Key rules governing shareholders’ pre-emptive rights in Oman

Under Royal Decree 18/2019, the Commercial Companies Law provides protections for shareholders seeking to maintain their ownership stakes when companies increase capital or transfer shares. These pre-emptive rights ensure existing shareholders have the first opportunity to subscribe to new shares or purchase offered shares before outsiders can participate.

In an exclusive interview with Times of Oman, Dr. Mohammed Ibrahim Al Zadjali, Founding Partner of Mohammed Ibrahim Law Firm, explains that “the law establishes distinct frameworks depending on the company type. For Joint Stock Companies, every shareholder has a preferential right to subscribe to new shares issued during capital increases, in proportion to their existing holdings. Shareholders may exercise or waive this right according to specified procedures. If shares remain unsubscribed, the board may offer them publicly or reduce the capital increase accordingly.”

“Important exceptions exist to these general rules. Extraordinary general meetings may allot up to 5 percent of capital increases exclusively for company employees. Additionally, shares may be allotted to specific named persons through a resolution, thereby bypassing standard pre-emptive rights in limited and clearly defined circumstances,” he said.

Dr. Mohammed stated that “for Limited Liability Companies, the framework is more comprehensive. Shareholders wishing to transfer shares to non-shareholders must first offer them to existing shareholders through formal written notice to the company manager. The manager circulates the offer, and shareholders have 45 days to express interest and deposit the full purchase price. Multiple interested shareholders receive proportional allocations based on current holdings. Only if no shareholder exercises this right may the transfer proceed to the intended third party on identical terms.”

“If shareholders decline to purchase, the company may acquire the shares using its capital or legal reserve, which then become jointly owned by all shareholders. Exceptions are narrowly confined to transfers by inheritance or will, although special approval applies if shareholder limits would be exceeded,” Dr. Mohammed noted.

He concluded by stating that “this framework balances corporate flexibility with shareholder protection, preserving ownership proportions and trust based relationships fundamental to Omani business entities.” 

(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).