Friday, February 12, 2010

Doing Business in Oman FAQ: What is the difference between an SAOC and an LLC?

Although the most popular corporate structure in Oman is the limited liability company (LLC), there are other corporate structures that exist and may be available to businesses seeking to form an entity in Oman. One example is the SAOC, which is a closely held or “closed joint stock” company.

The SAOC is a more formal and regulated company in Oman, though it is not as formal as the public joint stock company, or SAOG. Therefore, SAOCs would be appropriate for projects or arrangements that seek more formality than an LLC, but that do not require the most formal structure available. In addition, certain types of businesses in Oman are not permitted to take the form of an LLC and must adopt an SAOC or SAOG structure, such as insurance companies, banks and investment funds.

There are several key differences between LLCs and SAOCs. First, an LLC only requires two shareholders, whereas an SAOC requires at least three. Second, SAOCs must have a board of directors composed of no fewer than three directors, but LLCs may be managed by either a board of managers or a single manager. The LLC managers are appointed by the shareholders as provided in the constitutive contract, but in an SAOC the board of directors must be elected in accordance with Omani law. Third, the required minimum capital for an LLC ranges from RO 20,000 to RO 150,000, depending on whether foreign ownership is involved, whereas SAOCs require at least RO 500,000 of capital.

The shares in an LLC are not marketable and the shares must be fully paid up at inception of the company, but in an SAOC the shares can be offered for sale and it is permissible to pay some of the capital initially and issue additional capital later on. In addition, meeting formalities are different for each structure. LLCs may have informal meetings and no board meeting is required. SAOCs, on the other hand, must have statutory meetings at set intervals in accordance with Omani law.

Ultimately, the type of project or business involved and the individual needs of the parties involved will determine whether an LLC or SAOC is the best option for a particular situation.