Holding Companies in Oman

The new Omani Commercial Companies Law (Royal Decree No. 18/2019) (CCL) repealed the previous 1974 law and introduced a number of changes that companies had one year to comply with. One of the main changes made by the CCL related to holding companies. Holding companies may no longer be in the form of a limited liability company (LLC) and have to be converted into a joint stock company (SAOC or SAOG).

As more than one year have passed since the date of implementation of the CCL, companies that have not yet complied with the changes should do so as soon as possible to avoid facing (greater) fines. Although some companies have delayed the conversion of their holding companies from a LLC to a joint stock company due to the COVID-19 pandemic, the Ministry of Commerce and Industry have not yet issued any circular or guidance that allows a company to delay compliance with the CCL.

In this article, we consider the requirements for a holding company, how a holding company can be established, other key points and the practical steps required for an existing limited liability holding company.

Requirements for a Holding Company

Chapter 6 (Holding Company and Subsidiary Company) of the CCL (Articles 227 to 233) sets out a number of requirements for holding companies, including:

1. having a minimum share capital of two million Omani Rials;
2. the name of the holding company shall include “Holding Company”;
3. it shall financially and administratively control one or more joint stock companies or LLCs (a subsidiary);
4. it shall own at least 51% of the shares in its subsidiary;
5. it shall be a joint stock company (SAOC or SAOG); and
6. having one or more of the following objects: (i) manging or participating in the management of its subsidiaries; (ii) participate in the establishment of a joint stock or LLC; (iii) provide financial support to its subsidiaries through loans and guarantees to third parties; (iv) invest its funds in shares, bonds and other securities; (v) acquire movable or real estate property necessary for carrying out its activities as permitted by the law; and (vi) acquire patents, trademarks, concessions and other intangible rights and to license them to its subsidiary companies and third parties.

Establishment of a Holding Company

A holding company can be established in one of three ways, by:

1. establishing a new joint stock company which meets the above requirements;
2. amending the objects of an existing joint stock company into those of a holding company and meeting the other requirements; and
3. converting a LLC into a holding company.

Other Key Points

Other points to consider in relation to holding companies include:

1. a holding company shall invest its funds through its subsidiaries, rather than directly;
2. a holding company cannot own shares in a general partnership, a limited partnership or another holding company;
3. the provisions in the CCL relating to joint stock companies also apply to holding companies as far as they are consistent with the holding company provisions in the CCL;
4. the holding company and its subsidiary have separate legal personality and the holding company shall not be liable for the debts of its subsidiary; and
5. a subsidiary may not own shares in its holding company. If it owns shares in its holding company prior to the date it became a subsidiary, the subsidiary is required to dispose of such shares within one year and the subsidiary shall have no voting rights in relation to such shares during such period.

Practical Steps

If you have an existing holding company which is a LLC, it is necessary to consider if it falls within the holding company requirements of the CCL. If it does so, it needs to convert into a joint stock company and to satisfy the other requirements for holding companies under the CCL.

Alternatively, if the existing holding company has a business itself (i.e. invests it funds directly) as well as holding shares in subsidiaries, it is not a “holding company” under the CCL. In this situation, removing any reference to “holding” from the name of the company would be required to comply with the CCL.

Please contact us if you require any further information on holding companies in Oman.

Article co-authored by Bassam Al Raisi.