The Foreign Capital Investment Law promulgated by Royal Decree 50/2019 (New FCIL) came into force on 1 January 2020. The New FCIL replaces the 1994 Foreign Capital Investment Law (Old FCIL).
The New FCIL does not provide for any minimum share capital requirement (this was RO 150,000 under the Old FCIL), nor any general limit on foreign ownership of an Omani company (this was previously 70%), so this new law has the potential to really open up foreign investment in Oman.
Article 14 of the New FCIL states that the Minister of Commerce and Industry will issue a decision stipulating those activities in which foreign investment is prohibited. Article 15 of the New FCIL provides for Executive Regulations, which will set out the conditions and process for issuing approvals, permits and licences for investment projects under the New FCIL.
While to date there has been no Ministerial Decision or Executive Regulations issued pursuant to the New FCIL, the Ministry of Commerce and Industry (MOCI) has just released an unofficial "negative list" of 37 commercial activities that are prohibited to foreign investors. The MOCI has verbally advised us that the negative list activities will be included in the pending Executive Regulations. We really need to see the Executive Regulations to get more certainty about how the New FCIL will be applied.
In the absence of a clear regulatory framework, we understand that the MOCI is now applying the new FCIL on a case-by-case basis. It remains to be seen if 100% foreign ownership of (non-engineering) consultancy companies, and companies in certain other sectors where foreign ownership has traditionally been more restricted, will be generally permitted, but we think it is too early to say that any activity which is not on the negative list can now be undertaken by a 100% foreign-owned company.
When considering the initial registered capital amount for a new Omani limited liability company (LLC) under the New FCIL, investors who need the new LLC to hire expatriate employees should be aware that the company's Oman Chamber of Commerce and Industry (OCCI) grading will be a factor in the visa approval process. An LLC with a low OCCI grade may not be able to get any expatriate visas.
We recommend that a foreign investor in an established Omani company checks whether any shareholders' agreement to which it is a party contains a call option or change of law provision that permits the foreign investor to increase its shareholding beyond 70% (i.e. the general limit under the Old FCIL). From an Oman law perspective, a shareholder in an Oman LLC can achieve virtually full voting control of the company with a 75% shareholding.
We will publish further updates on the application of the New FCIL when things becomes clearer, but in the meantime please contact us if you have any questions.
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