In April 2019, the new Commercial Companies Law (the "New CCL") entered into force and repealed the previous Commercial Companies Law (Law No. 4/1974) in its entirety. Although the New CCL will not have a significant bearing on the corporate sector, we do believe that the changes brought forward will bring Omani corporate legislation one step closer to its global counterparts. Some of the key progressive highlights of the New CCL are noted below.
Limited liability companies (or LLCs)
- An LLC can now be incorporated with just a single shareholder. This seeks to benefit not just Omani, GCC or American investors but foreign investors as well, in light of the new Foreign Investment Law. A foreign investor can have a 100% owned LLC in Oman subject to the restrictions laid down in this new Foreign Investment Law.
- The maximum number of shareholders in an LLC has been increased from 40 to 50.
- New CCL does not prescribe any minimum share capital.
- The duties and liabilities of authorised managers of LLC are now on the same footing as the duties and liabilities of directors of a joint-stock company. The authorised managers will now be expected to adhere to greater standards of duty of care.
- It is now mandatory for authorised managers to formally notify the shareholders of a conflict of interest in any transaction or business proposed to be entered by an LLC.
- Lending is completely prohibited to authorised managers and shareholders. We believe this will result in increased transparency in LLCs.
Joint-stock companies (or JSCs)
- Shareholders holding just 10% of the share capital can now make a requisition request to call a shareholders' meeting. Previously this figure stood at 25%.
- An item for discussion can be included on a meeting agenda by shareholders holding 5% of the share capital. This was 10% previously.
- Directors and executives are liable to report any interests (or change of such interests) they have in a JSC within five business days of their appointment. There must also now be a register maintained by JSC recording such interests.
- The option to pay half the nominal value of the issued shares on subscription is not provided for in the New CCL.
- The shareholders may resolve to retain and convert a portion of net profits of the company into new shares.
- The quorum for directors' meetings has been increased from 51% to two-thirds of the board's strength.
- The board must now have an odd number of directors. To this effect, the chairman no longer has a right to cast a vote in case of a deadlock.
- At least four directors' meetings must be held in a year with a gap not exceeding 120 days between each such meeting.
- A director is deemed to have resigned if he/she is absent from three consecutive directors' meeting unless a valid reason for such absence is provided and acceptable to the board.
- The individual signing the minutes of directors' meetings is now liable for the validity of such minutes.
- The shares of a JSC may be converted into global depository receipts (or GDRs) allowing foreign investors to participate in the trade of equity of JSCs listed on the Muscat Stock Market.
- The concept of Sukuk (the Islamic equivalent of conventional bonds) has been introduced. The provisions that previously applied to conventional bonds now cover Sukuk as well.
We expect further clarity in the near future on the New CCL from the regulators in Oman. The new executive regulations may provide further explanation on the areas that were previously covered under the previous law but are not mentioned in the New CCL (e.g. the minimum amount of share capital for LLCs). Nevertheless, failure to make changes (such as the revision of the company's constitutional documents) in line with the provisions of the New CCL may result in statutory penalties. As such the company and all the stakeholders involved must take action to comply with the New CCL.
How we can assist
BSA Al Rashdi & Al Barwani Advocates and Legal Consultants are at the forefront of helping international, regional and local clients take advantage of these exciting new opportunities available after issuance of the new foreign investment law and the new company law. We have recently advised a number of clients on obtaining 100% full ownership of their existing businesses. BSA led the client through the process, including liaising with relevant governmental departments and committees in order to obtain the required approvals as well as negotiating with the local partners.
Our legal experts are adept at navigating clients through the evolving business landscape in Oman. Amongst other things, we can advise on the incorporation of a single-member company; assist in the holding of annual general meetings; or provide day to day guidance on the interpretation of the company law provisions.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.