On 17 February 2019, the new Commercial Companies Law (Royal Decree 18/2019) was enacted (the “New CCL”), which repeals and replaces the previous Commercial Companies Law (RD 4/1974 as amended). The New CCL took effect on 17 April 2019.
With the end of the financial year approaching, companies in Oman will be required to hold their first annual general meetings (“AGMs”) in line with the New CCL.
Under the New CCL, limited liability companies (“LLCs”) are now required to hold an AGM within 180 days from the date of the end of the financial year and joint stock companies (closed joint stock companies (“SAOCs”) and public joint stock companies (“SAOGs”)) have 90 days from the end of the financial year to do so.
This article sets out the steps and requirements for joint stock companies and LLCs to hold AGMs, and subsequently Ordinary General Meetings (“OGMs”), in accordance with the New CCL.
Joint stock companies and LLCs will also need to check their constitutional documents and/or shareholders’ agreements, for any additional requirements and/or higher voting percentages than those set out in the New CCL.
Joint Stock Companies
Under the New CCL, joint stock companies are required to hold AGMs to carry out the following:
- study and approve the report of the Board of Directors (“Board”) on the company's activity and financial position during the financial year;
- study and approve the report of the Board on the organisation and management of the company during the financial year;
- study and approve the auditor's report on the audited financial statements of the company for the financial year;
- elect and dismiss members of the Board;
- study and approve the proposal of distribution of dividends to shareholders;
- approve the remuneration and attendance fees of the members of the Board; and
- appoint the auditor for the new financial year and determine his/her fees.
In order to carry out these activities during the AGM, joint stock companies are required to give their shareholders access to the financial statements, reports of the Board and the auditors, at least 15 days before the AGM.
The Board of a joint stock company must prepare the agenda for the AGM (the “Agenda”).
During the AGM, shareholders of the joint stock company may not consider matters other than those included in the Agenda. However, they may consider urgent matters during the AGM, upon a decision of an absolute majority of the votes of those shareholders present.
Invitation to the AGM
The invitation to attend the AGM (the “Invitation”) must include the Agenda for the AGM, otherwise such Invitation shall be deemed invalid. For SAOCs, the Invitation (along with the Agenda) must be submitted to the Ministry of Commerce (“MOCI”) for approval, whereas SAOGs are required to obtain approval from the Capital Market Authority (“CMA”).
The Invitation must then be sent to each of the shareholders of the company at their address as recorded in the register of shareholders, at least 15 days before the date set for convening the AGM. MOCI may send an observer to attend an AGM of an SAOC and the CMA may send someone to an AGM of an SAOG.
The Invitation of a joint stock company must then also be published in Arabic in two local newspapers for at least two consecutive days, at least 15 days before the date set for convening the AGM.
The Invitation must state the date, time and place of the AGM and set a date for a second meeting that would be held if the legal quorum is not met at the AGM. Such second meeting must be held within seven days of the date of the AGM.
Quorum and Attendance
The AGM shall only be valid if attended, either in person or by proxy, by shareholders representing at least half of the joint stock company’s share capital. Each shareholder shall have the right to attend the AGM in person or by proxy and shall have one vote for every share they own.
All members of the Board must attend the AGM, but the absence of all or of some of them shall not affect the validity of the AGM, provided the legal quorum of shareholders is present.
If a shareholder wishes to appoint a proxy, then they must provide the company with a signed written authorisation for the appointment of that respective shareholder’s proxy to be valid. The proxy may be from amongst shareholders or any other third party, but he/she may not be a member of the Board, otherwise such proxy shall be void.
A proxy may represent more than one shareholder in a joint stock company, provided their shares combined shall not exceed five percent of the company’s shares, otherwise such proxy shall be void. However, a parent may act as a proxy for his/her minor child(ren), even if their shares combined exceed five percent of the company’s share capital.
The AGM shall be chaired by the chairperson of the Board or by his/her deputy if he/she is not present. In the absence of both the chairperson and his/her deputy, the AGM shall be chaired by whoever the Board appoints, or by the company’s auditor if the Board fails to appoint someone.
Some of the procedure and requirements set out above may be avoided if a joint stock company can confirm to MOCI/ CMA that 100% of its shareholders will be present at the AGM, provided MOCI/ CMA is notified of the date of the AGM.
Minutes of the AGM (the “Minutes”) must be drafted by the secretary appointed by the AGM. These Minutes must include the following:
- the number and percentage of shares present in company’s share capital and the number and percentage of shares represented by the shareholders at the AGM;
- the issues addressed at the AGM;
- the decisions taken at the AGM;
- the number of votes approving the decisions; and
- any other data the shareholders request to enter therein.
The Minutes must be duly signed by the secretary, the auditor and the legal advisor of the company, and approved by the chairperson.
The Board must file the Minutes in Arabic with MOCI/ CMA within 7 days from the day following the date of the AGM.
The procedure set out above is the same for a joint stock company to hold OGMs, save that they would not need to address any/ all of the issues that need to be considered at the AGM.
LLCs are required to hold AGMs to discuss the distribution of profits, approval of balance sheets, profits and loss accounts, the manager’s reports and the auditor’s report. To do so, the manager of the LLC (the “Manager”) must send the shareholders the financial statements, the Manager’s report and the auditor’s report for the financial year, within 180 days from the date of the end of the financial year.
The Manager of the LLC must prepare the Agenda.
During the AGM, shareholders of an LLC may not consider matters other than those included in the Agenda. However, they may consider urgent and unexpected matters that arise during the AGM.
Invitation to the AGM
The Invitation must include the Agenda, the date, time and place of the AGM, otherwise such Invitation shall be deemed invalid.
The Invitation must be sent to each of the shareholders of the company at their address as recorded in the register of shareholders, at least 15 days before the date set for convening the AGM. Unlike joint stock companies, LLCs are not required to obtain approval from MOCI/ CMA for their Invitations and Agenda, nor are they required to publish their Invitations in local newspapers.
Quorum and Attendance
Like joint stock companies, the AGM of an LLC shall only be valid if attended, either in person or by proxy, by shareholders representing at least 50% of the LLC’s share capital. Each shareholder shall have the right to attend the AGM in person or by proxy and shall have one vote for every share they own. However, unlike joint stock companies, the Manager of an LLC is not required to attend an AGM.
If this legal quorum is not met for the AGM, then a second meeting must be held to discuss the same Agenda. The shareholders of the LLC must be notified of such second meeting at least seven days in advance. The decision made during the second meeting shall be valid, regardless of the percentage of share capital represented therein, provided that it is held no later than 30 days from the initial date of the AGM.
If a shareholder wishes to appoint a proxy, then they must provide the LLC with a signed written authorisation for the appointment of that respective shareholder’s proxy to be valid. Such proxy must be another shareholder in the LLC but such proxy may not represent more than one other shareholder in the LLC, otherwise the proxy will be void.
The New CCL does not specify who should chair the AGM of an LLC. However, this would depend on the provisions of the LLC’s constitutive contract and/or any shareholders’ agreement.
LLCs are not required to file their Minutes externally. However, resolutions of the decisions made at the AGM should be prepared as soon as possible and signed by shareholders with at least 50% of the share capital of the LLC, to be valid. The Minutes and signed resolutions of the AGM must be kept internally, in the LLC’s records.
This procedure is the same for an LLC to hold an OGM, save that it would not need to be held at the end of the financial year or address any/ all the topics that need to be considered at the AGM.
Please get in touch with any member of our team if you require any assistance regarding the procedure for convening a meeting or any advice on your obligations under the New CCL.