Business Structures And Regulations

• Manufacturing businesses
• Printing, publishing, and broadcasting houses.
• Medical products.
• Insurance companies.
• Tourism ventures.
• Bank, financial leasing companies and others. (Said, 2016)

The laws MCI of are meant to govern the following types of companies or commercial entities under those mentioned ventures-

Sole Partnership: It is often considered as an establishment rather than a company and thus, these types of enterprises will not have any independent legal body from that of the owner. It is allowed to be created only by Omani nationals or G.C.C nationals (subjected to definite conditions) and only for the activities considered permissible. The main process to establish a Sole Partnership requires legal application with applicable documents to the MCI.

General Partnership:GCC and Oman nationals are permitted to be a partner and each of them are jointly liable without any limitation to the company.

Limited Partnership:A limited partner who includes himself in the partnership name, will be equally liable as a general partner. Non Oman or GCC nationals are not included in assuming any type of business organization, which is inappropriate for foreign investors.

Limited Liability Company (LLC):LLC is regulated by the Commercial Companies Law (CCL). Where the business includes banking or insurance activities conducted by any third party, LLC is not legally permitted to engage in such practices.

Joint Stock Companies (SAOG and SAOC): It is a commercial company which is governed by the CCL.SAOG founders must contribute their part of investment and submit to the MCI and Memorandum of Association.SAOC founders needs to do the same to the Memorandum of Association to be approved by the MCI. Shares of this companies are not allowed in Muscat Securities Market.

Joint Ventures: It is governed by the CCL and the company needs to be confirmed to the relationship amongst the partners and will never affect any third party. It has no separate legal entity of its own like other enterprises.

Holding Company: It is a type of Limited Liability Company, which is restricted from holding shares in a general or limited partnership companies. Foreign companies do not choose the legal form during initial investments because the rules are issued by the MCI to regulate Holding Companies. (Pauceanu, 2016)

The comparisons between the firms are as following—

Formation Process

The formation processes of those companies, mentioned in previous chapter are as follows-

Sole Partnership: Sole partnership is the business process where an individual deal on his own account with a trade license issued to his own name. The sole property owner is liable to the full amount of his investments in his business.

General Partnership: Two or more persons who are jointly liable for all its responsibilities to the whole investment create it. In absence of any agreement to the dissimilarities, the partners will share losses and profits according to their capital investments and no minimum capital requirement is mentioned.

Limited Partnership:

Limited partnership encompasses two categories of partners-

1. One or more general partners with equal distribution of liabilities, for the debts to the full amount their property.
2. One or more limited partners with limited liabilities to the amount of their capital investments.
3. It can be defined as a modified general partnership.

Limited Liability Company (LLC): It is formed by two or more natural or juristic individual with limited liability to the minimum value of the capital shares. The number of shareholders are limited to 40 and the minimum capital requirement is R.O 20,000/- when there are no foreign participation. The minimum requirement is R.O 150,000/- for a foreign involvement. 10% of total profit is needed as a legal reserve after tax until it equals 1/3^rd of the company’s shared capital.

Joint Stock Companies (SAOG and SAOC): It is a commercial company, which is divided into shares of equal value, which will be negotiable. General Joint Stock Company or SAOG must have a minimum number of three natural or juristic persons as founders who shall contribute to their part of capital in the MCI. The minimum requirement of capital is at least R.O 2 million. Companies, offering shares to the public for purchase, needs to subscribe in between 30% - 60%. A single promoter is not allowed to possess more than 20% of the capital. Shareholders liabilities are limited according to the values of the purchased shares.

The shares cannot be tendered to the public for purchase in SAOC or Closely held Joint Stock company. The minimum capital is required is R.O 500,000/-. To establish the company, at least three natural or juristic promoters are needed and they must subscribe to the capital of the company. The accountability of the company’s shareholders is limited to the value of the purchased shares.

Joint Ventures: It is a commercial company formed by two or more natural and juristic partners. These type of companies are limited for the arrangement among the partners and must not be revealed to the third parties. The liability of the partners is unlimited on the liabilities of the company.

Holding Company: It is a type of Limited Liability Company or Joint Stock Company, which practices financial control on one or more companies as well as manages them with at least 51% of the shared capital. Minimum required capital is R.O 2 million. (Pauceanu, A.M., 2016)

The Administrative Requirement of the Following Firm Under the Oman Commercial Company Law (OCCL) Is as Follows:

Sole Proprietorship

A sole proprietorship is an organization, which is own and controlled by a single person. It is consider the simplest and easiest form of business because of very fewer formalities. The administrative requirement is very confined or limited in this organization because of limited transactional activity. In this firm most of the management and business, the owner makes decisions. This firm has some advantages over the other, as it does not require paying corporate business tax, no need annual fillings and easy record keeping (Klapper, Amit, Guillén, &Quesada, 2007). The firm has a little number of employees due to the limited administrative tasks. The financial management of the firm is not a challenge to tackle, as there is very little paperwork due to less amount of business handling. In short, it can conclude that there is no such administrative requirement

Partnership (General and Limited)

It is a small firm with limited partnership. Two or more members in Oman can build it. Its organization structure is a little bit complex than a sole proprietorship. The General Partnership managerial structure is different from the Limited Partnership. In general, a partnership firm there is no such documentation is required for becoming partners but in general, it is necessary to do so. In Limited Partnership, the partners play a different role such as one of them act as a general partner and other as a limited partner (Cohen, & Grant, 2018). In this firm, there is no such need of formal administrative is required. Each partner pays tax on his share profit. The administrative requirement such as financial management, retention of records and the daily official task is restricted in this firm.

Limited Liability Company (L.L.C)

Limited Liability Company (LLC) is a firm that consists of one or more owners know as members. It has very limited recordkeeping requirements, but it must have an operating agreement. It should submit articles of the business with the state. It offers huge organizational pliability and tax as a partnership or a corporation. The contact should be constitutive. This firm does not need to pay corporate tax. The Government of Oman grant relaxation from personal tax i.e. there is no need to pay personal income tax (Yaghi, & Alibeli, 2017). The MCI approve the name of the company and it requires several documents such as foreign shareholder documents, Omani shareholder documents, a bank certificate, and OCCI registration.

Joint Stock Companies (general-S.A.O.G. and closed – S.A.O.C.)

SAOG and SAOC are joint companies. The main difference between them is that an SAOC is a closed company whereas an SAOG is listening in the Muscat Securities Market (MSM). SAOC requires a minimum of three shareholders and a minimum capital of RO500, 000 to establish the firm whereas in SAOG minimum capital is RO2m. The process for building an SAOG or SAOC is more or less similar to LLC, but is larger and more document intensive, especially in the case of SAOG. Many administrative aspects have to be looking out in these firms such as final constitutive contract and articles of association, foreign shareholder details, Omani shareholder details. After this, MCI commercial and OCCI registration are done.

Joint Venture

In a joint venture, the company is more flexible regarding the organizational structure. The joint venture is not a legal entity so it does not entertain contacts or hire employees (Jureidini, 2016).It does not have its own tax liabilities. In a joint venture, foreign ownership is allows up to 70 % according to Oman’s World Trade Organization rules.

Holding Company

It is a company, which does not produce goods or services, its main purpose to own other companies shares to form a business group. In Oman joint venture firm, majority shareholder owns 70% while minority shareholder 30% ((Saleh, Zahirdin, &Octaviani, 2017).

Findings

From the above-generated findings, it can be said that Oman provides flexible sets or rules and regulations for stating up the business. There is no personal or income tax to pay in this country and even the corporate also enjoys some tax relaxation, as the government needs only 15 % corporation. The fewer formalities restricted paper works and tax relaxation can attract more foreign investment to the country. Its shareholding polices is the most highlighting factor which can encourage more and more entrepreneur to invest in the country. In Oman, a foreign shareholder can own 70 % of the share but in some special cases, it gets extended to 100 %. The government initiative of Oman’s Ninth Five-Year Development Plan has attracted its attention from all over the world. Its main purpose is to rectify the historical inequalities and improve the economic growth of the country.

Conclusion

The detailed analysis of the basis of the generated research provides a clear conception that Oman has developed a plan to focus on the industrialization and privatization of the country’s economy. The government has taken all the initiative to attract foreign investment by providing a flexible set of rules and regulations for starting up a firm in the country. Oman’s government has also made allowances for development projects, which will benefit business sectors within 2020. The government has successfully initiated its Ninth Five Year Development Plan, which is attracting a lot of investment in the country.

References

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Christensen, T.L., Avaya Inc, 2016. Using business rules for determining presence. U.S. Patent 9,398,152.

Bayern, S., 2015. Three Problems (and Two Solutions) in the Law of Partnership Formation. U. Mich. JL Reform, 49, p.605.

Said, B.M., 2016. The future of reform in Oman. Contemporary Arab Affairs, 9(1), pp.49-67.

Pauceanu, A.M., 2016. Foreign Investment Promotion Analysis in Sultanate of Oman: The Case of Dhofar Governorate. International Journal of Economics and Financial Issues, 6(2), pp.392-401.

Klapper, L., Amit, R., Guillén, M. F., & Quesada, J. M. (2007). Entrepreneurship and firm formation across countries. The World Bank.

Cohen, A., & Grant, J. (2018). Future Calling: Infrastructure Development in Central Asia.

Yaghi, A., & Alibeli, M. (2017). Theoretical and empirical analysis of citizens’ willingness to pay: Ethical and policy implications for the environment in the United Arab Emirates. Public Integrity, 19(1), 41-57.

Jureidini, R. (2016). Ways forward in recruitment of low-skilled migrant workers in the Asia-Arab states corridor. ILO Regional Office for the Arab States and the ILO Regional Office for Asia and Pacific, Beirut and Bangkok.

Saleh, M., Zahirdin, G., & Octaviani, E. (2017). Ownership structure and corporate performance: evidence from property and real estate public companies in Indonesia. Investment Management and Financial Innovations, 14(2), 252-263.