Viewpoint: Ben Ewing
The year 2019 saw several legislative changes in Oman aimed at encouraging business growth and diversification of the economy, which has so far relied heavily on the hydrocarbons industry. I would like to outline the major changes to the legal framework and the potential positive impact on Oman’s investment climate.
One of the changes pertains to the new Commercial Companies Law (CCL), as promulgated by Royal Decree No. 18 of 2019. An important change under the new CCL is the introduction of the one person company as a limited liability company (LLC), which removes the requirement to have a minimum of two shareholders for the incorporation of an LLC, though a natural person can open only one sole shareholder LLC in their name.
Additional changes to the LLC regulatory framework concern the minimum share capital and the ban of capital contributions in the form of labour or services. As far as joint-stock companies are concerned, the rights of minority shareholders have been reinforced. Changes have also been made with regard to corporate governance: time limits have been reduced significantly and shareholders, and boards of directors are now faced with a larger number of restrictions and responsibilities.
In order to extend public-private partnerships (PPPs) beyond the power and water sector, Royal Decree No. 54 of 2019 established the Public Authority for Privatisation and Partnership (PAPP). The authority’s mission is to facilitate running a PPP, including by improving the efficiency of commercialisation, the management of economic resources and the operation of public utilities, and by expanding the productive base of the sultanate. The PAPP will also prepare, evaluate, negotiate and award tenders for PPP projects, in consultation with the relevant ministry, which will retain overall responsibility for managing the projects. The PPP is required to align with strategy and development plans, and offer economic or social return.
Developers are now provided with an appeals process relating to tendering, enabling them to challenge decisions they perceive as unfair. Bids for a PPP can now be rejected by the authority if prices “unjustifiably exceed” the comparative cost. Under the new PPPs Law, direct approaches and awards are now permitted. A further important amendment to be noted is that 100% foreign ownership is allowed.
We can also find several incentives and advantages for foreign investors in the new Foreign Capital Investment Law, as promulgated by Royal Decree No. 50 of 2019. It provides more clarity by defining the rights and obligations of foreign investors and including previously absent definitions. This new law does not require a minimum foreign capital investment, provided that it abides by the proposed time frame for its implementation in accordance with the economic feasibility study. For specific sectors, the law allows for 100% foreign ownership, although these areas are yet to be defined.
Foreign investment projects in the sultanate’s less developed regions will benefit from additional advantages. Article 23 of the new law also stipulates that government cannot seize projects, freeze investments or take persons into custody, except by a court ruling. It is also exempt from taxes of the state.
Lastly, the new Bankruptcy Law, as promulgated by Royal Decree No. 53 of 2019, provides a comprehensive legal framework. It replaces the previously applied regulations of the Commercial Code of 1990 and the CCL of 1974. The main focal point shifts now from liquidation of the insolvent companies to restructuring with the introduction of a new “preventive composition stage”. If liquidation is considered, the new law stipulates an order for creditors and gives employee salaries priority.
Taken together with the National Programme for Enhancing Economic Diversification, the new legal framework has laid the groundwork for the improvement of doing business. These measures will support business growth and attract investment to bring the sultanate a step closer to achieving it strategic goals set out in the ninth five-year development plan 2016-20.
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