Thursday, December 4, 2014

Construction Sector Update: How the Ministerial Decision No. 174/2014 May Affect Your Business

The Regulation of the Works of Institutions and Companies Operating in the Contracting Field (the “Regulation”), enacted pursuant to Ministerial Decision No. 174 of 2014, came into force on the 19th June 2014 with the aim to supervise construction companies and monitor their activities more closely and, in particular, with regards to ensuring that construction companies adhere to health and safety obligations as set out in the Regulation.

Registration requirements of new construction companies

Registration of a new company operating in the construction industry is now conditional on submitting the following documents to the Ministry of Commerce and Industry (“MOCI”):

  1. The permitted activities of the company shall be limited to that of contracting.
  2. The company’s capital shall not be less than RO 25,000 (this is an immediate and upfront requirement).
  3. Provide a bank certificate stating the deposit of capital or provide a report of assets that are certified by a specialized office.
  4. Provide proof of financial solvency for partners.
  5. The company shall have an established headquarters which is registered with the competent authorities.
  6. Constitutive contract of the company must be signed by all partners.
  7. Copies of partner’s IDs.
  8. Provide a copy of the lease of the company that is certified by the municipality of the relevant Wilayat.
  9. Provide a security clearance (i.e., no criminal record) letter from the competent authorities (Good Conduct certificate) from Royal Oman Police.
  10. Provide a letter regarding the partners’ full time management of the company provided that one/all of them shall be managers at the company. Alternatively, an Omani authorized manager and signatory shall be appointed as a full-time manager of the company.

Once registered in the Commercial Register, a company has a period of one year to register itself with the Omani Contractors Association.

Obligations of a company in the construction sector

The Regulation specifies that a company operating in the construction sector and new companies yet to be registered shall within two years from the date of implementation of the Regulation:

  1. Not employ its registered workforce in works other than contracting works.
  2. Comply with the prescribed Omanisation rates.
  3. Register its financial statements and submit them to the competent authority (i.e. MOCI/Ministry of Finance) upon request.
  4. Take the necessary measures to ensure the safety of the workers and residents at the work site taking into account the requirements and regulations of security, health and safety approved by the competent authorities (i.e., Department of Civil Defence within the Royal Oman Police).
  5. Mention the name of the company and its data on all the cars, equipment, locomotives and trucks that are used in the contracting activity.
  6. Comply with the provisions of laws and regulations that are related to the contracting activity.
  7. Register all contracting contracts in its own records and submit the same to the relevant competent authorities (i.e. Ministry of Manpower) upon request.
  8. Dispose of waste at the work site in accordance with the regulation and decisions approved by the competent authorities (i.e. Ministry of Environment and Climate Affairs).

Liability for non-compliance with the Regulation

If a company has violated the provisions of the Regulation, the Director-General of Commerce (the “Director General”) has the authority to notify a company in writing warning them to remedy such violation within 15 days. Depending on the nature of the liability, the “competent authorities” shall mean the MOCI, Ministry of Manpower, Ministry of Regional Municipalities and Water Resources, Ministry of Environment and Climate Affairs, Royal Oman Police, Muscat Municipality and Dhofar Municipality. If a violation is not corrected or is committed again, the Director General has discretion to either:

  1. order administrative cessation of the company’s activities for 1 year maximum; or
  2. withdraw the Commercial Register of the company and apply for the court to judicially resolve it.

A company may raise a complaint through an application sent to the Minister at the MOCI within 60 days from the date it received the Director General’s notification. The Minister must have made a decision regarding the company’s complaint within a further 60 days, however is under no obligation to override the Director General’s decision in favour of the complainant.

Whilst the Regulation was only implemented in June 2014 and its true impact is yet to be felt, it would appear that the Director General has extensive power to sanction those who do not comply with the Regulation.


Currently, it is not entirely clear as to how the Regulation will be implemented. What is certain however is that the Regulation was implemented to regulate the actions of construction companies more closely and ensure that the minimum criteria as set out in the Regulation by imposing penalties for non-compliance are met.