14- Manual of Zakat Handling of Investments

Investments in Other Special Joint Arrangements Joint Venture Companies The Saudi Companies Law defines joint venture companies as a company that does not have a legal personality, is not subject to publicity procedures, and is not registered in the commercial register, and a joint venture company may be proven by all means of proof. The joint venture company is one of a people’s company, which is built on the basis of mutual trust between the partners, and the advantage of personal consideration is clear and noticeable in this type of company more than other people’s companies, because the partners in joint ventures do not stand before others, but often present their shares as ownership to the joint managing partner, and s/he deals in his/her own name. Following are the effects of personal consideration for the formation of the joint venture company: 1. The company’s founding contract is not required to be written, and said contract is not published, nor is the procedures for ratification or registration in the commercial registry taken. 2. A joint venture company is a company, like other companies, that brings together two or more people to do business with the aim of making profits, provided that each of the partners deals with others in his/her personal name. However, a joint venture company differs from other companies by not forming a legal person, as it is not deemed a self-contained entity, and there is no personality independent from the partners. 3. All partners in a joint venture acquire the status of a merchant. 4. A joint venture is subject to the provisions of the joint liability company. Zakat Handling With regard to the partner in the joint venture, his/her investment in such arrangements does not appear to the public. Such a company does not have the legal personality that must be registered in the commercial registry with the statutory authorities in the Kingdom of Saudi Arabia. Accordingly, unless such investments meet the criteria for permissibility of deduction set forth in Paragraphs (4) and (5), such arrangements may fall outside the scope of the Regulations in terms of zakat handling as an investment, and they may not be deducted from ZB.