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A new corporate governance code (Code) for companies listed on the Muscat Securities Market (MSM) was recently unveiled by the market regulator (CMA). All MSM-listed companies have until July 22, 2016 to comply with the Code’s mandatory rules save that the provisions governing independent directors will apply to directors elected to boards in the interim.The Code was adopted after two years of detailed review by a multi-sectoral committee formed by the CMA and several rounds of public consultation.

The Code sets down a detailed framework for the management and regulation of public joint stock companies based on the four core values of transparency, accountability, fairness, and responsibility; concepts common to many corporate governance codes elsewhere in the world. It defines 14 key principles of corporate governance with corresponding minimum compliance requirements for each. The level of detail makes this Code far more comprehensive than the 2010 version which it replaces.

One of the primary aims of the ramped-up Code is to separate the board from the executive management of public companies by requiring all directors to be non-executives. Another is to improve the effectiveness of directors by setting out requirements on attendance at board meetings, training in corporate governance and annual performance evaluation by an independent party. The Code also introduces the concept of collective responsibility for board decisions, professional criteria that an individual proposed for election must satisfy, and a mandatory nomination and remuneration committee to assist the board and general meeting in identifying suitably skilled individuals for election.

The requirement for a minimum one third of the board to be independent is the same under the new Code as under the previous code. However, a more rigorous definition of independent director under the Code will potentially impact companies dominated by a large single shareholder or operating in highly specialised fields. Companies will also need to factor in the potential time and cost implications for their operations arising from more stringent related party transaction rules under the Code.

The launch of the Code coincided with the establishment of the Oman Centre for Corporate Governance and Sustainability (OCCGS) under the stewardship of the CMA. The OCCGS is tasked with building the infrastructure, skills and value system to transform corporate behaviours and performance in Oman. A sound, transparent and effective regulatory framework and robust institutions for corporate governance is central to the CMA’s strategy to transform Oman’s capital markets sector into a major engine of growth for the national economy.

For more information on corporate governance or Oman’s capital markets, contact Mansoor Malik or Ardeshir Patel.