With its vast infrastructure and growing economy, Qatar has become the centre of attention for many business investors and entrepreneurs around the world. Some of the businesses which are already reaping the benefits and have gone forward with company registration in Qatar include shipping companies, logistics and transportation firms, real estate groups, and so forth.
In its 2020 Doing Business Report, World Bank ranked Qatar third among the list of fastest-growing global economies. Business investors will be glad to know that the country has done away with personal income tax, and the corporate tax is as low as 10%. In addition, the availability of an inexpensive labour force ensures effortless company formation in Qatar.
The business opportunities at your disposal in Qatar are genuinely endless. The joint venture is one such business idea that has catapulted entrepreneurs to massive success. If you consider starting a joint venture in the country, you have come to the right place. Read on to learn more!
What Is A Joint Venture?
Joint Ventures or JVs have become a popular choice among business contractors in Qatar. In this type of company formation in Qatar, two like-minded enterprises join hands to pave the way for a joint venture to pursue a project.
JVs can both reduce business risks and lead to exponential profits. Most of the time, the joint venture is an opportunity for enterprises to realize their business goals effectively, which may not be technically or economically feasible for only companies.
What Are the Types of Joint Ventures in Qatar?
When it comes to opening a business in Qatar, many companies go for Joint Ventures. Foreign entrepreneurs must familiarize themselves with the different types of JVs that exist in Qatar. According to Article 4 of the Commercial Companies (Law No. 11 of 2015), an established company in Qatar can be any of the following types:
- Joint Partnership Company
- Limited Partnership Company
- Particular Partnership Company (Mahasa Company)
- Public Shareholding Company
- Private Shareholding Company
- Equities Partnership Company; and
- Limited Liability Company
Furthermore, Article 5 states that a company that does not have any of the aforementioned forms will be void in nature. Additionally, persons who contract on behalf of such a null enterprise will jointly bear responsibility for any obligation arising out of the execution of such a contract.
Experts wondering how to do business in Qatar must know that JVs can either be incorporated (IJV) or unincorporated (UJV) in Qatar. The Commercial Companies Act authenticates the former as an independent legal entity, and the latter is a contractual agreement.
Everything You Need to Know about IJVs and UJVs
Joint ventures in Qatar can either serve as an IJV or a UJV. While an incorporated joint venture is authenticated by the Commercial Companies Law to be an independent legal entity, the unincorporated one is not.
Two or more businesses join hands to constitute an IJV to contribute their money, time, effort, knowledge, and other essential resources to set up a brand-new legal entity. If a foreign enterprise wishes to get incorporated in Qatar, it may also be subject to the Foreign Investment Law and the Commercial Companies Law.
For an IJV company registration in Qatar, the businesses may need to produce authenticated Memorandum and Articles of Association, notarized constitutional documents of the foreign enterprises, banks letters confirming funds, a registration certificate, municipal licenses, and documents for commercial registration in Qatar.
UAVs are contractual agreements and carry less hassle as compared to IJVs. Businesses that constitute a UJV need not worry about the additional costs of incorporation, operational costs, etc. This type of unincorporated business venture is not subject to any predetermined laws, but any rules for effective business management must be mentioned in the contractual agreement. Many businesses prefer this model for a joint venture as it warrants greater freedom.
Participation in Tenders in Qatar
More often than not, business parties enter into a Joint Venture to take part in bids to win tenders for big projects. Specific tenders mandate that the companies shall be incorporated before participating in the proposals. Some of them also demand undertakings from business parties agreeing to merge once they have won the bid formally.
At times, tenders do not require business parties to take the form of an incorporated JV at all, and an unincorporated JV works just fine. It is, therefore, crucial to producing a joint venture agreement under the tender in question.
What Are Some Joint Venture Requirements that Companies Should Keep in Mind?
It is essential to draft the joint venture agreement with great care, especially in an unincorporated JV due to the absence of compliance with the Commercial Companies Law. If you are wondering about how to do business in Qatar, you should keep the following things in mind:
●Clear Demarcation of Obligations
The agreement should list out the different responsibilities that shall be taken up by the parties in pursuance of the project. Generally, the deal only lists out the primary duties due to the broad scope of the project, which may result in a lack of clarity regarding work and unnecessary disputes. However, parties can go beyond and mention the date of completion of each business task as well.
●Management of the JV
As seen earlier, an IJV is subject to the Commercial Companies Law, which sets down guidelines for governance and management of the venture. However, the law is silent on the control of a UJV. Generally, the partners of an experience come together to appoint a board of directors/managers for management purposes, and the contribution of each party has a direct effect on their right to nominate the number of directors and so forth.
●Splitting of Profits
The agreement must mention what constitutes profit and how it shall be distributed among the partners of the JV.
In the case of IJVs, an aggrieved party can claim liability from the defaulting partner of the JV with whom the former has engaged in any business transaction with. However, article 57 of the Commercial Companies Law states that the third party can seek legal recourse against the whole JV if the latter’s existence has been revealed to the aggrieved party at any point during a business transaction.
The joint venture agreement must mention the events that can result in partners' exit from the venture.
Thanks to developing infrastructure and business-friendly laws, Qatar has become one of the most desirable business hotspots in the middle-east. Suppose you are planning on opening a business in Qatar to pursue mega-projects. In that case, a joint venture can serve as a hassle-free solution and can equip you with technological, economical, or any other type of help that you may need. Contact us today to learn more about the lucrative business opportunities in Qatar!