Overview of the Regulations to the Commercial Companies Law

The Regulations to the Commercial Companies Law (the “Regulations”) were issued under Omani Ministerial Decision No.146/2021 by the Ministry of Commerce, Industry and Investment Promotion (“MOCIIP”) in October 2021 in accordance with Article 2 of the Commercial Companies Law (Royal Decree 18/2019) (“CCL”).

The Regulations cover various types of entities including closed joint stock companies (SAOCs), limited liability companies (LLCs) and single person companies (SPCs). Open joint stock companies (SAOGs) are specifically excluded from these Regulations and governed by separate regulations issued by the Capital Market Authority.

This article focuses on the changes made by the Regulations which companies in Oman should be aware of. First, we consider the general provisions, then closed joint stock companies and limited liability companies and finally single person companies.

General Provisions

Registration Applications: According to the Regulations, applications to register a company, a branch or a commercial representation office should be submitted through the electronic system which is called Invest Easy (One Stop Shop) (www.business.gov.om/ieasy/wp/en/). The application needs to include all the basic information about the company (e.g. the company’s name, objects, legal form, head office etc.) or relevant documents of the branch’s head office or the foreign company in case of a commercial representation office. The authorised activities of a commercial representation office are limited by the Regulations and they are prohibited from doing various activities such as importing, exporting and selling.

Company Information: The Regulations requires all companies to include the following information in all their documents and publications:

• the company’s name and legal form;
• the commercial registration number;
• the address of the company;
• the company’s head office;
• means of communication; and
• any other data specified by the MOCIIP.

Financial Statements: Article 10 of the Regulations sets out the occasions when MOCIIP may request audited financial statements of the company, including transfer of shares and increase in share capital. The data must be submitted within (7) seven working days from the date of their request.

Contribution in-kind: Contribution in-kinds should be determined by a licenced appraisal office or auditor in Oman and, in case of any dispute between the partners, it should be resolved by agreement between the partners.

Profit and Loss: Article 17 of the Regulations prohibits any agreement between the partners to allocate a fixed interest to a partner and makes such a provision null and void. The general position sets out in the Regulations is that each partner shall receive profits, and be responsible for losses, in proportion to their contributions to the share capital of the company.

Company Conversion and Merger: The Regulations sets out the requirements and documents needed for a company’s conversion and merger in Articles 18-23.

Liquidation: The Regulations have also introduced two new liquidation procedures named optional liquidation and judicial liquidation. The required process and documents for both liquidation procedures are described in the Regulations.

Closed Joint Stock Companies (SAOCs)

According to the Regulations, no company can hold more than 51% of the share of another company and manage such company unless such company is in the form of a holding company. The CCL requires a holding company to be in the form of a joint stock company.

In relation to share capital increases, the Regulations introduce additional requirements which need to be met before such a decision is made by the shareholders in an extraordinary general meeting (EGM). Article 44 of the Regulations requires the company’s board of directors to provide justifications for the proposal to increase the issued capital within the limits of the authorised capital and a report on the company’s business during the current fiscal year, the last approved budget, and a report issued by the auditor regarding the correctness of the financial statements contained in the board’s report.

Additionally, in relation to general meetings, the application to approve its agenda and invitation and the minutes of such general meeting shall now be filed with the Registrar through the electronic system. The annual general meeting (AGM) shall determine the allowance for directors attending board meetings and its committees which now cannot exceed OMR 6,000 per annum for each director.

Article 60 of the Regulations introduces certain conditions that a directors of a closed joint stock company must meet. Among other criteria, such a candidate must be (i) a physical person with good conduct and reputation, (ii) aged 25 years or over, (iii) shall not have been sentenced to insolvency or bankruptcy unless such status has ceased to exist, and (iv) shall not have been sentenced by a final judgement of imprisonment for a felony or convicted of a penalty for a crime involving dishonesty unless rehabilitated.

Article 68 of the Regulations requires the approval of the ordinary general assembly (OGM) for extraordinary transactions or those that do not fall within the course of the company’s normal activity.

Furthermore as a new rule the Regulations states that each company shall appoint a legal advisor and a full-time internal auditor by a decision of the company’s board of directors.

Limited Liability Companies (LLCs)

According to the Regulations, the following processes relating to a limited liability company shall be submitted through the electronic system:

• application for registration of a new limited liability company;
• any transfer of shares by a partner; and
• any decision on reducing the company’s share capital.

Provisions regarding the management of a limited liability company remain unchanged in the Regulations.

Single Person Companies (SPCs)

Single person companies were first introduced in the CCL to offer an alternative choice to those who prefer to hold their business activities through a legal entity but did not wish to have partners. According to the Regulations, the constitutive contract of a single person company shall be based on a model which will be prepared by MOCIIP. In addition, the constitutive contract has to include certain information including: (i) the company’s name and head office, (ii) the share capital (cash and/or in-kind) and nominal value of shares, (iii) the name of the partner, (iv) the objects of the company and (v) the date of incorporation of the company and its term. The name of the company shall be followed by “SPC”.

Additionally, the Regulations states that when one company owned by two or more persons incorporates more than one single person company, the objects of those companies shall be different.

Conclusion

The general thrust of the Regulations seems to apply greater supervision and control of companies. Examples include giving MOCIIP the power to request audited financial statements or other data from a company at any time and making it mandatory for companies to use licenced professionals for different processes such as valuation of contribution in-kinds. This approach becomes even more pronounced in relation to closed joint stock companies where we can see additional requirements for share capital increases, more mandatory filling requirements relating to EGMs, the introduction of certain conditions that a director of a closed joint stock company must meet and the mandatory appointment of a legal advisor and a full-time internal auditor.