The MOCI has issued Ministerial Decision 201/2016 (“MD 201/2016”), which became effective on 5 September 2016 amending previous Ministerial Decision 137/2002, regarding the rules and conditions for electing the members of a board of directors in a public joint stock company, and the terms specifying their responsibilities. The provisions introduced by MD 201/2016 are consistent with the Code of Corporate Governance (the “Governance Code”) for Public Joint Stock Companies, which was introduced by the Capital Market Authority (the “CMA”) and came into effect on 22 July 2016, in relation to the composition and responsibilities of the board of directors in Public Joint Stock Companies (i.e., public companies).
MD 201/2016 prohibits executives in a public company, and any person who works for the company and is entitled to receive financial compensation for his/her work, from being a board member in that company. MD 201/2016 provides that the board of a public company must be comprised of at least one third independent members and have a minimum of two seats. MD 201/2016 states that a member is not independent if:
- S/he holds 10% (ten percent) or more of the shares of the company, company’s parent company, or company’s affiliates or sister companies.
- S/he is a representative of a corporate body holding 10% (ten percent) or more of the shares of the company, company’s parent company, or company’s affiliates or sister companies.
- In the two years preceding candidacy, s/he used to hold an executive position or was an employee in the company, company’s parent company, or company’s affiliates or sister companies, was employed by any party contracting with the company (including independent auditors, key suppliers, and NGOs that received finance representing more than 25% of its annual budget) or used to hold about 20% of the shares of any of the abovementioned parties.
- S/he serves as a member on the board of the company’s parent company, affiliates, or sister companies.
- S/he is a first-degree relative to any of the board members in or key management personnel of the company, company’s parent company, or company’s affiliates or sister companies.
- S/he has a material, economic or financial relationship with the company or any of the company’s sister, affiliate or owned entities.
MD 201/2016 prohibits a person from nomination to the board of a public company if that person is an employee in any other private or public joint stock company which has similar objectives to those of the public company s/he is nominating to become a board member in. It also prohibits board members from interfering in the company’s day-to-day activities and from being held under mandate or assignment for the company.MD 201/2016 requires the board of directors in public companies to establish a separate ‘Nomination and Remuneration Committee’ from among its members to consider nomination applications for board membership and determine the remuneration for board members. This committee will also assist the company to produce clear and credible policies on remuneration and board membership nominations which should enhance transparency and professionalism in public companies. It should be noted that the formation of this committee was one of the major introductions to the Governance Code, which we have discussed in more detail in a previous article on Oman’s Code of Corporate Governance.