Public Prosecution Investigations and Criminal Complaints within the Commercial Context

In Oman, corporations may find themselves involved in commercial disputes that end up in arbitration or litigation. Within that context, it is not unusual to find that a party in those disputes has chosen to separately lodge a criminal complaint at the Royal Oman Police (“ROP”). The supposed rationale behind such an action is that a criminal complaint may place commercial pressure on another party and could lead to a settlement within the commercial dispute.

However, what makes the above scenario slightly unusual is that, pursuant to the Omani Penal Code, crimes in Oman are treated as strictly personal. As such, corporate entities – faceless abstract giants as they are – cannot be named as the accused. To be rendered valid, a criminal complaint must be lodged against an individual employed by the corporation in question and not against the corporation itself. Sadly, to what extent a named particular individual is personally responsible for the grievance for which they are charged is less important than the extent of their proximity to that grievance.

To this end, the ROP and Public Prosecutor are tasked with ascertaining which person or persons are closest to the crime at hand. The Public Prosecutor is the pivotal figure in cases of this nature. He/she holds the power to decide whether or not the complaint brought forward against a corporate entity can be filed as a criminal court case. In effect, the Public Prosecutor exercises his/her discretion. Whilst they are meant to identify the face of the corporate entity, they can elect to name any employee they so deem as being a person of interest. For example, if an individual is injured at a playground due to a faulty slide, the criminal investigation could be against the maintenance manager of the playground apparatus.

The Public Prosecutor and ROP may move to confiscate travel documents at an early stage. Even though the legal system is known to operate in a more flexible manner, ample precedent exists for seizing travel documents. Passports may be taken early on during investigations to curtail all movements of the accused until a decision is reached.

The matter becomes even more convoluted when the accused is not an Omani citizen. Expatriates can find themselves embroiled within a criminal judicial system that they do not understand and that causes them great anguish. This can be especially crippling for the accused. It then becomes vital for a lawyer to conduct an exhaustive investigation of the case at hand and carry out a methodical examination of the known facts. Documentary evidence, witness statements and third-party reports are often painstakingly obtained to protect a client’s interests, and ultimately to procure their freedom.

Expatriates often make the mistake of assuming that legal principles such as “burden of proof” and “innocent until proven guilty” apply within Oman. As stated earlier, the Omani legal system is far more fluid. Accordingly, a crime usually has to be proven beyond a measure of a doubt before any punishment is meted out to the accused on behalf of his/her employer. In practice, this is not always followed through, making any outcome difficult to predict in advance. However, an appeal system exists so as to offer an opportunity to remedy miscarriages of justice.

From a practical perspective, the procedural timeline with regards to a criminal complaint within a commercial setting is as below:

1. A criminal complaint is made to the ROP or the Public Prosecutor against an individual attached to a company.

2. The ROP/Public Prosecutor carries out his/her own investigation of the complaint and decides whether the individual is the appropriate person to be investigated. This step may involve inviting the individual to attend an interview. The individual MUST attend. Failure to attend may result in an arrest warrant being issued and/or a travel ban being imposed. The Public Prosecutor may allow the individual to be accompanied by a lawyer or may refuse to do so.

3. The Public Prosecutor documents the investigation and decides whether to file a criminal case with the Primary Court or not.

4. If there is to be no criminal case, the ROP/Public Prosecutor will inform the individual and may keep the file open. However, no further action would be taken at this stage.

5. The entity which reported the complaint has a mechanism whereby it can seek to have the decision not to proceed overturned. This would be by way of an ex parte application to the Appeal Court asking the Court to look into the decision and explaining why the decision is wrong. The Appeal Court can then provide an order to the ROP/Public Prosecutor to continue investigating or to investigate in a different manner or to file a criminal case.

6. If there is to be a criminal case, the individual may need representations being made for bail and evidence must be gathered quickly.

7. Expert and witness testimony must be examined immediately as the case must be rigorously defended.

As can be seen, lawyers play a critical role in relation to Public Prosecution investigations and criminal complaints within the commercial context. It is vital to engage the assistance of a lawyer from the outset so that all matters can be dealt with expeditiously and so that all avenues are explored with the client early on.

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Anticipated Rule Change Could Spur IPOs of Family Owned Businesses

Family owned businesses play a central role in the economies of both developed and developing regions around the globe. Economic studies estimate that 40 percent of large companies in the United States and Europe are family owned. In the Middle East this percentage is even greater: more than 80 percent of Middle Eastern companies are owned or operated by a single family. However, the ownership dynamics within controlling families is quite fluid. Experts believe that over the next 10 years companies worth approximately US$1 trillion will be passed from one generation to the next within business-owning families.

In Oman, the central role of family owned businesses is even more pronounced. The local press has cited HE Yahya Bin Said Al Jabri, Executive President of the MSM, in reporting that 95 percent of Omani companies are family owned.

For this reason, safeguarding the future of Oman’s family businesses has been a key priority in the Sultanate’s economic development model. Recent plans announced by the Ministry of Commerce and Industry to lower capital dilution requirements suggest that the most promising future path for some family owned businesses may lie in tapping Oman’s public capital markets. This path leads directly to augmented share capital and strengthened corporate governance mechanisms.

According to a report in the Times of Oman, the government is preparing a new set of amendments to the Commercial Law which will lower the minimum capital dilution from 40 percent to just over 20 percent for family owned businesses undertaking initial public offerings (IPOs) on the Muscat Securities Market (MSM). By lowering the percentage of equity in the company that the law requires a family to relinquish, family owned companies should be more likely to float of portion of their shareholdings on the MSM.

The goal of these amendments and the policy behind them is that promoting public flotation will (i) strengthen family owned businesses by allowing them access to public investment capital; (ii) refine their corporate governance practices through adherence to listing standards; and (iii) streamline access to professional strategic and management advice that could fill potential succession gaps.

While Oman’s family owned businesses are currently among the strongest and most respected enterprises in the Sultanate, some family businesses may face vulnerabilities over the longer term. A leading professional services firm recently released a survey indicating that relatively few family businesses in the region survive beyond the third generation. That report also highlighted that only 16 percent of family owned businesses have instituted a clearly defined succession plan.

Another potential area of vulnerability for family owned businesses is the need for larger amounts of capital to compete in an increasingly international, big-player dominated environment. Concurrently, the more restrictive credit environment in recent years and some high-profile defaults by family owned businesses has made borrowing necessary capital much more difficult. Loosening the requirements for tapping the equity markets should afford family owned businesses another source of much-needed funds.

Similarly, as companies in many sectors grow larger, they often need a more formalised corporate governance structure in order to function properly. Becoming a publicly listed company and adhering to the MSM’s corporate governance standards should help provide structure and discipline to family owned companies.

Nevertheless, many family businesses have balked at the prospect of raising funds through IPOs. The current 40 percent capital dilution requirement has meant that any firm listing shares has had to give up a substantial ownership stake to public investors. Given that family control has been a central driver of success for many companies, few family businesses have been willing to relinquish that much ownership and such a degree of control. Further, bringing in outside investors and managers has been thought to risk disrupting the company’s culture and shifting focus from long-term development to short-term profits. Consequently, only eight percent of family businesses in the Middle East are publicly traded.

By lowering the minimum capital dilution percentage, the authorities’ objective is to enable family owned companies to bring in outside investors without giving up as much control. This change should enable more family owned businesses in Oman to partake of the advantages of public flotation, while mitigating its risks.

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