Doing Business in Oman
Memorandum of association and article of association considered as a constitutional document to establish a new company. The terms of Company Commercial Law royal decree No.18/2019 helps in constituting the article of association of a company.
The article of association is a document that specifies the regulation for a company’s operations where it serves a variety of purposes. It states the company’s purposes and how it supposed to accomplish tasks.  Such as, appointing a new director and handing the financial records. Moreover, it details how a company issue stock shares, pay dividends, audits financial records and voting rights. On the other hand, equally it works as a contract for shareholders to comply with the company regulation where shareholders also can use it as a guidance to interact with the board of directors.   
Unlike memorandum of association, article of association is public document and will be furnish to the agencies whenever ask for. In the meanwhile, if shareholder resolve not to disclose any information in their company’s article of association, they can sign a separate shareholder agreement.
  1. Components of the article of association
The articles of association will usually specify the way a company issues shares, distributes dividends, and performs financial records. The article of association is focused on giving the reader the information about the methods a company uses to achieve its daily, monthly, and yearly goals.
The articles of association are relatively similar in any part of the world, even though the exact terms and items vary across jurisdictions. In general, it includes the following:
  1. Interpretations of terms
  3. Meeting
  4. Powers of shareholders
  5. Accounts and Audit
  6. Dissolution and Liquidation
          The components of the article of association are explained further below.
Here, the approved and fully subscribed capital of the company, the percentage of owners, and everything related to shares. For instance, transferring and termination of shares, profit, increasing and reducing the company's capital also assigning shares to partners, evaluation of the contributions and shareholder’s shares disposal shall be deeply explained and clarified with the specified periods which included in commercial company law.
In this section, notices, resolution, votes, and subsequent annual general meeting are listed. For example, a limited liability company shall convene a shareholders’ meeting at least once a year within. According to “Article 282” the company’s managers may convene a shareholders’ meeting at any time and they shall convene a shareholders’ meeting when the law or the Constitutive Documents so require, or pursuant to a request of one or more shareholders who represent at least one fifth of the company’s share capital and publish the notice pursuant to the provisions of this Law. Whereas, If the managers fail to convene the shareholders’ meeting, any shareholder shall be entitled to request the competent court to appoint a person to convene the shareholders’ meeting and prepare its agenda.
In this section, the powers of the company’s partners are determined, including the delegation of powers to the directors as per company’s requirements and according to what determined by the law. Such as, election, appointing and removal of directors, specify all rights and privileges and licensing and giving powers.
Auditing of accounts, appointment of auditors is discussed in this part of the Articles of Association. A limited liability company shall have an auditor to be appointed by the shareholders’ meeting for one financial year. Appointment of the company’s auditors and determination of the periods of their work, their rights, duties, authorities, and liabilities shall be justified in this section.
In this section, cases in which companies are liquidated and dissolved are discussed, depending on the type of company. For example, LLC May be dissolved for reasons specified in the Constitutive Contract or as otherwise provided by law. May be dissolved at any time by a favourable vote of partners representing three quarters of the capital.
  1. Which companies required to have an article of association
The following entities required to have their own article of association:
  1. Limited Liability Companies (LLC)
  2. Close Joint Stock Companies (SAOC
  3. Open Joint Stock Companies (SAOG)
  1. Conclusion
It is always advisable to the companies based in Oman to have their article of association drafted by corporate lawyers so as to avoid disputes among the shareholders/partners.
Ghada Al-Ghaithi
Associate Lawyer – (Corporate & Commercial)
This article is written for educational purpose; reviews in this subject and notes will be well accepted from the readers.
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Rental Contracts- Lessee liability

Doing Business in Oman


Rental Contracts, Lease, lessee, lessor, long term lease

A lease contract is a contract whereby the lessor is obligated to enable the lessee to benefit from a certain property for a certain period in return for a known fee. Due to the pandemic the business activities have been already subdued which has largely incurred substantial businesses losses, so commercial and individual lessees were unable to fulfill the obligation of the rent payments which has been on continuous basis and resulted on legal liability on them.


Lessor is not entitled to the rent in the absence of the benefit of the lessee even if lessor does not cause it, such as force majeure or the issuance of an act by the government that prevents the full use of the property. But if this partially affected the use, the lessee may stop paying the rent and terminate the contract after giving a notice to the lessor.

The decision of the ‘Supreme Committee tasked with control of Covid-19 in Oman’ is considered in the place of force majeure that entails the application of the provisions of Article (172) and (550) of the Civil Transactions Law Article )172(:

  1. In bilateral contracts, if force majeure occurs rendering the performance of the obligation impossible to complete, the corresponding obligation shall be extinguished, and the contract shall automatically be revoked.
  2. Where the obligation is partial, only the corresponding obligation to that part which becomes impossible to be performed shall be extinguished. Such provision shall also apply to temporary impossibility in permanent contracts. In both cases, the lessee may rescind the contract provided that a notice is served to the Lessor.

Moreover, according to Article (550) of the civil transaction law:

  1. If any matter is issued by the competent authorities that prevents the total enjoyment of the leased property without cause attributed to the lessee, the lease shall be cancelled, and the rent shall be extinguished from the date of prevention.
  2. If said prevention shall prejudice the enjoyment of the leased property in a manner that shall partially affect the receipt of the intended benefit thereof, the lessee shall rescind the contract and be discharged from the rent as of the date of the service of a notice to the lessor.

Furthermore, according to Section 2 Impossibility of Performance (Article 339) of the civil transaction law. The Obligation shall be extinguished if the debtor proves that the fulfilment thereof became impossible due to a foreign* cause beyond his will.

In conclusion, either the lessee file a commercial case in order to reduce the rent amount or evacuate the building after giving the lessor 3 months’ notice or lesser period but more than 1 months, with the expectation that a case might be filed by the lessor against the lessee where the lessee must make assure to the competent court that the impossibility of performance of the contract occurred due to the financial deterioration that the lessee went through which led to this situation. If a case if filed, the lessee needs to have in hand the Audited Financials if the lessee is a company/commercial wherein it is evident 3 years continuous losses and for individual she/he must have his/her financial statement.  

Ghada Al-Ghaithi

Associate Lawyer – (Corporate & Commercial)


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Doing Business in Oman

Company registration in Oman - International Companies/Investors; No upfront capital required for the incorporation of LLC in Oman.

1.1. LLC Incorporation;

a. LLC Company formation in Sultanate of Oman require an Omani Shareholder (Sponsor) with minimum 30% shareholding and 70% of the outstanding Shareholding with a foreign investor/shareholder.

b. The minimum share capital to register an LLC is Omr 150000(USD 390,000), as per the recent updates of Ministry of Commerce a foreign Company need not to deposit or provide evidence of Omr 150000 share capital investment. The share capital investment can be paid within a period of 2 years from the date of incorporation, which will reflect in the Audited Financial Statement of the Company.

c. Facts of LLC incorporation;
i. Each shareholder is liable only to the extent of his/her share capital. ii. Public subscription for raising of funds can be permitted if converted to Joint Stock Company (SAOC, SAOG) in the later stage. iii. A foreign manager can be assigned for the day to day management of the business. iv. The shareholder has the liberty to share profits and losses in a ratio different to the share capital ratio. v. The setting up of an Omani LLC requires only One General Manager and 2 shareholders of any nationality. vi. LLC can be 100% owned subject to the Foreign Investment Laws (applicable to GCC & US investors). vii. Tax levied at 15% flat from the net profit of the Company. viii. No personal income taxes. ix. Employees can only be recruited after establishing a tenancy agreement and registration with the Muscat Municipality and Ministry of Manpower. x. Omanisation targets; Each business must employ a minimum number of Omanis depending on the sector. xi. Registration period 10 to 25 days.

1.2. Free Zone Company Set-up;

1.2.1. Sohar Free Zone

a. Operating from a strategic location on the Arabian Peninsula, Sohar offers an ideal environment for business. The combination of wide market access, sound global logistics and attractive business incentives ensure that your company will enjoy the ultimate freedom to do business. With the existing road network, deep-sea port and airport companies in Sohar can target India, the Middle East, China and South-East Asia while enjoying direct access to Abu Dhabi, Dubai, Al Ain and Muscat, as well as the biggest consumer market in the region, Saudi Arabia. Sohar lies in the center of the Al Batinah region, in the North of Oman. This is a prime area for investment. With its geographical location, economic resources and high population density, the Batinah region has played an important part in Oman`s history. It has always been the country`s maritime and commercial outlet to the Gulf and the Indian Ocean and its mineral resources have provided the basis for several important heavy industries.

b. Company Registration in Sohar
The Company registration procedure in Sohar Free Zone is almost similar to that of incorporating an LLC with an added detail of taking lease of the land in the free zone and the Company shall deal in the manufacturing and industrial segment.

c. Advantages of Company Set-up in Sohar Free Zone
i. 100% Foreign Ownership. ii. Must have a minimum of 2 shareholders, both of which may be foreign entities. iii. Corporate Tax Holiday of up to 25 Years. iv. A guaranteed 10-year exemption of corporate tax (normally 15% in Oman). v. One-Stop Shop for all Relevant Clearance offering a single window through which all licenses, permits and approvals can be obtained. vi. 0% Import or Re-export Duties. vii. 0% Personal Income Tax. viii. No customs duties for individuals coming in and working in the Free zone. ix. Low Capital Requirements. x. Relaxed Level of Omanisation the minimum Omanisation level for Sohar Port and Free zone is 15%. xi. Free Trade Agreements with US and Singapore.

1.2.2. Duqm Free Zone

a. The Special Economic Zone Authority at Duqm (SEZAD) is a government agency that was established pursuant to Royal Decree No. 119 of 2011 and entrusted with the powers and responsibilities of developing and administering the Zone to become a regional maritime and transit-trade hub, an important complex for export-oriented industries, and an attractive tourism destination and the business gateway to Asia and Europe.

b. Advantages of setting up of Companies in DUQM
i. Easy and facilitated access to land based on long term leases and reduced rates. ii. Removal of any restrictions on foreign ownership and minimum investment capital; waiver/reduction of corporate tax and customs duties. iii. This is in addition to nationally applicable incentives such as the waiver of personal income tax, convertibility of currency, and the full repatriation of investment capital and profits. iv. Tax -exemption for 30 years from the date of starting business and for 30 years renewable. This exemption does not apply on banks, financial institutions; insurance and reinsurance companies, telecommunication services providers and land transport companies – unless they are registered with SEZAD and do their business continuously within the boundaries of the area. v. Up to 100% foreign ownership. vi. Exemption from minimum capital requirement stipulated in the commercial companies’ law and other laws. vii. No currency restrictions. viii. Exemption of Commercial Agency Law provisions. ix. Free repatriation of profits & capital. x. Usufruct agreements up to 50 years renewable for similar periods. xi. Freedom to import all kinds of goods (except the legally banned imports) without prior approval or permit unless classified as explosives or chemical products. To import such products, investors should abide by the laws and regulations in force. xii. The imported goods are not subject to any restrictions related to the retention period in the Zone, unless otherwise specified by SEZAD Board of Directors. Investors are also free to transport these goods within or within any other free zone inside the Sultanate. xiii. The finished or assembled products in the area are treated as locally produced products. xiv. The enterprises have the right to open representation office inside the custom jurisdiction subject that they are registered in accordance with the laws and regulations in-force in the Sultanate. xv. The one-stop station provides all necessary services for the enterprises. Through this window, investors can obtain all the required permits, licenses, approvals and visas as well as registration of enterprises and implementing all rules and regulations related to the area and decisions taken by the SEZAD. xvi. Speedy and efficient processing of expatriate manpower applications. The process shall not take more than five working days from the date of submitting the application. xvii. Visas for expatriates and their families' members will be issued by the Passport and Residence Department that is being set up in the area. xviii. The custom system is modernized to ensure speedy processing of goods and transactions. The Department, which uses transparent and clear valuation methodologies, processes the transactions and releases the goods in a very quick and speedy manner while maintaining control of the efficiency. The samples are also fully checked and reported at the same site.

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