jnobia108 - Business Law
student.2020
BALW4115CH4OmanCommercialCompaniesLaw-a3def2c9194b0392228ada6ef5fec7a0.pptxChapter Four Partnership, Corporation and Agency law THE COMMERCIAL COMPANIES LAW No.18/2019
Course: Business Law
Course Code: BALW4115
Specialization: Common
Department of Business Studies
Outcome: At the end of this chapter, the student should be able to: 1. Describe the formation and operation of partnerships and corporations including limited partnerships.
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General Provisions:
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The provisions of this Law shall apply to commercial companies whose principal places of business are located in the Sultanate or which carry out their principal activities therein.
A commercial company is a legal entity established under a contract by two or more persons each of whom undertakes to participate in an enterprise for profit, by contributing a share of the capital in the form of tangible or intangible property, services or labour, with a view to sharing any profit or loss resulting from the enterprise.
As an exception from the provisions of the preceding paragraph, the company may be comprised of one person in accordance with the provisions of this Law.
General Provisions:
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Commercial companies must adopt one of the following forms:
1. General Partnership
2. Limited Partnership
3. Joint Venture
4. Joint Stock Company (public / closed).
5. Holding Company
6. Limited Liability Company
7. One-Person Company
General Provisions:
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Any company which carries out a commercial business without adopting one of the forms provided for in Article (4) of this Law, shall be considered null and void.
All the persons who have carried out business or acted in the name of the company or to its account shall be severally and jointly liable for the obligations arising from the business or actions made by them.
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The Concerned Body may issue models of Constitutive Documents.
The Constitutive Documents shall be:
Apart from the joint venture, It shall be available to the public for perusal, and they must be registered in accordance with the laws in force.
Shall not contain any condition for absolving the founders or some of them from any responsibility resulting from the establishment of the company.
Apart from the joint venture, the Constitutive Documents and any amendments thereto must be written in the Arabic Language, otherwise they will be null and void.
General Provisions:
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The objective of the company must be lawful.
The persons who have carried out business or acted in the name of the company or to its account shall be jointly liable for the obligations arising from the business carried out or acts made by them.
Any company established in the Sultanate shall be of an Omani nationality and shall enjoy the privileges prescribed by this Law.
It must have the Sultanate as its principal place of business and it may have one or more branches in the Sultanate or abroad.
General Provisions:
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Companies with foreign capital contributions may be established, provided that the principal place of each of them shall be in the Sultanate in which it shall carry out its activity.
Companies may also be established to carry out business outside the boundaries of the Sultanate (offshore) in the free zones, and the regulations of such companies and the rules and procedures that govern their performance shall be approved by the Council of Ministers.
The Concerned Body may register branches and commercial representative offices of foreign companies in the Sultanate.
General Provisions:
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Apart from joint ventures, a company shall acquire a legal personality from the date of its registration.
Apart from the joint venture, the notices, contracts, documents, warnings, receipts and all papers and printed materials issued by the company, must contain its name, form and place of business and the other data specified by the Regulations.
1. GENERAL PARTNERSHIPS
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A general partnership is a company formed by two or more natural persons who shall be jointly liable for the company’s debts to the full extent of their property, and upon the death of any of them, the liability shall pass to his/her inheritors in respect of his/her unpaid debts.
The name of the general partnership shall consist of the names of all the partners. It may also be limited to the name of one or more partners and to be followed by the expression “and company”.
The name of the company must be in conformity with the true state of affairs.
The company may have a special trade name, provided that it must be connected with an indication that it is a general partnership.
1. GENERAL PARTNERSHIPS
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The partners shall submit an application for registration of the general partnership and its Constitutive Documents to the Registrar within thirty (30) days .
Any partner in the general partnership shall acquire the status of a merchant .
The bankruptcy of the company shall result in the bankruptcy of all the partners thereof.
1. GENERAL PARTNERSHIPS
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Shares of the partners in the general partnership shall not be represented by negotiable instruments.
Shares in a general partnership shall not be assigned except with the approval of all the partners and subject to the restrictions set out in the Constitutive Documents.
The partner may assign to a third party the rights connected with his/her share in the company and such agreement shall not have any effect except between the parties thereto.
1. GENERAL PARTNERSHIPS
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Creditors of the company shall be entitled to have recourse against it for repayment out of its property.
They shall also be entitled to have recourse against a partner for repayment out of his/her private property.
All partners shall be jointly liable to the company’s creditors.
The property of a partner shall not be subjected to repayment of the company’s debts except after obtaining a final judgment against the company, serving notice on it and its failure to settle within a reasonable time.
2. 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.
2. LIMITED PARTNERSHIPS
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The name of a limited partnership may consist of the name of one or more partners along with an addition of an indication of the existence of partners.
The name of the company shall also be followed by the expression “Limited Partnership”.
If a limited partner agrees to the inclusion of his/her name in the name of the company, he/she shall be held as a general partner.
The company may have a special trade name provided that it shall be connected with an indication that it is a limited partnership.
2. LIMITED PARTNERSHIPS
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A limited partner shall not participate in the management of the company.
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.
He/she shall not be considered participating in the management of the company.
2. LIMITED PARTNERSHIPS
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If a limited partner performs any role in the management of the company, he/she shall be jointly liable for any obligations arising against the company during his/her performance of such role .
A limited partner shall not be deemed to be carrying out a commercial business in the name of the company.
Shall not be deemed to have acquired the status of a merchant.
The bankruptcy of the company shall not result in his/her bankruptcy.
2. LIMITED PARTNERSHIPS
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The death of one of the limited partners or the declaration of his/her incapacity or bankruptcy shall not result in the dissolution of the limited partnership. unless the competent court decides otherwise.
A judgement declaring the bankruptcy of a limited partnership shall result in the bankruptcy of the general partners only.
A limited partnership shall be subject to all the relevant provisions regulating the general partnership with respect to matters in respect of which there is no provision in this Law.
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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 joint venture shall not have a name of its own and its existence shall not be raised as a defence against claims made by third parties.
A contract of the joint venture shall define its objectives, the rights and obligations of the joint venture partners, the method of distribution of the profits and losses, the manner of management of the company and any other essential elements.
Article 87
A partner in a joint venture shall not be considered a merchant, unless he/she carries out commercial business by himself/herself
3. JOINT VENTURES
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A joint stock company : is a company whose share capital is divided into shares which shall be traded in the manner prescribed by law. A shareholder shall not be liable except to the extent of his/her shareholding in the share capital.
A joint stock company shall consist of at least three (3) natural or juristic persons.
The companies established solely by the Government or jointly with another shall be exempt from this provision.
4. JOINT STOCK COMPANIES
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The company shall have a trade name which shall not be a name of a natural person. ( unless the objective of the company is to exploit a patent registered in accordance with the law in the name of such person, or in the event of being converted to a joint stock company.)
The name of the company shall not be misleading as to its objectives, its identity or the identity of its members.
The name of the company shall be followed by the phrase :
“Public Omani Joint Stock Company” or the expression “SAOG
“Closed Omani Joint Stock Company” or the expression “SAOC”.
4. JOINT STOCK COMPANIES
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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
Shall not be less five hundred thousand (500,000) Omani Rials in the case of a closed joint stock company.
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.
4. JOINT STOCK COMPANIES
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*The Founders
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.
4. JOINT STOCK COMPANIES
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The Constitutive Documents shall particularly include the following data:
1. name of the company and its principal place of business;
2. objectives of the company;
3. amount of the share capital, the number of the shares to which it is divided and value and type of the share;
4. names, nationalities, places of residence and addresses of the founders and the number of shares subscribed for by each one of them;
5. number of the members of the board of directors;
6. duration of the company, if it is for a limited duration, its commencement date and the expiry date.
4. JOINT STOCK COMPANIES
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The establishment of a joint stock company shall be effected by submission of an application for establishment to the Concerned Body signed by at least three (3) of the founders and accompanied by a list of the names of members of the constitutive committee.
The constitutive committee shall attach to the application for establishment, a copy of the Constitutive Documents signed by all the founders and any data or other documents specified by the Regulations.
It shall also attach a bank statement certifying the payment by the founders of the value of the shares in the case of a closed joint stock company.
4. JOINT STOCK COMPANIES
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The founders of a public joint stock company shall subscribe for a percentage of at least thirty percent (30%) and not exceeding sixty percent (60%) of the share capital and the remaining shall be offered for public subscription.
except in the case of conversion to a public joint stock company, in which case the shareholders or partners in the company may, prior to the conversion, retain seventy five percent (75%) of the share capital.
A single founder shall not own more than twenty percent (20%) of the share capital whether in his/her name or in the names of his/her minor children who are less than eighteen (18) years of age.
Companies fully owned by the State and holding companies shall also be exempt from the prescribed percentages.
4. JOINT STOCK COMPANIES
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The founders shall, within thirty (30) days of the date the decision of establishment of the company is issued, invite the public for subscription.
The subscription shall remain open in accordance with the period specified in the prospectus, which shall not exceed fifteen (15) days.
The Authority may, if required, permit the extension of such period for a similar period.
4. JOINT STOCK COMPANIES
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*THE SHARES
A company shall have an issued share capital and its articles of association may specify an authorized share capital.
The share capital of a company shall be represented by shares that are tradable in the manner prescribed by law.
A company shall not issue “founder’s shares”, “concessionary shares” or any other securities which grant the founders or any other person a right to any part of the company’s earnings or profits without having made an appropriate prior contribution to the share capital.
4. JOINT STOCK COMPANIES
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A share shall not be owned by more than one person except in the case of inheritance. provided that the heirs shall be represented by one representative.
The transfer of ownership of a company’s shares shall be effected by entering it in the shareholders register.
A company shall not consider the ownership of any share by any shareholder unless his/her ownership is registered in its shareholders’ register.
4. JOINT STOCK COMPANIES
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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 provisions related to the joint stock company shall apply to the holding company to the extent that is not inconsistent with the provisions of this Chapter.
5. HOLDING COMPANY AND SUBSIDIARY COMPANY
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The objects of the holding company shall be as follows: (Article 228 )
1. manage its subsidiary companies or to participate in the management of the other companies in which it is a shareholder.
2. participate in the establishment of joint stock companies or limited liability companies.
3. provide guarantees, loans and finance to its subsidiary companies.
4. invest its funds in shares, bonds and other securities.
5. acquire the movable and immovable properties necessary for carrying out its activity within the limits permitted by law.
6. acquire patents, trademarks, concessions and other intangible rights and to utilize and license them to its subsidiary companies and to others.
5. HOLDING COMPANY AND SUBSIDIARY COMPANY
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A holding company shall be established by either of the following methods:
1. establishing a joint stock company whose objectives shall be determined by one or more of the objectives provided for in Article 228 of this Law.
2. amending an objective of a joint stock company to an objective of a holding company.
3. conversion of a limited liability company into a holding company.
A holding company shall adopt a commercial name, provided that the expression “holding company” shall be added beside such name.
The issued share capital of the holding company shall not be less than two million (2,000,000) Omani Rials.
5. HOLDING COMPANY AND SUBSIDIARY 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.
A subsidiary company of any of the holding companies, shall not hold shares in such holding companies.
5. HOLDING COMPANY AND SUBSIDIARY COMPANY
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The board of directors of a holding company may invite the chairman of the board of directors of any of its subsidiary companies to attend the meetings of the board of directors of the holding company.
He/she may participate in the discussions without having a countable vote on the resolutions.
5. HOLDING COMPANY AND SUBSIDIARY COMPANY
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A limited liability company : shall consist of natural or juristic persons whose number shall not be less than two (2) and not more than fifty (50) persons, and their liability for the company’s debts shall be limited to the value of their shares in the share capital.
The share capital of the company shall be divided into shares of equal value and fully paid on registration.
The companies established by the State alone shall be exempt from the provision of this Article.
6. LIMITED LIABILITY COMPANY
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The name of a limited liability company may consist of the name of one or more shareholders, or any word or expression.
The name shall not be misleading as to its objectives, its identity or the identity of its shareholders.
The name of the company shall be followed by the phrase “limited liability company” or the expression “LLC”.
6. LIMITED LIABILITY COMPANY
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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.
A limited liability company shall be established with a share capital specified in its Constitutive Documents and shall be divided into shares of equal nominal value.
Contributions to the share capital of a limited liability company may be made in cash or in kind, but they shall not consist of services or labour.
6. LIMITED LIABILITY COMPANY
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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:
1. the name of the company and the principal place of its business.
2. the amount of its share capital and a statement of the shares in cash or in kind and their value.
3. the names of shareholders, their nationalities and addresses and the number of their shares.
…..
6. LIMITED LIABILITY COMPANY
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4. the company’s objectives.
5. the date of establishment of the company and its duration.
6. the name of the company’s manager, his/her personal data and authorities.
7. the beginning and end of the company’s financial year and the date of its first financial year.
8. the bodies which have jurisdiction to resolve disputes between the shareholders.
9. 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.
6. LIMITED LIABILITY COMPANY
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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.
6. LIMITED LIABILITY COMPANY
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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.
6. LIMITED LIABILITY COMPANY
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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.
6. LIMITED LIABILITY COMPANY
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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.
7. THE ONE-PERSON COMPANY
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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.
7. 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.
7. 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
Questions:
Multiple Choice
1. A Joint Stock Company founders:
Cannot exceed 60% of share subscriptions
A single founder shall not own more than twenty percent (20%) of the share capital
Both a and b
None of the above
2. Find the correct statement from the following regarding a holding company
Paid up capital OMR 2 million
Paid up capital OMR 500000
Paid up capital OMR 200000
None of the above
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3. Adil started a company called Healthy Food General Omani Joint Stock Company along with three of his friends. They decided not to invite public subscription. Their share capital is:
R.O. 100,000
R.O. 90,000
R.O. 80,000
None of the Above
4. All types of commercial companies are required to issue models of Constitutive Documents and this document must be made available to public except:
Limited Liablity Company
Joint venture
Joint stock company
General Partnership
Short Answer Questions:
Differentiate General Partnership and Limited Partnership on any two basis.
State provision related to a one person company.
Long Answer Questions:
Explain the formation of Joint Stock Companies.
Discuss the general provisions of Commercial Company Law.
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Case Lets:
1. British Luxury car manufacturer and Chinese’s Company Cherry Automobiles developed a short term partnership to form ‘Cherry Jaguar Land Rover Automotive Company in 2014:
Identify the commercial company formed
List any three features of such an organization
2. Mr. Faizal is having a Joint Stock Company SAOG for past 2 years and he is successful. Now, Mr. Faizel wants to make an investment of 51% in another company called Al Raafah SAOG.
Can Mr. Faizal make such an investment and what must be the minimum capital requirement for such an investment?
As per Oman commercial company law what is the name provided for such companies.
State four important objectives of such a company.
Reference
ROYAL DECREE No.18/2019 PROMULGATING THE COMMERCIAL COMPANIES LAW.
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