Key Changes Announced in the Oman Commercial Companies Law
A new Commercial Law for Oman was announced in April 2019. The New Commercial Law has attempted to generate sturdier and more transparent corporate governance in Oman. The main aim is to assist in making business in Oman easier; below we have listed an overview of the key changes to this law and what companies need to do to comply:
Limited Liability Companies (L.L.C)
Single Shareholder Companies- Companies are now permitted to be incorporated with a single natural person or single corporate shareholder, however, some restrictions apply:
- A natural person may not incorporate more than one single-shareholder LLC
- This corporate vehicle is likely to be available to Omani and GCC citizens. Therefore an LLC with a foreign shareholder is likely to still need at least two shareholders. Minimum Share Capital- Minimum share capital is no longer stipulated. However, minimum share capital of OMR 150,000 set by the FCIL for LLC’s that have foreign shareholders remains in place.
- Capital contributions in the form of services or labour are now expressly forbidden for LLC’s.
- Shareholders can now limit their liability of capital contributions made to the company Maximum Shareholders- The maximum number of shareholders in an LLC has been increased from 40 to 50. Liability of Authorised Managers- Liability of authorised Managers is now the same as that of Directors of a Joint Stock Company (JSC)
- Authorised Managers must now make a formal notification at shareholder meetings Conflicts of Interest- Authorised Managers must inform shareholders of any conflict between any transactions involving the Manager and the company Related Party Loans- The new law now prohibits a company from providing any form of lending facility to its Authorised Managers and Shareholders. Shareholder Information Rights- Shareholders may now request documentation relating to companies in which they hold shares
- This documentation can go back 10 years
- This is to ensure greater visibility on company operations
Joint Stock Companies (SAOC/SAOG)
Board Meetings- Two thirds of the board must now be present at Board Meetings
- Decisions of the Board can now be released in advanced in the form of draft minutes
- Any person who signs minutes of the meeting will be liable for the content
- Board members may appoint a proxy to attend the meeting on behalf of the Director. The proxy is not permitted to attend more than 2 meetings consecutively
- The Chairperson no longer has the main casting vote. In the case of equality of votes, the Chairperson’s vote would decide a resolution Shareholder Meetings- One or more Shareholders holding at least 10% share capital can now call a general meeting
- One or more Shareholders holding at least 5% share capital can now request the Board of Directors to add an item on the meeting agenda
- A person who is appointed as proxy for more than one Shareholder may only attend the general meeting if that proxy represents shareholders holding more than 5% share capital Director Interests- A register of interests involving transactions where a Director has interests must be kept
- Cash contributions which are seen as payments to Shareholders can now be converted into equity (partly)
- The shares of joint stock companies can now be converted into global depositary receipts which enables external investors (outside of Oman) to trade the equity of companies listed in the MSM
- The Board of Directors and auditors are now jointly liable for and damaged caused by them not preserving the company’s share capital
Director and Shareholder Restrictions (JSC)
- Directors and Shareholders may not participate in the management of another company that carries out a similar business without prior approval of the OGM
- Directors and Shareholders many not enter directly, or indirectly into any agreements with the company for their own account without prior OGM approval
- Directors and Shareholders may not act as a proxy for more than two consecutive Board Meetings
Time Limits: These have been shortened or clarified in the new law including:
- The minutes of a JSC Shareholders meeting now have to be filed within 7 days
- 15 days notice is required for a Shareholder meeting of a JSC/LLC
- A merger must be announced in 2 newspapers for 2 consecutive days with the merger taking affect 3 months from publication
- More than 2 years of inactivity will result in automatic dissolution of a company
- Sukuk: The new law has introduced the concept of Islamic Bonds (Sukuk) to the provisions that cover bonds. This clarifies that all provisions formerly explicitly applicable only to bonds also apply to Sukuk, thereby formalising the Islamic financial instrument’s role in Oman.
- Sanctions: The list of offenses and sanctions has been increased in the new law. Penalties range from imprisonment for not less than 6 months and not more than 3 years and/or a fine OMR 100 to OMR 50,000.
How Can Companies Comply with the New Commercial Law in Oman?
Omani companies have one year to comply with the New Commercial law, 17th April 2020. Although this new law does not affect some companies this will provide all companies to review their constitutional documents and practices in addition to corporate governance processes to ensure no conflicts of interest.
For more information on the New Commercial Companies Law in Oman, PRO Partner Group can assist you with any queries you may have, contact Natalia Shutilo on firstname.lastname@example.org.
*All information above has been sourced from an English translation of the official Arabic release; PRO Partner Group is not liable for any information incorrectly translated. This article will be updated if any further information or details are announced. More details: https://www.addleshawgoddard.com/en/insights/insights-briefings/2019/corporate/key-changes-in-the-new-oman-commercial-companies-law/