A limited liability company may need to increase its share capital to expand its business, finance new projects, strengthen its financial position, or attract additional investment. Oman’s Commercial Companies Law issued by Royal Decree 18/2019 establishes a clear legal framework for such increases while safeguarding the rights of shareholders.
In an exclusive interview with Times of Oman, Dr. Mohammed Ibrahim Al Zadjali, Founding Partner of Mohammed Ibrahim Law Firm, explained that “an increase in the share capital of an LLC is treated as a fundamental corporate change. Under the law, the shareholders’ meeting must unanimously approve any increase in the company’s share capital.”
“Existing shareholders enjoy a statutory preemptive right when new shares are issued. Each shareholder is entitled to subscribe to the new shares in proportion to their existing shareholding. If a shareholder chooses not to subscribe to their full entitlement, the remaining shareholders may subscribe to the unclaimed shares in proportion to their respective holdings. This mechanism helps safeguard shareholders’ proportionate interests in the company,” he said.
He further explained that “the additional capital may be contributed in cash or through contributions in kind.
Where non-cash assets are contributed, the law requires a report prepared by a valuation office or an auditor licensed to practice in the Sultanate, to ensure that such assets are fairly assessed and accurately reflected in the company’s share capital. The Ministry retains the power to re-estimate the value of such contributions, either directly or through independent experts.”
He added that “all amounts contributed towards the capital increase must be deposited with a licensed bank in the Sultanate of Oman. These funds shall not be withdrawn until the new shares are fully paid for and the capital increase has been registered with the Commercial Register and published in accordance with legal requirements.”
He concluded by stating that the law ensures that increases in share capital are conducted transparently and fairly, safeguarding shareholders’ rights while supporting the growth and stability of LLCs.
(Mohammed Ibrahim Law Firm (info@mohammedibrahim.net), (+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)
