Most foreign investment problems in Jordan do not arise from hostile regulation. They arise from avoidable oversights during setup and early operations. After advising dozens of foreign-owned businesses in Jordan, we see the same mistakes repeat. Here are the seven most consequential ones and what to do instead.
1. Choosing the Wrong Entity Type
Investors often default to a limited liability company without analysing whether a private shareholding company, a branch, or a free zone entity would better serve their objectives. The wrong structure can lead to unnecessary tax exposure, governance complications, or difficulty bringing in future investors. A branch, for instance, exposes the parent company to unlimited liability in Jordan, while an LLC limits shareholder liability but may not suit a business that needs to issue different classes of shares.
What to do: Map out the ownership structure, planned activities, exit strategy, and tax position before selecting an entity. Consult with a corporate lawyer to compare the real costs and constraints of each option.
2. Ignoring Sector-Specific Restrictions
Jordan maintains foreign ownership restrictions and special licensing requirements in certain sectors, including transportation, construction contracting, security services, and some retail activities. Investors who register a company without confirming that their intended activity is open to foreign participation risk having their licence application rejected or, worse, operating without proper authorisation. Some sectors are reserved for Jordanian investors, while others cap foreign ownership, commonly at 49%.
What to do: Before registration, verify whether the sector has foreign ownership caps, requires a Jordanian partner, or demands a sector-specific licence from a ministry or regulatory body. The current list of restricted and capped sectors is set out in the Investment Environment Bylaw No. 7 of 2023, issued under the Investment Environment Law No. 21 of 2022, which provides the primary framework.
3. Inadequate Shareholder Agreements
Many foreign investors enter joint ventures with Jordanian partners using only the standard memorandum of association, which covers the minimum requirements under the Companies Law No. 22 of 1997. This leaves critical issues unaddressed: deadlock resolution, non-compete obligations, dividend policies, exit rights, drag-along and tag-along provisions, and the day-to-day management allocation between partners.
What to do: Negotiate and sign a comprehensive shareholders' agreement alongside the memorandum of association. This document should be governed by a clear choice of law, include a dispute resolution mechanism (typically arbitration), and address every foreseeable scenario between the partners.
4. Disputes With Local Partners
Where a Jordanian partner is required or chosen voluntarily, disputes frequently arise over management control, profit distribution, reinvestment decisions, or the partner's failure to contribute the agreed resources. Without proper contractual protections, resolving these disputes can be slow, expensive, and damaging to the business.
What to do: Conduct thorough due diligence on any prospective local partner. Define each partner's contributions, responsibilities, and exit rights in writing. Include arbitration clauses that allow for international arbitration if the stakes justify it.
5. Licensing and Regulatory Gaps
Company registration with the Companies Control Department is only the first step. Investors frequently overlook the vocational licence from the municipality, registration with the Income and Sales Tax Department, enrolment with the Social Security Corporation, or sector-specific permits. Operating without these registrations exposes the company to fines, penalties, and potential shutdown orders.
What to do: Prepare a compliance checklist before commencing operations. Assign responsibility for obtaining each licence and registration, and set deadlines. A post-registration compliance review by legal counsel can catch gaps before they become problems.
6. Employment Law Violations
Jordan's Labour Law No. 8 of 1996 imposes mandatory requirements on employment contracts, working hours, overtime, annual leave, maternity leave, end-of-service indemnity, and social security contributions. Foreign employers accustomed to different regimes frequently violate these rules unintentionally, for example, by using fixed-term contracts improperly, failing to pay end-of-service indemnity, or exceeding the permitted ratio of foreign workers under Jordanisation requirements.
What to do: Use employment contracts that comply with Jordanian law from the outset. Budget for social security contributions (currently 21.75% of gross salary, shared between employer and employee) and end-of-service indemnity. Monitor the Jordanisation ratio and obtain work permits for foreign employees before they begin working. See our detailed guide on hiring employees in Jordan.
7. Delaying Intellectual Property Registration
Foreign investors sometimes assume that their home-country trademarks, patents, or industrial designs are automatically protected in Jordan. They are not. Under the Trademarks Law No. 33 of 1952 and its amendments, Jordan operates a first-to-file trademark system, meaning that a third party can register a foreign brand locally before the brand owner does. Recovering a squatted trademark is possible but far more expensive and time-consuming than registering it proactively.
What to do: File trademark applications with the Industrial Property Protection Directorate at the Ministry of Industry, Trade and Supply before or immediately upon entering the Jordanian market. An investor holding patents or industrial designs relevant to the business should register those as well.
When to Speak With a Lawyer
The common thread in all seven mistakes is that they are preventable with proper planning. A foreign investment lawyer can conduct a pre-entry legal audit, identify the risks specific to the sector and structure, prepare the right documents, and put compliance systems in place before problems arise. The cost of prevention is a fraction of the cost of correction.
For advice on a specific matter, you may contact the firm.
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