TRW & Co · Corporate and M&A
Joint Ventures in the UAE: Structuring and Governance
A joint venture in the UAE can be a jointly owned company or a contractual consortium. Incorporated ventures typically use a mainland LLC, private joint stock company, free zone company or DIFC or ADGM vehicle, often combined. Success depends on control, deadlock and exit terms, and the 2025 Commercial Companies Law amendments give onshore ventures better tools for each.
Key pointWhere the shareholders' agreement and the registered constitution conflict, notaries and licensing authorities will usually apply the constitution, so exit and deadlock mechanics that live only in the agreement may be impossible to complete in practice.
At a glance
Two basic models
Incorporated ventures use a jointly owned company; contractual ventures use a consortium or co-operation agreement, which is quicker but carries joint liability risk.
Recognised forms only
Onshore company law recognises a closed list of company forms, and a company outside them is void, with joint liability for those who contracted in its name.
2025 tools for JVs
Since late 2025, onshore LLCs can use share classes and constitutional drag and tag rights, and authorities can appoint interim independent directors on board deadlock.
Merger control applies
Forming a venture that confers joint control must be notified where relevant UAE sales exceed AED 300 million or combined share exceeds 40%.
Two-tier structures common
Partners often own a DIFC or ADGM holding company with an onshore LLC subsidiary that holds the trade licence and customer contracts.
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Setting up a joint venture in the UAE: the short answer
A joint venture in the UAE can be incorporated, through a jointly owned company, or contractual, through a consortium or co-operation agreement with no new entity. Incorporated ventures usually use a mainland LLC, a private joint stock company, a free zone company or a DIFC or ADGM company, often in combination. Contractual ventures suit single projects and bids, but they carry joint liability and characterisation risks that partners often underestimate.
Whatever the vehicle, three issues decide whether the venture survives contact with reality: who controls which decisions, how deadlock is broken and how each partner can leave. The 2025 amendments to the Commercial Companies Law give onshore ventures better tools for all three, including share classes and constitutional drag-along and tag-along rights. Merger control may also apply when the venture is formed.
This guide explains the structures, the governance terms that matter and the mistakes we see most often. For our full practice overview, see joint ventures and strategic alliances.
The legal framework for joint ventures
Company law
Onshore, Federal Decree-Law No. 32 of 2021 on Commercial Companies recognises a closed list of company forms, including the limited liability company, the public joint stock company and the private joint stock company. A company that does not take a recognised form is void, and those who contracted in its name can be jointly liable for its obligations. That rule shapes how contractual ventures must be drafted.
Federal Decree-Law No. 20 of 2025, in force since late 2025, amended the law in ways that suit joint ventures: share classes for LLCs, drag-along, tag-along and succession provisions in LLC and private joint stock company constitutions, redomiciliation between emirates and between the mainland and free zones, and a power for the licensing authority to appoint independent directors for a limited period where shareholders cannot agree on board appointments. Some provisions depend on implementing decisions, so check the current position before relying on them.
Foreign ownership and sector rules
Most mainland activities can now be wholly foreign-owned, so a UAE partner is a commercial choice rather than a legal requirement in most sectors. Activities with strategic impact and some regulated sectors, such as banking, insurance, telecoms and energy, carry their own ownership and approval rules. Our guide to 100% foreign ownership in the UAE explains which activities still need a UAE partner.
Competition law
Forming a joint venture can be an economic concentration under Federal Decree-Law No. 36 of 2023 Regarding Regulating Competition where a partner acquires control, including joint control. A filing with the Ministry of Economy and Tourism is required where the parties' annual sales in the relevant UAE market exceed AED 300 million or their combined share exceeds 40%, and the venture cannot be implemented until cleared. The Ministry's economic concentration page sets out the process, and our guide to merger control in the UAE explains the tests.
Contractual or incorporated: structures compared
The vehicle decides which law governs the relationship, which court or tribunal hears disputes and how easily the venture can raise finance or be sold. The answer for a joint venture in the UAE is often a combination of structures rather than a single entity.
| Vehicle | Best for | Strengths | Watch points |
|---|---|---|---|
| Contractual JV or consortium | Single projects, tenders, co-development | Quick, flexible, easy to unwind | Joint liability to third parties; risk of being treated as an unregistered company; tax characterisation |
| Mainland LLC | Operating businesses serving the UAE market | Direct market access; share classes and drag and tag now available | Statutory pre-emption; notarisation of changes; implementing rules still settling |
| Private joint stock company | Larger ventures and those planning private placements or a later listing | Board-based governance; capital-raising flexibility | Governance requirements; more formal process |
| Free zone company | Trading, logistics, services and technology | Fast set-up; free zone regulations | Onshore activity needs mainland licensing or a branch |
| DIFC or ADGM company | Holding vehicles and investor-led ventures | English-style law, flexible classes, common-law courts | Operating subsidiaries still need onshore licences |
Project companies
Large energy, utilities and infrastructure ventures typically use a dedicated project company owned by the sponsors, with a government or government-related offtaker or concession grantor. The shareholders' agreement sits alongside the concession or offtake contract, construction and operation contracts and the financing documents. Lenders will expect share security, restrictions on sponsor transfers and step-in rights, so the joint venture terms must be negotiated with the financing in mind. See our guide to project finance in the UAE.
The two-tier model
A common answer is a DIFC or ADGM holding company owned by the partners, with an onshore LLC subsidiary holding the trade licence and customer contracts. The partners' relationship is governed by English-style law and courts, while the business meets mainland licensing requirements.
Governance terms that decide whether the venture works
Contributions
Cash, assets, IP, contracts or know-how. In-kind contributions to a mainland company must be valued, and IP is often better licensed than assigned so that it returns on exit.
Board and reserved matters
Board seats, chair, casting vote and a list of reserved matters such as the budget, new financing, related-party deals and disposals. Keep the list to genuinely fundamental decisions.
Funding
How further capital is called, what happens if a partner does not fund and whether shareholder loans or new equity are used. Dilution mechanics must work under the chosen company law.
Related-party contracts
Supply, services, secondment and licence agreements between the venture and each partner. They decide where money flows and are a frequent source of disputes.
Transfers
Lock-ups, rights of first refusal, drag and tag rights and change of control of a partner. Onshore, align them with statutory pre-emption.
Disputes
Most international ventures choose arbitration, for example under the Dubai International Arbitration Centre rules, or the DIFC or ADGM courts, for predictability and enforcement.
With share classes now available onshore, voting and economic rights can be written into the registered memorandum rather than living only in the shareholders' agreement. That matters because a notary, licensing authority or new shareholder will look first to the constitution.
Deadlock and exit mechanisms
A 50:50 joint venture in the UAE without a workable deadlock mechanism can be paralysed by a single disagreement over the budget. The statutory power of a licensing authority to appoint independent directors is a backstop that hands control to strangers, not a solution. Partners should build their own ladder.
- Define deadlock. Specify which decisions, after how many failed meetings, amount to deadlock, so that the mechanism cannot be triggered tactically.
- Escalate. Refer the issue to senior executives of each partner for a fixed period, with a written position from each side.
- Mediate. Use a short, confidential mediation, or an expert for technical or valuation questions.
- Apply interim rules. Continue on the last approved budget and business plan, so the business keeps running while the dispute is resolved.
- Trigger a buy-sell. Use a Russian roulette or Texas shoot-out clause, a put or call option at fair value, or a sale of the whole venture.
- Implement the exit. Transfer shares, release guarantees and security, unwind related-party agreements and allocate IP, employees and customers.
Exit terms should also cover change of control of a partner, insolvency, material breach and the treatment of IP and non-compete obligations after exit. Onshore, draft the mechanics so that partners waive or exercise pre-emption within a defined timetable; otherwise a carefully designed drag right may not work when it is needed. Our guide to shareholders' agreements in the UAE covers the drafting.
Make the shareholders' agreement and the constitution say the same thing. Where they conflict, the notary and licensing authority will usually apply the registered constitution, which can leave a partner with a contractual claim but no practical way to complete an exit.
Partner diligence and the documents a joint venture in the UAE needs
Choosing the right partner matters more than any clause. Before signing, check the partner's ownership and beneficial owners, licences, financial standing, litigation, sanctions exposure and ability to deliver its contribution, including clear title to any IP or land it brings. Findings should translate into protective terms, such as conditions, specific warranties or staged contributions, rather than sitting unread in a report.
The document set for a joint venture in the UAE is usually larger than partners expect. A typical incorporated venture needs:
- A term sheet or memorandum of understanding, with binding confidentiality and exclusivity terms.
- The joint venture or shareholders' agreement.
- The memorandum or articles of association, reflecting share classes, reserved matters and transfer rights.
- IP licences or assignments and technology transfer agreements.
- Services, supply, offtake and secondment agreements between the venture and each partner.
- Valuation reports for in-kind contributions.
- Merger control and regulatory approval documents, where required.
- A board charter, a delegation-of-authority matrix and the first business plan.
Ancillary agreements deserve the same attention as the main agreement. They decide where the money flows and are where most disputes start.
Illustrative scenario: a 50:50 manufacturing venture
Illustrative only; the parties are generic. A European technology company and a UAE industrial group agree to manufacture components for the regional market. The European partner contributes technology; the UAE partner contributes land, a factory and customer relationships.
They form an ADGM holding company owned 50:50, with an Abu Dhabi mainland LLC holding the industrial licence. The technology is licensed, not assigned, with improvements owned by the venture and a licence-back on exit. Reserved matters cover the budget, new financing and related-party contracts; everything else sits with management. Deadlock goes to escalation, then mediation, then a Texas shoot-out after a cooling-off period.
Before signing, the partners test merger control. Combined sales in the relevant UAE market are below the turnover threshold, but they record the analysis. They also agree arbitration seated in the ADGM. When a dispute over pricing to the UAE partner's affiliates arises in year three, the related-party approval mechanism resolves it without triggering deadlock.
Risks and common mistakes
Running a contractual venture like a company
Consortiums often start as contracts and gradually acquire staff, bank accounts and customers. Because a company that does not take a recognised form is void, with joint liability for those who contracted in its name, an unincorporated venture that behaves like a company is exposed. Each party should contract in its own name, liability should be allocated clearly and the scope should stay defined. Once the venture becomes an ongoing business, incorporate it.
Ignoring merger control at the term sheet
Partners often assume a new venture is too small to notify or that competition law does not apply to greenfield projects. If a partner acquires joint control and either threshold is met in a relevant UAE market, the venture must be notified and cleared before implementation, and the regime treats an undecided application as rejected. Failure to notify can attract fines calculated on UAE sales. Test the thresholds before signing and build clearance into the timetable.
Vague IP terms
When a partner contributes technology or brands without a clear licence or assignment, disputes follow on exit, especially over improvements developed by the venture. Specify who owns background and foreground IP, which licences survive termination and how trade marks used by the venture are registered and transferred on exit.
Tax and transfer pricing surprises
A joint venture company is subject to corporate tax, and transactions between the venture and its partners are related-party transactions subject to the arm's length principle. Contractual ventures raise separate questions about whether they are treated as unincorporated partnerships. Model the position early with a registered tax agent and document related-party pricing; TRW & Co coordinates with tax agents on the legal side.
Cross-border partners
A joint venture in the UAE often joins partners from different legal systems: a UK or Singapore technology company with a UAE family group, a Chinese contractor with a government-related entity, or a Bangladesh manufacturer with a UAE distributor. Each partner's home law affects outbound investment approvals, sanctions screening and enforcement of awards. Indian and Bangladeshi investors need to factor in outbound investment and foreign exchange rules at home. Choose a governing law and seat that both partners' home courts will respect, and confirm that an award can be enforced where the assets are; see our guide to arbitration in the UAE.
TRW & Co coordinates across its offices in Dhaka, Singapore and London on cross-border ventures.
Checklist before you sign
- Define the venture's purpose, scope, territory and contributions in writing.
- Complete due diligence on the partner, including ownership, sanctions exposure and IP title.
- Choose the vehicle and jurisdiction with the exit and any financing in mind.
- Test merger control and sector approvals, and build review time into the timetable.
- Agree a deadlock ladder that ends in a decisive mechanism.
- Align the shareholders' agreement with the constitution and registered class rights.
- License IP with clear terms on improvements and exit.
The best joint venture in the UAE is designed for the day the partners disagree, not the day they sign. If a dispute has already arisen, see our guide to shareholder and co-founder disputes. To discuss a venture, contact TRW & Co or email info@trw.co. Where representation before UAE onshore courts or the DIFC/ADGM Courts is required, we work alongside locally licensed advocates and registered practitioners.
Frequently asked questions
01Can a foreign company form a joint venture in the UAE without a local partner?
In most sectors, yes. Most mainland activities can now be wholly foreign-owned, so a UAE partner is usually a commercial choice rather than a legal requirement. Activities with strategic impact and some regulated sectors, such as banking, insurance, telecoms and energy, have their own ownership and approval rules. Free zone and DIFC or ADGM companies can generally be wholly foreign-owned, though onshore activity needs the right mainland licence.
02What is the best vehicle for a joint venture in the UAE?
It depends on the business and the partners. A mainland LLC suits operating businesses serving the UAE market, a private joint stock company suits larger ventures planning to raise capital, and a DIFC or ADGM company suits holding structures and international investors. Many ventures combine a DIFC or ADGM holding company with an onshore subsidiary. Contractual consortiums suit single projects and tenders.
03Is a contractual joint venture legally recognised in the UAE?
Contracts between businesses to co-operate on a project are valid, but the Commercial Companies Law recognises only specified company forms, and a company that does not take one of them is void, with joint liability for those who contracted in its name. A contractual venture should therefore be drafted so that each party contracts in its own name, liability is allocated clearly and the arrangement does not operate as an unregistered company.
04How is deadlock resolved in a UAE joint venture?
Through the mechanism the partners agree. A typical ladder runs from escalation to senior executives, to mediation or expert determination, to a buy-sell clause such as a Russian roulette or Texas shoot-out, or a sale of the whole venture. Since 2025, a licensing authority may appoint independent directors for a limited period where shareholders cannot agree on board appointments, but this is a backstop rather than a substitute for a negotiated mechanism.
05Does a new joint venture need merger control approval in the UAE?
It may. Forming a joint venture can be an economic concentration where a partner acquires control, including joint control. A filing with the Ministry of Economy and Tourism is required where the parties' annual sales in the relevant UAE market exceed AED 300 million or their combined market share exceeds 40%, and the venture cannot be implemented until cleared. Test the thresholds at the term sheet stage.
06How are joint venture disputes resolved in the UAE?
Most international ventures choose arbitration, seated in the DIFC, ADGM or onshore, under institutional rules such as those of the Dubai International Arbitration Centre, or opt for the DIFC or ADGM courts. These options offer predictability and established enforcement routes. The choice should consider where each partner's assets are and whether an award or judgment can be enforced there, because a favourable decision is only as useful as the ability to collect on it.
Sources and official materials
- Federal Decree-Law No. 32 of 2021 on Commercial Companies — Company forms and 2025 amendments relevant to joint ventures
- Federal Decree-Law No. 36 of 2023 Regarding Regulating Competition — Economic concentrations including joint ventures
- Ministry of Economy and Tourism: Economic Concentration — Merger control filing process
- Dubai International Arbitration Centre — Arbitration rules commonly used for joint venture disputes
- ADGM rules and regulations — ADGM Companies Regulations for holding vehicles
General information only, current as at 27 October 2026. It is not legal advice and does not create a lawyer–client relationship. UAE law differs between the onshore jurisdiction, the DIFC, ADGM and the free zones, and changes frequently; check current official sources and take advice on the facts of your matter.
