Procedure for Setting up a Holding Company in Oman

Under the Commercial Companies Law of Oman (“CCL”), a holding company may be formed either as a joint stock company or a limited liability company.  The minimum capital requirement of a holding company is RO 2,000,000.  Such capital may either be paid up upon incorporation of the holding company in full or in part to the extent of 50% in the case of a joint stock company.  In case of the issued share capital being partly paid up then the remaining balance will need to be paid up within three years from the date of incorporation of the holding company.

The objectives of the holding company must be as follows:

(a) the management of subsidiary companies or participation in the management of other companies in  which the holding company owns shares;

(b) the investment of its funds in shares, bonds and securities;

(c) the granting of loans, guarantees and finance to its subsidiaries; and

(d) the acquisition of patent rights, trade marks, concessions and the other intangible rights for the exploitation by the company or lease to its subsidiaries or to other companies.

A holding company cannot own interests in a general or limited partnership and it is prohibited from owning shares in any other holding company.

Minimum capital

The minimum capital requirement of a holding company will be RO 2,000,000.  As set out above, 50% of the issued share capital may be paid at the time of incorporation of the holding company with the remaining balance will need to be paid up within three years from the date of incorporation of the holding company.

Duration for setting up a holding company

In the case of limited liability companies, the holding company may be registered within 15 days from the date of receipt of all documents from the intending shareholders.  In the case of joint stock companies, it may take approximately 45 days, for the reasons set out above.  However, please note that the entire capital of RO 2,000,000 must be paid up at the time of incorporation.

Number of directors

In the case of joint stock companies, there must be no fewer than three directors, and the maximum number of directors may not exceed twelve.  Limited liability companies do not have a board of directors.

Article 128 of the CCL provides:

“The board of directors of the holding company may invite the chairman of the board of directors of any of the subsidiary companies to attend the meetings of the board of directors of the holding company when considering any matter relating to the affiliate company, so as to enable him to make any remarks, express his opinion or give explanations or statements requested by the board on certain issues.  He may participate in the discussions without having the right to vote.”

Expatriate director

There are no restrictions on the number of expatriate directors on the board of the holding company.

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Formation of an LLC in Oman

The limited liability company (“LLC”) form is the form most commonly chosen by foreign investors owing to the speed with which it may be established and it being inexpensive in comparison to the establishment and operation of joint stock companies.  LLCs are not required to be listed on the Muscat Securities Market in Oman (“MSM”).  Therefore, all listing and other fees payable to the MSM or the Capital Market Authority of Oman can be avoided in this manner.
An LLC is formed by at least two and no more than 40 natural or juristic persons.  Companies in Oman may be incorporated with different grades.  These being:

Capital (RO)	Grade
250,000 and above	Excellent
100,000 to 249,999	First
50,000 to 99,999	Second
25,000 to 49,999	Third
Up to 24,999	Fourth

A company with an excellent grade would be included with a list of companies given preference over companies with lower grades when bidding for Government contracts pursuant to the tenders floated by the Government.

Minimum capital requirement

The minimum capital of an LLC is RO 20,000 in the case of companies wholly owned by either Omani, GCC or United States nationals.  Please note that an Omani, GCC or US entity that intends to establish a new company (“NewCo”) must itself be wholly owned by GCC or US citizens; otherwise, it will be deemed to be a foreign company. 

An LLC which has foreign participation, i.e., non-Omani/GCC/US citizens, must have a minimum paid-up share capital of RO 150,000.  The foreign investor may own up to 70% of the company’s equity whilst the remaining 30% must be retained by a local shareholder. 

The foreign investor’s equity participation in the LLC may be increased from 70% to 100% provided (i) that the foreign investor who proposes to invest in an LLC can demonstrate that such entity is in need of foreign technical know-how or expertise which is not readily available in Oman; or (ii) that the foreign investor is participating in developing the national economy and is investing substantial capital in the country.  Where a foreign investor intends to retain equity in an LLC in excess of 70% and up to 100%, an application will need to be filed with the Minister of the Ministry of Commerce and Industry (the “MOCI”) on whose recommendation the Council of Ministers will be required to grant their approval.  

Documents and information required from the shareholders

Generally the documentation required to be provided by the shareholders are as follows:

The foreign/non-Omani juristic shareholders will need to provide:

(1) the foreign shareholders’ board resolutions (if corporate entity/entities) resolving to participate in the new company.  The resolution will need to confirm the proposed names of the new company, the capital of the company, the extent of foreign shareholders’ participation in its capital, the names of the person(s) authorised to sign all company formation documents on behalf of the foreign shareholders for registration of the company and its management thereafter;

(2) memorandum and articles of association of the foreign juristic shareholder and other related registration certificates issued by the concerned authorities from the country of such shareholders’ incorporation; 

(3) duly audited accounts to evidence that at least three years have lapsed from the registration of the establishment of the company; and

(4) copies of passports of the authorised individuals to act on behalf of the foreign shareholders for the purposes of (1) above, if the intention is to have individuals nominated by foreign shareholders to act as authorised signatories for the purpose of managing the new limited liability company, with their names listed in the resolutions referred to above.

Items (1) and (2) need to be notarised by the notary public; legalised by the Ministry of Foreign Affairs; and consularised by the Omani Consulate in the foreign shareholder’s country of incorporation (“Duly Authenticated”).

Under the new apostille procedure, the documents need only one single formality if the country of incorporation of the foreign partner is an apostille country under the Hague Convention 1961.  In this case, the documents will only need to be apostilled by the competent authority in the country of incorporation. 

The foreign/non-Omani shareholders (natural persons) will need to provide: 

(i) copy of passport; 

(ii) certificate of good conduct issued by the concerned body in the country of origin evidencing that the partner has never been involved in any crime; and

(iii) six months’ bank statements showing a balance sufficient to fund the foreign partner’s share of NewCo’s capital. 

In respect of the local shareholders, if necessary, they will be required to provide the following:

(1) copies of their constitutive documents (where the investment is being made in the name of a corporate entity) comprising the articles of association and commercial registration certificate;

(2) confirmation of the authorised signatories empowered to act on behalf of the local shareholders;

(3) statement of account from a bank (for a period of three months) evidencing the financial solvency of the local partner or a statement of shares or funds owned by such partner in an Omani establishment or companies; and

(4) if the local shareholder is an individual, the statement as mentioned in item (3) above and copies of his/her ID card or passport will need to be provided.

In respect of the NewCo, the shareholders will need to confirm and/or provide:

(i) the proposed name of the NewCo;

(ii) the proposed activities of the NewCo; and

(iii) list of the authorised signatories to be registered as managers of the NewCo.

Due to a recent amendment in the law, the capital contribution certificate evidencing the minimum capital of the NewCo is no longer necessary.  The shareholders have one financial year from the incorporation of the NewCo to evidence the company’s capital through the audited accounts to be filed with the MOCI. 

Procedures for setting up an LLC

In order to set up NewCo, the foreign investor would need to first identify an Omani national, if Omani shareholding is necessary, to be its second member and then to check the availability of the proposed name of NewCo.  The name of NewCo may include the foreign investor’s name but the MOCI does not permit any LLC to include the word “Oman” in its name.  In the event that the shareholders of the NewCo will be either wholly owned by, or individuals who are, Omani, GCC or United States citizens, an Omani partner will not be required.

The MOCI has prescribed the standard form of constitutive contract (being the contract of incorporation and the articles of association) for LLCs in Arabic which may be used or, alternatively, the shareholders are at liberty to have a constitutive contract of NewCo (preferably bilingual) to be put in place setting out the objectives of NewCo, amount of capital, number of shares, the shareholders’ nationalities, their respective shareholdings, their voting rights, membership meetings, etc.  Such document may provide for any restrictions or limitations on the rights of the members to participate in the management of the company and/or in the distribution of profits and losses between the parties.

All shareholders will be required to sign the company’s constitutive contract for the company and to deposit with the MOCI the LLC formation documents.  Details of the company will then be entered in the Commercial Register at the MOCI at which point the company will be deemed established but not operational.

Generally, for registration of the NewCo, the LLC formation documents to be submitted to the MOCI are as follows:

(i) constitutive contract, in original, signed by all the shareholders;

(ii) copies of all documents (listed above) of the foreign shareholder; and

(iii) copies of all documents (listed above) of the local Omani shareholder.

Once the MOCI has approved the constitutive contract and the documentation granting the authority to set up and to manage the NewCo, the NewCo will be registered in the Commercial Register at the MOCI.  NewCo will be allocated a Commercial Register Number to be used on all its stationery, nameplates, etc. and will receive an official Registration Certificate.

After the formation, a bank certificate issued by the bank in Oman confirming that the shareholders have deposited their full contributions of the share capital into the designated bank account or the duly audited accounts evidencing the capital contribution must be submitted to the MOCI within a period of four months from the close of the first financial year.  Additionally, the Municipality license must be obtained from the relevant Municipality which will only be granted after a lease agreement for office premises is submitted to the Municipality.  The lease can be entered into after the formation of NewCo but before it is operational.  The Municipality license must also be submitted to the MOCI.  After both the bank certificate and the Municipality license are submitted to the MOCI, the NewCo will be fully established and ready to operate and carry out any of its listed activities.

Time frame

Once NewCo’s proposed names have been checked and all the necessary documentation duly attested have been received, the formation of NewCo and the completion of all the registration formalities should not take more than two weeks following submission of the documents to the MOCI.

Official costs

The likely costs for registration of NewCo (with a minimum capital of RO 150,000) would be as follows:

	Name of the concerned ministry	Fees
1.	Ministry of Commerce and Industry	RO 100 plus a fee for each registered activity (fees vary)
2.	Oman Chamber of Commerce and Industry	RO 225
3.	Municipality charges	RO 50 (minimum)

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Third-Party Contractual Rights

The Oman Civil Transactions Law, Royal Decree 29/2013 (the “Civil Code”), provides that “a contract shall be made by virtue solely of the confluence of offer and acceptance, subject to the specific provisions laid down for the conclusion of the contract.”

This is consistent with the common law doctrine of privity, or third-party rule - anyone not “privy” or party to a contract could not sue or be sued under it.  In English law, the rule derives from Tweddle v Atkinson [1861] EWHC QB J57, and was applied by the House of Lords in Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd [1915] UKHL 1.  This state of the law was criticised as unfairly preventing non-parties from enforcing contracts made for their benefit.

The Oman Civil Code contains provisions granting rights to third parties allowing them to enforce the terms of a contract to which they are not party.  The provisions in the Civil Code are similar to the provisions of the English law statute on this subject (Contracts (Rights of Third Parties) Act, 1999).

If the terms of a contract require either party to such contract to ensure the performance of certain obligations under said contract by a third party, such third party cannot be held liable for failure to perform those obligations unless the third party itself had previously consented to perform such obligations.

The Civil Code provides that a contract to which a third party is not a signatory cannot impose obligations on such third parties.  However, certain rights may be granted to third parties.  If a right has been granted to a third party in a contract, then the third party has the ability to enforce the terms of the contract against the party/parties who had granted this right.  The Civil Code further clarifies that the rights granted to a third party may be revoked or amended by the party granting those rights at any time prior to the third party informing the parties to the contract of its intention to benefit from the rights granted to it.

However, the parties to a contract can specifically provide in the contract that the third parties mentioned in the contract will not acquire any rights to enforce the terms of the contract against any of the parties.  In the absence of such a specific exclusion to the rights of a third party, all third parties that are mentioned in a contract will have a right to enforce the terms of the contract against one or more of the parties.

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