Oman Establishes Legal Framework for Holding and Subsidiary Companies

Oman has established a structured legal framework for holding and subsidiary companies through its Commercial Companies Law, issued by Royal Decree 18/2019. This law aims to facilitate investment and streamline the management of group business structures within the Sultanate.

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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. Importantly, a holding company is statutorily required to invest its funds through its subsidiaries.

Dr. Mohammed Ibrahim Al Zadjali, Chairman of Mohammed Ibrahim Law Firm, explained that a holding company is defined as a joint stock company that exercises financial and administrative control over its subsidiaries. This control is typically established by holding at least 51% of the shares in each subsidiary. Crucially, holding companies are statutorily required to invest their funds exclusively through these subsidiaries. The law also explicitly prohibits holding companies from acquiring shares in general or limited partnerships, or from owning shares in other holding companies.

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The law prohibits holding companies from acquiring shares in general partnerships or limited partnerships or own any shares in other holding companies. A minimum issued share capital of OMR 2,000,000 is required, and the commercial name must include the term “holding company”. The provisions of the joint stock company shall apply to the holding company to the extent that is not inconsistent with the provisions of Commercial Companies Law.

To operate, a holding company must meet a minimum issued share capital of OMR 2,000,000, and its commercial name must clearly include the term "holding company." The law specifies six key objectives within which a holding company must operate. These include managing subsidiaries, participating in the management of companies where it holds shares, establishing new joint stock or limited liability companies, providing financial support and guarantees to subsidiaries, investing in various securities, and acquiring both tangible and intangible assets like patents and trademarks, which can then be licensed to subsidiaries and others.

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the law sets out six objects within which a holding company shall operate: managing subsidiaries or participating in the management of companies in which it is a shareholder; establishing joint stock or limited liability companies; providing guarantees, loans and finance to subsidiaries; investing in shares, bonds and other securities; acquiring movable and immovable properties within the limits permitted by law; and acquiring patents, trademarks, concessions and other intangible rights, utilizing and licensing them to subsidiaries and others.

Dr. Al Zadjali further clarified that a subsidiary company, regardless of whether it is a joint stock or limited liability entity, possesses its own independent legal personality. Consequently, the holding company is not liable for the subsidiary's debts. However, a subsidiary is restricted from holding shares in its parent holding company. If it held such shares prior to becoming a subsidiary, they must be disposed of within one year, with voting rights suspended during this period.

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a subsidiary company whether a joint stock company or limited liability company has its own independent legal personality, and the holding company bears no liability for its debts. A subsidiary shall not hold shares in any of its holding companies; if it held such shares before becoming a subsidiary, they shall be disposed of within one year from the date subsidiary status is established, with voting rights suspended during that period.