Wednesday, June 25, 2008

The Oman Law Digest 2009 - BUSINESS REGULATION AND COMMERCE

The Law of Commerce [issued by RD 55/90] regulates commercial activities in Oman. The Law covers all aspects of business including sale, purchase, agency, lease, insurance, charge and guarantee.

The Law defines “commercial act” as an act effected by a person with entrepreneurial intent even if he is not a merchant and gives a non-comprehensive list of commercial acts which includes: sale and purchase of goods; lease of equipment; contracts of supply; public and private banking; commercial agency; transactions involving negotiable instruments; incorporation of commercial companies and sale and purchase of securities; extraction of natural resources; insurance; carriage of goods by land, sea and air; construction contracts; and maritime and aerial navigations.

Sale of immoveable property, sale of business, agency, real estate lease, and mortgage are required to have formal written contracts and require registration. Sale and purchase contracts of moveable property do not require registration.

Non-Omani persons cannot engage in commerce unless appropriately authorised by law.

In sale and purchase transactions, parties must agree on goods and price, and the principle of caveat emptor applies. Consideration must be in proportion to prevailing standards in trade. All types of sales including sale of business, sale by delivery on board, sale at port, Cost, Insurance and Freight (CIF) and Free on Board (FOB) are covered by this law.

A commercial agency is defined as a contract whereby a principal assigns to another person the task of carrying out a specific legal act for remuneration unless it is agreed to be gratuitous. If remuneration is not agreed in writing then it must be according to prevailing trade standards.

Merchants are required to maintain two types of commercial books: day books, in which all day-to-day transactions must be entered, and inventory books, which must be updated at least once a year.

In private sector transactions, negotiable instruments may be prepared and negotiated in English.

Bills of exchange must contain: (i) the term “bill of exchange” written in the text of instrument; (ii) an unconditional order to pay specified sum; (iii) the name of the drawee; (iv) the name of the payee; (v) the date of maturity; (vi) the place of payment; (vii) the date and place of making; and (viii) the signature of the drawer.

Bills of exchange may be drawn payable at sight or on a specified date or specific time from making or from sight. Endorsements must be unconditional and partial endorsements are void. An endorsement to a holder shall be deemed to be an endorsement in blank. The holder may fill the blank with his name or that of another person; further endorse in blank to another person; or deliver it to another person without completing or endorsing it.

Acceptance of a bill of exchange shall evidence that provision for payment is held by the acceptor which cannot be rebutted by drawee or holder. If a bill of exchange is not accepted, the burden of proof will be upon drawer to prove that drawee held provision for payment on the date of maturity.

Order promissory notes must contain: (i) the term “Order Note” written in text of note; (ii) an unconditional promise to pay specified sum; (iii) the date of maturity; (iv) the place of payment; (v) name of the payee; (vi) the date and place of making; and (vii) the signature of the maker.

Provisions with respect to bills of exchange in relation to endorsement, maturity, payment, recourse by reason of non-payment, prohibition on granting of time for payment, conservatory attachment, protest, calculation of time limits and working days, recourse by drawing, payment by way of intervention and extinctive prescription are expressed to be applicable to order promissory notes as well.

A demand order promissory note must be presented for payment within one year after the date of making it.

Cheques must contain: (i) the term “cheque”; (ii) an unconditional order to pay the specified sum; (iii) the name of drawee; (iv) the place of payment; (v) the date and place of making; (vi) the name of person to whom or to whose order payment is made; and (vii) the signature of the maker.

Cheques must be drawn on a bank, and may be expressed to be payable to the bearer. Cheques made payable to a person are negotiable by endorsement. Issuance of cheques without sufficient funds on account is a criminal offence.

Cheques drawn in Oman must be presented for payment within six months but, in practice, these limitations are not strictly adhered to.

The Law also contains provisions on crossed and account payee cheques.

The Unified Industrial Organisation Law for GCC Countries [RD 61/08] is applicable to companies undertaking industrial activities. The law ratifies GCC policy on industrialization to further regional economic development plans and programs and emphasizes use of local raw materials; installation of modern technology most suited to the local industrial environment; and recruitment and training of local manpower and deals with health, safety and environment standards and standards approved by the WTO for trade and export.