Al Busaidy Mansoor Jamal & Co.

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Oman Commercial Laws

Ministry of Commerce eases the rules for setting up business in Oman

Filed under News, Oman Business, Oman Commercial Laws

Oman-ministry-of-commerce-and-industryOman’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.

New Omani laws on Consumer Protection and Competition

Filed under Oman Commercial Laws

Oman Consumer and Competition laws

Royal decrees issuing two key laws were announced in the press in Oman earlier this week; Royal Decree 66/2014 amending Oman’s Consumer Protection Law and Royal Decree 67/2014 issuing Oman’s first-ever Competition and Anti-Monopoly Law.

While the Ministry of Legal Affairs has not yet issued the Official Gazette in which the final text of the laws will appear, both have been preceded by an extended consultation period among stakeholders and debated in the Majlis Ash’Shura, Oman’s consultative assembly and the lower house of the Council of Oman, and the Majlis al-Dawla, Oman’s State Council and the upper house of the Council of Oman.

Based on this, we expect the Consumer Protection Law to provide a more robust legal framework to combat the steady rise in complaints from consumers regarding monopolistic behaviour, price-fixing and commercial fraud.The long-awaited Competition and Anti-Monopoly Law is expected to combat monopolistic practices by:-

  • prohibiting anti-competitive agreements including both horizontal (i.e., cartels) and vertical agreements for tie-in arrangements, price-fixing, limiting or controlling production, re-sale price maintenance and bid-rigging;
  • prohibiting enterprises considered to have a ‘dominant position’ in the market from engaging in anti-competitive or restrictive practices such as price manipulation, predatory pricing, limiting market access and tied selling;
  • introducing a reporting requirement for any activity, such as mergers and acquisitions, which results in an entity attaining a dominant market position and prohibiting such activities which result in an ‘economic concentration’ above a certain threshold.

Both the Consumer Protection Law and the Competition and Anti-Monopoly Law are expected to contain tough financial penalties and prison terms for non-compliance.  The Public Authority for Consumer Protection will be the regulatory authority responsible for implementing both.

Commentators are optimistic that the new laws, along with the amended Commercial Agencies Law which came into force in July 2014, will make the market more attractive to foreign investors, promote healthy competition and provide enhanced protection for the consumer. They are also in line with Oman’s commitments as a member of WTO to liberalise trade and eliminate restrictive practices. Contact Reetika Walia  for more details. Sign up here for further updates.

 

Changes to Oman’s Commercial Agencies Law

Filed under News, Oman Commercial Laws, SMEs

Oman Commercial Agencies LawOman’s Commercial Agencies Law was amended by royal decree at the end of July to remove a number of statutory protections for Omani agents selling or distributing products or services of foreign companies. The Commercial Agencies Law, originally issued in 1977, governs the relationship between foreign principals and their local agents. The law has long been viewed as unfavourable to the foreign principal largely due to provisions which entitle an agent to claim compensation in the event of the ‘without cause’ termination of an agency agreement of indefinite duration or failure to renew a fixed term agreement upon expiry.  As a result, a foreign principal wishing to terminate an agency agreement without the consent of the agent often faces protracted negotiations and high compensatory payments. These provisions, common to most GCC agency arrangements, are viewed as restrictive practice by the World Trade Organization (WTO). As a result of the new changes:-

  • Powers previously granted to the Ministry of Commerce and Industry (MOCI) to ban the imports of a foreign principal’s goods in the event of its ‘without cause’ termination of the agency have been removed.
  • The prohibition against direct sales of a foreign principal’s goods or services or sale through an intermediary other than the registered agent has been removed. Agents no longer have a statutory right to claim damages for commission or profits earned from such sales.
  • The right of an agent to statutory compensation upon termination of the agency agreement has been removed.
  • The Council of Ministers, acting on the recommendation of the competition and anti-monopoly authorities, has the power to break up monopolies over specific types of goods and services which have a negative impact on supply and demand and lead to unjustified price increases.

These amendments to the Commercial Agencies Law are the first of three complementary legislative measures aimed at increasing competition and curbing price rises.  A draft competition and anti-monopoly law and new consumer protection law are reportedly close to being finalised. These measures signal the government’s determination to develop a competitive private sector as part of Oman’s economic diversification strategy a main pillar of which is to create a level playing-field for small and medium scale enterprises.  They are also in line with Oman’s commitments as a member of WTO to liberalise trade and eliminate restrictive practices. For more information on the changes, contact Reetika Walia or your usual focal point at AMJ.

Controversial scrapping of price controls on hold

Filed under News, Oman Business, Oman Commercial Laws, Oman Economy

Oman price controls

Oman’s ruler, Sultan Qaboos bin Said, has put on hold the government’s decision to scrap price controls after the new rules caused an unusual public backlash on social media and triggered an intervention by the Majlis Ash’shura, the elected lower chamber of the Council of Oman, the country’s bicameral parliament.

Under rules dating back to 2011 in the wake of the street protests when inflation was a major concern, retailers and traders needed to seek the approval of the Public Authority for Consumer Protection (PACP) to raise the prices of all goods. The authorities have acknowledged for some time that these controls are not compatible with a free-market economy and sought to deregulate prices on all but twenty three staple items such as rice, cooking oil, sugar, powdered milk and fresh and other dairy products.

The lifting of price controls announced by PACP in mid-June had been sanctioned by the Council of Ministers during their deliberations on a new consumer protection law back in March. However, in late June the Majlis Ash’shura unanimously rejected the controversial decision and successfully appealed to Sultan Qaboos to postpone its adoption until new competition and anti-monopoly legislation is in place to protect consumers. The Sultan’s decision puts pressure on the Council of Oman to speed up its deliberations on the draft laws in question, the revised Commercial Agencies Law and the new Competition and Anti-Monopoly Law. The third law on consumer protection was forwarded to the sultan in late May following an unusual joint session of the Majlis Ash’shura and the appointed upper house, Majlis al‑Dawla (State Council) aimed at resolving the councils’ differences on the draft law. The session discussed eleven articles, agreeing on seven and voting on a further four.

These episodes illustrate the challenges facing Oman in balancing the competing demands of stakeholders when introducing key market reforms. They also mark the growing confidence and role of the Majlis Ash’shura in the legislative process as well as the success of Oman’s constitutional framework for achieving consensus in the event of disagreement within the Council of Oman.