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)
