Key Rules Governing Board Formation in Closed Joint Stock Companies

Oman’s Commercial Companies Law, promulgated by Royal Decree 18/2019, establishes the framework for board formation in closed joint stock companies, with detailed provisions set out in the Corporate Governance Principles issued by Ministerial Decision 5/2025. These principles govern board composition, members’ qualifications, independence and nomination, and apply to all closed joint stock companies except those in which the government holds shares.Speaking to Times of Oman, Dr. Mohammed Ibrahim Al Zadjali, Chairman of Mohammed Ibrahim Law Firm, stated that “boards must have an odd number of members, from three to eleven, elected by the ordinary general meeting through direct secret ballot. Shareholders have votes equal to shares held and may split them among nominees, but one vote cannot go to more than one nominee. Members serve three years of the date of convening of the general meeting in which the election was conducted to the date of third annual general meeting following such general meeting, unless extended by virtue of law. The board then elects a chairman and deputy chairman, appoints a secretary, and files the resolution and minutes with the Registrar within seven days.” “At least one-third of members must be non-executive, and the chairman or deputy chairman of the board of directors cannot simultaneously serve as the company’s chief executive officer. At least two independent members are required if the board has more than seven members, and at least one if the company’s total assets exceed OMR5 million in the audited financial statements or the number of shareholders exceeds fifty,” he said.He added that “board members must possess competence, experience and skills, and act with integrity while avoiding conflicts of interest. A public announcement inviting nominations for independent membership must be issued at least fourteen days before the general meeting at which the board is to be elected, with the candidate list delivered to the legal adviser at least seven days before that meeting. Once elected, the board must appoint a secretary qualified in law, accounting, auditing or corporate secretarial work, with at least three years’ management experience.” “Within ninety working days of the board’s formation, the chairman must establish a system for introducing new board members to the company’s business, particularly its financial and legal aspects, and for training them where necessary at the company’s expense, covering governance, prevention of administrative and financial abuses, and the skills board members are required to possess,” he concluded.* (Mohammed Ibrahim Law Firm ([email protected]), (+968 244 87 600) was established on 14th December 2006 and is serving clients through its offices in Muscat and Sohar, as well as operating on a request basis in other areas. It offers legal representation across a wide range of practice areas that include Labour Law, Corporate, Commercial, Contracts, Banking and Finance, International Trade, Foreign Investment, Insurance, Maritime Law, Construction and Engineering Contracts, International Arbitration, Intellectual Property and more)