The fundamental legal framework of the sultanate is laid out in the Basic Statute of the State (Royal Decree 101/1996, as amended), which is essentially Oman’s constitution. All primary legislation is issued by His Majesty the Sultan pursuant to royal decrees, which are published in the bimonthly Official Gazette.

Secondary legislation, typically ministerial decisions, is issued and implemented through the government, and published in the Official Gazette.

The sultanate has a three-level court system consisting of the primary courts, the appeals courts and the Supreme Court. The courts play an important role in interpreting the law in the course of resolving the cases that come before them.

However, Oman is a civil law jurisdiction, so Omani court decisions do not carry the same precedential weight as court decisions carry in common law jurisdictions such as the US or the UK, although the objective of the Supreme Court is to issue judgments which, thereafter, should not be contradicted.

Overview Of Omani Corporate Law

Omani law provides a solid foundation for doing business. The Basic Statute of the State has established a strong tradition of respect for private property rights and for the promotion of freedom of economic activity within the limits of the law.

Among the key corporate and commercial law statutes in Oman are the Commercial Companies Law, which was promulgated by Royal Decree 4/1974, as amended; the Law of Commerce, promulgated by RD 55/1990, as amended; the Foreign Capital Investment Law, promulgated by RD 102/1994, as amended; and, for publicly listed companies, the Capital Market Law, promulgated by RD 80/1998, as amended, and its associated Executive Regulations.

These statutes have been complemented by a variety of other royal decrees and ministerial decisions. These include laws that cover specific sectors, such as banking, insurance, electricity and water, mining and telecommunications, among others.

For the majority of companies that do business in Oman, the Commercial Companies Law is the most relevant statute. The Commercial Companies Law is very broad in scope, covering a wide range of regulatory aspects, from capital contributions to corporate governance to liquidation.

Perhaps the most important feature of the Commercial Companies Law, however, is the menu of options of different types of legal structures that it provides for companies to do business in Oman. Below we discuss these legal structures and their availability to foreign companies and individuals, together with two other aspects of Omani law that are of high importance to the business community: labour law and property law.

Legal Structures For Doing Business

The Commercial Companies Law offers a number of available legal structures for doing business in Oman. We discuss below the three main types of Omani companies – limited liability companies (LLC), closed joint-stock companies (SAOC), and public joint-stock companies (SAOG) – as well as alternative business structures such as branches, commercial agency relationships and commercial representative offices.

An Omani company may be wholly Omani-owned, or may be partly or even wholly foreign-owned, although the latter is still fairly exceptional other than for companies operating in the electricity sector (for which this is a statutory right) and companies incorporated under free trade agreements (FTAs) as described in the following paragraph.

If an Omani company is partly foreign-owned, according to the current regulations the foreign ownership may not exceed 70% of the company’s shares, while a minimum of 30% of the firm’s shares must be Omani-owned. Omani LLCs that are owned in part by foreign entities are required to have a higher minimum share capitalisation (OR150,000, or $390,000) than wholly Omani-owned companies, which must have OR20,000 ($52,000).

Oman has entered into FTAs with certain countries, which, as an exception to the general rules described above, afford companies and individuals from those countries the right to wholly own Omani companies. These companies and individuals are also treated as well as Omani nationals with respect to LLC minimum share capitalisation requirements.

The sultanate’s two most significant trade agreements to date are the Economic Treaty of the GCC States, which allows citizens of other GCC countries (including Bahrain, Kuwait, Qatar, Saudi Arabia and the UAE) to wholly own Omani companies with permitted objectives, and the US-Oman FTA, which allows American companies and citizens to wholly own companies in the sultanate, except in certain business sectors which are excluded from the FTA, such as real estate brokerage, manpower agencies, and printing and publishing.

Limited Liability Companies

An Omani LLC is a partnership of sorts, with the partners’ liability limited to their respective capital contributions. LLCs are the most common type of company in the sultanate. They are attractive not only because of their limited liability provisions, but also because they allow for lower minimum share capitalisation and fewer procedural, corporate governance and disclosure requirements than joint-stock companies.

An Omani LLC must have a minimum of two partners. The minimum share capitalisation for an LLC that is wholly owned by Omanis is OR20,000 ($52,000), although an Omani LLC that includes foreign shareholding is required to have a greater minimum share capitalisation of some OR150,000 ($390,000) unless an FTA applies.

Corporate governance of an Omani LLC is carried out by its partners, who give legal effect to their decisions by passing partners’ resolutions; Omani LLCs, by law, are managed by individual managers appointed by the partners, rather than by boards of directors. Omani LLCs are subject to the regulation of the Ministry of Commerce & Industry and the Commercial Companies Law.

Closed Joint-Stock Companies

Some larger, non-listed companies choose to form an SAOC rather than an LLC. Although SAOCs require a significantly higher minimum share capitalisation of some OR500,000 ($1.3m), they also offer certain advantages over LLCs.

For example, while shares in an Omani LLC cannot be pledged because the Commercial Companies Law expressly prohibits their sale to satisfy a partner’s unpaid debts, joint-stock company shares can be pledged pursuant to the Commercial Companies Law and the Law of Commerce. Thus an Omani company that requires the ability to pledge its shares as collateral for the purpose of obtaining bank financing might choose to incorporate as an SAOC rather than as an LLC. Some companies also incorporate as SAOCs due to requirements that certain kinds of business activities – such as banking, insurance and commercial air transportation – may be carried out only by joint-stock companies.

Finally, companies may choose to incorporate as an SAOC in order to develop their corporate governance and reporting frameworks with an eye toward a future public listing on a financial market. However, an LLC may be converted directly into a SAOG if it wishes to do so. An Omani SAOC has a board of directors that manages the company, and only a limited number of issues need to be referred to the company shareholders. Omani SAOCs are subject to a greater degree of supervision and regulation by the Ministry of Commerce & Industry and the Commercial Companies Law.

Public Joint-Stock Companies

An SAOG is entitled to issue shares to the public and is subject to Capital Market Authority (CMA) regulations. The minimum share capital for an SAOG is OR2m ($5.2m).

While an SAOG has a board of directors that operates in the same way as that of an SAOC, SAOGs are subject to more rigorous corporate governance through the oversight of the CMA as well as the Ministry of Commerce & Industry. Omani SAOGs are subject to the Capital Markets Law and its associated executive regulations, as well as strictures of the Commercial Companies Law.

The standard corporate tax rate for all Omani companies is a flat 12% of annual corporate profits in excess of OR30,000 ($78,000). In addition to Omani companies as described above, there are also several other types of business structures – including Omani branches, commercial agency relationships, and commercial representative offices – that are specifically designed to allow foreigners to carry out their activities in the sultanate without actually establishing their own Omani company.

Omani Branches

A local branch is a legal structure provided by the Foreign Capital Investment Law that is specifically intended for foreign companies to do business in Oman in certain circumstances. A foreign company may only establish an Omani branch office for the purpose of performing a contract for an Omani government or quasi-government entity (which typically includes nominally private Omani companies that are wholly and sometimes even partly owned by the government).

The tenure of the branch office is restricted to the term length of the government contract and may be extended for additional terms if the contract is extended or if the company enters into another contract with the government which it registers to the branch. The branch is restricted to servicing government contracts only, however, and may not service non-government contracts.

It is important to note that from an Omani legal perspective, a branch is viewed as being part of the foreign company it represents, and therefore the foreign parent company must bear unlimited liability for its Omani branch. Branches, similar to Omani companies, are subject to a flat corporate income tax rate of 12% on their annual profits in excess of OR30,000 ($78,000).

Commercial Agency

A commercial agency is a legal structure that allows foreign companies to sell their products or services in the sultanate, without having their own Omani company or branch. Under this structure, the foreign manufacturer or supplier is able to supply its goods or services within Oman – not directly, but by appointing an Omani commercial agent to sell, promote or distribute its products or to provide its services on its behalf.

The Law on Commercial Agencies (RD 26/1977, as amended) does not draw any distinction based on whether the agent is designated as an “agent”, “representative”, “distributor” or any other intermediary; all such arrangements are deemed to be commercial agency relationships.

The agent must be: (i) an Omani national resident in Oman, or (ii) an Omani company (with at least 30% Omani shareholding) that has “commercial agency” as one of its approved business objects.

The principal may appoint an agent either on an exclusive basis or non-exclusive basis (for example, more than one agent may be engaged by the principal in respect of the same products or services). The agency agreement must be in writing and registered in Arabic with the Agency Register at the Ministry of Commerce & Industry and the Oman Chamber of Commerce & Industry. Agency relationships may be unilaterally terminated, or they may not be renewed on the expiration of a contract, by either the principal or the agent at any time.

However, under Omani law, if such a right is exercised in what is considered to be an “abusive” manner, then, as a matter of Omani law, compensation is payable by the terminating party, regardless of any contractual wording to the contrary. Establishing the fact that a termination or non-renewal is not “abusive” in this way may in practice be quite onerous. The only way to not to be bound by Omani law is by having the agency agreement refer to a foreign law, coupled with an arbitration clause.

Commercial Representative Offices 

Commercial representative offices are used less frequently than the other legal structures mentioned above, as the representative office is limited to the marketing and promotion of products or services of the foreign parent company but may not directly engage in sales, import or export, contracting with customers or any other direct commercial activity.

Labour Law 

The Labour Law (RD 35/2003, as amended) prescribes minimum benefits which must be accorded to all employees in Oman, although the employer naturally may provide greater benefits. All employment relationships in Oman must be documented in a written labour contract, which must include details such as the name of employer and employee, the job description, the employee’s salary and termination notice period.

A labour contract in Oman may be for either a fixed term or an indefinite term. If the labour contract does not specify its duration, it is deemed to be for an indefinite term. Although fixed-term labour contracts are permitted, the company may use only one fixed-term contract per employee and may not use fixed-term labour contracts in succession (for example, signing a one-year labour contract with the employee, followed by another one-year labour contract with the employee).

If the company wishes to retain the employee after the expiration of his original fixed-term labour contract, the employer must enter into a contract of indefinite duration with the employee. If the second contract is stated to be a fixed-term contract, the Omani courts would disregard this wording and treat the second contract as being of unlimited duration. Any labour contract, whether it be fixed term or indefinite, may require new employees to serve a probationary period, provided that the probationary period shall not exceed three months and no employee shall be required to serve more than one probationary period with the employer.

Terminating a labour contract during the probationary period is straightforward: either party may terminate by giving seven days prior written notice to the other party (all seven days must fall within the probationary period), and the employer must state a reasonable basis for the termination. A labour contract for a fixed term can also be the subject of a straightforward cessation; provided the employer simply lets it expire, the employment relationship ends at the expiration of the contract term with no further liability by either party.

However, if the labour contract is for an indefinite term, termination is somewhat more complicated: while the employee may terminate simply by giving the written notice specified in the contractual notice period, the employer can only avoid having to pay compensation by terminating “with cause” and only after complying with the intricate procedural formalities required by the Omani courts.

For Omani employees only, both the employer and the employee are required to make contributions to the Public Authority for Social Insurance (PASI) national insurance scheme during the entire term of the employee’s employment with the company.

For expatriate employees only, when the employees leaves the company after more than one year of continuous service, the employer must pay the employee an end-of-service benefit, calculated as per the employee’s the final basic salary, equal to half a month’s basic salary for each year of the employee’s first three years of continuous service plus one month’s basic salary for each year of the employee’s continuous service thereafter.

The Labour Law provides for companies to employ Omanis to the maximum extent possible. Local employee quotas, known as Omanisation requirements, which set the percentage of Omani nationals that Omani companies must employ, have come to the fore in recent years. The applicable Omanisation percentage varies by sector and by job description category, and is subject to revision from time to time by the Ministry of Manpower.

However, Omanisation requirements usually do not pose a significant obstacle for companies that need to employ specialised expatriate workers for their operations in Oman. To employ a foreigner, the employer must obtain a prior labour clearance from the Ministry of Manpower. The employer must comply with various conditions, such as proving that qualified Omani nationals are not available for the relevant post and achieving the minimum sector-specific Omanisation target.

Property Law

The primary real estate law of Oman, the Land Law (RD 5/1980), broadly recognises individual and corporate real estate ownership. The Land Law also provides that all private property ownership requires registration with the land registry at the Ministry of Housing.

Successive land laws introduced in the last decade have substantially liberalised real estate ownership in Oman. These laws have sub-categorised individual and corporate land ownership into Omani, non-Omani GCC and foreign ownership.

Property Ownership By Individuals

Omani individuals are entitled to freehold rights and may own real estate property anywhere in Oman. Omani individuals are eligible to acquire a plot of state-owned land, which is granted subject to the satisfaction of the conditions of eligibility. Other GCC individuals and non-GCC foreign individuals have a restricted right to own real estate.

Property Ownership By Companies 

Only limited liability companies wholly Omani- or GCC-owned and joint-stock companies with at least 30% Omani shareholding may own real estate in Oman.

All such companies may own real estate for the limited purpose of furthering their own business objectives such as usage as administrative offices, warehouse or staff residences. However, only firms with “real estate development” as one of their permitted business activities may use the land to construct and resell built-up residential units (such as villas or apartments) and commercial units ( including shops, offices and showrooms).


While Omani individuals and wholly Omani-owned companies have freehold rights, there are varying degrees of restrictions on other GCC and foreign property ownership.

Other GCC individuals and companies are entitled to freehold rights in Oman, but there are statutory restrictions on such rights. For example, the ownership of vacant land by other GCC nationals is conditional on the development of such land within four years from the date of acquisition. Foreign individuals and companies may own property only within areas designated as integrated tourist complex (ITCs).

Integrated Tourist Complexes

As a watershed in property ownership, the Law of Integrated Tourism Complexes (RD 12/2006, as amended) made it permissible for foreign individuals and companies of all types to own real property in Oman for residential and non-residential use in ITCs. ITCs are typically required to comprise residential, commercial and tourism components.

Foreign individuals and all types of companies may purchase residential and non-residential units in an ITC from the relevant developer and register ownership title with the Ministry of Housing. Subject to applicable conditions, foreigners owning units within ITCs, along with their immediate family members, are entitled to Omani residence visas. The law also permits succession to the property to be in accordance with the inheritance laws applicable to the foreign owner in his native country.


Companies which are not entitled to own land in Oman, may be entitled to hold usufruct rights in land. By law, usufruct rights can only be granted for the purposes of carrying out a specific project which contributes to Oman’s economic or social development. However, most privately owned utilities and infrastructure projects are currently granted usufruct land rights.

A usufruct right by law enables its holder to exploit and use the land for the purposes of the applicable project, in the capacity of an owner, subject to any restrictions in the usufruct contract and the obligation to return the land to its owner on expiry of the usufruct term. The duration of a usufruct term must be commensurate with the requirements of the particular project up to a maximum term of 50 years, and is renewable. However, the most important characteristic of a usufruct land right for the purposes of financing the project for which the right was granted is that, unlike a land lease, a usufruct land right may be mortgaged. For this purpose, a mortgagee’s right with respect to the land is protected (even in the case that the usufruct right is terminated), in both cases as a matter of promulgated law.

OBG would like to thank Curtis, Mallet-Prevost for their contribution to THE REPORT Oman 2013