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Doing Business in Oman
ARTICLE OF ASSOCIATION AS PER OMAN’S LAWS AND PRACTICE
 
Memorandum of association and article of association considered as a constitutional document to establish a new company. The terms of Company Commercial Law royal decree No.18/2019 helps in constituting the article of association of a company.
The article of association is a document that specifies the regulation for a company’s operations where it serves a variety of purposes. It states the company’s purposes and how it supposed to accomplish tasks.  Such as, appointing a new director and handing the financial records. Moreover, it details how a company issue stock shares, pay dividends, audits financial records and voting rights. On the other hand, equally it works as a contract for shareholders to comply with the company regulation where shareholders also can use it as a guidance to interact with the board of directors.   
Unlike memorandum of association, article of association is public document and will be furnish to the agencies whenever ask for. In the meanwhile, if shareholder resolve not to disclose any information in their company’s article of association, they can sign a separate shareholder agreement.
 
  1. Components of the article of association
The articles of association will usually specify the way a company issues shares, distributes dividends, and performs financial records. The article of association is focused on giving the reader the information about the methods a company uses to achieve its daily, monthly, and yearly goals.
The articles of association are relatively similar in any part of the world, even though the exact terms and items vary across jurisdictions. In general, it includes the following:
 
  1. Interpretations of terms
  2. Shares
  3. Meeting
  4. Powers of shareholders
  5. Accounts and Audit
  6. Dissolution and Liquidation
          The components of the article of association are explained further below.
 
I.        INTERPRETATIONS OF TERMS
 
III.SHARES
 
Here, the approved and fully subscribed capital of the company, the percentage of owners, and everything related to shares. For instance, transferring and termination of shares, profit, increasing and reducing the company's capital also assigning shares to partners, evaluation of the contributions and shareholder’s shares disposal shall be deeply explained and clarified with the specified periods which included in commercial company law.
 
IV.MEETING
 
In this section, notices, resolution, votes, and subsequent annual general meeting are listed. For example, a limited liability company shall convene a shareholders’ meeting at least once a year within. According to “Article 282” the company’s managers may convene a shareholders’ meeting at any time and they shall convene a shareholders’ meeting when the law or the Constitutive Documents so require, or pursuant to a request of one or more shareholders who represent at least one fifth of the company’s share capital and publish the notice pursuant to the provisions of this Law. Whereas, If the managers fail to convene the shareholders’ meeting, any shareholder shall be entitled to request the competent court to appoint a person to convene the shareholders’ meeting and prepare its agenda.
 
V. POWERS OF SHAREHOLDERS
 
In this section, the powers of the company’s partners are determined, including the delegation of powers to the directors as per company’s requirements and according to what determined by the law. Such as, election, appointing and removal of directors, specify all rights and privileges and licensing and giving powers.
 
VI.ACCOUNTS & AUDIT
 
Auditing of accounts, appointment of auditors is discussed in this part of the Articles of Association. A limited liability company shall have an auditor to be appointed by the shareholders’ meeting for one financial year. Appointment of the company’s auditors and determination of the periods of their work, their rights, duties, authorities, and liabilities shall be justified in this section.
 
VII.DISSOLUTION AND LIQUIDATION
 
In this section, cases in which companies are liquidated and dissolved are discussed, depending on the type of company. For example, LLC May be dissolved for reasons specified in the Constitutive Contract or as otherwise provided by law. May be dissolved at any time by a favourable vote of partners representing three quarters of the capital.
 
  1. Which companies required to have an article of association
The following entities required to have their own article of association:
  1. Limited Liability Companies (LLC)
  2. Close Joint Stock Companies (SAOC
  3. Open Joint Stock Companies (SAOG)
 
  1. Conclusion
It is always advisable to the companies based in Oman to have their article of association drafted by corporate lawyers so as to avoid disputes among the shareholders/partners.
 
Ghada Al-Ghaithi
Associate Lawyer – (Corporate & Commercial)
admin@anlawoman.com
+968-94717666
This article is written for educational purpose; reviews in this subject and notes will be well accepted from the readers.
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Rental Contracts- Lessee liability

Doing Business in Oman

THE ONGOING PANDEMIC AND ITS EFFECT ON LONG TERM COMMERCIAL RENTAL CONTRACTS

Rental Contracts, Lease, lessee, lessor, long term lease

A lease contract is a contract whereby the lessor is obligated to enable the lessee to benefit from a certain property for a certain period in return for a known fee. Due to the pandemic the business activities have been already subdued which has largely incurred substantial businesses losses, so commercial and individual lessees were unable to fulfill the obligation of the rent payments which has been on continuous basis and resulted on legal liability on them.

RIGHTS OF THE LESSOR AND LESSEE IMPUNITY FROM CONSEQUENCES OF NON-PAYMENT

Lessor is not entitled to the rent in the absence of the benefit of the lessee even if lessor does not cause it, such as force majeure or the issuance of an act by the government that prevents the full use of the property. But if this partially affected the use, the lessee may stop paying the rent and terminate the contract after giving a notice to the lessor.

The decision of the ‘Supreme Committee tasked with control of Covid-19 in Oman’ is considered in the place of force majeure that entails the application of the provisions of Article (172) and (550) of the Civil Transactions Law Article )172(:

  1. In bilateral contracts, if force majeure occurs rendering the performance of the obligation impossible to complete, the corresponding obligation shall be extinguished, and the contract shall automatically be revoked.
  2. Where the obligation is partial, only the corresponding obligation to that part which becomes impossible to be performed shall be extinguished. Such provision shall also apply to temporary impossibility in permanent contracts. In both cases, the lessee may rescind the contract provided that a notice is served to the Lessor.

Moreover, according to Article (550) of the civil transaction law:

  1. If any matter is issued by the competent authorities that prevents the total enjoyment of the leased property without cause attributed to the lessee, the lease shall be cancelled, and the rent shall be extinguished from the date of prevention.
  2. If said prevention shall prejudice the enjoyment of the leased property in a manner that shall partially affect the receipt of the intended benefit thereof, the lessee shall rescind the contract and be discharged from the rent as of the date of the service of a notice to the lessor.

Furthermore, according to Section 2 Impossibility of Performance (Article 339) of the civil transaction law. The Obligation shall be extinguished if the debtor proves that the fulfilment thereof became impossible due to a foreign* cause beyond his will.

In conclusion, either the lessee file a commercial case in order to reduce the rent amount or evacuate the building after giving the lessor 3 months’ notice or lesser period but more than 1 months, with the expectation that a case might be filed by the lessor against the lessee where the lessee must make assure to the competent court that the impossibility of performance of the contract occurred due to the financial deterioration that the lessee went through which led to this situation. If a case if filed, the lessee needs to have in hand the Audited Financials if the lessee is a company/commercial wherein it is evident 3 years continuous losses and for individual she/he must have his/her financial statement.  

Ghada Al-Ghaithi

Associate Lawyer – (Corporate & Commercial)

admin@anlawoman.com

+968-94717666

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