United Arab Emirates: Legislation That Leads To More IPOs

Last Updated: 26 September 2017
Article by Catherine Jaskiewicz
Most Read Contributor in United Arab Emirates, September 2017

With a large number of recent IPOs in Oman caused by amendments to the Oman Insurance Companies Law, Ms Catherine Jaskiewicz of BSA looks at the various provisions of the new legislation and the regulatory framework. A number of insurers in Oman are set to launch their initial public offerings (IPOs) this year to comply with the amended provisions of Royal Decree 39/2014 which require insurers to change their legal status to public joint stock companies.

The number of public issues conducted recently by insurers operating in Oman is a direct result of amendments to the Oman Insurance Companies Law introduced by Royal Decree No. 39/2014, promulgating amendments to certain provisions of the Insurance Companies Law. The changes introduced by the new legislation oblige insurers to adhere to a raised minimum capitalisation requirement and to become publicly traded firms.

The apparent rationale behind the Capital Market Authority's (CMA) decision to modify regulatory framework of the insurers in Oman was consolidation and strengthening of the insurance market. The new legislation had to be applied immediately to the newly established insurance companies. However, existing insurers which are fully registered and licensed, were granted a three-year grace period to comply with the new regulations. The new legislation states that the insurance business may be conducted only by public joint stock companies established in accordance with the Oman Commercial Companies Law. Further, the new Article 3.2 provides for a doubling of capitalisation requirement. The applicant has to prove the paid-up capital of not less than OMR10 million.

To meet the elevated requirements set by the new legislation all existing insurers should increase their share capital to a minimum of OMR10 million, and convert from the form of an Omani closed joint stock company to a public joint stock company (SAOG), and subsequently, go public by listing on the Muscat Securities Market. In accordance with the Oman Commercial Companies Law (promulgated by Royal Decree No. 4/1974 as amended), all traded companies shall offer to the public at least 40% of their equity stake. This means that the legislation obliges the funders of SAOGs to divest a standard 40% of capital on the exchange. However, the IPOs may exceed the minimum equity listing requirement, or upon securing an exemption from the CMA float only a 25% stake in the firm.

The new legislation introduced a number of minor amendments to the Oman Insurance Companies Law, including:

  • The amended wording of Article 7 provides for a new shortened grievance period to appeal to the CMA against any decision rejecting application for an insurance licence.
  • "Any person may appeal the decision of the Executive President rejecting the application for insurance licence referred to in Article 6 of this law, to the Appeals committee of the Capital Market Authority within 60 days from the date of the application rejection notice in accordance with the procedures prescribed in the Capital Market Law and the Executive Regulations thereof."
  • The amended wording of Article 56 sets new penalties for firms breaching the insurance law in the form of fines. "Without prejudice to any other punishment provided for in this law, any person who infringes the provisions of the decision issued to enforce it shall be punished with a fine not less than OMR10,000 and not exceed OMR100,000."
  • The new Article 56 allows the CMA to reach out-of-court settlements with firms prior to issuance of an official judgment in the case, and following the payment of the prescribed amounts. "The Board of Directors of the Capital Market Authority may reconcile any of the offences provided for in this law or the regulations or the decisions issued to enforce it, whatever is the status of the public proceedings and prior to a judgment being rendered, in consideration of payment of a sum not less than double the minimum limit of the penalty prescribed for such offence and not more than double the maximum limit. The reconciliation shall entail closure of the public proceedings in the offense."

The Sultanate's insurance sector is regulated principally by the Oman Insurance Companies Law (promulgated by the Royal Decree No. 12/1979 as amended) and its Executive Regulations (issued by Ministerial Decision No. 5/80). Following issuance of Royal Decree No. 90/2004, the Capital Market Authority has statutory jurisdiction over the insurance sector in Oman. Before 2004, all regulatory powers were vested in the Ministry of Commerce and Industry in Muscat.

Previously published in Middle East Insurance Review September 2017

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.

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