Newly introduced legislation regulating the activities of companies in Oman will increase transparency and oversight, while also serving to encourage more local firms to list on the country’s stock exchange.
On April 17 Oman’s new Commercial Companies Law came into effect, introducing a number of reforms to previous legislation regulating company activities enacted in 1974.
Speaking just ahead of the changes, Mohammed bin Rashid Al Badi, acting director of the legal department at the Ministry of Commerce and Industry (MoCI), said the law would create a more investor-friendly climate conducive to business growth.
“The new Commercial Companies Law will help in attracting investments, enhancing governance and inclusiveness, and will speed up the registration of commercial companies,” he told local media on April 14.
Under the new code, corporate governance requirements and standards for limited liability companies (LLCs) and closed joint-stock companies have been tightened, with authorised managers now retaining liabilities and obligations similar to those of directors.
The rights of minority shareholders have been reinforced with the reduction of thresholds for requesting general meetings and adding agenda items. Small shareholders have also been granted greater access to company financial documents.
Additionally, the new legislation permits LLCs with only one shareholder to operate through the introduction of the sole shareholder company. Previously, LLCs were required to have a minimum of two shareholders.
Transparency has been bolstered by a requirement that companies publish their articles of association online, with the timeline for reporting on meetings and financial results shortened to improve information flow.
Existing companies have one year to comply with the regulatory changes, and the MoCI and the Capital Market Authority (CMA) will be conducting seminars and workshops to brief the business community on the new obligations.
See also: The Report – Oman 2019
Capital markets to benefit from legal changes
The legislation not only brings Oman’s commercial law in line with international business standards, but also serves as a vehicle to encourage more firms to list on the stock exchange, according to Abdullah bin Salim Al Salmi, executive president of the CMA.
“The new law facilitates the public listing process and gives more protection to shareholders and foreign investors,” he told OBG. “Moreover, it enshrines further governance principles to safeguard the sustainability of companies.”
Currently, there are 116 companies listed on the Muscat Securities Market, a figure the CMA would like to see increase.
The flow of new listings on the exchange has been sluggish, with two initial public offerings conducted in 2018, rather than the six initially expected by the authority.
As a result of regulatory requirements mandating that electricity distribution companies go public, 2019 is set to see at least three new listings, and the CMA is anticipating more interest among private firms now that the process has been streamlined.
The new legislation gives the CMA greater oversight responsibility for company operations, including the authority to regulate public joint-stock companies and supervise their activities to ensure they operate in accordance with administrative rules.
Family-owned businesses encouraged to list
The government is specifically encouraging traditional family firms to go public, allowing them to expand their capital bases while increasing investment opportunities for Omanis.
Family-owned firms are allowed to retain up to 75% of their capital base, as opposed to public joint-stock companies, whose owners are required to hold 30-60% and offer the balance for public subscription.
According to the CMA, this will help create an environment conducive to growth while limiting the potential challenges faced when family-owned businesses pass from one generation to the next.
Increased investment integral to long-term economic development plans
The push to increase private sector involvement in the economy is part of Oman’s Vision 2040, an economic blueprint that seeks to boost investment and raise the private sector’s share of GDP to 42% within 22 years.
While forecasts vary, according to the latest “World Economic Outlook” report published by the IMF in mid-April, Oman’s economy is predicted to remain somewhat subdued in 2019, growing by 1.1% before accelerating to 6.2% the following year.
For its part, ratings agency Fitch forecast in late April that Oman’s economy would grow by 2.7% in 2019. The report said expansion would be driven by a combination of stronger hydrocarbons earnings and private sector investment that will generate more opportunities for new and existing companies.