"Boards supervise while management manages". This governance principle is re-emphasised by the Ministry of Commerce & Industry (MOCI) in its recent decision no. 201/2016 relating to the Boards of public joint stock companies (the Decision). The Decision updates Ministerial Decision 137/2002 (Rules and conditions for election of members of boards of directors of public joint stock companies and their responsibilities) to align it with the new Code of Corporate Governance which came into force on 21 July 2016 (the New Code).
The salient amendments are summarised here.
- All directors of listed companies are now required to be "non-executive" and are prohibited from participating in the day-to-day management of the company. The Decision states that directors must not undertake any work for the company from which they can receive material compensation (monthly or annually) in a fixed manner (other than, presumably, the usual director sitting fees). However, what is "material" is not described and is likely to be determined according to the size of the listed company.
- A director (or a person who has been nominated to be a director) of a listed company cannot be an employee of another public or closed joint stock company in the Sultanate of Oman that is carrying out similar objectives. This expands on existing provisions under the Commercial Companies Law (SD 04/1974) where directors were only prohibited from being a director of another public or closed joint stock company that carried out similar objectives.
- The Decision lists the attributes of an "independent director" as set out in the eighth principle of the New Code. It also includes an all-encompassing additional provision which clarifies that independent directors of a listed company will lose their "independent" status if they have a material financial relationship with the listed company or any of its subsidiaries or affiliates. Again, the term "material" is not defined.
Listed companies should also consider the Decision when implementing the new requirements for annual board evaluations set out in the New Code. It is yet to be seen how listed companies will deal with these requirements, nevertheless, we expect that amendments such as those contained in the Decision will assist them in assessing their compliance obligations.