Technology:One reason why laws may need to change is due to the progessive nature of technology. As technology is continually developed, with that comes features which may be used in a harmful manner to society. As technology's capability is being grows, the law should be changed and adapted to remain relevant and purposeful. An example of this is the Summary Offences Amendment (2007) as a result of mobile phones equiped with cameras being used as an 'upskirting' device alongside 'online piracy' laws. This legislation was changed to make this actions illegal and protect victims. 

Changing community values:Another reason why laws may need to change is due to changing community values. Values across society changes over time. What people in society may consider important and relevant within one generation may alter over a transitional period of time. In order to remain relevant, the law must uphold and reflect the values and beliefs of society in the present time. For example, people's perspective revolving around issues such as Abortion (2004) have changed over time as well as the detrimental health impacts of smoking and passive smoking. As such, laws have been amended or introduced to reflect the changing values within the community for example the legalisation of abortion and the banning of smoking in pubs/clubs and in cars with minors. 

Changing community awareness:Another reason why laws may need to change is due to changing community awareness. As a national community, we are much more informed today and aware of relevant issues largely due to the speed and efficiency of communication. As informed citizens, we put pressure on law makers to amend or introduce legislation in areas that we believe need to change. For example, Brodie's law was introduced in 2011 after a teenager ended her life due to bullying at a café where she worked. This law now makes it a serious crime (punishable by up to 10 years) to bully others in the

workplace and holds spreads the responsibility of ending bullying.

Changing Expectations of the Legal System:Another reason why laws may need to change is due to the change expectations towards our legal system. Years ago, laws were expected to regulate behaviour however people now expect the law to uphold individual rights as well as protect people from harm. As such, the law has needed to take a more active role to ensure that it remains relevant. Examples of these include online defamation, duty of care and negligence. 

Social values

Changes in society

Community protection

Protection of rights

In Australia the law changes in several ways on an ongoing basis. The law can be changed through the federal and State legislatures enacting legislation. This legislation might reflect new social values or developments in society. For example, the emergence of internet technologies has required a new set of laws dealing with the issues of the internet.

Australian Law Reform Commission

New or changed legislation can also reflect political decisions and can be influenced by bodies such as lobby groups or the Australian Law Reform Commission (ALRC) and its State equivalents. Introducing mandatory sentencing for certain offences, or excising parts of Australia for the purpose of the processing of asylum-seekers, are examples of the legislature changing the law to accord with political values on those issues.

The law also changes when judges make decisions in court. Changes in the law brought about by judges' decisions are less predictable and less able to be controlled than legislative changes for two reasons. Firstly, judges make decisions on the basis of factual circumstances brought before them, so legal change in an area depends on an issue being brought before the court. Secondly, judges are constrained by the need to follow judicial precedents. The development of the common law through the courts is more fragmentary than is the development of statutory law through the enactment of legislation.

The Australian Law Reform Commission was established in 1975, pursuant to statute. It is a permanent and independent federal statutory body. The role of the ALRC is to examine how areas of law might be changed or reformed. The ALRC is officially requested to look into areas by the Attorney-General of the Commonwealth of Australia. Although it is established and directed by the federal government, the ALRC is intended to have intellectual independence and to be able to make reports and recommendations in an unbiased and non-partisan way.

The focus of the ALRC is on federal laws and the processes of the legal system. In conducting its inquiries, the official aims of the ALRC are:

to simplify and modernise the law;

to improve access to justice;

to remove obsolete or unnecessary laws, and eliminate defects in the law;

to suggest new or more effective methods for administering the law and dispensing justice;

to ensure harmonisation of federal, State and Territory laws where possible; and

to monitor overseas legal systems and ensure that Australia compares favourably with the highest international standards.

Other inquiries, such as complaints about the legal profession or particular cases, are not under the jurisdiction of the ALRC, but go to other organisations and services.

The recommendations the ALRC give to the government do not automatically become enacted as law or legislative amendments, but the ALRC has a strong historical record of having its recommendations put into practice. It has been reported that nearly 80 per cent of the ALRC's reports have been either substantially or partially implemented. This record makes it one of the most effective and influential bodies involved in legal reform in Australia.

See animationLobby Groups

'Lobby groups' also have an influence on the changing of the law. Lobbying is the practice of advocating private and public interests to legislative and government bodies. Many large corporations and political interest groups hire professional lobbyists to promote their interests to the government. Lobby groups can take a wide variety of forms: for example, the NSW Council for Civil Liberties would be concerned with any government legislation or judicial cases which might infringe upon the freedoms of the citizens of NSW; whereas a lobby group working for the mining industry would have a more narrow focus on mining, trade and employment laws, as well as developments in environmental laws.

The development of 'Alternative Dispute Resolution' (ADR) is an example of the process of the legal system changing. ADR involves the people in a dispute coming together with an impartial mediator in a non-legal setting to work out their dispute through discussion with, and direction from, the mediator. ADR services arose, in part, in response to the need to relieve pressure on the courts and to lower the cost of resolving disputes. The ADR service also developed because of the belief that it can be a more effective way of resolving disputes - particularly disputes where the parties need to work or live together afterwards.

The law might also be influenced to change in order to reflect developments in international law. Countries can be parties to a 'treaty' or 'convention', which is an agreement between countries which is binding at international law. These agreements are not strictly binding on the internal laws of a country, but in some instances can have a large amount of influence over legal developments within a country. Less binding international 'declarations', such as the Declaration on the Rights of the Child (1959), might also be seen as having a broad influence on the legislative direction of a government.

Finally, the development of the Law of Equity in the common law system could be seen as a way in which the law has changed. Equity is a response by the legal system to problems in accessing justice arising from rigidities in the common law. The Law of Equity was developed to provide remedies where a strict application of the common law would lead to an unfair or unconscionable result. Equity has also developed remedies which supplement the main common law, such as court orders to stop or command conduct (an 'injunction') so as to prevent unjust or unfair situations from continuing

Omani Labour Law – Recent Changes and Amendments

Guiding Principle

With Royal Decree No. 113/2011 amendments and changes to the Omani Labour Law, Royal Decree No. 35/2003 has been

published. The aim to the new changes has been to clear up uncertain areas in the Labour Law. The changes are quite far-

reaching, in particular to changes in working hours, overtime, leave, etc.

I. Introductory Note

The Labour Law inOman (Omani Labour Law = OLL) is regulated by Sultan’s Decree No 35/2003 and issued by the Ministry of

Manpower (MOM). The Labour Law applies to all employers and employees, public and private establishments, organizations and

their subsidiaries, are they Omani or Expatriates, which practice their activities in the Sultanate of Oman, Art.4 OLL.

II. Recent Changes and Amendments to the Omani Labour Law

Already some time rumoured and discussed about, the OLL was recently finally amended in October 2011 by Royal Decree No.

113/2011. The key amendments are hereinafter summarized as follows:

1.  Payment of Salary and Overtime

With Royal Decree 113/2011 the definition of gross salary has been amended by including all allowances, such as travel,

transport and housing allowance, in addition to the basic salary. Previously travel, transport and housing allowance was not

considered to be part of the gross salary.

Furthermore and with the change, the new Royal Decree has reinforced the payment of salaries to employees within 7 days of

the date on which the salary becomes due, whereas the salaries must be paid into a local licensed bank account of the

employee. However and as an exemption, this rules does not apply where employers have agreed with their employees to

transfer the salary into overseas bank accounts.

Another amendment was made with regards to the payment of overtime. In cases where the employee is claiming overtime, the

payment will be now calculated on the employee’s basic salary. Nevertheless, each employer has still the liberty to pay overtime

on the basis of the gross salary.

2.  Working hours

The most significant change is introducing the 5-day working week. Consequently, the maximum working hours has been

reduced from 48 hours a week to 45 hours per week, Art. 68 OLL. During the month of Ramadan, the maximum working hours

per week has been also reduced to 30 hours per week. However, the daily working hours of 9 hours has been maintained,

whereas the employer must grant the employee now a 2 day weekend and thus reducing the working week from a six-day week

to a five-day week.

A further change has been passed with respect to overtime. The new Royal Decree has capped the maximum worked hours a

day by 12 hours, meaning that an employee cannot make more than 3 hours per day overtime.

3. Maternity Leave

Unlike the previous Article in the Omani Labour Law respective maternity leave, with the new amendments by Royal Decree

113/2011 maternity leave has been increased to 50 days (previously maximum 6 weeks as per Art. 83 OLL). This entitlement is

limited to a maximum of three separate sets of maternity leave during employment.

4. Annual Leave

According to the existing Omani Labour Law, each employee was entitled to receive in the first year of employment 15 calendar

days of leave. This entitlement has now been increased to 30 days per year and is payable on the basis of the gross salary.

Additionally the law stipulates that it is not anymore permissible to waive any leave, meaning that that forwarding and carrying

over leave is likely to be held null and void, with the effect that the employer has to compensate the employee for any loss or not

taken leave during employment or upon termination of employment.

5. Emergency Leave

Emergency leave according to Art. 61 OLL has been now increased from 4 days to 6 days per year. In the past, emergency

leave was limited to 2 days at the same time. This rule has been abolished now. A new Ministerial Decision is expected soon to

regulate on how emergency leave can be taken.

6. Transfer of Employees

With the implementation of the new Royal Decree 113/2011, a new provision to Art. 48 of the OLL concerning the sale, lease or

like of a business has been added. Where there is a transfer of an employment contract on a project from one contractor to the

other, and the work to be carried out remains the same, then employees will be automatically transferred to the other contractor

on the same terms and conditions as held under the old contractor.

7. Omanisation

Generally employers must employ Omani workers as far as possible. The Ministry of Manpower (MOM) from time to time has

stipulated the percentage of Omanisation required in each sector of economic activity.

Now with the amended regulation, an employer who does not meet the prescribed Omanisation target may fear to pay a penalty

between OMR 250 and OMR 500 for each Omani worker required to be employed. Each employer will have a timeline of 6

month to meet the requirement, otherwise the penalty will be doubled.

8. Awards for Unfair Dismissal

Another significant change is the removal of the cap on compensation awards for unfair dismissal, to be decided and ruled by

Oman courts. Before the amendment, the court had to award the employee a minimum compensation equal to 3 monts gross

salary. Now, the amount the court may award as compensation for unfair dismissal is unlimited, which may result in uncertainty

for both employer and employee.

Amendments to Sector Law

Amendments to the Law for the Regulation and Privatisation of the Electricity and Related Water Sector (the “Sector

Law”) promulgated by Royal Decree No. 78/04 as amended.

The Sector Law was recently amended pursuant to Royal Decree No. 47/2013 (issued on 1 October 2013). The key

amendment constitutes the inclusion of certain water desalination projects which are neither combined with nor co-

located on the same site as electricity generation within the ambit of the Sector Law. Prior to this recent amendment,

the Sector Law did not apply to such projects. 

Subsequent to the recent Sector Law amendment, the Chairman of Public Authority for Electricity and Water (PAEW)

has the power to determine whether or not a water desalination facility will be designated a “Desalination Facility of

Special Nature”. Only projects which are so designated will be subject to the Sector Law.

If a project is designated a Desalination Facility of Special Nature, it will be required to be procured in accordance

with the Sector Law, it will be regulated by the Authority for Electricity Regulation Oman, the person implementing the

project will be required to be licensed to do so in accordance with the Sector Law, by virtue of a “Desalination Licence

of Special Nature”, and its capacity and output will be purchased by Oman Power and Water Procurement Company

SAOC. 

Brief overview of the amendments:

1. OPWP Functions: The functions and duties of Oman Power and Water Procurement Company SAOC (OPWP) as set out in Article 74 of the Sector Law have been amended so that it will be OPWP's responsibility to secure the production of desalinated water and electricity from facilities including a Desalination Facility of Special Nature.

2. Exclusion: Article 76 has been amended to include provisions that OPWP is also not obliged to purchase production capacity (electricity/water) if the production facility is a Desalination Facility of Special Nature.

3. New capacity of desalinated water: Article 78 has been amended to provide that, in the event that PAEW determines that there is a need for new capacity of desalinated water, it shall inform OPWP. It shall thereafter be OPWP's responsibility to determine whether such new capacity should be combined with electricity generation capacity or co-located with it on the same site. If OPWP decides that there is a need for such capacity and the Ministry of Finance approves it, then OPWP will be obliged to provide the new capacity as per the procurement provisions of the Sector Law.

However, if OPWP decides that there is no need for the new capacity of desalinated water to be combined with electricity generation capacity or co-located with it on the same site, PAEW shall decide whether it shall provide such capacity; or a full state-owned company shall do so (after obtaining the approval of Ministry of Finance); or PAEW may decide to procure the new capacity together with its output from a Desalination Facility of Special Nature in accordance with the procurement provisions of the Sector Law.

OPWP cannot refuse to announce or delay in announcing the competition in accordance with Article 79 of the Sector Law under the pretext that it was not notified by PAEW in accordance with Article 78.

4. Rights and duties of a Licensed Generator/Desalinator: Article 89 has been revised to give the same rights and duties to a Licensed Desalinators as are given to a Licensed Generator and Licensed Generator/Desalinator.

5. Licensing Requirement: The Desalination Facility of Special Nature shall require a Desalination Licence of Special Nature from the Authority for Electricity Regulation (AER) and a new Article 112 (2) bis has been included to set out the conditions for such a licence. The conditions are:

i. a stipulation that the powers granted under the licence are limited to specific production facilities and/or production capacity; and

ii. a stipulation that it is permitted to impose restrictions on the percentage share of the total desalination market in respect of the licensee or its subsidiaries or related commercial projects.

6. Decisions by PAEW: A new Article 135 bis provides that the Chairman of PAEW is to issue the criteria applicable to a decision to determine whether a facility will be designated a Desalination Facility of Special Nature.

A new Article 135 bis 1 provides that the Chairman of PAEW shall issue a decision determining the current water desalination facilities that meet the criteria as issued in Article 135 bis. The existing desalination facilities that are not connected or co-located with electricity generation facilities on the same site shall be notified by PAEW and such facilities shall have to rectify their position and obtain the specific Licence for Desalination Facility of Special Nature within one year of such notification from PAEW.

A new Article 135 bis 2 provides that the water produced by a Desalination Facility of Special Nature will be subject to all the provisions related to water stipulated in the Sector Law.

Spotlight on Amendments to Commercial Agencies Law of Oman

In July, Oman’s Commercial Agencies Law (“CAL”) was amended by virtue of a new law, Royal Decree 34/14.

It is one of the most significant changes in Omani law in recent times.

The main significance of RD 34/14 is that it has cancelled the previous Article 10 of CAL.

Article 10 was heavily relied upon by any Omani agent whose agency contract was governed by Omani law.

Put simply, Article 10 superseded any contractual provision to the contrary. A foreign principal could only

terminate/not renew its Omani law agency contract without having to pay compensation if the registered Omani agent

in question had materially breached the agency contract.

In other words, even if the agency contract allowed for termination on, say, 30 days’ notice, this provision was

negated by Article 10. The Omani Courts habitually took the view that - unless there was a material contractual

breach by the registered agent - any termination was unjustified, and thus the agent’s Article 10 right to statutory

compensation from the principal was triggered.

Pursuant to Article 10, it was common for the Omani Courts to award terminated registered Omani agents two or

three years’ net profit derived from the agency in question, plus reimbursement of any expenditure in respect of

capital items which were rendered wholly redundant due to the agency termination.

Obviously, foreign principals were very wary of Article 10 of CAL, seeing it as tying them to their agents, even if they

thought the latter were under-performing and there was a contractual basis for termination.

As a consequence, foreign principals have, for a long time, tried to enter into agency contracts with Omani entities

which refer to a non-Omani applicable law, coupled with an arbitration clause. The reason for this is because CAL

has always stated that the Omani Courts will decline jurisdiction if the agency contract is governed by an arbitral

clause.

Many foreign principals have thus been able to avoid the ambit of Article 10 by combining a non-Omani governing law

with an arbitral clause in the agency contract.

However, depending on the view taken by the Omani Courts, now that Article 10 has been deleted, foreign principals

will no longer need to worry about this aspect of CAL.

The other changes arising from RD 34/14 are as follows:

i. The Minister of Commerce & Industry no longer has the power to ban imports of a foreign principal’s products. Previously, His Excellency could do so if he thought a principal had unjustifiably terminated an agent. However, to the best of our knowledge, this power had never been exercised.

ii. Article 7 of CAL has been deleted. This provision had previously required overseas manufacturers and suppliers – apart from those dealing in weapons, ammunition and military equipment - to only do business in Oman via an appointed agent. The upshot of this deletion is currently unclear. In our view, overseas manufacturers and suppliers will still need a valid legal presence in Oman to do business in Oman. This deletion may, therefore, be an attempt to encourage more overseas manufacturers and suppliers to set up their own legal entities in Oman.

iii. Finally, Article 14 of CAL has now been amended, such that if there is a monopoly which negatively affects supply and demand, and causes unjustified rises in prices, the Council of Ministers are empowered to determine the number of allowed agencies for each agent.

The view of the relevant Ministry – the Ministry of Commerce & Industry – is that the new law comes into immediate

effect and applies to all current agency contracts governed by Omani law.

It will be interesting to see whether RD 34/14 creates a number of Omani Court cases.

Amendments to Capital Market Law

The Capital Market Law (“Capital Market Law”) was amended on 10 November 2014 by way of Royal Decree 59 of

2014 (“Amending Law”). The Amending Law came into effect on the date of issue.

The Amending Law amends Articles 7(b), 12, 13, 17 (second paragraph), 52(2), 60, 63 A(3), 64, 65, 66, 67 and 68.

The Amending Law has also added two new Articles – 68(bis) and 72. This article aims to highlight the significant

amendments brought to the Capital Market Law.

Investigation of alleged violation of Capital Market Law

Article 60 of the Capital Market Law has been substantially revised to provide that in case of investigation by the

relevant authority at the Capital Market Authority (“CMA”), the authority shall have the ability to seek assistance from

specialised entity in Sultanate. It can also provide the results of such investigation to external authorities that perform

oversight functions on the capital market.

The revised Article 60 will have far reaching impact on CMA’s ability to effectively investigate any violation of the

Capital Market Law and thereafter initiate action.

Increased penalties

The Amending Law has substituted Articles 63A(3), 64, 65, 66, 67 and 68 with new articles which provide for

substantially increased penalties in the following cases:

providing insider or undisclosed information, making false statements or announcements which may influence an investor’s decision, violates the Capital Market Law or commences an activity without procuring a license, disposes of securities in a manner that makes prospective investors believe that the prices of the such

securities are going to fluctuate substantially or make unreal demand for such securities, fix prices of securities in violation of the Capital Market Law, including inaccurate or false information in the prospectus of a joint stock company.

A new Article 68(bis) has been added to provide that if found guilty of violation of the Capital Market Law, its

executive regulations and related decisions, the relevant court shall have the power to instruct the violator to return all

the amounts and revenues resulting from such violation. This provision is in addition to the penalties specified in

Capital Market Law (as amended).

Exemptions to Special Purpose Vehicles established to issue Bonds

A new Article 72 has been added which provides that special purpose companies formed for issuing bonds shall be

exempted from the requirements of Foreign Capital Investment Law, which means that such companies can possibly

own 100% foreign owned companies. Such companies shall also be exempted from paying taxes and charges as

may be imposed by the relevant State Administrative Apparatus. In addition, these companies will have the ability to

own movable and immovable assets include land.

Acquisition of 25% or more in a public joint stock company

Article 7(b) of the Amending Law now specifies that persons (natural or juristic) can singly or jointly own 25% or more

of a public joint stock company provided the acquiring person meets the requirements set by the Board of Directors of

CMA. The new Article 7(b) specifies the kind of controls and disclosure requirements that an acquirer will be required

to fulfill.

Acquisition of shares under this Article 7(b) will not require the approval of the Executive President of the CMA as

long as the acquirer meets the requirements specified by the CMA Board. The CMA Board is yet to issue the

requirement criteria to be complained with by the acquirer.

Removal of provisions relating to General Assembly of MSM

The Amending Law has done away with the provision relating to formation and function of General Assembly set out

in the Article 13 prior to the amendment. Accordingly the definition of ‘General Assembly’ has been removed from

Capital Market Law.

Article 13 has been substituted by new Article 13 which provides that the Board of Directors of Muscat Securities

Market (“MSM”) will choose an auditor who is licensed to work in Oman after obtaining approval of the CMA Board.

The Board of MSM will also determine the fees of such auditor.

Brokers’ ability to sale unpaid shares

The Amending Law has replaced the second paragraph of Article 17 to provide that a licensed broker shall have the

ability to sell securities bought in favour of one of its clients who has not paid the price for such securities. The sale of

unpaid securities by the broker shall be in accordance with the rules issued by CMA Board.

The amended Article 17 provides the brokers’ the ability to sell the unpaid securities bought in favour of a client as

opposed to the earlier limited option of requesting suspension from trading of unpaid securities.

Inclusion of Shariah related activities in CMA Board’s functions

Article 50 which provides the functions of the Board of Directors of CMA has been revised to provide that the Board

shall have the authority to determine the conditions and procedures regulating financial trusts and issuing, listing and

trading bonds and related Shariah activities.

CMA’s Board of Directors

Article 52(2) has been amended to provide that the Representative of Ministry of Finance shall now be appointed as

the deputy chairperson of the Board of Directors of the CMA. This position was earlier held by representative of the

Minister of National Economy.

Amendment to Insurance Company Law - What are the new regulatory requirements?

Royal Decree 39/14 issued on August 12, 2014 introduces new regulatory requirements for insurance

companies (“Royal Decree”).

The most significant requirement is that an insurance company must be a public joint stock company.

Since many existing insurance companies are closed joint stock companies, this new legislation creates

the requirement for these insurance companies to convert to public joint stock companies. Pursuant to the

Royal Decree existing insurance companies have been given a period of three years to adjust to the new

regulatory requirements.

It is interesting to note that according to recent media reports, many existing companies are considering

making initial public offers in the near future. It would appear that existing companies are not waiting or

wanting to utilize the full three year period.

When making an initial public offering a closed joint stock company will need to:

1. Verify the company is in compliance with all regulatory requirements in Oman (including its insurance license, municipality license etc.);

2. Appoint an Issue Manager, Reporting Accountants and Issue Legal Advisors;3. Notify its creditors (if any);4. Restore / increase its paid up capital to at least OMR 10 million;5. Prepare a prospectus and revise its Articles of Association;6. Comply with Capital Market Authority and Muscat Security Market Listing Requirements.

The Royal Decree makes some other changes to the existing Insurance Company Law of 1979 (as

amended). These include:

a. Shortening the grievance period in case of rejection of application for an insurance license from 90 days to 60 days;

b. The fine for any person violating the law is expressly stated as between OMR 10,000 to OMR 100,000; and

c. Granting the Board of Directors of the Capital Market Authority the discretion to agree to reconciliation with a person under investigation in exchange for the payment of an amount not less than twice the minimum fine and not more than twice the maximum fine.

With a Royal Decree requiring insurance companies to list, it will be interesting to see how the financial

markets price and react to a number of insurance companies listing. It is still not certain the extent to

which existing companies will offer their shares to the public.

Amendments to the Code of Corporate Governance

Corporate Governance is the method by which corporations are controlled, specifying how a corporation’s

structure for decision-making is to be governed as well as setting out strategies for monitoring

performance. Recently, the Capital Market Authority (“CMA”) in Oman circulated a draft Code of

Corporate Governance (the “New Code”) which will, if approved, replace the existing Code of Corporate

Governance issued by circular 1 of 2003 (together referred to as the “Codes”). Both the Codes set out

that the provisions are obligatory on all public joint stock companies listed on the Muscat Stock Market

and investment funds taking the form of public joint stock companies. The aim of the New Code, which is

in line with the GCC Code of Corporate Governance, is to enhance and expand on the existing principles

of corporate governance.

The amendments to the definitions of both ‘independent director’ and ‘related party’ were discussed in a

previous article. This article explores further changes to the Code of Corporate Governance.

Directors’ meetings and professional conduct

Article 3 of the New Code has provisions on the composition of a board of directors’ meeting and how the

meeting is to be conducted. The additional provisions set out the following: 

o a meeting of the board will not be legally valid unless at least half of its members are present or represented;

o a director may represent no more than one director in a board meeting;o at two meetings per annum the meeting may be held by modern methods of communication; ando the directors may adopt resolutions by circulation as long as the resolution is signed by all

members and is included for approval in the agenda of the next board meeting.

These additional provisions ensure that directors’ meetings are conducted in a manner that will enhance corporate governance of a company. 

The New Code has also inserted an annexure which details a code of professional conduct of directors. This section deals with the following: 

o Professionalism of a director;o Due diligenceo Integrity;o Conflict of interest;o Compliance with rules and regulations;o Access to information; ando Personal characters.

The above is especially helpful to public joint stock companies since it outlines not only how a director should conduct themselves but also includes an explanation as to why such provision has been inserted.

While the Commercial Companies Law, issued by Royal Decree 4 of 1974 (as amended), specifies that directors are not to have any direct or indirect interest in transactions or contracts concluded in respect of the company, it does not provide detail. Here, the explanation provided for in the New Code’s annexure is particularly useful as it clarifies how directors should conduct themselves. Under the Conflict of Interest section, a director should at all times maintain transparency, avoid conflicts of interest and disclose all contractual interest with the company. This is to avoid a director taking an improper advantage of his position and to maintain ethical standards in the functioning of the business. The annexure goes onto specify other standards by which a director is expected to comply. It includes that a director must not make improper use of information acquired and shall comply with all regulations and directives relating to selling and buying company shares. 

In addition, in respect of Compliance with Rules and Regulations, the New Code states that a director should take the necessary measures to ensure compliance with the rules and regulations governing its operations. This is to enable the director to obtain knowledge on the legal and regulatory framework in which the company operates, if he is not aware of it already. 

Functions of the chairman

Although the existing Code of Corporate Governance highlighted that the roles of CEO, General Manager and chairman are not to be combined, it does not provide details as to the specific role of the chairman of the board. Article 5 of the New Code lists the functions of the chairman including (but not limited to) the following: to lead the board; to encourage members to obtain accurate and timely information; to draw up an introductory programme for directors about the company business and employees; and to ensure implementation of the resolutions of the directors. 

Significantly, if companies are compliant with these provisions to encourage transparency, accountability and liability of managers, it should result in effective overall regulation of companies. The draft of the New Code which was finalised by the Corporate Governance Committee is currently being reviewed by the CMA and is therefore, at the time of writing, neither approved or in force.

Real Estate Law Update: Royal Decree Relaxes Foreign Shareholding Restrictions

A recent amendment to Omani land use laws could well prove to be a tipping point in the liberalization of

the real estate sector in Oman. The Land Law of 1980 and its subsequent amendments originally paved

the way for corporate ownership of land, by permitting wholly Omani (or GCC) owned companies and

public joint stock companies with at least 51% Omani shareholding to own land in the Sultanate. 

Yet even after the enactment of the Land Law, corporate ownership of land remained highly restricted, as

Omani companies with foreign ownership – even joint stock companies with greater than 51% Omani

shareholding – could not own and utilize real property except for limited purposes complementary to their

business objects. For example, these companies could use land only for installing a showroom,

warehouse or business office, for providing staff accommodation, or for other administrative purposes.

Only wholly Omani owned companies were permitted to engage in real estate development as a business

object. 

Trading and investing in real estate development, as well as the reselling of real estate property,

remained the exclusive preserve of wholly Omani owned companies with related real estate objects until

2004, when these business fields were opened up to wholly GCC owned companies. However, ownership

of land in the Sultanate by companies with non-Omani GCC shareholding is subject to conditions which

include a well-defined timeline for development of the land along with restrictions on reselling the land

without first completing the planned developments to the property. Real estate companies with non-

Omani shareholding had to content themselves with usufruct rights over land granted by the Government

or by private parties. Usufruct as a beneficial interest in land is time-bound and has limited assignability,

which can be a deterrent to undertaking long-term real estate development projects.

These restrictions are now changing. The recent amendments to Omani land use laws issued by Royal

Decree 76/10 seek to relax the foreign shareholding restrictions as well as the limitations on the usage of

land. The amendments enable public and closed joint stock companies with a minimum of 30% Omani

shareholding to own land in the Sultanate. More significantly, the amendments allow these companies to

engage in real estate development as a business object, a key permission that previously had been

restricted to wholly Omani (and later, GCC) owned companies. Although the amendments do not purport

to grant ownership rights to companies that are not in the real estate development sector, they represent

a watershed event for real estate development companies that are executing various ITC and non-ITC

projects in Oman. (Integrated tourism complexes, or ITCs, are large-scale planned developments that

usually include residential properties, hotels, shopping and entertainment facilities.) 

Pursuant to the amendments, real estate companies must do the following in order to own land:

obtain prior approvals from the relevant government authorities for a specified real estate project;

not dispose of the land within four years of the registration of ownership;

obtain a building permit for the land;

register the sale of units only after the completion of construction of the units and the basic

infrastructure related to them; and

have real estate development as a business object stated in its commercial registration.

It is unclear whether real estate companies with existing holdings satisfying the above conditions would be entitled to “upgrade” their existing rights on the back of the amendments.

The amendments also increase the permitted foreign shareholding in companies for entitlement to usufruct. Omani companies with up to 70% foreign shareholding and a minimum of 30% Omani (or GCC) shareholding are now entitled to usufruct over land for national development projects. 

Furthermore, the amendments amend the Law on Ownership of Real Estate in Integrated Tourism Complexes, authorizing the Ministry of Tourism (with the prior approval of the Ministry of Finance) to exempt investors in tourism projects – including ITC projects – from the payment of usufruct fees for five years in relation to the undeveloped project area. The amendments make it obligatory to commence an ITC project within two years of securing the land. Lastly, another significant development is that the amendments allow the developer to subdivide the project land in coordination with the Ministry of Tourism, with the proviso that the subdivision will be in accordance with the designated purpose for which it was earmarked.