Legal Framework Governing Share Capital Increase in Limited Liability Companies

Increasing share capital is a critical step for limited liability companies (LLCs) in Oman seeking to expand operations, fund new projects, or attract investment. Oman's Commercial Companies Law, established by Royal Decree 18/2019, outlines a clear legal process for these capital increases, ensuring shareholder rights are protected.

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an increase in the share capital of an LLC is treated as a fundamental corporate change. Under the law, the shareholders' meeting must unanimously approve any increase in the company's share capital.

Dr. Mohammed Ibrahim Al Zadjali, Founding Partner of Mohammed Ibrahim Law Firm, explained that a share capital increase is considered a fundamental corporate change. "Under the law, the shareholders' meeting must unanimously approve any increase in the company's share capital," he stated. Existing shareholders possess a statutory pre-emptive right, allowing them to subscribe to new shares proportionally to their current holdings. This mechanism ensures that shareholders' stakes in the company remain consistent.

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Existing shareholders enjoy a statutory pre emptive right when new shares are issued. Each shareholder is entitled to subscribe to the new shares in proportion to their existing shareholding. If a shareholder chooses not to subscribe to their full entitlement, the remaining shareholders may subscribe to the unclaimed shares in proportion to their respective holdings. This mechanism helps safeguard shareholders' proportionate interests in the company.

Contributions to the capital increase can be made in cash or through assets. For contributions in kind, a valuation report from a licensed office or auditor is mandatory to ensure fair assessment. The Ministry of Commerce, Industry and Investment Promotion retains the authority to re-evaluate these contributions. All funds raised must be deposited in a licensed Omani bank and cannot be withdrawn until the new shares are fully paid and the capital increase is officially registered and published.

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the additional capital may be contributed in cash or through contributions in kind.Where non-cash assets are contributed, the law requires a report prepared by a valuation office or an auditor licensed to practice in the Sultanate, to ensure that such assets are fairly assessed and accurately reflected in the company's share capital. The Ministry retains the power to re-estimate the value of such contributions, either directly or through independent experts.

This legal framework ensures that share capital increases are conducted with transparency and fairness. It supports the growth and financial stability of LLCs while upholding the rights and proportionate interests of all shareholders, fostering a secure environment for business development in Oman.

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all amounts contributed towards the capital increase must be deposited with a licensed bank in the Sultanate of Oman. These funds shall not be withdrawn until the new shares are fully paid for and the capital increase has been registered with the Commercial Register and published in accordance with legal requirements.