Opening up Omani closed joint stock companies

In a decisive move, the Omani Ministry of Commerce (“MOCIIP”) has published a set of long-awaited corporate governance principles (“Principles”) with which closed joint stock companies (SAOCs) must now comply.  These Principles were published under Ministerial Resolution 5 of 2025.  The purpose of the Principles is to enable SAOCs to develop stronger leadership, clear accountability, and enhanced transparency and to create a set of rules akin to those that apply to Omani-listed companies. The effect of the Principles is that SAOCs will need to make changes to their existing governance and as a minimum, will require changes to their articles of association. 

The following areas will be of importance to those who own or manage SAOCs in Oman:

Equal treatment of shareholders

The Principles make reference to the notion that shareholders are to be treated equally although the extent to which the Principles achieve this is limited to the concept that shareholder rights are to be stated in the articles of association and that such articles must contain mechanisms to ensure that those rights are not interfered with.  This could be interpreted as ensuring that minority shareholders are not deprived of their proportion of distributable profits, the right to vote and receive information to be discussed at general meetings of the shareholders.  We would expect compliance with this principle to be achieved through robust provisions in shareholders’ agreements and articles of association.

Related party transactions

A key area on which the Principles give priority is the challenging topic of related party transactions. RPTs are closely regulated under the corporate governance principles that apply to public joint stock companies but in recent times have been less so regulated for SAOCs. It is now the case that the responsibility for assessing related party transactions rests with the audit and risk management committee and this committee is ultimately responsible for providing recommendations to the board in relation to such transactions.  In all cases, related party transactions must comply with the rules laid out by IFRS.  Related parties are defined broadly in the Principles and include members of the board of directors and senior management of the SAOC and its group in addition to individuals that control the company’s operations or that could influence its decisions.

SAOCs must now exercise a heightened level of transparency in relation to rights or benefits that are granted to related parties that have or could have an impact on the integrity of the decision making process.  Such rights or benefits must be disclosed to the audit and risk management committee.

Board ethics, transparency, and conflicts of interest

The board of directors is now required to attain a certain standard to improve governance standards as a whole within the SAOC.  These standards extend to the active involvement of each director in a way that informs them of the company’s activities and operations and include the following:

• Acting with honesty, fairness, and independence
• Recognising that their duties are owed to the company and its shareholders and not solely to the company or body nominating them
• Avoiding conflicts of interest and ensuring that their role of director is not exploited for person gain

Board role and composition

The Principles outline the qualification criteria that must now be met by each member of the board of directors of an SAOC.  They provide a more thorough and rigorous mandate of responsibility for the board which includes: developing actionable performance indicators, developing and continuously formulating strategy, overseeing the policy for disclosing data and corporate governance-related issues, and thoroughly overseeing the work and performance of the executive management.  In addition, one-third of the board must now be comprised of non-executive members.  At least two independent members are required if the board exceeds seven directors.   At least one director must be independent if the assets of the company are valued at more than OMR 5m.

Independent directors must also meet certain criteria stated in the Principles before they can be treated as being truly independent.  These criteria include not holding any material, economic, or financial interest in or relationship with the SAOC or any of its subsidiaries and affiliates, providing independent and objective conjecture, and protecting the rights of minority shareholders.  Independent directors are required to regularly assess their independence and are under a duty to confirm independence to the SAOC on an annual basis, noting any issues that might affect their independence.   The Principles further provide for circumstances in which a person’s independence is revoked, immediately.

The Principles bring the role of the chairperson into greater focus and now demand that the chairperson assumes responsibility for a variety of issues including promoting governance principles within the board, establishing a new director onboarding programme, promoting collaboration between board members, and resolving conflicts, enhancing communication with shareholders and developing the relationship between the board and the executive management.

Board key performance indicators

The Principles require the board of directors to implement a mechanism to assist with monitoring the performance of board members, their adherence to professional conduct standards, and the level of involvement they demonstrate at meetings of the board.  The nomination committee will now be enabled to identify the skills that are required for holding board membership and submit recommendations to the shareholders and board performance generally will be evaluated once during each term of office applying standards that will be established by the MOCIIP in due course.

Board meetings

The Principles now helpfully allow a degree of flexibility in relation to decision-making at board meetings.  The Principles reflect that meetings can be held on an emergency basis meaning that board meetings can be called and convened by the chairperson within 24 hours.  Meetings are expressly permitted to be held using video and other technological aids that are routinely used in the modern day and resolutions are capable of being adopted by circulation.

Executive management

The Principles require the executive management to develop a set of internal regulations for managing the SAOC operations and to agree on performance standards and indicators to carry out a self-evaluation of the executive management.  These regulations will need to be developed together with the input of the board of directors and will cover matters including the following:

• The development of the company’s short, medium, and long-term strategy
• Recommending the most effective organisation structure
• Establishing a risk management framework
• Developing proper succession planning mechanisms for key management employees
• Establishing mechanisms to ensure the effective use of company assets and protecting shareholder rights

The Principles make clear that the executive management remains accountable to the board of directors for all actions undertaken by it as a body and remains bound by the general duties of confidentiality that they owe to the SAOC.

Corporate social responsibility

SAOCs now have CSR obligations that must align with global best practice and government policy.   SAOCs are permitted to establish a separate entity to carry out CSR responsibilities and detail relating to activities undertaken and costs incurred in connection with CSR must be disclosed in the annual financial statements.

Half year accounts

In addition to annual audited accounts, SAOCs must now prepare half year accounts and submit them to MOCIIP.  There is no requirement for half year accounts to be audited.