Joint Stock Companies And The New Commercial Companies Law – Preparation Of Accounts And The Appointment Of Auditors

In the latest of our legal updates following the introduction of the new Commercial Companies Law (SD No. 18/19) (New CCL), we focus on the provisions dealing with accounts and auditors of joint stock companies in the Sultanate of Oman. Review of the relevant provisions of the New CCL reveals that action has been taken to expand on the provisions of the old Commercial Companies Law (SD No. 4/74) (Old CCL) and to implement tighter controls on the preparation of accounts and the appointment of auditors.

In this article, we highlight a number of key changes in this area which will affect joint stock companies moving forward.

Accounting and audit standards

Article 209 of the New CCL states that a company's financial statements must now be prepared in accordance with the International Financial Reporting Standards (IFRS) and that audits must be conducted in accordance with the International Standards on Auditing (ISA). The New CCL goes further to state that the "Competent Authority" (i.e. the Capital Markets Authority (CMA) for public joint stock companies and the Ministry of Commerce and Industry for closed joint stock companies) has discretion to approve other standards which do not contradict IFRS or ISA. The Old CCL did not specify any requirements in relation to accounting or auditing standards, but these were included in the Income Tax Law (SD 28/09 (as amended)) (Tax Law) - the amendments introduced by the New CCL are clearly an attempt to introduce uniform practice for joint stock companies in these areas and ensure alignment with the Tax Law.

Errors

The board of directors are now under an obligation to rectify any errors identified in financial statements prior to the company's annual general meeting (AGM) and send details of those errors to the company's shareholders prior to the AGM. However, the New CCL does not provide a specific deadline for such notification being given to the shareholders. If the board is unable to remedy the errors prior to the AGM, then consideration of the report containing the financial statements shall be deferred unless the errors are immaterial. Note that the board of public joint stock companies must now also provide the CMA with a copy of the report following correction. This new provision, set out in Article 218, is a new obligation which was not addressed in the Old CCL.

Termination of an auditor's appointment

Article 222 of the New CCL provides that a company may dismiss an auditor by virtue of a...