Tuesday, March 9, 2010

Joint Ventures in Oman

It is very common for two or more companies to submit a joint tender in Oman. A joint tender consists of two companies cooperating together to submit a single tender for a project, in which each company will execute separate parts of the project. In this situation, the parties need to determine how to structure their relationship during the tender stage. A common arrangement in such cases is that of a "joint venture", but there is often confusion about what this means in Oman.

In practice, companies in Oman frequently use the term “joint venture” interchangeably with “LLC”, or limited liability company. However, companies that are operating only at the tender stage may refer to the term "joint venture" to mean a more flexible structure. In Oman, companies jointly bidding without yet forming an LLC oftentimes call themselves members of a "consortium".

Ultimately, the vocabulary used to describe the relationship is less important than the actual structure adopted by the parties. What is important is including language in the bid submission to confirm to the Tender Board or the client that the parties are committed to adopting an appropriate structure for servicing the contract.

Particularly, foreign companies without a permanent presence in Oman and participating in a joint bid submission should include language confirming that they intend to form an entity in Oman if the contract is awarded. This is important because of the restrictions on foreign companies doing business in Oman without adopting the proper structure. The language may be generic to allow the foreign company flexibility in what structure is later adopted (for example, a branch, LLC, or FTA company, if applicable).