New Commercial Companies Law: Modernising Corporate Legalisation In Oman

Introduction

In April 2019, the new Commercial Companies Law (the "New CCL") entered into force and repealed the previous Commercial Companies Law (Law No. 4/1974) in its entirety.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.

Key highlights

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...