead and enforce jurisdiction stipulations in the contract. As far as foreign jurisdiction is concerned, in some cases, the Indian courts maybe not willing to give up jurisdiction on grounds of convenience. In the UAE also, the parties are free to choose whichever law they want themselves to be governed under. Nonetheless, any corporate Joint Venture will be subject to the relevant statutory provisions to the companies in the UAE. However, it has been systematically observed that the UAE courts have been reluctant to enforce any foreign judgment that goes against the UAE company law provisions[4].

That was the overall picture of comparison and contrast as far as the Joint Venture scenario in India and the UAE is concerned. Now we shall take a look at some of the key provisions of the Joint Ventures in Singapore.

In recent years, Singapore has turned out to be a thriving business hotspot particularly encouraging new Joint Ventures. Inflight catering services SATS is setting up a new joint venture with Wilmar International in the food supply industry[5], a proof of the thriving business ground that Singapore offers.

The first interesting point to note is the foreign investment policy of Singapore with regards to Joint Ventures. Unlike India and the United Arab Emirates, Singapore doesn’t have many restrictions on the quantum of investment that can be made by foreign companies (listed or unlisted). Only a few sectors are regulated in this regard.

As far as those ventures are concerned which have been attributed a separate legal identity, we see some difference with regard to the minority rights in India and Singapore. It has been reflected in the form of shareholder special resolutions i.e. a 75% majority instead of the simple majority for specific corporate actions like changing the constitution of the company. Other forms of minority stakeholder protection are given in the form of oppression remedy and the court’s power to order a company to wound up on just and equitable grounds[6].

The Competition law in the country also prohibits anti-competitive agreements, abuses of a dominant market position as well as mergers which together, lessen the competition in the market.
Joint Ventures in Singapore are regulated by the Companies Act, Contract Law, Tax law among others. There is no single legislation for the Ventures just like India but rather they are governed by a host of laws. The interesting thing to note in this regard is there are no general requirements under Singapore Law to file the requisite formation documents of a joint venture with any competent authority.

If a Joint Venture is not classified as a merger under section 54 of the companies Act, still section 34 of the same would limit anti-competitive agreements. In simple terms, the competition in the market is reduced.

If the Joint Venture is in the form of a contract, then the parties are free to deliberate upon the law to which they want to be subjected. However, the JV’s created under some statutory provision will be subjected to the rules of that Statute. The two main authorities that look into the matters concerning Joint Venture operations in Singapore are the Accounting and Corporate Regulatory Authority (ACRA) and the Competition Commission of Singapore (CCS).

We see how convenient joint venture regulations are around the world. Incentives are provided by various governments across the globe who want their country to be on the global economy and in turn facilitate the establishment and working of Joint Venture endeavors. It’s a very convenient form of business and it keeps the ball in the court of the co-venturers who themselves decide as to which way they want the business to head.

End-Notes:

1. https://www.investopedia.com/terms/j/jointventure.asp
2. Pursuant to Federal Law no 2 of 2015.
3. https://www.mondaq.com/CorporateCommercial-Law/610710/Recent-Trends-Joint-Ventures-In-The-Middle-East
4. https://uk.practicallaw.thomsonreuters.com/w-011-0467?transitionType=Default&contextData=(sc.Default)&firstPage=true&bhcp=1
5. https://www.lexology.com/library/detail.aspx?g=ae90f88b-dc4e-44df-83ef-e0e62197e267
6. Sec 216 and 254 of the Singapore Companies Act.

Written By: Mr. Ritvik Nigam, Qualifications: Pursuing B.A.-L.L.B. (2nd year) - Symbiosis Law School-NGP (2019-24), Email: [email protected]