Know your Business Partners - Part II: Basic Due Diligence Tips

In the first part of this article, we reviewed how a foreign company considering doing business in Oman can (and should) gather basic information on proposed clients, agents and business partners. This second part provides a brief outline of basic searches an Omani company should undertake when doing business with a foreign company.

Most countries have online commercial registry records that can be accessed and allow documents to be downloaded either for free or for a small fee. The first step is to identify the official website of the registry as opposed to private companies providing the same service at a premium. By way of example, if you are looking for information on an English company, Companies House (the beta service can be found at https://beta.companieshouse.gov.uk/) publishes an overview, the full filing history and details of the officers of each company.

The documents filed, which include annual returns, can be viewed or downloaded for free and will provide useful background information on the company. Also, you will be able to confirm whether the company representative with which you are interacting is officially authorised to act on behalf of the company.

A similar system is available in Australia and Italy. Access to the documents is subject to a fee payable online starting at as little as €4 and subject to (free) registration on the website. Wikipedia publishes and updates from time to time a list of the existing registries (https://en.wikipedia.org/wiki/List_of_company_registers) and is a useful starting point to identify the relevant registry. If the target company is registered in the United States of America, please note that you will need to consult a state-specific registry or, alternatively, for public companies you may utilise the search options provided by the U.S. Securities and Exchange Commission (https://www.sec.gov/edgar/searchedgar/companysearch.html). The website includes a guide and a tutorial on how to perform efficient searches. Generally and in most jurisdictions, listed companies are subject to disclosure requirements and there is a wealth of information available. Often useful documents can be found on the official website of the company in the “Investors’ Information” section.

Whenever the potential foreign partner does business in a regulated sector such as finance, banking or legal services, it likely will have to be registered with a regulator. It is often possible to consult the regulator’s registry to confirm that the proposed partner is duly registered and in good standing. Examples of such regulators include professional associations and financial conduct authorities.

Check the press: in many countries it is customary to disclose names in connection with court proceedings. The local press in the country/area of operations of your proposed business partner may have reported on the company or its officials. Any online translation tool will allow you to understand the general sense of a newspaper article regardless of its original language. In the past year, on three separate occasions, a simple internet search showed that a foreign individual who approached an Omani business person/company to propose a joint project or an investment had previous convictions for fraud or financial crimes in his home country or elsewhere. In one specific instance, the fraud that led to conviction in the home country had a structure identical to the business proposition presented to the Omani business man. Always remember that “if it’s too good to be true, then it probably is” or, in other words, be wary of people or situations that offer a large benefit for very little in return.

Check the proposed partner’s website, use scam alert and similar websites to search company names and persons’ names and to verify who owns the website/domain and for how long it has been registered.

Finally, when you are reasonably satisfied that the foreign company/individual you reviewed appears to satisfy the requirements for being a reliable business partner, ensure that you acquaint yourself with the basic rules applicable to foreigners doing business in Oman.

For instance, if you are planning to set up a limited liability company, the foreign corporate partner must be registered in the country of origin for at least three years (ten years if the project involves the establishment of a consultancy company). In foreign participated companies, requirements apply also to the Omani partner, in particular with reference to the financial status. Verify whether you, as local partner, and the prospective business partner, as foreign partner, actually qualify with respect to the requirements of the specific activity you are considering.

Evaluate whether you wish to be involved directly as an individual partner or through a corporate entity you may establish and, if the latter appears preferable, review the financial and compliance requirements applicable to the corporate vehicle.

Finally, consider the level of involvement you are planning to have in the business and the degree of liability and financial commitment that you are willing to take on.

Click here to read Know your Business Partners - Part I: Basic Due Diligence Tips