Introduction

The Commercial Companies are utilized as vehicles for importing products

and/or services into the Sultanate and not to establish a business presence.
Commercial agencies are governed by the Commercial Code (the Code)
(Royal Decree 55/90), the Commercial Agencies Law (Royal Decree 26/77 as
amended by Royal Decree 82/84 and Royal Decree 73/96), and the
Commercial Register Law (Royal Decree 3/74 as amended by the Royal
Decree 88/86). The Commercial Agencies Law defines a commercial
company as Any agreement through which a merchant or a commercial
company in the Sultanate is assigned to promote or distribute the products
or services of a foreign person or entity in consideration for profit or
commission. Only Omani nationals (or a naturalized person who has been a
citizen at least three years) who is eighteen years age or older and who is
registered as a member of the Oman Chamber of Commerce, or companies
duly established in accordance with the laws of Oman and with at least 51%
Omani ownership may be appointed as commercial agents. Commercial
company agreements need not be exclusive. This means that the principal is
free to appoint more than one agent in Oman. The commercial company
agreement must be in writing and must be duly certified and authenticated.
As per the (Article 6), the company agreement must include at least the
essential elements like: the names of the agent and principal and their
nationality; the products or services subject matter of the agency; and the
term and the territory. The agreement must be directly between the provider
of the services or the manufacturer of the products and the agent.
Furthermore, during the term of the agency, the principal may not engage in
the sale of the products and services in the territory, whether directly or
through any other intermediary. The agent will be entitled to his/her
commission/share of profit for any such sales (Article 7). The Limited Liability
Company (LLC), Joint-Stock Company (Closed) (SAOC), Joint-Stock Company
(Public) (SAOG) and Joint Venture (JV) Companies are the four types of
commercial companies in Oman out of which I would be discussing the Joint

Stock Company (Public) SOAG and Joint Venture (JV) in detail in this
coursework.
The Joint-Stock Company (Public) (SAOG) and Joint Venture (JV)
Commercial Companies
The public joint stock company (SAOG), is a joint stock company which has
offered its shares to the public and is listed on the Muscat Securities Market
(MSM). The minimum number of shareholders in an SAO is three (unless the
SAO has been formed by the government). There must be at least three
founders (or promoters) in an SAOG. They are required to subscribe for
between 30% and 60% of the capital, with no single founder subscribing for
more than 20% (subject to limited exceptions). In general, at least 40% of
the capital of an SAOG must be offered to the public, and there can be
different classes of shares provided these are included in the articles of
association on incorporation. The minimum issued capital is OR2m ($5.2m)
for an SAOG and OR500, 000 ($1.3m) for a SAOC. The CCL allows for the
payment of up to 50% of this required capital to be deferred for a period of
up to three years from the date of incorporation. SAOs are managed by a
board of directors (the board) who are appointed from time to time by the
SAOs shareholders. The board conducts the SAOs business by passing
resolutions in accordance with the SAOs articles of association. The
minimum number of members of the board is three for an SAOC and five for
an SAOG, with a maximum of 12 in both cases. The normal term of office for
board members is three years on a renewable basis. Shares in SAOs are
freely negotiable, subject to certain restrictions placed on the founders (a
founder shareholder cannot dispose of their shares before the firm has
published two balance sheets for two consecutive financial years) and a
shareholder may pledge their shares as a security for the shareholders own
loans and other financial obligations. The Joint ventures on the other hand
are regulated by the Commercial Companies Code (Royal Decree 4/74, as
amended by Royal Defense Decrees 13/89; 83/94; 16/96). Joint ventures are
not considered juristic persons under the law (Articles 3 and 52). Joint

venture agreements are private arrangements, and thus, do not require

public recording (Articles 6 and 52). An Omani partner must hold at least
51% ownership of the joint venture project (Article 7). If the joint venture
conducts business with third parties as a joint venture, the transactions will
be subject to the provisions of Al-Tadamon Company and the provisions of
the general partner in a Tadamon Company (Article 54). Tadamon companies
are very similar to general partnerships in common law legal systems. As for
the Joint Venture (JV) commercial company is concerned it does not have a
name of its own since it is essentially an agreement between two or more
natural or juristic persons establishing legal relationships between its
members without affecting third parties. It has no juristic personality and not
subject to registration with any government authority. It must have a
minimum of two partners. As for the constitutional documents are concerned
JV needs to have the JV agreement. This type of company is not applicable
for any minimum capital requirement.

As for the Rights and Obligations

Accruing from ownership of shares are concerned, the established agreement

in JV shall govern the rights and obligation of partners and will also govern
distribution of the profits and losses. The management of affairs and any sort
of decision making of JV is to be governed by JV Agreement. As for the
liquidation of a JV commercial company concerned there is no juristic
personality; therefore, no question of liquidation. However, the JV Agreement
can be terminated as per contractually agreed provisions. In sultanate of
Oman the Joint Venture (JV) commercial companies are not applicable for any
kind of business shares and are thus free from any share.
Objective of the Coursework
The chief objective of this study work is to know how the commercial
companies in Sultanate of are started run and followed legally on the track of
their business. In addition it is to know about the types of commercial
companies in Oman in general but about the Joint-Stock Company (Public)
(SAOG) and Joint Venture (JV) Commercial Companies in particular. In this
coursework the researcher will narrate the characteristics the way these two

types of companies can have start their businesses and how can they
manage and liquidate their businesses in Sultanate of Oman. Further it will
as well be discussed how these two types of companies can handle their
disputes in case any may occur. The researcher will as well look into the
steps that these two companies may require to manage their businesses and
what are the Omani legal systems these companies might follow in order to
have the smooth businesses. What laws and regulations are there to be
followed and in case any of these companies if goes against these laws what
could be its consequences. Putting it in brief the core objective of this
coursework will be to know and understand the setup, management,
liquidation and dispute resolutions of Joint-Stock Company (Public) (SAOG)
and

Joint

Venture

(JV)

Commercial

Companies

within

the

business

environment of Sultanate of Oman.

The General and Essential Characteristics of Joint-Stock Company
(Public) (SAOG) and Joint Venture (JV)
The SAOG are the companies with shares listed on the Muscat Securities
Market. The minimum capital requirement is RO 2 million. The maximum
shareholding of the promoters is 60%, with the balance 40% offered to the
public. Promoters cannot dispose of their shares in a SAOG prior to the
publication of two audited balance sheets of the company. The SAOG
stands for Society Anonym Omanize General. An SAOG is also a joint stock
company, but the minimum capital required for this type of company is 2
million (approx. U.S. $5.2 million). Moreover, in an SAOG, a minimum 40 per
cent of the companies stocks are issued for public subscription. It is also
called a general joint stock company. SAOGs are open joint stock companies
which means the stocks can be sold and traded to third parties. SAOG is an
open joint stock company which means the stocks are available for
secondary market trading, but the liability of the company debts falls on the
stockholders. It is to be noted that for an SAOG company, the minimum stock
made available to shareholders is a minimum 40 per cent. The Omani joint

venture commercial company referred to above is an unincorporated

commercial company and thus, whilst referred to as a company, it does not
benefit from separate legal personality. Essentially, it is established by a
contract between investors engaged in a common venture. Whilst a joint
venture cannot enter into contracts independently from its partners and
cannot own property, it keeps a separate set of financial books for the
venture and is audited and taxed as a commercial company on this basis.
The partners of the joint venture may be exposed to unlimited joint and
several liability, and this is the primary reason for which this form of
commercial entity is not preferred.
The Management and Liquidation of Joint-Stock Company (Public)
(SAOG) and Joint Venture (JV) as per the Omani Laws.
The Joint-stock Company is a Commercial Company whose capital is divided
into equal negotiable shares pursuant to the Law. The liability of the
shareholder shall be confined to the payment of the value of the shares he
subscribes and he shall not be responsible for the debts of the Company
except within the limits of the nominal value of the share he subscribes. The
Company shall have an issued capital and the Companys Memorandum of
Association may, however, specify an authorized capital exceeding the
issued capital. The Joint-stock Company shall consist of, at least, three
natural or juristic persons. Companies established by the government solely
or jointly with others shall be exempt from this provision. The name of the
Joint-stock Company may consist of any word, but shall not bear the name of
a natural person, unless the purpose of the Company is to take advantage of
a patent registered under the name of such person provided the name of the
Company shall not be misleading as to its objects, identity or the identity of
its partners. The name of the Company shall, wherever it appears, be
followed by the words: Limited Omani Joint-Stock Company (S.A.O.C.) or
General Omani Joint-Stock Company (S.A.O.G). If a violation of the provisions
of the preceding paragraph induces a third party in good faith into error as to
the extent of the partners liability, the persons responsible for such violation

shall be personally liable towards such third party for the damages caused
thereby.

The

Joint-stock

Company

shall

not

be

established

without

authorization from the Directorate General of Commerce together with his

approval of the Memorandum and Articles of Association of the Company.
Mixed Companies shall be subject to the conditions provided in the Foreign
Business and Investment Law. The Director General of Commerce shall
decide the authorization application within 30 days from the date of the
submission of the application together with the required documents to the
Ministry. If the application is rejected, or if such period lapses without a
decision has been made, then concerned parties may appeal to the Minister
of Commerce and Industry whose decision in this respect shall be final. A
joint venture is formed by two or more legal or natural persons establishing a
legal relationship between them without affecting third parties. The joint
venture must not have a name of its own and its existence must not be
raised as a defense against claims made by third parties. It is not registered
in the Commercial Register. However, it is considered as a separate entity for
tax purposes. As per the Article 51 to 55 of Omani commercial Laws the joint
venture is a Commercial Company formed by two or more juristic or natural
persons and establishing legal relationships between its members without
affecting third parties. The joint venture shall not have a name of its own and
its existence shall not be raised as a defense against claims made by third
parties. The joint venture is not subject to registration or publication in the
Commercial Register. The contract establishing the joint venture shall define
the ventures objects, the rights and obligations of partners and shall govern
the distribution of profits and losses among them subject to the provisions of
part one of this Law and any legal provisions of obligatory nature. The joint
venture shall have no juristic personality and third parties shall have no legal
connections except with the partner or partners of the venture with whom
they have entered into a contractual relationship. However, if the partners
disclose the existence of the joint venture to a third party who is thereby
induced to enter into a contract with the joint venture or one or more of its

partners, then the provisions governing the liability of general partnerships,

and their general partner shall apply in respect to such contract. And, the
joint venture shall not issue negotiable or transferable shares, nor may it
issue bonds. As per the Article 17 of the Omani Commercial Laws the
Liquidation shall be effected by all the partners of the Company or by one
liquidator or more who shall be appointed by agreement of all the partners or
by virtue of a special provision in the Companys Memorandum or Articles of
Association. In the absence of such an agreement on the appointment of
liquidators or if there is a legitimate reason that prevents entrusting the
liquidation to the persons appointed pursuant to the aforesaid agreement in
the Companys Memorandum or Articles of Association, then the Authority
for the Settlement of Commercial Disputes shall, upon application by any
interested party, appoint one or more liquidators for the Company.
Management of Disputes of Joint-Stock Company (Public) (SAOG)
and Joint Venture (JV) as per the Omani Laws.
Omani law provides substantial protection to commercial agents, especially
in the context of termination. If the principal terminates an unlimited term
commercial agency without cause, the principal must compensate the agent.
With respect to limited term agencies, the principal is free to cancel
registration at the end of the term. However, an agent may seek
compensation where the principal has abused this right to terminate. The
most common example is where the principal unjustly terminates or fails to
re-new. The Dispute Resolution Authority has jurisdiction over commercial
agency disputes (Article 18). The Dispute Resolution Authority was formed by
Royal Decree 79/81 and is the sole body responsible for hearing Commercial
disputes in the Sultanate. The Authority has sole discretion in determining
the appropriate amount of compensation to be paid in disputed cases. The
governing law in agency agreements must be Omani to be registered and
enforceable. However, the parties are free to decide on the dispute
resolution forum. Omani courts are bound to accept foreign arbitration

awards because Oman is a member of the 1958 New York Convention on the
Enforcement of Foreign Arbitral Awards. In practice, this means that the
parties may choose arbitration as a means of settling disputes arising under
the agency agreement outside of Oman, and subject to recognized rules of
arbitration and conciliation, such as the International Chamber of Commerce
in Paris, the London Court of International Arbitration in London, etc. Having
a dispute decided by one or more arbitrators chosen by the parties would
certainly be more beneficial to the foreign principal and devoid of the delays
and politics of home court advantages for Omani agents. Under the New
York Convention, any such award would be enforceable in Oman. Any
Company to which the provisions of the preceding paragraph apply, and
which fails to abide by such provisions within the one year period specified
for such Company, shall be unlawful and may be dissolved and liquidated at
the end of the said period pursuant to an application submitted to the
Authority for the Settlement of Commercial Disputes by the Minister of
Commerce and Industry or any other person.
Conclusion
While concluding my words I would very much like to state that for doing
business in Oman, it is necessary for any foreign individual, partnership or
company to comply with laws governing foreign business activity; in
particular, the Foreign Capital Investment Law. There is no such thing as an
off-the-shelf company in Oman. Every firm must be specifically incorporated
and is subject to express authorization regarding foreign investors. This is
neither a simple nor a quick process and requires a significant amount of
documentation. There are several options available to a business looking to
establish a presence in Oman. The most appropriate entity will generally
depend on the size of the business, the individual needs of the parties
involved, the administrative burden the business is prepared to undertake
and the desired shareholder base of the business. As for the any SAOG
company in Oman is concerned its shares are listed on the MSM and are
freely transferable. The minimum capital for an SAOG is RO2m. As would be

expected for a public company, this structure carries a much greater

regulatory burden and cost than either an LLC or SAOC, and is highly
regulated. SAOGs must comply with a mandatory Code of Corporate
Governance, as well as the disclosure rules set out in the Executive
Regulations of the Capital Markets Law. The board of directors of an SAOG
must comprise a minimum of five and a maximum of 12 directors. One third
of the board must be independent. The process and length of time attributed
to incorporating a company in Oman can vary and sometimes unforeseen
hurdles can arise. However, the country is an evolving market for a broad
spectrum of businesses. The government of Oman aims to develop its
economy through a series of five-year plans, under the umbrella framework
known as Vision 2020. The government is committed to steady progress,
diversification and the involvement of the international and local private
sectors, and the legal framework is continually developing to improve and
support foreign investment. As a law firm, we believe Oman remains a
country full of possibilities for investors.
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