One of the most important aspects of doing business in any country is the choice of the legal form used for the business. Company legal forms across legal systems are frequently similar, but there can be significant differences in the precise definitions and categorisations of different company forms. These differences have practical implications in regard to matters such as limited liability, minimum number of shares, and others.
As an Omani law student in the UK, I wrote this blog post to examine the key differences between Omani and UK company legal forms.
General Concept of a Company
In Oman, the term “company” refers to any business vehicle other than a sole trader doing business as an individual in his or her personal capacity. Accordingly, a partnership, i.e. the legal form where two or more partners carry out an activity together with one or more of the partners having no limited liability, is considered a type of a company in Oman, is governed by the Commercial Companies Law, and is referred to as a Tadhamun Company (General Partnership) or Muhassa Company (Limited Partnership). The Omani concept of a company widens more as the Omani law considers a joint venture, merely a contract between two parties to carry out a joint project, to be a company form and regulates it under the Commercial Companies Law.
This differs from the UK, where the term “company” usually refers to a specific type of business vehicle with limited liability and a legal personality distinct from its shareholders. Other business vehicles, such as partnerships, are governed by a totally different set of legislation. The UK also does not consider venture capital a form of a company. However, the UK also has a hybrid business form between a company and a partnership called a Limited Liability Partnership that does not exist in Oman.
Limited Liability Companies
In Oman, the Commercial Companies Law has several types of what is generally considered a limited liability company, i.e. a legal form with a legal personality distinct from the shareholders who have limited liability towards the conduct of the business. These are the One Person Company (a limited liability company with one shareholder), a Limited Liability Company (a limited liability company with a maximum of 50 shareholders, and a Joint Stock Company (a limited liability company with a minimum capital of 2,000,000 Rial if the shares of the company are traded in the stock market or a minimum capital of 500,000 if the shares of the company are not traded in the stock market. The law also has specific rules for a holding company (a joint stock company created for the purpose of owning other companies).
In the UK, there is no distinction in the actual legal form identified by Omani law; all are merely referred to as a Limited Company. This company can be owned by one or multiple people, and there is no cap on the number of shareholders a company can have. The same applies in regard to publicly traded companies. A Limited Company can trade its shares on the stock market in the UK without having to adopt a different legal form.
Limited Liability Partnerships
Oman only has the traditional legal forms of a general partnership and a limited partnership in the area of partnerships. These forms also exist in the UK and offer a legal form jointly owned by the shareholders without offering limited liability except to limited partners in a limited partnership. However, the UK also offers a hybrid form between a company and a partnership called a Limited Liability Partnership (LLP) as a legal vehicle in which all the partners have limited liability, allowing them to manage the business directly without needing a board of directors. LLPs allow for a different tax treatment than an LLC, as the partnership is not subject to corporation tax and the partners are individually taxed through self-assessment tax returns as the profits are directly distributed among them.
Beyond UK Business Legal Forms
In addition to the standard limited company, partnerships, and limited liability partnerships, the UK also has several legal forms available for some specific purposes that are not necessarily profit-oriented, such as Community Interest Companies that prioritise community benefits over profit; Right to Manage Companies that are formed by leaseholders to manage their building; and UK Societas’ that provide a framework for operating across the UK and EU (formally known as Societas Europaea before Brexit).
Conclusion
Company Law is one of the critical areas of law for any person interested in corporate legal work. I highly recommend reading the Commercial Companies Law to learn about Omani company law. You can also read Decree’s Intel on the link below for an Overview of Types of Companies in Oman:
