Oman: Oman Heralds A New Framework For Sukuk Issuances And New Listing Categories

Last Updated: 17 June 2016
Article by Sadaf Buchanan

The past few weeks have seen frenetic activity in key legislative developments being released in Oman. Hot on the heels of the publication of Oman's new Sukuk Regulations on 5 April 2016 came the introduction of new listing categories on the Muscat Securities Market (MSM).

Why are the Sukuk Regulations significant?

The Capital Market Authority (CMA) Decision 3/2016 issued on 5 April 2016 introduced the CMA's long-awaited Sukuk Regulations (the Regulations). 

These Regulations mark the culmination of more than three years of drafting, re-drafting and consultation with industry players both locally and internationally. The CMA has worked hard behind the scenes to take on board comments of key stakeholders to achieve the objectives of having a framework which will further promote capital market issuances in Oman. 

As an interim measure pending release of the Regulations, an amendment to the Capital Markets Law was promulgated in November 2014 (Sultani Decree 59/2014) which added licensing and regulation responsibility of SPVs to the CMA as well as the identification of the terms and conditions of financial trusts and issuance, listing and trading of Sukuk instruments and their Shariah supervision.

The absence of a dedicated Sukuk regulatory framework, along the lines of the Regulations, did not hamper the ability of the Government of Oman to launch its debut Sukuk in 2015, nor the ambitions of a number of key corporations in planning their issuances. However, those of us who are working on structuring Sukuk transactions for a range of Omani issuers drawn from a broad spectrum of industries and sectors welcome a more formal legislative basis, which brings more certainty for both issuers and investors.

What are some of the key features of the Sukuk Regulations?

The SPV

The ability to issue through an Omani limited liability company SPV with significantly lower minimum capital requirements, rather than through a joint stock company which requires minimum paid-up capital of OMR 500,000 (approximately USD 1,300,000). 

Not only must the SPV be a company registered at the Ministry of Commerce and Industry, but the CMA must also grant a separate licence to the SPV (terms and conditions have yet to be disclosed), which will mean a fee of OMR 1,000 with further fees on renewal of the licence every five years.

The prospectus

The Regulations refer to issuances taking place with a "draft prospectus as per the form prepared by the CMA". Currently, no such form exists for Sukuk issuances and the current practice to date has been to adapt the model form of prospectus for equity issuances. This is not ideal and there are a number of areas of uncertainty in trying to fit bond and Sukuk issuances within that framework. It remains to be seen whether a new dedicated model form will be released for Sukuk issuances but this would certainly assist issuers.

The Regulations mention no requirement that the prospectus must be issued in Arabic form, thus providing a greater degree of flexibility to potential issuers in terms of both the cost and timing of a launch. In practice, however, the CMA is still insisting that the Arabic prospectus is filed and signed by the various advisers and the issuer.

Credit rating

The CMA may request a credit rating of the obligor but this is not a strict requirement.

Sukuk programmes

The Regulations anticipate both standalone Sukuk issuances as well as programmes. This marks a positive development and one designed to encourage issuers to have the programme establishment completed with the flexibility to take advantage of favourable market conditions and issue quickly and regularly.

Shariah Supervisory Board

There appears to be no requirement for the beneficiary/obligor to have its own Shariah Supervisory Board, hence issuers may be able to engage the services of an independent Shariah consultancy firm. Further clarification will be required from the CMA as to how this is reconciled with annual reporting obligations confirming that the Sukuk is Shariah-compliant. The requirement of an annual certification by a Shariah Supervisory Board introduces further obligations on the issuer which were not included in previous drafts of the Regulations.

Financial trust

The formal introduction into Oman law of the detailed requirements for constituting financial trusts in the context of Sukuk transactions.

Subscription by Omanis only

The CMA may restrict subscription and trading to Omani nationals in certain circumstances and further clarity will be required on these provisions.

What else?

New listing categories on the Muscat securities market

The other key development of the past few days relates to a further amendment of the Executive Regulations of the Capital Market Law of 1998. Decision No. 5/2016 came into force on 6 June 2016. 

One of the notable features is the introduction of a new "Bond and Sukuk Market" on the MSM. The CMA intends to have existing and future bonds and Sukuks listed on the MSM to be placed into this new category over time and we therefore expect the CMA to disclose the associated transitional arrangements. 

The Bond and Sukuk Market does not yet have US Dollar capability but we understand that this facility is being developed quickly. It remains to be seen what additional administrative requirements will be implemented by the MSM and whether privately placed bonds and Sukuk will be subject to public disclosure requirements or whether there will be an equivalent of a Third Market framework where bonds are traded OTC.

Together with the Bond and Sukuk Market, there are a number of other new categories also being introduced, such as "Under Monitoring Market" and a "Rights Issue Market".

The new and updated categories are also intended to serve as an upgrade and to facilitate the review of market information in line with the CMA's mandate to promote capital markets in Oman.

What next in relation to Sukuk issuances?

The Regulations refer to further forms and directives to be issued by the Executive President of the CMA to prescribe their implementation and we will continue to consult with the CMA as to the implications for potential issuers, arrangers and investors.

Whilst not all industry recommendations have made their way into the Regulations – for example, the disapplication of the prohibition on issuing bonds in excess of issued share capital (in the context of Sukuk issuances), or related party approval exemptions (as the SPV will likely be a subsidiary of the Obligor), the Regulations do provide a number of key concessions not previously available under Oman law. 

The Regulations therefore mark a significant and positive step forward in the promotion of Sukuk issuances in a market that has grown by more than 50% over the past year alone. There is certainly more to come and these legislative developments signal the much needed steps being taken to facilitate issuances in and from the Sultanate of Oman.

About Dentons

Dentons is the world's first polycentric global law firm. A top 20 firm on the Acritas 2015 Global Elite Brand Index, the Firm is committed to challenging the status quo in delivering consistent and uncompromising quality and value in new and inventive ways. Driven to provide clients a competitive edge, and connected to the communities where its clients want to do business, Dentons knows that understanding local cultures is crucial to successfully completing a deal, resolving a dispute or solving a business challenge. Now the world's largest law firm, Dentons' global team builds agile, tailored solutions to meet the local, national and global needs of private and public clients of any size in more than 125 locations serving 50-plus countries. www.dentons.com.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Events from this Firm
4 Apr 2017, Seminar, New York, United States

Please join Dentons for an informative seminar examining the current landscape for cross-border M&A. We will hold two panel discussions, followed by a networking reception, in our New York office on April 4 from 3 to 6:30 p.m. Both sessions will offer limited seating, in order to facilitate group participation and dialogue.

5 Apr 2017, Other, New York, United States

Join your friends at Dentons and KCC for the Second Annual Texas Hold'em poker tournament. Come out to meet and catch up with fellow colleagues in the restructuring and distressed investing fields.

11 Apr 2017, Seminar, Singapore, Singapore

The Dentons Rodyk Dialogue is a partnership between Dentons Rodyk and Singapore Management University (SMU) to create a major forum for thought leaders to share ideas and views affecting Asia’s legal, business, cultural and economic landscape.

 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.