Sunday, February 28, 2016

Legal Updates

MD 151/2015: Amending Ministerial Decision 26/2012 Regarding Controls of Permitting Doctors Working in Civil Governmental Health Institutions to Work in Private Health Institutions

Ministerial Decision (“MD”) 151/2015 issued on 18 November 2015 amends the framework for doctors who work in government health institutions whilst also working in private health institutions. Under the new regulations, only Omani doctors may choose to work in both institutions simultaneously.

The new amendment also contains several new rules as to the specific approvals and permits required by doctors who want to simultaneously work in both types of institutions. The regulation seeks to ensure that doctors who choose to simultaneously work in both type of institutions do not neglect their work in the government institution, nor influence patients to visit them in the private institutions.

MD 328/2015: Amending Some of the Provisions of the Organizational Regulations in Practicing the Recruitment of Non-Omani Manpower

MD 328/2015 issued on 26 November 2015 seeks to amend MD 1/2011, which contains certain regulations regarding the recruitment of non-Omani manpower. MD 1/2011 has already been amended by MD 420/2012 and both amendments contain regulations regarding licensed establishments who bring non-Omani employees to the Sultanate, including domestic workers in households.

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Sunday, February 21, 2016

Is Salary Reduction Permissible Under the Oman Labour Law?

General Overview

In the current challenging economic climate, many companies in the region are not only working towards maximizing their earnings but also trying to reduce costs whilst retaining their valued employees. One of the many ways that some of the companies are looking to reduce their operating costs is by reducing the financial package and benefits of various employees.

The Omani Labour Law (promulgated by Royal Decree 35/2003, as amended) is the primary law regulating employment-related issues (the “OLL”); the OLL mainly sets out specific article(s) on the obligations and the duties of the employers towards the employees’ rights and benefits in the workforce.

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Tuesday, February 16, 2016

Foreign ownership restrictions in the GCC – time for change?

Curtis Partner Taimur Malik discussed foreign ownership restrictions in the GCC for the International Bar Association's latest newsletter. The full text is reproduced here, with the kind permission of the IBA.

During the last decade we have seen the Gulf Cooperation Council (GCC) countries taking initiatives to diversify their income and reduce dependence on the oil and gas sector. Such initiatives often involve foreign direct investment in projects that can create jobs, result in local supplier development, create in-country value and increase the host country’s export base.

In many cases, foreign investors collaborate with the host government or a local business group to implement the desired project. In some cases, the host GCC government would grant a 100 per cent foreign ownership approvals to foreign investors to establish a 100 per cent foreign-owned company for a given project. Moreover, in most GCC countries, if a foreign company has a contract with the government then it is often allowed to establish a branch office of its parent company in the host country in order to perform the contract.

However, such exemption approvals and foreign investor-host government partnerships are the exceptions and the majority of foreign investors need to find and work with a national or private sector entity of the host country as a shareholder in the company being established.
Foreign investors often do not know either individuals or corporate entities that might be suitable partners for such joint ventures, and the risks of dealing with an unknown partner in an unfamiliar territory often deter foreign investors. Moreover, often local partners are unable or unwilling to commit their share of the capital required for a project and prefer to limit their participation to local support only. Consequently, foreign investors are often required to stump up all the financial resources necessary for the investment. If foreign investors still feel comfortable in taking such risks, they nevertheless derive what comfort they can from entering into side agreements (such as a loan agreement to cover the capital contribution made by a local partner) despite the uncertain enforceability of such arrangements.

As a general rule, in UAE and Qatar, a foreign investor can hold up to 49 per cent shareholding in a company. In the Sultanate of Oman, a foreign investor can own up to 70 per cent of the registered share capital of a limited liability company.

In Saudi Arabia, a foreign investor can have up to 100 per cent control of its investment by establishing a branch office or by forming a limited liability company (unless the desired activity or sector is on a list of activities or sectors restricted by the Supreme Economic Council, or if the desired activities relate to a sector (such as trading, telecom or real estate) in which a certain level of participation by a local shareholder is mandatory).

Exceptions to the general foreign ownership restriction rules are increasing across the region, either by way of special approvals granted pursuant to free trade agreements or the establishment of free trade zones in these countries. For example, special zones and industrial estates such as Salalah Free Zone, Sohar Free Zone and Knowledge Oasis Muscat in the Sultanate of Oman allow 100 per cent foreign ownership of companies (with reduced minimum capital requirements and various other incentives). Similarly, UAE has more than two dozen special zones (such as Jebel Ali Free Zone, DIFC, Khalifa Industrial Zone Abu Dhabi and RAK Free Trade Zone) where such incentives exist for foreign investors. In terms of free trade agreements, US citizens and entities are allowed to establish 100 per cent US owned companies (with the exception of certain sectors) in the Sultanate of Oman pursuant to the free trade agreement between the two countries.

That more such exceptions are being made reflects an acknowledgment by the GCC countries that foreign investors prefer to invest in an environment where they can own up to 100 per cent of their local enterprise. In circumstances where foreign investors feel the genuine need for local participation, we see examples of partnership with local parties – even where that is not a mandatory legal requirement.

In view of the above, it is perhaps worthwhile to consider whether the GCC countries would benefit from further relaxing foreign ownership restrictions and allowing up to 100 per cent foreign ownership across the board, with the exception of a limited number of activities and sectors which are deemed critical for reasons of national security, religion or for the protection of local industry. If there are concerns relating to shell companies being established by foreign investors solely to obtain investment-based residence visas, governments can revise and increase the minimum capital requirements for 100 per cent foreign-owned companies and place additional obligations on foreign investment companies to show regular evidence of real business activity by submitting annual audited statements.

Relaxing foreign investment restrictions will lessen the problem of liability risks faced by local shareholders, who are often held liable in their capacity as shareholders, authorised signatories and/or directors of companies despite having no real investment stake in or control over the business activities – and the associated risks – of the companies with which they are involved.

The benefits of increased foreign investment and enhanced legal protection for foreign investors, coupled with genuine need-based partnership and collaboration with local parties, could outweigh the benefits of the existing foreign investment restriction rules.



This article first appeared in the February 2016 issue of the Newsletter of the Arab Regional Forum of the Legal Practice Division of the International Bar Association, and is reproduced by kind permission of the International Bar Association, London, UK. © International Bar Association.

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Sunday, February 14, 2016

Corporate Governance in Oman

In our Client Alert issued in September 2015, we discussed Oman’s new Code of Corporate Governance (the “New Code”), focusing on only some of the key new rules introduced by the New Code. We also highlighted the four key elements underlying the purpose of the New Code, namely: transparency; accountability; fairness; and responsibility.

As previously mentioned, the New Code applies to all public joint stock companies (SAOGs) listed on the Muscat Securities Market. In this article, we will focus, in more detail, on some other aspects of the New Code.

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Sunday, February 7, 2016

Preparing a Company or Business for Sale: Vendor Due Diligence

Selling a business can be a stressful, time-consuming and resource-intensive process for a vendor and
can often take over six months to complete. By undertaking vendor due diligence, a vendor can
prepare a target company or business for sale, which can in turn result in a smoother, more efficient
and cost-effective sale process for the vendor.

There are a number of benefits that a vendor can derive from undertaking vendor due diligence. First
and foremost, any issues that could potentially affect the value of the target company or business can
be identified and addressed. This can include issues that the vendor may not have been previously
aware of and might have caused embarrassment if later identified by a prospective purchaser. Further,
vendor due diligence can also reveal ways in which the target company or business can be more
favorably presented, or the sale structured to better suit the requirements of the vendor.

With all issues identified and either resolved or addressed, the vendor can be more confident as to the
value of the target company or business and will be prepared to respond to any concerns raised by a
prospective purchaser during its due diligence investigations, which will reduce the risk of the
purchaser seeking to discount the value of the target company or business during the negotiation
phase.

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Friday, February 5, 2016

Welcome to Sikander Siddiqui

We are pleased to announce that Sikander Siddiqui has joined the Banking and Finance Team as a Senior Associate.

Mr. Siddiqui specializes in conventional and Islamic finance products, structured finance, project acquisition finance, trade finance and debt capital markets. He has broad-based experience in the fields of equity investments, power projects, mergers and acquisitions (including group restructurings and de-mergers) and competition laws. Clients in the transportation industry also benefit from Mr. Siddiqui’s experience on various shipping and aircraft matters.

Prior to joining Curtis, Mr. Siddiqui served as the vice president of the legal department of Dubai Islamic Bank, the world’s first Islamic bank, and has also practised at top-tier banking & finance and corporate law firms in Pakistan. In Pakistan, he advised various banks and financial institutions and has worked on the issuance of multiple term finance certificates and sukuks.

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Thursday, February 4, 2016

Legal Updates

Ministerial Decision 144/2015 Issued on 8/11/2015 Amending Ministerial Decision 86/2000 Regarding the Registrations of Drug Companies, their Products and the Pricing of these Products

Ministerial Decision (“MD”) 144/2015 from the Ministry of Health amends Article (11) of MD 86/2000 regarding the registration of drug companies, their products and the pricing of these products. Article (11) determines the profit margins that are levied on imported drugs and the percentages thereof which will go to the agent and the distributing pharmacy depending on the drug price. The drug price is determined by a technical committee; after that the profit margin is added as a percentage of this price.

Instead of a fixed profit margin of 70% where the agent’s share is 45% and the rest goes to the distributing pharmacy, MD 144/2015 sets the profit margin to 43% for drugs that cost less than OMR 20 to export, 39% for drugs that cost OMR 20 to OMR 50 to export, and 35% for drugs that cost more than OMR 50 to export. The agent’s profit margin in all these cases is fixed at 15% with the remainder going to the distributing pharmacy.

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Wednesday, February 3, 2016

Product Recall in Oman

General Overview of the Law

The main regulation that governs all forms of product recall in Oman is the Consumer Protection Law issued by Sultani Decree No. 66/2014 (the “Consumer Protection Law”). The Public Authority for Consumer Protection (“PACP”) is the relevant authoritative body that oversees and regulates the supplier’s activities.

Article 27 of the Consumer Protection Law requires that the Omani supplier (the “Supplier”) immediately informs the consumers who purchased the commodity or received the service and the “competent authorities” on the discovery of a defect, and immediately withdraws the commodity from the market.

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Tuesday, February 2, 2016

Agency Agreements Under the Laws of Oman

General Overview

Agency/distributorship agreements in Oman are governed by Law of Commercial Agencies promulgated by RD 26/77 and the amendments thereto (“CAL”) contained in RD 73/96, RD 66/2005, and RD 34/2014.

Article 1 of CAL defines a Commercial Agency as “any agreement whereby a manufacturer or supplier outside Oman assigns one or more merchants or commercial companies in Oman to sell, promote or distribute goods and products or supply services whether in his capacity as an agent, representative or intermediary for the product of the original supplier who has no legal presence in Oman, against a profit or commission.”

Ownership

Omani companies intending to act as agents of a foreign principal must be established under Omani law and they must have in their objects the right to import, trade and undertake commercial agency business. Such companies must be based in Oman and the minimum shareholding of an Omani national in a company undertaking agency business in Oman remains at 51%, as per the CAL. The MOCI, as a matter of policy, has commenced also allowing Omani companies with foreign shareholding of up to 70% to be permitted to act as agents in Oman for a foreign principal.

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