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. 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 otherís expertise, joint-ventures often meet
UAE And India Ė 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 JVís 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
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 isnít 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. There are
certain free zones in the UAE where the foreign company can have 100% ownership
but they come with a lot of restrictions.
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 donít 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
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, 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 doesnít 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 courtís power to order a company to wound up on just and equitable
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
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 JVís
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. Itís 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.
Written By: Mr. Ritvik Nigam
- Pursuant to Federal Law no 2 of 2015.
- Sec 216 and 254 of the Singapore Companies Act.
, Qualifications: Pursuing B.A.-L.L.B.
(2nd year) - Symbiosis Law School-NGP (2019-24), Email: [email protected]