Monday, August 5, 2013

Internal Regulations for the Management of Public Joint Stock Companies

Corporate governance is increasingly becoming the cornerstone of corporate management for companies in Oman and the principles of good corporate governance are being considered in the formulation of internal policies of companies.

The Rules of Internal Regulations for Management of Public Joint Stock Companies, Business and Personnel Affairs issued by the Capital Market Authority (Administrative Decision 4/02) (the “Rules”) provide the framework for internal policies and procedures to govern the management of public companies, their business and employee affairs.

Pursuant to the Rules, public companies must have policy manuals detailing various aspects of management of the company, conducting the company’s business and the administration of human resources.

The Rules charge the Board of Directors with the responsibility of undertaking an annual review of the effectiveness of the internal control systems based on the implementation of the internal policies for reporting to shareholders.

The Rules require public companies to have policy manuals to address the following issues as a bare minimum:

  • An organizational chart reflecting the hierarchy of the employees, the responsibilities of persons holding executive positions, their respective powers and duties, and their reporting structure.
  • Financial authorisations with approval limits for expenses and cash disbursements.
  • Powers, functions and responsibilities of the executive management (CEO, CFO, COO, GM, etc.) and subcommittees of the Board.
  • Sitting fees, remuneration and other benefits of the members of the Board and its subcommittees setting forth the basis for such remuneration and benefits.
  • Policies on work and procurement for purchase and other transactions of the company.
  • Human resource policies on compensation structure, appointment, training and development, promotion, and termination of service and other relevant aspects.
  • Investment policy of the company and the related procedures.
  • Policies and procedures for timely disclosure of material information to the public, the CMA and the Muscat Securities Market. This includes procedures to classify and identify material information and delineation of the rights of various officers to access such information.
  • Related-party transactions, together with the appropriate code of ethics that applies to the Board and the executive management.
  • Furthermore, public companies could have policies for a clear approach to, inter alia, expenditure, accounting and procurement, corporate governance and the roles and responsibilities of the board committees (e.g., the remuneration committee).

While adherence to the Rules is mandatory for Public Joint Stock Companies, other forms of companies could also benefit from the good corporate governance practices enshrined in the Rules.