Corporate governance in Oman has undergone a period of
renaissance in 2016 with the new Code of Corporate Governance for
Public Listed Companies (the Code) coming into effect on 22 July.
The Capital Market Authority (CMA) has prescribed 14 new Principles
that are in keeping with internationally accepted standards of
corporate governance. This forms part of a drive by the government
to ensure better regulation and administration of public companies
listed on the Muscat Securities Market and a renewed stimulus to
attract greater foreign investment.
Public listed companies and their advisers have been gearing up
to navigate the new corporate governance terrain in Oman. In a
Circular issued on 1 December 2016 (Circular E/10/2016), the CMA
offers fresh guidance on aspects of the Code that have been queried
since it came into effect.
The Circular clarifies that compliance with the provisions of
the Code are mandatory as they form part of the listing
requirements under Article 50 of the Capital Market Law (SD 80/89).
It is also now clear that the explanatory notes under each
Principle are also binding and that they represent the minimum
requirements that listed companies should implement or comply
The Circular touches on a number of aspects of the Code
including director sitting fees, director independence, the role of
the audit committee, the nomination committee and the board
secretary, related party transactions, public disclosure
requirements and procedures on holding board meetings. We will
follow with a further update covering some of these aspects
however, in this article we discuss one of the key areas of the
Code that the Circular offers some much needed guidance on.
Under the Code, listed companies are now required to appraise
and evaluate their boards on an annual basis using an independent
consultant appointed by the shareholders at the AGM.
Many public companies will be preparing to hold their AGMs
during the first 3 months of 2017 and there has been some ambiguity
as to how companies will comply with the new board appraisal
requirements for the first time. The Circular's guidance is
the criteria and mechanism for board appraisal may be proposed
by the directors but ultimately must be approved by the
shareholders at a general meeting; and
the timing of the board appraisal should also be decided on by
resolution of the general meeting.
Further direction offered in the Circular is that the general
meeting may resolve to form a committee to appraise the performance
of the board consisting of shareholders who hold 5 per cent or less
of the share capital (of course whilst doing so, if a shareholder
is also a director, they should abstain from such participation).
This seems to be a suggestion rather than a mandatory requirement
and would be in addition to the requirement for appointing an
Finally, the Circular also clarifies that there are no minimum
requirements for the selection of the independent consultant,
except that the consultant should not be a member of the executive
management or be the external auditor of the company (the direction
in the Code itself is that neither the external nor the internal
auditor of the company may be engaged).
The general tone of the Circular is to assist and provide
guidance on the Code. It is clear that the CMA realises that
uncertainty in interpreting the Code does exist and that companies
will at first require guidance and direction on the new corporate
governance landscape in the Sultanate. Overall, the message is that
the CMA is committed to improving and enhancing the legislative and
regulatory framework in the interest of public companies.
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