jnobia108 - Business Law
student.2020
4.Ch-4-B.Law-new-5b4c16e2b451f464abdbac3de3bb9258.pptxPartnership, Corporation and Agency law
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Chapter - 4
Learning Objectives:
Describe the formation and operation of partnerships and corporations including limited partnerships
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General Provisions
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A Commercial Company is a contract by which two or more persons undertake to participate in an enterprise for profit, each contributing a share of the Capital in the form of tangible or intangible property or services, with a view to sharing any profit or loss resulting form the enterprise.
The Commercial companies must adopt one of the following forms:
General Partnerships
Limited Partnerships
Joint Ventures
Joint-stock Companies
Limited Liabilities Companies
Holding Companies
One-person Company
All Commercial Companies, except joint ventures, shall be considered juristic persons.
Contd…
General Provisions
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All contracts, receipts, notices and other documents issued by Commercial Companies shall indicate the Company’s name, its form, its principal place of business and the number and place of its registration in the Commercial Register. The provisions of this article shall not apply to the joint ventures..
Only the Joint-stock Company may have as its object the conduct of insurance business, solicitation of savings or capital from the public, investment of funds of the account of third parties, conduct of banking business or the provision of commercial air transport services.
The Memorandum and Articles of Association of Commercial Companies other than those related to joint ventures shall be public documents which shall be registered and published according to this law and the Commercial Register Law.
Commercial Companies with non-Omani partners, whether such partners are natural or juristic persons shall comply with the foreign capital investment Law.
General Partnerships
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Establishment of the General Partnership
The general partnership is a Commercial Company formed by two or more natural or juristic persons aiming to do business with a name. The partners of a general partnership shall be jointly and severally liable for the general partnership’s debts to the full extent of their property.
The general partnership is subject to all provisions of Part One of this Law. (all previous is Part-1)
The partner shall register the general partnership in the Commercial Register.
The title of the general partnership may also include the name of one or more partners provided that the title of the Company shall not be misleading as to its objectives, identity, or its partners’ identities. Wherever it appears, the title of the Company shall be followed by the term “General Partnership”.
….Contd
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Any person, who is a non-partner in the Company but agrees that his name be included in the title of the Company, is responsible for the Company’s debts as a general partner to any third party.
Each partner in a general partnership is deemed to be in commercial business under the partnership’s name and considered ‘merchant’.
The bankruptcy of a general partnership shall result in the bankruptcy of each of its partners.
The partners’ share in the partnership shall not be represented by negotiable certificates. A partner shall not transfer his share in the partnership to a third party except with the consent of all partners or as specified in the partnership’s Memorandum of Association.
A Partner can transfer his profits or returns to a third party. Such transfer affects only those parties, but not other partners.
Contd…
General Partnerships
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A partner who has withdrawn from the partnership shall not be held liable for the debts incurred by the partnership subsequent to the date of the registration of the partner’s withdrawal, in the Commercial Register but he shall remain liable for the partnership’s debts incurred on the date of such registration. Any agreement to the contrary between the partners shall not affect the rights of the partnership’s auditors.
A partner shall not be required to pay any of the partnership’s debts out of his own property unless the creditor has proven that despite all reasonable efforts he has made to collect his debt from the partnership, the latter has filed to pay the debt.
Contd…
General Partnerships
Limited Partnerships
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The limited partnership is a Commercial Company, which comprises two categories of partners:
One or more general partners who shall be jointly and severally liable for the limited partnership’s debts to the full extent of their property.
One or more limited partners whose liability for the partnership’s debts shall be limited to the amount of their contribution to the partnership’s capital provided such amount has been stated in the limited partnership’s Memorandum of Association.
The limited partnership is subject to all provisions of part one of the Law and also the General Partnership.
The general partners shall register the limited partnership in the Commercial Register.
The name of the Limited Partnership Company shall be followed by the expression “Limited Partnership.”
A limited partner’s liability shall be limited as long as he does not participate in the management of the partnership or act in the name of the partnership, whether as an agent or otherwise. If he participates, he is liable like a General Partner.
Contd…
Limited Partnerships
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However, he/she may by himself/herself or through a representative :
inspect the books
records, accounts and other documents of the company
have discussions with the other partners on the same matters.
A limited partner shall not be deemed to be participating in the management of the partnership for mere participation in the internal management in the course of exercising the rights provided by Law or the partnership’s Memorandum of Association, or for mere supervision he may exercise over the acts of the managers of the partnership, or because he has given them advice or an opinion or matters relating to the partnership.
Limited partners shall not be deemed to carrying on commercial business under the name of the partnership and shall not have the status of merchants by reason of being limited partners.
The death, declaration of ineligibility, bankruptcy, withdrawal or dismissal of a limited partner shall not result in the dissolution of the partnership unless the partnership’s Memorandum of Association so provides.
Contd…
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The joint venture is a Commercial Company formed by two or more juristic or natural persons and establishing legal relationships between its members without affecting third parties. The J V shall not have a name of its own and its existence shall not be raised as a defence against claims made by third parties.
JV is not subject to registration or entry in the Commercial Register.
The contract establishing the joint venture shall define the venture’s objects, the rights and obligations of partners and shall govern the distribution of profits and losses among them subject to the provisions of this Law.
The joint venture shall have no juristic personality and third parties shall not have legal connections except with those partner (s) with whom there is contractual relationship. However, if the partners disclose the existence of the joint venture to a third party who is thereby induced to enter into a contract with the joint venture or one or more of its partners, then the provisions governing the liability of general partnerships, shall apply in respect to such contract.
The joint venture shall not issue negotiable or transferable shares, or bonds.
Joint Ventures
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A Joint Stock Company is a commercial company whose capital is divided into equal negotiable shares.
The liability of the shareholder shall be confined to the payment of the value of the shares he subscribes and he shall not be responsible for the debts of the Company except within the limits of the nominal value of the share he subscribes.
The Company shall have an issued capital and the Company’s Memorandum of Association may, however, specify an authorized capital exceeding the issued capital.
The Joint-stock Company shall consist of, at least, three natural or juristic persons. Companies established by the government solely or jointly with others shall be exempt from this provision.
The name of the Joint-stock Company should not have any person’s name.
However if the Company takes advantage of a patent registered under the name, then it can use.
The name of the Company should be followed by the words: Public Omani Joint-Stock Company (S.A.O.G). Or Closed Omani Joint-Stock Company (S.A.O.C.)
Joint Stock Companies - Establishment
Contd…
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The issued share capital shall not be less than two million (2,000,000) Omani Rials for a public joint stock company (SAOG) and five hundred thousand (500,000) Omani Rials in the case of a closed joint stock company (SAOC)
As an exception from the preceding paragraph, the minimum share capital of a public joint stock company may be one million (1,000,000) Omani Rials, if it is established by way of conversion from another legal form.
Contributions to the Capital of the Joint-stock Company shall be in cash or in kind and shall not consist of services or labour of any person.
Directorate General of Commerce is the authority to approve the establishment of a Joint-stock Company. The same office should approve the Memorandum and Articles of Association of the Company.
Mixed Companies shall be subject to the conditions provided in the Foreign Business and Investment Law.
Joint Stock Companies - Establishment
Contd…
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Founders/Promoters
Whoever practically participates in the procedures of establishment of a joint stock company with the intention of assuming responsibility therefor, shall be deemed to be a founder of such joint stock company.
Whoever signs the Constitutive Documents or provides a share in cash or in kind upon the company’s establishment shall particularly be deemed to be a founder.
Whoever, other than the shareholders, carries out the preparation or review of the Constitutive Documents, shall not be deemed to be a founder.
Founders should exercise required care in all matters dealing with the joint stock company.
Founders, from among themselves should make a committee with at least 3 members to carryout the establishment procedures.
Joint Stock Companies - Establishment
Contd…
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Constitutive Document
The constitutive documents shall include the following data.
name of the company and its principal place of business;
objectives of the company;
amount of the share capital, the number of the shares to which it is divided and value and type of the share;
names, nationalities, places of residence and addresses of the founders and the number of shares subscribed for by each one of them;
number of the members of the board of directors;
duration of the company, if it is for a limited duration, its commencement date and the expiry date.
Joint Stock Companies - Establishment
Contd…
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The application for establishment of a joint stock company shall be signed by at least three (3) founders and accompanied by a list of the names of members of the constitutive committee.
A decision on the application for establishment must be taken within fifteen (15) days of the date of submission of the application satisfying all the required documents. If the application is rejected or the specified period has expired without a decision being taken on the application, the interested persons shall be entitled to make a complaint against the rejection or failure to take a decision on the application in accordance with the procedure set forth by the Regulations.
In Public companies (offering share to public), the Founders should hold 30% to 60% shares. Remaining shares can be offered to public.
Any single Founder should not have more than 20% of the capital either in his name or in the name of his children who are less than 18 years of age, except when a Company fully owned by Omanis is transformed into a Joint-stock Company provided it has already issued three annual audited balance sheets.
Joint Stock Companies - Establishment
Contd…
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Within 30 days of the date the decision of establishment of the company is issued, the founders shall invite the public for subscription.
Invitation to the public to subscribe for the shares of a Company shall be announced in two daily newspapers, for at least two consecutive days and at least one week prior to the commencement of subscription.
The invitation for subscription shall be governed by a prospectus, prepared as per the legal requirements of Muscat Securities Market. The same should be approved by Muscat Securities Market.
Subscription shall be effected through, at least, three national Banks licensed to operate in the Sultanate. The founders shall provide such Banks with sufficient copies of the prospectus and the Company’s Articles of Association. During the subscription period, any person shall have the right to obtain a copy of each.
Joint Stock Companies - Establishment
Contd…
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The announcement shall include the following information:
The name of the Company, its principal place of business, its objectives and its duration.
The date of the decision authorizing the establishment of the Company.
The Capital of the Company, number of shares and their nominal value.
Promoter’s names, address and nationality of each of them, the number of shares he has subscribed for, the nominal value of such shares and the amounts he has paid.
A description of all contributions in kind, if any, and the names of those who made such contributions, their value and the bases of their evaluation.
Subscription period and requirements.
The number of shares offered, their nominal value, the method of payment and issue expenses, if any.
The Banks assigned for subscription.
Any other information Muscat Securities Market deems necessary
Joint Stock Companies - Establishment
Contd…
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The subscription shall remain open in accordance with the period specified in the prospectus, which shall not exceed fifteen (15) days. However, the authority may extend the time.
The amounts specified in the subscription document shall be deposited in a special account to be opened in the name of the Company followed by the expression “Under Incorporation” in one of the designated Banks. The amounts deposited shall not be used before the constitutive meeting has approved incorporation expenses.
The Bank shall keep the funds received from subscribers. If any subscriber’s offer is rejected, such amount should be returned.
In case the incorporation of the Company is abandoned or postponed without a legitimate reason, the Bank shall refund the funds paid by subscribers to them.
If company reduces subscription, excess funds paid by subscribers shall be refunded to them. If the issue is oversubscribed, the excess amounts shall be refunded to the subscribers.
Joint Stock Companies - Establishment
Contd…
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If all shares offered for public subscription are not subscribed for within the subscription period, the promoters shall either abandon the incorporation of the Company, or reduce its capital.
If the promoters have contributed in kind, the same shall be described in the prospectus document.
The evaluation of the contribution in kind shall be subject to the assessment of one or more experts appointed by the Ministry of Commerce and Industry upon promoter’s request and pursuant to the regulations.
Contributors of shares in kind shall be bound to transfer the titles of the evaluated shares in kind to the name of the Company immediately after the constitutive meeting’s approval of the experts’ report, and the Auditors of the Company shall make sure of such transfer.
Joint Stock Companies - Establishment
Contd…
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The promoters shall, within 30 days after the expiry date of subscription, summon the subscribers to the constitutive General Meeting.
The constitutive General Meeting should be arranged according to this Law and the provisions of the Company’s Articles of Associations, which govern the extraordinary general meetings.
The promoters shall present to the constitutive General Meeting a report, together with supporting documents, including sufficient information on all the actions taken, the expenses paid for the incorporation of the Company and all commitments contracted by the promoters on behalf of the Company under incorporation. The constitutive General Meeting may ratify all or part of such contracted actions or commitments.
Promoters are jointly and severally responsible for the contracts made for the company under incorporation, which have not been approved by constitutive meeting.
Joint Stock Companies - Establishment
Contd…
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The constitutive General Meeting shall elect the members of the first Board of Directors and appoint the first Auditors.
The constitutive General Meeting or a subsequent extraordinary meeting may adopt internal regulations that govern the management and business of the Company. Such internal regulations shall be amended only by an extraordinary General Meeting.
The Company’s first Board of Directors shall register the Company with the Commercial Register within 15 days from the date of the constitutive General Meeting. The Board of Directors shall be jointly responsible for the damages arising from non-registration of the Company.
The Company shall make its Articles of Association available to the public at its principal place of business for inspection, and any person shall be entitled to obtain a duplicate thereof against reasonable fee.
Joint Stock Companies - Establishment
Contd…
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If any fault has occurred in the procedures of establishing a Joint-stock Company, any interested party may, within five years from the Company’s establishment, warn the Company of the necessity of amending such fault.
If the Company fails to take the necessary actions to make the required amendment within one month from the warning to, such interested party may claim the dissolution of the Company by the Authority for the Settlement of Commercial Disputes.
The promoters or founders, the members of the first Board of Directors and the first auditors shall be jointly and severally responsible for the damages arising from the dissolution of the Company and which are attributable to their illegal acts or their negligence or their omission in establishing the Company.
Joint Stock Companies - Establishment
Holding company
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A holding company is a joint stock company exercising financial and administrative control over one or more joint stock or limited liability companies, which become its subsidiaries through the holding of at least fifty one percent (51%) of the shares of each of such companies.
A holding company shall invest its funds through its subsidiary companies.
A holding company shall not acquire shares in general partnerships or limited partnerships, or own any shares in other holding companies.
The Capital of a Holding Company shall not be less than 2 (Two) Million Omani Rials.
Holding company
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The objectives of the Holding Company shall be as follows:
To manage its subsidiary companies or to participate in the management of the other companies in which it is a shareholder.
To participate in the establishment of joint stock companies or limited liability companies.
To provide guarantees, loans and finance to its subsidiary companies.
To invest its funds in shares, bonds and other securities.
To acquire the movable and immovable properties necessary for carrying out its activity within the limits permitted by law.
To acquire patents, trademarks, concessions and other intangible rights and to utilize and license them to its subsidiary companies and to others.
Holding company
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A holding company shall be established by either of the following methods:
By establishing a joint stock company whose objectives shall be determined by one or more of the objectives provided for in the Law.
By amending an objective of a joint stock company to an objective of a holding company.
By conversion of a limited liability company into a holding company.
Holding company
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A subsidiary company: is a joint stock company or a limited liability company, which is subject to the control of another company that owns at least fifty one percent (51%) of its shares.
Each of the holding company and its subsidiary company shall enjoy an independent legal personality.
The holding company shall not be liable for the debts of the subsidiary company.
The board of directors of a holding company may invite the chairman of the BoD of any of its subsidiary companies to attend its Board meetings, when considering matters related to the subsidiary company, for expressing remarks or opinions, or to give any explanations or statements requested from him/her. He/she may participate in the discussions without having a countable vote on the resolutions.
Holding company
Limited liability company (llc)
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The Limited Liability Company is a Commercial Company with a fixed capital divided into equal shares.
2 or more natural or juristic persons. Maximum partners - 50 (fifty). Maximum number can be increased by the Minister.
Government companies are not subject to this rule.
Liability is limited to the nominal value of their shares.
The share capital of the company shall be divided into shares of equal value and fully paid on registration
LLC should be registered in the Commercial Register.
“Limited Liability Company” or “LLC” should be written at the end of the name.
The shares of shareholders in the share capital of a limited liability company shall not be tradable and the company shall not resort to subscription for raising or increasing its share capital.
An LLC either directly or indirectly, cannot borrow take money from public as share capital.
Limited Liability Company (llc)
Contd…
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A limited liability company shall be established under a contract signed by all shareholders and it must contain the data specified by the Ministry, particularly the following:
the name of the company and the principal place of its business.
the amount of its share capital and a statement of the shares in cash or in kind and their value.
the names of shareholders, their nationalities and addresses and the number of their shares.
the company’s objectives.
the date of establishment of the company and its duration.
the name of the company’s manager, his/her personal data and authorities.
the beginning and end of the company’s financial year and the date of its first financial year.
the bodies which have jurisdiction to resolve disputes between the shareholders.
the percentage for adoption of resolutions of the general meeting of shareholders in every meeting to be convened, with the exception of resolutions, the percentage for which has been provided by law.
Limited Liability Company (llc)
Contd…
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If one or more shareholders offer contributions in kind, the shareholder shall specify its kind, place and value.
The Ministry may estimate the value of such contribution by itself or by referring it to one or more experts.
If the value of the contribution was estimated at more than its real value, the provider of the contribution must pay the difference in cash to the company.
Shares in a limited liability company shall not be divisible, but a share may be owned by more than one person. (provided that the several owners shall be represented by one person )
Joint owners of a share shall be jointly liable for any obligations arising from such ownership.
Limited Liability Company (llc)
Contd…
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A company shall prepare a register of its shareholders in which:
the name of each shareholder
his/her nationality
his/her domicile of choice
his/her address, his/her age and the number of shares owned by him/her
any legal disposal of such shares shall be recorded in the shareholders’ register.
Limited Liability Company (llc)
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A one-person company : is a limited liability company whose share capital is wholly owned by one natural or juristic person.
A natural person shall not establish more than one limited liability company comprised of one person, nor shall a limited liability company established by one person (of a natural or juristic capacity), establish another limited liability company comprised of one person.
A one-person company shall be established in accordance with the procedures and rules specified by the Regulations.
The owner of the company shall not be liable for its debts except to the extent of the share capital allocated to such company.
The company shall be managed by the owner of the share capital.
The owner may appoint one or more managers for the company to represent it before the courts and third parties, and be responsible to the owner for its management.
THE ONE-PERSON COMPANY
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The company shall cease to exist upon the death of the owner of the share capital unless the shares of the heirs are held by one person.
The company will also cease to exist if the juristic person which owns the share capital ceases to exist.
If the owner of the company, in bad faith, liquidates it, discontinues its activity before the expiry of its duration or before achieving the objective of its establishment or does not separate the company’s business from his/her other private business, he/she shall be liable for its obligations to the extent of his/her private property
The provisions regulating the limited liability company shall apply to the one-person company to the extent they are not inconsistent with its nature.
THE ONE-PERSON COMPANY
Commercial agencies
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Commercial agencies are governed by the Commercial law which has been issued by the Royal Decree No. 55/90.
According to the Commercial Agencies Law, the commercial agency is defined as: “Any agreement through which a merchant or a commercial company in the Sultanate is assigned to promote or distribute the products or services of a foreign person or entity in consideration for profit or commission’’
An agency agreement must be registered at the Commercial Agencies Register at the Ministry of Commerce and Industry to be enforceable and the Ministry shall issue a certificate to prove the recorder within 15 days as from the date of application.
There are two kinds of Agency Agreements:
Limited term Agencies: governed by a fixed duration between the parties.
Unlimited term Agencies: doesn’t include a fixed period.
Commercial agencies
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Agency Agreements will be terminated on the following cases:
after the expiry of the agreed duration and if the parties don’t agree to renew it. In such case the principal shall inform the agent three months before the expiry or otherwise it will be renewed automatically for similar period upon the agreement.
By the Ministry if was discovered that the agreement was registered upon incorrect data.
Upon finalizing the agreed object(s) that both parties agreed upon.
Upon the death of the agent.
At the request of one party upon the breach of the other party.
The agent will have the right to ask for compensation if the principal terminates the agency agreement without cause or breach the agreement by selling by himself or through another agent the same product.
Once the agreement has been terminated, the agent shall ask the Ministry to cancel the registration from their records within one month, or otherwise, the Ministry will do this from their end and will inform the agent accordingly.”
Commercial agencies
Reference
ROYAL DECREE No.18/2019 PROMULGATING THE COMMERCIAL COMPANIES LAW.
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Thank you
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