Joint ventures, shareholder agreements and exit rights: structuring a Rwandan joint venture company, what belongs in the articles and what in the shareholders' agreement, nominee directors under Article 147, pre-emption, drag, tag, put and call options, statutory buy-out and unfair prejudice remedies, deadlock and the 2026 merger rules for joint ventures

Choosing the joint venture vehicle

Most foreign investors who share a Rwandan business with a partner do so through a private company limited by shares incorporated under Law N° 007/2021 of 05/02/2021 governing companies, as amended by Law N° 019/2023 of 30/03/2023. It gives limited liability, a separate legal person that can hold land rights, licences and an investment certificate, and a familiar share-based structure for dividing control and profit. A private company must have at least one director ordinarily resident in Rwanda, must restrict the transfer of its shares, may not have more than 100 shareholders, not counting current and former employees, and may not invite the public to subscribe (Articles 7 and 8). Those features suit a joint venture: the transfer restriction is mandatory, so the only question is what form it takes.

Other vehicles exist. Law N° 008/2021 of 16/02/2021 governing partnerships, as amended by Law N° 018/2023, provides general, limited and limited liability partnerships, which may suit professional or fund structures; a purely contractual joint venture, with no new entity, is common for a single construction or supply contract, but leaves each party directly exposed and can create a permanent establishment for a foreign party (Transfer pricing and international tax). There is no general cap on foreign shareholding in a Rwandan company, and a 100% foreign-owned company is possible, but sector rules may require Rwandan participation or regulator approval of shareholders; the vehicle choice is discussed more fully in Choosing a business vehicle. Where the joint venture will register under the Investment Code for incentives, RDB must be told within 30 days before any change in the nature of the investment, its suspension or termination (Article 27 of Law N° 006/2021 of 05/02/2021 on investment promotion and facilitation).

Articles and shareholders' agreement: what belongs where

The Companies Law does not regulate shareholders' agreements, and nothing in it prevents them. It is also relevant evidence of control when the company records and files its beneficial owners with the Office of the Registrar General (ORG), because Article 116 bis, inserted in 2023, looks at voting rights and the right to appoint or remove a majority of the directors as well as at shareholdings. But an agreement binds only its parties, while the incorporation documents bind the company, its board and every future shareholder. The Law repeatedly makes its default rules subject to the incorporation documents: transfers are made 'subject to the incorporation documents of a company' (Article 75); the board may refuse or delay registration of a transfer only where the Law or the documents expressly allow, by a resolution adopted within 30 working days setting out its reasons in full and sent to both parties within five working days (Article 75); non-transferable shares pass only by operation of law, transmission or repurchase unless the documents provide otherwise (Article 80); and the pre-emption right on new shares may be negated, limited or modified by the documents (Article 59).

The practical rule is therefore to mirror in the articles every provision the parties need the company to respect: the transfer restrictions and the right of first refusal, the drag-along and tag-along mechanics, the board composition and the right of each partner to appoint and remove directors, quorum requirements, reserved matters, and the authority under Article 147 for nominee directors to act for their appointer. Matters that concern only the partners, such as funding commitments, non-compete covenants, business plans, the pricing formula for options and dispute resolution, may stay in the agreement, which can also oblige each party to vote its shares to give effect to it. Reserved matters can be protected by a special resolution, which needs 75% of the votes cast unless the documents set a higher majority or unanimity, so a partner holding more than 25% has a statutory veto over the matters in Article 191, including altering the incorporation documents, an amalgamation, liquidation and removal from the register. A private company may opt out of certain statutory requirements by unanimous resolution under Article 209, but not of the directors' report or the annual meeting.

Nominee directors and their duties

A director's fundamental duty is to act in good faith in a manner he or she believes on reasonable grounds to be in the best interests of the company, with reasonable diligence (Article 147). That duty sits uneasily with a joint venture in which each partner appoints directors to protect its own interests. Article 147 resolves the tension in three cases. A director of a wholly owned subsidiary may act in the best interests of the holding company if the incorporation documents expressly permit it. A director of a subsidiary that is not wholly owned may do so if the documents expressly permit it and the shareholders other than the holding company have agreed in advance. And, most relevant here, a director of a company carrying out a joint venture between the shareholders may, when acting in connection with the joint venture and if expressly permitted by the incorporation documents, act in the best interests of a shareholder or shareholders, even where that is not in the best interests of the company. Without that express permission in the articles, a nominee director who votes as the appointing partner instructs, against the company's interest, risks breaching the duty.

The permission does not displace other duties. Directors must not act in a way that unfairly prejudices or unfairly discriminates against any shareholder (Article 148), must not let the company take an unreasonable risk of failing the solvency test (Article 150), and must disclose their interests in transactions and observe the rules on related-party dealings (Articles 167 and 168). Failure to comply with Articles 167 and 168, among others, is expressly treated as unfairly prejudicial conduct under Article 230. A joint venture that buys from or sells to one partner should therefore set out in the agreement how conflicted directors participate, and record each related-party contract in the register of interests. Board structure, the resident director requirement and the company secretary are covered in Directors, governance and the company secretary.

Statutory exit rights for a minority partner

The Companies Law gives a minority shareholder a limited but useful buy-out right. Under Article 106, a shareholder who voted all its shares against, or did not sign, a special resolution altering the incorporation documents to impose or remove a restriction on the company's business, or approving a major transaction or an amalgamation, may require the company to purchase its shares. Article 240 extends the right to special resolutions affecting the rights attached to shares and changing the company's status between public and private. A major transaction is the acquisition of assets worth 10% or more of the company's assets, or the disposal of, or the incurring of obligations worth, more than half of them; giving security alone does not count (Article 196). Major transactions also need the prior opinion of an independent professional financial adviser on their fairness, a board decision and a special resolution at a general meeting (Article 197).

The procedure appears twice in the Law, with different periods. Articles 107 and 108 give the shareholder 15 days from notice of the resolution to ask for the purchase, the board 30 days to answer, and seven days to state a price. Articles 241 and 242 give the shareholder ten working days from the announcement of the vote, the directors 20 working days to agree to buy, arrange a third-party buyer, apply to court for an exemption or abandon the action, and five working days to nominate a fair and reasonable price. Until the inconsistency is resolved, a shareholder should act within the shorter period, ten working days, and a company should answer within the shorter period too. If the shareholder objects to the price within ten working days, the company refers the price to arbitration forthwith and pays the nominated price as an interim payment within five working days; the arbitrator fixes a fair and reasonable price with interest on any balance or excess (Article 242). A third-party purchaser steps into the company's shoes, with the company indemnifying the seller if it fails to pay (Article 243). The court may exempt the company where the purchase would be disproportionately damaging, cannot reasonably be funded, or the notice was not in good faith, but only after reasonable endeavours to find a third-party buyer (Article 245), and an insolvent company cannot be made to buy (Article 246).

Beyond the buy-out, a shareholder, a beneficial owner or a director may apply to the competent court where the company's affairs have been or are likely to be conducted in a manner that is unfairly prejudicial, and the court may order the purchase of shares, compensation, regulation of the company's future conduct, the appointment of a receiver or liquidation (Article 230). Failure to comply with the allotment and pre-emption rules (Articles 58 to 61), the rules on interested transactions (Articles 167 and 168), the buy-back rules (Article 177), financial assistance (Article 186), special resolution matters (Article 191) or major transactions (Article 197) is deemed unfairly prejudicial. A shareholder or director may also seek leave to bring a derivative action in the company's name (Articles 231 to 234). These claims are heard by the Commercial Court under Law N° 30/2018 of 02/06/2018 determining the jurisdiction of courts (Article 81), unless the parties have agreed to arbitrate.

Using the statutory buy-out right as a dissenting partner

1. Check that the resolution qualifiesThe special resolution must approve a major transaction, an amalgamation, a change of status, a change to the company's capacity or business restrictions, or an action affecting class rights (Articles 106 and 240).
2. Vote all your shares against itCast every vote attached to the shares registered in your name, or held for the same beneficial owner, against the resolution, or do not sign a written resolution; abstaining partially loses the right.
3. Serve written notice promptlyAsk the company in writing to purchase all your shares within ten working days of the announcement of the result (Article 241), the shorter of the two periods in the Law.
4. Receive the board's decisionWithin 20 working days the directors agree to buy, find a third-party buyer, apply to court for an exemption, or decide not to proceed with the action (Article 241).
5. Receive and test the priceWithin five working days of agreeing to buy, the directors nominate a fair and reasonable price (Article 242); obtain your own valuation.
6. Object within ten working days if necessaryA written objection sends the price to arbitration; the company must pay the nominated price within five working days as an interim price, with a balance and interest if the arbitrator fixes a higher figure.
7. Complete the transfer and the taxShares bought by the company are cancelled (Articles 184 and 242); the gain is subject to 10% capital gains tax, which the company withholds and pays within 15 days after the month of transfer.

Drag, tag, put and call options: making them work

Rwandan statute contains none of the usual exit clauses, so their effectiveness depends on drafting. A right of first refusal works best as a restriction in the articles that the board is expressly empowered to enforce by refusing registration under Article 75. A tag-along right obliges a selling majority to procure that the buyer offers the same terms to the minority; it is a contractual promise and should be backed by a provision in the articles that the board will not register a transfer that breaches it. A drag-along right, by which a majority accepting a third-party offer can require the minority to sell on the same terms, needs a clause in the articles, a power of attorney from each shareholder allowing the transfer form to be signed on its behalf, and a mechanism for paying the consideration into a designated account. Shares transfer only on entry in the register, on a signed transfer form with the certificate (Article 75), and the register must be updated within seven days and the index within 14 days (Articles 114 and 115, as amended).

Put and call options between the partners are ordinary contracts. Where the company itself is to buy shares, the buy-back rules apply: offers must be general or special offers following board resolutions and certificates (Articles 176 to 179), any shareholder or the company may ask the court to restrain an unfair acquisition (Article 180), and acquired shares are cancelled with notice to the Registrar General within 15 days (Article 184). A contract for the company to buy its own shares is specifically enforceable, except where performance would make the company fail the solvency test or leave only redeemable shares outstanding (Article 185), so a put against the company is only as good as its solvency. Price formulas based on multiples of earnings, net assets or an independent valuation should specify the valuer, the accounting date and the treatment of shareholder loans.

Two regulatory consequences follow any exit. First, the exercise of an option that moves the joint venture from joint to sole control is itself a change of control under Article 10 of Law n° 011/2026 and may be notifiable before completion (Merger control and competition law); for a bank, crossing 5% or any supervisory threshold needs the National Bank of Rwanda (BNR)'s prior authorisation under Law nº 044/2024 of 30/05/2024 governing banks. Second, the tax: a sale of unlisted shares bears capital gains tax at 10% of the gain since 29 May 2025, charged on direct or indirect transfers in Rwanda or abroad and withheld and paid by the resident company whose shareholding changed within 15 days after the month of transfer (Article 37 of Law nº 027/2022, as replaced by Law nº 014/2025); and a change of more than 25% in the ownership of an unlisted company forfeits its unused tax losses unless the change is an internal reorganisation keeping all shareholders of at least three years' standing (Article 31). Option prices should be set net of, or with an adjustment for, both (Capital gains, property and other taxes).

Joint ventures and competition law

Under Article 10 of Law n° 011/2026, in force since 4 March 2026, a merger includes the creation of a full-function joint venture which, on a lasting basis, performs the functions of an autonomous enterprise (Article 10(1)(c)), as well as any acquisition of control over the whole or part of an enterprise. Control includes holding more than half the capital, business or assets, the ability to exercise decisive influence through a majority of votes or the power to appoint or veto a majority of the board, and 'material influence over the commercial policy' (Article 10(2)). Veto rights over the budget, business plan or senior appointments may therefore give each partner control, making the joint venture jointly controlled. A notifiable merger must be filed within 30 days of the decision to merge; the authority decides within 45 days of a complete notification, extendable once by up to 15 days; the review is suspensory, and approval is deemed if the deadline is missed (Articles 11 and 14). Rwanda's notification thresholds and fees are to be set by Regulations of the competition authority, which had not been published at 10 October 2026, and transactions below the thresholds can be called in within 12 months of completion (Article 11(3)).

A joint venture with a regional footprint must also be tested against the COMESA Competition and Consumer Protection Regulations, 2025, approved by the COMESA Council on 4 December 2025 and reported by practitioners to be in force from 5 December 2025, which contain a specific joint venture test (Regulation 41(6)) and, according to practitioners, treat a joint venture as full-function where it is intended to operate for three years or more, and against the EAC merger regime applied since 1 November 2025. Both regional regimes are suspensory. A joint venture that is not full-function, such as a joint purchasing or research arrangement between competitors, is assessed instead under the prohibition of anti-competitive horizontal agreements in Article 4 of Law n° 011/2026, which bans price fixing, output limitation, bid rigging and market allocation; agreements with efficiency benefits may be authorised for a limited period under Articles 6 and 7. Non-compete and exclusivity clauses in the joint venture agreement should be no wider than the joint venture's business requires.

Deadlock and dispute resolution

A 50:50 joint venture, or one with wide reserved matters, will deadlock unless the documents provide a way out. The usual sequence is escalation to senior executives, then mediation, then a buy-sell mechanism: a 'Russian roulette' clause, in which one partner names a price at which the other must either buy or sell; a 'Texas shoot-out', with sealed bids; or a put or call at a valuation fixed by an independent expert. Each needs a clear trigger, a defined deadlock matter, time limits and a funding period, and should be mirrored in the articles so that the company registers the resulting transfer.

Disputes between partners are commonly referred to arbitration under Law N° 005/2008 of 14/02/2008 on arbitration and conciliation in commercial matters, often at the Kigali International Arbitration Centre (KIAC), or to a foreign seat; the parties' choice of governing law and forum is generally respected in commercial matters (FAQ 72; Arbitration law and KIAC). Without a contractual mechanism, the fallback remedies are blunt. A shareholder may ask the court to put the company into liquidation where it is 'just and equitable' to do so (Article 104 of Law N° 075/2021 of 06/12/2021 relating to insolvency), or bring an unfair prejudice claim under Article 230 of the Companies Law, where the court may order one partner to buy the other out. Both take time and destroy value, which is why the deadlock clause deserves as much negotiation as the business plan.