Access to Company Documents under the Old CCL and the New CCL

Introduction

Shareholders in a company do not always have automatic right of access to the company’s books and accounts.  This article compares the rights of shareholders in a limited liability company to inspect company documents under the old and new Commercial Companies Law.

The Old CCL 

The old law placed restrictions on the rights of minority shareholders’ access to company documents.  Article 160 of the Old CCL states:

“The managers shall send a copy of the company’s balance sheet, profit and loss statement and the reports of the managers and auditors, if any, concerning the expired financial year, together with a notice of a members’ meeting for the approval of these documents and the allocation of net profits, if any, to each member of the company within six months after the end of the company’s financial year.  The originals of these documents shall be available for inspection by the members of the company during business hours at the principal place of business of the company during a period of at least two weeks immediately preceding the date set for the members’ meeting for the approval of these documents.”

In addition, each member of the company had the right to inspect the original balance sheets, profit and loss statement, reports of the managers and auditors, if any, relating to the last five financial years of the company at any time during business hours at the principal place of business of the company.

The New CCL

However, under the New CCL, shareholders have been granted access to a wider range of company documents, and to documents going back twice as long.

Article 277 of the New CCL provides:

“Every partner may request – whenever he wishes – to inspect records and documents relating to business conducted in the previous ten (10) years, and any provision in the Constitutive Documents or any subsequent agreement that is inconsistent with the provisions of this article shall be void.”

Furthermore, article 270 of the New CCL states:

“Any partner who is not a manager may request, at any time, any information about the company and may examine, either by himself or with the help of a specialist expert appointed by him, the company’s books, records, accounts and other documents.” 

Conclusion

Investors in small corporations generally seek access to a company’s books and accounting records as a way of determining the value of their investments or because they suspect mismanagement.
By granting shareholders full access to all the company’s documents and records – and not just to the restricted categories set out in the Old CCL – it is hoped that the transparency of the management and operations of limited liability companies will be improved.

Read more about the New Commercial Companies Law (Sultani Decree 18/2019):

Oman's New Commercial Companies Law (February 2019)

New Commercial Companies Law Permits Work and Services as Contributions in Kind to the Share Capital of Joint Stock Companies (April 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)

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The Board of Directors of an Omani Joint Stock Company under the New Commercial Companies Law

Sultani Decree 18/2019 issuing the Commercial Companies Law (the “New CCL”) replaced Sultani Decree 4/74 (the “Old CCL”) and became effective on 17 April 2019.  Executive regulations will be issued within one year to provide clarifications, particularly on the provisions introduced by the New CCL (the “Executive Regulations”).

This article focuses on the changes affecting the composition, elections and functions of the board of directors.

Article 3 of the New CCL provides that:

“Commercial companies in existence on the date of enforcement of this Law shall comply with its provisions within one year of the date of its enforcement.”

Most joint stock companies will be required to amend their articles of association and, if applicable, their shareholders’ agreement before 17 April 2020 to comply with the New CCL.

Number of board members 

The New CCL provides that closed joint stock companies must have at least three directors; and listed joint stock companies at least five.  In both cases the number of directors cannot exceed eleven.  The main change is that there must be an odd number of directors.  An existing company with an even number of directors constituting its board will, in order to comply with these provisions, have to decide whether to add a new director or remove an existing one.

Board meetings

The board of directors may hold meetings by audio and video conferencing, provided that the board secretary is able to identify each of the members and record the discussion.  The number of meetings that may be held via video conference during a certain timeframe is not restricted to a certain maximum number.

Quorum and majority

Under the Old CCL, board meetings required a quorum of 50%.  Such quorum has been increased in the New CCL to two thirds.  Resolutions have to be approved by absolute majority unless the articles of association provide for a higher percentage.  This appears to imply that the majority of directors (as opposed to the majority of the directors attending the meeting) must express a positive vote.  The Executive Regulations may provide further clarifications on this.

Removal of directors

The New CCL provides that any director who does not attend three consecutive board meetings without an acceptable reason is deemed to have resigned by law.  It is interesting to note that the New CCL no longer includes provisions whereby directors appointed by the Government cannot be removed in any circumstances.

Conflict of interest

Under the Old CCL, members of the board of directors were not allowed to participate in the management of any business competitive with that of the company, except with the approval of the ordinary general meeting, with such approval to be renewed annually.  Under the New CCL, instead, a director may not participate in the management of another company engaged in similar business.  No approval can be given to authorise such participation.

In the event of violation, the director concerned will be held liable for damages incurred by the company.  Directors are forbidden from entering into related party transactions.  The Executive Regulations will define the meaning of related party and the applicable rules on recording and disclosure of such transactions.

Read more about the New Commercial Companies Law (Sultani Decree 18/2019):

Oman's New Commercial Companies Law (February 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)

Establishment of Companies by Sultani Decree (July 2019)

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In the Pipeline - June 2019

The Capital Market Authority issued a directive on 15 May 2019 suspending the 10% withholding tax that is applicable on dividends and interest, with the aim of boosting foreign investments.  The suspension period is three years and may be extended.

Following the success of compulsory medical insurance policies in other Gulf states, Oman has initiated the rollout of its own national mandate.  The Unified Health Insurance Policy (UHIP), also referred to as Dhamani, is expected to grant approximately two million workers in the private sector and their dependents access to health care.  Implementation will gradually take place in 2019 and throughout 2020.

The establishment of the Oman Credit and Financial Information Centre is promulgated by Sultani Decree 38/2019, and the Centre shall be affiliated with the Central Bank of Oman.  The Oman Credit and Financial Information Centre will enjoy administrative and financial independence in addition to acquiring its own legal identity.  The data, systems and assets shall be transferred from the Banking Credit Information Statistics Department of the Central Bank of Oman to the newly established Centre.  The Board of Governors of the Central Bank of Oman shall issue regulations regarding the enforcement of the provisions. All contravening provisions will be repealed.

The Oman-UK Joint Defence Agreement has been ratified by Sultani Decree 42/2019.  The Agreement was signed in Muscat on 21 February 2019.  It will be published in the Official Gazette and will be enforced from the date it is issued.

Sultani Decree 39/2019 promulgates the regulations enforcing the Convention on the Prohibition of the Development, Production, Stockpiling and Use of Chemical Weapons and their Destruction.  This shall apply to the Chemical Weapons Convention and it will require the banning of the development, production, stockpiling and use of chemical weapons.  The Minister Responsible for Foreign Affairs shall issue the necessary decisions.  The new law replaces Sultani Decree 21/97 and repeals all contravening provisions.  It will be published in the Official Gazette and will be enforced 90 days from the date of publication.

Please contact us if you would like more detailed advice on the above.

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