Introduction
On 13 February, 2019, His Majesty Sultan Qaboos issued Sultani Decree 18/2019, promulgating a new Commercial Companies Law (the “New CCL”), which is to be published in the Official Gazette and implemented within 60 days from the date of publication.The New CCL repeals the Commercial Companies Law promulgated by Sultani Decree 4/1974 (the “Old CCL”) and replaces it with entirely new provisions.
The Minister of Commerce and the Chairman of the Public Capital Market Authority will issue executive regulations within a year of the New CCL’s implementation. They will also issue any decisions required to enforce the provisions of the CCL. Current decisions will remain in force until the issuance of such new decisions.
Companies governed by the Old CCL must comply with the requirements of the New CCL within one year of its implementation.
Below we set out a few of the key changes in the New CCL. Some of these will require positive action to avoid possible regulatory sanctions. For more comprehensive advice on how the New CCL may affect your company, please contact us.
Key Changes
1. Capital contributions
Subject to the specific provisions governing each category of company, the New CCL provides (in Article 21) that capital contributions may take the form of cash, moveable or immoveable property, intangible rights, services or labour.Article 239, however, restricts the nature of capital contributions in limited liability companies to cash or tangible property, explicitly proscribing contributions in the form of services or labour.
2. Limited liability companies
The New CCL introduces a new corporate vehicle, the sole shareholder company, which is a limited liability company with only one – either natural or juristic – shareholder. Under the Old CCL, limited liability companies had to have a minimum of two shareholders.Article 291 provides that natural persons may not incorporate more than one sole shareholder company. A sole shareholder company may not incorporate another sole shareholder company.
For other forms of limited liability company, the maximum number of shareholders has been raised from 40 to 50, which ceiling may be raised if the minister concerned considers it to be in the public interest to do so.
The New CCL removes the minimum share capital requirement of OMR 20,000 for limited liability companies.
3. Joint stock companies
The minimum share capital requirement remains at OMR 2 million for public joint stock companies; and at OMR 500,000 for closed joint stock companies.However, if a public joint stock company is created by converting another type of company, the limit is only OMR 1 million.
The option, available to both public and closed joint stock companies under the Old CCL, to pay half the nominal value of the issued shares on subscription, provided that the remainder is paid within three years of incorporation, is not provided for in the New CCL.
The founders of a public joint stock company may subscribe to no less than 30% of the shares of the company and no more than 60% of the shares. However, in the event a company is being converted into a public joint stock company, the maximum is 75%.
Closed joint stock companies may now offer securities – other than shares – for public subscription.
4. Holding companies
Holding companies may no longer take the form of limited liability companies. To comply with the New CCL, any holding company currently in the form of a limited liability company must be converted into a joint stock company whose object is to conduct the business of a holding company.They must have paid up share capital of no less than OMR 2 million.
5. Corporate governance
The New CCL imposes a large number of new restrictions and responsibilities on both shareholders and boards of directors.For example, board meetings are now only quorate with a minimum of two thirds of the board members in attendance.
Shareholders with more than 5% of the shares in a company may not act as proxies for other shareholders in general meetings.
Board directors may not stand in as proxies for shareholders in general meetings.
Many of the time limits set out in the Old CCL have been reduced significantly: e.g., where the deadline for filing the minutes of an annual general meeting used to be fifteen days, under the New CCL the deadline is now seven days.
6. Sanctions
The list of offences under the Old CCL has been expanded under the New CCL, and the sanctions that may be imposed have been significantly increased.Read more about the New Commercial Companies Law (Sultani Decree 18/2019):
New Commercial Companies Law Permits Work and Services as Contributions in Kind to the Share Capital of Joint Stock Companies (April 2019)
Access to Company Documents under the Old CCL and the New CCL (June 2019)
The Board of Directors of an Omani Joint Stock Company under the New Commercial Companies Law (June 2019)
Establishment of Companies by Sultani Decree (July 2019)
