Monday, July 8, 2019

Establishment of Companies by Sultani Decree

Typically, commercial companies in Oman are incorporated in accordance with, and governed by, the provisions of Sultani Decree 18/2019, promulgating the Commercial Companies Law (the “CCL”).

However, under the provisions of Sultani Decree 33/1974 concerning Companies Established by Sultani Decree, companies may be established by a Sultani Decree.  Establishing a company by Sultani Decree is most often required when a company is established by a governmental body to acquire public or exclusive functions.  These functions typically relate to a specific activity or economic/business sector and, up to the establishment of the company, form part of the competences of a ministry or other government entity.  Usually, a simultaneous and separate Sultani Decree is issued amending the list of competences of such ministry or public authority by deleting the matters delegated to the new company.  An outline of the main provisions in respect of the establishment of a company by Sultani Decree is set out below:


  • The entity proposing the establishment of the company must submit to His Majesty a written statement setting out the reasons preventing the new company’s incorporation in accordance with the CCL.
  • His Majesty shall then rule as to whether such reasons are sufficient for the situation to be considered exceptional.
  • If the company is set up and no explanatory statement has been submitted; or such statement contains material misrepresentations; or such statement omits material facts whose inclusion is necessary to prevent the statement from being misleading, the company shall be deemed void ab initio.  Any persons conducting activities in the name of the company shall be considered personally liable for the obligations arising out of such activities.
  • The new company must take one of the forms of company provided for in the CCL.  However, in practice, a company formed by Sultani Decree tends to take the form of a closed joint stock company.
  • The new company’s constitutive documents or regulations, its governing rules, and its activities must comply with the provisions of the CCL within one year of the issuance of the Sultani Decree establishing the company.
  • Failure to comply with the above shall render the new company void at the end of this period.  Any persons conducting activities in the name of the company thereafter shall be personally liable for the obligations arising out of such activities.
  • The new company must comply with the Commercial Registration Law.
  • The company must be managed in accordance with the provisions of the CCL.  Traditionally, government-owned companies formed by Sultani Decree have employed at the outset governmental staff drawn from the promoting ministry or government unit.  This is usually provided for in the relevant Sultani Decree.

Notable examples of government-owned companies established by Sultani Decree include Oman Post, Oman Fisheries, Oman Oil and Oman Aviation Services.