Legal structure & choice of venture entity:
1-Contractual joint Venture (no separate legal entity)
Joint ventures involve larger commitments for foreign companies, but over the long term, they may qualify for favorable tax treatment or other economic incentives from the Saudi Arabian government.
joint ventures are essentially unincorporated associations in the form of a consortium. if a foreign entity is a joint venture partner in a an unincorporated association, it has to be either licensed pursuant to the foreign investment regulation and commercially registration from the ministry of commerce and investment in the event that such foreign entity is part of a consortium bidding for public sector contracts. For practical purposes, the joint venture is considered as a general partnership.
2-Equity joint venture: alternatively the foreign company may create a separate legal entity i.e., a new limited liability company in Saudi Arabia. most foreign firms prefer to use this form of joint venture to establish a presence in Saudi Arabia. Unlike a branch office, a joint venture can engage in business activities.
To form a limited liability company, it is essential to involve Saudi citizens. While Saudi participation is not a legal requirement, the government strongly favors a company in which Saudi investors participate. in addition, if Saudis own a certain percentage of the company’s capital, the company may qualify for certain tax breaks and other investment incentives.
3-Joint Venture Agreements in Construction:
- Joint venture in which all ventures are named in the contract and the bond.
- Pre-bidding agreement for an item joint venture
- Pre-bidding joint venture (one venture financially incapable but has interest more than 51%)
- Pre-bid silent joint venture agreement
- Financial & management assistance joint venture agreement
- Form guaranteeing obligation of co-venture principal to advance his share of contribution
- Teaming agreement