Trading in Oman: What’s Changing?
Restructuring Key Points
Undertaking restructuring in the Oman market on any level, whether corporate, management, operation or debt, would likely be subject to the provisions of various laws. Beside the statutory requirements that clients need to be aware of, there are also practical implications that should be considered, as most of these restructuring transactions are to be registered with Omani authorities, i.e. the Ministry of Commerce and Industry.
Based on the above, clients must firstly be aware of the rule of Omani sponsorship which requires an Omani partner (whether an individual or a corporate entity wholly owned by Omanis) to own 30% minimum of the share capital of the entity registered in Oman and the remaining 70% can be owned by the foreign shareholder. Despite the fact that the shareholding ownership is split into thirty for the Omani and seventy for the foreign investor, the dividends can be split between them differently according to their agreement and does not have to be proportionate to their shareholding. The foreign shareholder cannot own the whole beneficial interest of an entity registered in Oman. The relationship between the Omani shareholder and the foreign shareholder are commonly regulated by a private shareholders agreement. There is no tax or restriction on repatriation of dividend outside of Oman.
Secondly, if the restructuring relates to the financial liabilities of an entity in Oman, commercial mortgages can be taken over the assets of the entity. Creditors who have commercial mortgages or securities over the assets of the entity will be deemed secured creditors. Secured creditors have priority over any other ordinary creditor. Enforcement of a security over the assets of the entity can be made by a creditor which is based outside of Oman through filing a claim before the Oman courts.
The third element that clients need to be aware of is the requirement of obtaining approvals or licenses that are necessary for the operations of the business. Such requirements or licenses are issued by various bodies in the Sultanate and vary according to the type of project or activity. By way of an example, setting up a manufacturing plant or the addition of an industrial activity requires an industrial license to be issued by the Ministry of Commerce and Industry and an environmental license to be issued by the Ministry of Environment and Climate Affairs.
New Laws
There are a number of draft laws currently being considered by various governmental bodies for issue in 2018 or 2019 including: the Public-Private-Partnership Law, new Foreign Capital Investment Law and the new Commercial Companies Law. Once these laws come into effect, they aim to define a wider and more enhanced role for the private sector and international investors to play in the Oman market – in order to boost the economy. Ownership of foreign investors in some sectors might be increased to 100% instead of 70% although this is not certain until the official New Foreign Capital Investment Law is issued.
Free Trade Agreement with the USA
Entering into a Free Trade Agreement (FTA) with the US represented a challenge as it deals with a number of areas under Oman law that need to be considered and amended so that it’s in line with the FTA. These include (but are not limited to): customs law and its regulation, foreign capital investment law, telecommunication law and its regulations and immigration law and its regulations. Although the laws have been amended to reflect the obligations of the Oman state in the FTA, the authorities in Oman are still facing difficulties implementing these amendments and changes, which more or less, treat American citizens the same as Omanis when it comes to investment in Oman. However, the FTA has eliminated trade barriers between Oman and the US, notably, the customs tariff of 5% on most products has been removed and Omani sponsorship is no longer required.
My name is Ahmed Al Barwani, the head of Al Tamimi & Company – Oman Office. I am admitted before the Oman courts and have right of audience before the Court of Appeal. My particular specialism is in inward investment, corporate restructuring, corporate governance, mergers and acquisitions.
In my capacity as Head of Office, I manage a team of specialist lawyers who provide legal services in number of practice areas: corporate, intellectual property, banking, litigation, arbitration, hospitality and employment.
Al Tamimi & Company as a firm has a wider regional presence with 17 offices in 9 countries with 60 partners and 350 lawyers and growing. We represent regional, international and local clients in various sectors that range from oil and gas, tourism to logistics, food, retail, mining and the health sectors.
