With effect from 1 January 2018, Saudi Arabia introduced VAT (VAT) at a standard rate of 5%. Certain products and services as well as certain transactions are void or exempt from VAT. The new VAT must be taken into account when assessing a company`s profitability in the Saudi market. Are there any special requirements or restrictions in your jurisdiction regarding joint ventures that may discourage international investors? The parties to the joint venture are in principle free to choose their right. However, Islamic law, which is largely considered public by saudi authorities, can have some impact on legal relations between the parties. For example, where a joint venture is not allowed to enter into contractual financing agreements, a shareholder loan cannot be remunerated. Shareholders can invest capital in the company`s capital reserve through a capital increase or a contribution of funds. The capital increase requires a shareholder decision by a majority of 75% or a higher majority agreed between the parties. The liability of shareholders is increased according to the share capital they sign. As a general rule, contributions to the capital reserve only require a declaration from the beneficiary shareholder. In which sectors are joint ventures most widely used in your jurisdiction? Restrictions on the exchange of information between shareholders and a joint venture apply only in certain constellations. While such restrictions are very rare for limited liability companies, some restrictions apply to the exchange of information where a joint venture is set up as a public limited company. In addition, the joint venture may be subject to restrictions through an agreement between its shareholders, for example.
B in order to protect certain interactions between one of the shareholders and the joint venture against other shareholders, or with third parties, for example. B in the case of transactions in which a client of the joint venture wishes to limit the disclosure of confidential information. Are there any restrictions on the remedies that a court may grant, which would relate to the resolution of joint venture disputes? Are there any restrictions on reconciling shareholder rights? Finally, at the time of its establishment, the partners of the Joint Undertaking should take measures to regulate the treatment of intellectual property from the termination of the Joint Undertaking or the exit of part of the Joint Undertaking. They should include in the Joint Undertaking Agreement provisions defining the parties who have the right to use the intellectual property after the dissolution of the Joint Undertaking, whether the Joint Undertaking refrains from owning intellectual property or a trade name when the Joint Undertaking leaves the Joint Undertaking and how to deal with infringements. These provisions are usually contained in the Joint Undertaking Agreement. Saudi law distinguishes between two types of joint ventures: non-legally viable joint ventures and private equity joint ventures. Non-legally competent joint ventures are cooperation between two or more parties without legal personality. You may not have any rights or obligations or cooperate with third parties.
All legal relationships related to non-legally viable joint ventures are directly related by their partners. The structure of a non-legally viable joint venture is defined only by the joint venture agreement between their parties and by general contract law, which derives largely from the principles of Islamic law in Saudi Arabia. What competition considerations have been put in place in the creation and operation of the joint venture? Is authorization required? The protection of minority investors under Saudi law is still a bit rudimentary.