We frequently assist clients in the formation of Omani companies. Clients who are not accustomed to doing business in Oman tend to have quite a few questions regarding the company formation process, on everything from complex subjects like corporate governance to more mundane - but important – things like naming the Omani entity. From time to time we publish such ‘frequently asked questions in the Client Alert for the benefit of all of our readers.
What name should we give to our Omani company?
For many of the clients that we help to form an Omani corporate entity, one of their first questions is what name they should give to the new company. Many wish to include the word “Oman” in the name, as in “Acme Widget Company (Oman) LLC”. However, due to internal regulations of the Ministry of Commerce and Industry, an Omani company must have a minimum capitalization of 500,000 Omani Rials (approximately US$1,300,000) in order to carry “Oman” in its name. This is significantly higher than the 150,000 Omani Rials (approximately US$400,000) capitalization that is normally required for Omani companies with foreign ownership. As a result, many of our clients choose names for their Omani entitiy that reference the region rather than the country, such as “Acme Widget Company (Gulf) LLC” or “Acme Widget Company (Middle East) LLC”.
How long does it take to form an Omani company?
We normally estimate that it takes one to two weeks to set up an Omani company once all of the appropriate corporate paperwork has been arranged, although the formation process can sometimes take as little as a few days depending on the availability of government authorities. Careful planning is the key to maximizing the speed of the process and minimizing headaches, and professional advisors can play a helpful role in determining which documents are necessary and how to prepare and/or obtain them most efficiently.
Monday, March 21, 2011
Company Formation FAQ’s
Friday, May 29, 2009
Focus On: Corporate Governance
There is widespread confusion in Oman about the applicable standards for companies with respect to transparency and conflicts of interest. A conflict of interest arises when a person has an interest that may compromise his reliability. For example, if company A is negotiating a contract with company B, and a director of Company A has a close relative working at Company B, this would be a conflict of interest. The director has a duty to act in the interests of his company, but he has a personal interest that may conflict with that duty. Even if there is no improper result, conflicts of interest can sometimes give the appearance of impropriety. For this reason, the government of Oman has issued several regulations related to conflicts of interest, or related party transactions, as they are also known.
In Oman, there are different laws and regulations applicable to different company structures. Specifically, there are different requirements for publicly traded companies (SAOGs), closely held companies (SAOCs), and limited liability companies (LLCs).
For SAOGs, Article 108 of the Commercial Companies Law states that members of the board or related parties shall not have any direct or indirect interest in the transactions or contracts concluded in respect of the company except when such transactions or contracts are in accordance with the regulations issued by the Capital Market Authority.
The Capital Market Authority has issued the Code of Corporate Governance (Circular 11/02) which defines related party transactions and the disclosure rules that apply to such transactions and contracts.
For SAOCs, the applicable rule is provided in Ministerial Decision 92 of 2003 titled “Rules regulating the Election of Board of Directors and the liabilities of Board Members”. These rules state that the Ministry of Commerce & Industry shall investigate violations that undermine the rights of shareholders in a closed joint stock company that are committed by members of the board of directors.
Sometimes, corporations operating in Oman are concerned about which standard applies, and particularly whether they need to comply with the Code of Corporate Governance. In some instances, there have been attempts to force SAOCs to comply with the Code. The Code of Corporate Governance only applies to SAOGs in Oman. SAOCs do not fall under the requirements of the Code of Corporate Governance because they are not publicly listed. Similarly, LLCs are not subject to the requirements of the Code of Corporate Governance.
