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On July 21, 2016, Oman’s Code of Corporate Governance for Publicly Listed Companies came into force in Oman. The New Code (issued by CMA Circular E/4/2015) replaced the previous code issued in 2002 and is legally binding on companies with shares listed for public trading on the Muscat Securities Market in accordance with Article 50(8) of the Capital Market Law (Royal Decree 80/98).

The New Code is presented in a novel format of 14 high-level principles of good corporate governance each underpinned by detailed terms for attainment. While primary responsibility for ensuring compliance with the New Code rests with the boards of directors of public companies, executive management and external auditors should note that they also have significant compliance-related obligations under the New Code.

Other key changes include:

• restricting board membership to non-executive members
• stringent qualifications for an individual’s nomination as an independent director
• revised rules concerning related party transactions and avoiding conflicts of interest (including restricting board members from voting on resolutions where he/ she may be an interested party and prohibiting the CEO of a public company from serving as CEO of its subsidiary)
• requiring boards to establish a nomination and remuneration committee in addition to the pre-existing requirement for establishing an audit committee
• requiring board members to undergo periodic training on corporate governance and sustainability and for their performance as directors to be assessed and reported upon by an external agency.

Boards are required to report on compliance with the New Code in their listed company’s annual report for the previous financial year. Accordingly, they will need to ensure that the companies they lead are fully compliant with the New Code no later than December 31, 2016 so that they can certify compliance in the next annual report.

The regulator, the Capital Market Authority (CMA), has been steadfast to date in declining waiver applications for derogation from the New Code which indicates that it fully expects public companies to meet the end of year deadline for compliance. Given the CMA’s track record of rigorously monitoring the compliance of public companies with the previous code through onsite inspections and compliance audits, we anticipate that it will monitor compliance with the New Code equally robustly.

Directors of public companies and auditors interested in advice on developing a road-map for compliance with the New Code, are invited to contact partners Mansoor Malik or Ardeshir Patel.