Establishing A Joint Stock Company Under Oman's New Commercial Companies Law

The process and requirements for establishing a joint stock company under the Commercial Companies Law promulgated earlier this year by Sultani Decree 18/2019 (New CCL) are, on the whole, the same as under Sultani Decree 4/1974 (Old CCL), which it replaced. There are, however, a raft of provisions relating to promoters of joint stock companies that were not included in the Old CCL, most significantly relating to the duty of care and potential liability of promoters. In this article Nick Simpson and Justine Harding highlight some of the key provisions of the New CCL impacting promoters establishing joint stock companies.

Role of promoter

The New CCL defines a promoter as anyone who participates in the incorporation process with the intention of assuming the responsibility arising from doing so. In particular, a promoter includes anyone who signs the memorandum or articles of association or who provides a contribution to the capital of the company, either in cash or in kind, upon incorporation. By way of clarification, anyone, other than a shareholder, who reviews or drafts the memorandum or articles of association is expressly excluded from the ambit of the definition of promoter. For example, a legal adviser who drafted the constitutional documents is not considered a promoter of the company.

The New CCL provides that promoters are to select from among themselves at least three people to form a committee to take the process of establishing the company forward.

Ratification of action taken by the promoters

Like the Old CCL, the New CCL provides for the ratification at the constitutive general meeting of action undertaken by the promoters on behalf of the company in relation to its formation. A report containing full information about the process and expenses incurred in respect of the incorporation of the company, together with details of actions taken on behalf of the company under formation, is to be submitted to the constitutive general meeting by the committee formed by the promoters.

The New CCL introduces a lower quorum for a constitutive general meeting with only shareholders or their proxies representing 65 per cent or more of the capital of the company required in contrast to the Old CCL, which required at least 75 per cent. Pursuant to the New CCL, resolutions at a constitutive general meeting are adopted by absolute majority of the votes cast. Again, this is a lower threshold than that required under the Old CCL, which...