The Strategic Guide to Joint Venture Agreement in the UAE
Who decides, who pays, who owns what, and how a partner leaves.
A practical guide to joint venture agreements in the UAE: choosing between a contractual venture and an incorporated vehicle, how control provisions work independently of shareholding, how contributions and further funding are handled, and what the exit and deadlock clauses need to say.
Reviewed by Mohamed Noureldin, Founder, Managing Partner & Senior Legal Consultant
Most UAE joint ventures begin with a two-page memorandum of understanding signed at the end of a good meeting. It records the split, names the business, and says the detailed agreement will follow. Sometimes it never does. By the time the parties disagree, the MOU is the only document either of them has, and the argument is about whether it was binding at all.
A joint venture agreement is worth the effort it takes because it answers, in advance, the four questions that break partnerships: who decides, who pays, who owns what, and how someone leaves.
First decide what you are actually forming
The phrase "joint venture" covers two quite different things in the UAE, and the choice determines everything downstream.
A contractual joint venture is a relationship, not an entity. The parties agree to cooperate on a project, share revenue or profit, and contribute stated resources — but no company comes into existence. That is workable for a single construction project or a defined bid, and it is usually the wrong answer for an ongoing business, because a contractual venture has no legal personality: it cannot hold a trade licence, sign a lease, employ staff or open a bank account. One party has to do all of that in its own name and carry the corresponding exposure.
An incorporated joint venture puts a company between the partners. On the mainland that means a company formed under Federal Decree-Law No. 32 of 2021 on Commercial Companies — most often a limited liability company — licensed by the relevant emirate's economic department. In the DIFC or ADGM it means a vehicle formed under those jurisdictions' own companies regulations, with their courts and their common-law framework applying to the company's internal affairs. In each case the JV company holds the licence, contracts in its own name, and its profits sit within the corporate tax regime introduced by Federal Decree-Law No. 47 of 2022.
It is also worth checking that a joint venture is the right instrument at all. Where one party is contributing a brand, a system and a territory rather than capital and shared control, a franchise or distribution agreement often reflects the commercial reality better and avoids giving away equity.
Ownership: check whether the old reason still applies
Many UAE joint ventures were originally built around the requirement that a mainland company be majority-owned by a UAE national. That requirement was removed by Federal Decree-Law No. 26 of 2020, and most mainland activities can now be held entirely by foreign investors, subject to the list of activities of strategic impact where restrictions remain. A branch of a foreign company is a separate case and the local service agent arrangement for branches continues to operate.
Two consequences follow. First, a partnership formed only to satisfy an ownership rule may no longer need to exist in that form, and the parties should decide deliberately whether to keep it. Second, legacy nominee and side-letter arrangements sitting behind older structures should be reviewed rather than inherited, because they were drafted against a rule that has changed.
Who decides
Control is not the same as shareholding. A partner with 60% of the shares can be blocked on everything that matters if the agreement is drafted properly, and a partner with 25% can be powerless if it is not. The provisions that determine this are:
- Board or manager appointments — how many each party appoints, who chairs, and whether the chair has a casting vote.
- Reserved matters — the list of decisions requiring unanimity or a supermajority: budgets, borrowing, related-party contracts, new business lines, issuing shares, appointing auditors, litigation.
- Quorum — a meeting that can proceed without one party's representative present is a route around every protection above.
- Delegated authority — what the general manager can commit the company to without going back to the board.
- Information rights — access to accounts and records, and the timing of management reporting. A minority partner that cannot see the numbers cannot enforce anything else.
Who pays
Set out what each party contributes and how it is valued. Cash is straightforward; equipment, licences, staff secondments, customer relationships and intellectual property are not, and a contribution described as "know-how" with no valuation method is a dispute waiting to happen. The agreement should then address further funding: whether partners can be required to contribute more, what happens to a partner who will not or cannot, whether shortfalls are met by shareholder loan or by issuing shares, and on what terms the non-defaulting partner may dilute the other. Distribution policy belongs here too — how much profit is retained, how much is paid out, and who decides.
Who owns what, and how someone leaves
Intellectual property brought into the venture should stay with the party that brought it, licensed to the JV for the term and for a defined purpose. Intellectual property created inside the venture needs its own rule, agreed before it exists. Confidentiality and non-compete obligations should state what survives termination and for how long.
Exit provisions are the ones parties skip and later need most: restrictions on transferring shares, pre-emption rights, tag-along and drag-along, put and call options, and a mechanism for valuing shares that does not depend on the parties agreeing at the moment they are least able to. Deadlock deserves a specific answer — escalation to senior management, then a buy-out mechanism or an orderly wind-down — because a JV company that cannot pass a resolution cannot file accounts, renew a licence or pay a supplier.
Governing law and forum
Mainland UAE law is civil law; the DIFC and ADGM apply their own common-law systems and have their own courts. A joint venture agreement should be governed by the law of the jurisdiction where the JV vehicle sits, with a forum that can actually deal with the company's internal affairs. Where the parties prefer arbitration, Federal Law No. 6 of 2018 on Arbitration governs arbitrations seated onshore, and the clause needs to fix the institution, the seat, the language and the number of arbitrators rather than leaving them to be argued about later.
Our joint venture practice structures these arrangements and negotiates them, and our contract drafting team prepares the shareholders' agreements, constitutional documents and ancillary licences that sit alongside them. We act on joint ventures in Dubai and Abu Dhabi and on DIFC and ADGM joint venture vehicles.
Disclaimer: this article is for general information only and does not constitute legal advice. Readers should obtain advice on their own circumstances before acting on anything set out above.
