More News

Oman’s Minister of Commerce and Industry has issued a decision changing the rules for registration of new companies and enterprises other than joint stock companies (MD139/2016). The new rules allow entrepreneurs setting up business in Oman an extended period of up to four months after the close of the company’s first financial year to produce evidence to the Ministry of Commerce and Industry (MOCI)of the share capital in the company instead of at the time of registration as was previously the case.

This decision relaxes the requirement in Oman’s Commercial Companies law that a temporary ‘company under formation’ bank account be opened before the company is registered and comes into existence as an independent legal entity. Founding shareholders of a new company were required to produce a bank certificate confirming that they had deposited their respective shares in a ‘company under formation’ account before the company could be registered at MOCI. The new rule streamlines business set-up procedures enabling entrepreneurs to register a company first and then open a fully-fledged bank account in the company’s name. It will also avoid the bureaucratic and time-consuming process for shareholders to get their capital back out of the ‘under formation’ account in the event that company formation does not proceed for any reason.

The decision is an indisputably welcome move to ease the rules for doing business in Oman for both Omani entrepreneurs and foreign investors. However it gives rise to several uncertainties arising from the temporary nature of the registration in the interval between issue of the company registration certificate and production of the bank certificate to MOCI. From an operational viewpoint, the company would be unable technically to enter into contracts for what might be an extended period prior to full registration at MOCI. It is critical for third parties contemplating an arrangement with a new company to conduct sufficient due diligence on its ability to enter into contracts. In this connection, it is important to note that the decision, which takes effect as an internal ministerial order until officially gazetted, does not specify how MOCI will deal with any company which does not produce the bank certificate within the set time frame.

For further advice on how to address these legal uncertainties and on company formation law and procedure in general, contact Mansoor Malik.