Operating a business in Oman requires adherence to Royal Decree No. 18/2019, which promulgates the Commercial Companies Law (“CCL”) and its executive regulations. This legislation establishes the legal framework for business operations and outlines potential risks for company owners, directors, and managers. Awareness of these risks is crucial for compliance and the long-term success of any company.
Personal liability of Directors and Managers
Under the CCL, directors and managers can be held personally liable for:
- Violations of the Law Act that contravene legal provisions or exceed granted authorities. For example, an authorised manager signs a contract with a third-party worth OMR 150,000 despite being authorized to approve contracts for only up to OMR 50,000. This act exceeds his authority and may result in personal liability under the CCL.
- Negligence and mismanagement, failing to act with due care and diligence in managing the company’s affairs.
- Fraud and misrepresentation, engaging in deceptive practices or providing false information.
As a result, this could lead to damages, fines or imprisonment depending on the severity of the offence.
Conflict of interest and competition
The law prohibits business owners and partners from:
- Engaging in competing activities, such as conducting a business that competes with the company’s operations without prior consent from the other partners.
- Undisclosed interests, failing to disclose personal interests that may conflict with the company's interests. Companies should adopt internal conflict of interest declarations and ensure that all partner interests are disclosed regularly.
Unregistered business operations
Another area of risk is operating a business without registering it, as the CCL emphasizes that business operations must be established and registered with the Ministry of Commerce, Industry and Investment Promotion to legally operate in Oman.
Operating a non-registered business risks no legal protection for partners, which could mean that agreements between partners are void, additionally exposing individuals to joint and unlimited liability for business debts and fines.
Labour Law and Omanization
All companies operating in Oman must comply with the Labour laws, especially in relation to employing Omani nationals and adhering to Omanization rules, as well as employee rights. Failure to comply with the provisions of the Labour Law relating to steps of disciplinary action, salary payment delays, or discriminatory practices could lead to disputes between the employee and employer and penalties being imposed.
Conclusion
To conclude, Oman’s evolving legal framework emphasizes transparency, accountability and practical compliance. Business owners should view legal obligations not as barriers but as foundations for protecting their business and sustainable growth. It is always advisable for businesses to conduct legal due diligence before entering the market and consult with legal professionals to ensure that they know their legal rights and obligations.