Liquidation And Dissolution of Companies According to The Law Governing in The Sultanate of Oman.

Lukshila Akshini | 08 November 2022

A few contend that life’s purpose comes from death. The corporate world can use the same phenomenological concept. Companies are born, live, and die even though they are not biological and obviously not. It is inevitable for businesses to live and die. While some businesses dissolve, others are founded. Additionally, as new businesses are formed, others are dissolved and struck off. In this research article, an effort is made to provide a general sense of “Dissolution and Liquidation of Companies” laws and practices in accordance with the law governing in the Sultanate of Oman.

A company is considered to be dissolved when its legal status is terminated. A phase in the process of ending a company’s legal personality is called “Dissolution”, and it entails a series of actions that lead to the liquidation of the company’s assets. However, it should be highlighted that because the company is still being used for the liquidation processes, its legal personality has not yet been lost.

There are several reasons why businesses fail, with bankruptcy being the most frequent cause. The wisest course of action may be to dissolve the limited liability company if it is insolvent, unable to pay its debts, or has more liabilities than assets and no reasonable prospect of repairing its financial status. The list of factors that can lead to a corporation being dissolved has grown. A company may now be dissolved for good cause if it hasn’t operated since the day, it was incorporated or if its operations have been suspended for more than two years. Additionally, the inability to increase the share capital of the company within a given timeframe and the reduction of its share capital below a set minimum threshold may both be grounds for dissolution.

A number of modifications have been made to Oman’s commercial company law and practice by the recently passed “Commercial Companies Law, Royal Decree No. 18/2019 (CCL)”. Article 40 of the Commercial Companies Law, promulgated by Royal Decree No. 18/2019, states that a company may be dissolved for the reasons listed in the Constitutive Documents and according to the following grounds:

• Failure to perform its function from the date of its inception or a two-year hiatus from performing it.
• Expiry of the term fixed for the company.
• The accomplishment of, or inability to achieve, the goals for which the business was founded.
• When shares are transferred to fewer partners or shareholders than the bare minimum required by law.
• The share capital is not able to be increased within the allotted time period, and it drops below the minimum amount that must be accessible.
• The bankruptcy of the business or the loss of all or the majority of its equity, if such a loss makes it difficult to utilize the remaining equity effectively.
• The shareholders’ voluntary dissolution of the corporation. A court order may also be used to dissolve a company at the request of the concerned body or the interested parties.

Any of the aforementioned causes for a company’s dissolution must exist before liquidation procedures can be initiated. The second stage of a company’s loss of legal personality is called “Liquidation”, and it entails a series of tasks that must be completed in order to end the company’s operations at the time of dissolution. These tasks include establishing liabilities, identifying and valuing assets, turning them into cash, paying creditors, and distributing the proceeds of the liquidation among partners.

It is important to remember that there are two different forms of liquidation. It may be Voluntary or Compulsory. When a business chooses to dissolve on its own terms with the consent of its shareholders, this is known as “voluntary liquidation”. As opposed to forced shutdown, “compulsory liquidation” happens when a corporation is shut down by a court order.

According to Article 40 of the Commercial Companies Law, if a corporation doesn’t take these steps, they must be taken as a result of a court order in response to a request by the interested parties or the relevant body. According to Article 41 of the Commercial Companies Law, the company must enter the liquidation phase after dissolution and must maintain its legal personality to the extent required for liquidation purposes. During the liquidation phase, the phrase “Under liquidation” must be added to the company’s name.

The representative of the company must inform the commercial registrar and all relevant authorities of the firm’s intention to dissolve and liquidate, together with the grounds for that decision. Accordingly, the authorities will record the dissolution in the business register and notify the company of any additional paperwork or legal requirements at that time. In order to give the public a chance to learn about the decision and, if necessary, safeguard their own personal interests, the dissolution should be announced in two local newspapers in both Arabic and English.

When a business is shut down, an official is appointed specifically to wind up its affairs. This officer is known as the “Liquidator”. The partners must appoint one or more liquidators. The fees of the liquidators and the time frame in which the liquidation must be completed will be outlined in the agreement of appointment, provided that the liquidator or liquidators are qualified to practice accountancy and auditing and have received the concerned body’s approval, according to the Article 43 of the Commercial Companies Law.

After being appointed a liquidator, the liquidator will represent the company in front of the public and the court. He/she will be in charge of paying off the company’s outstanding debts and selling its assets, both movable and immovable, at an auction or in any other way, unless a specific way is specified in the partners’ resolution or by the court. The liquidator must create a bank account with any nearby bank to deposit all of the liquidated funds in order to fulfil this responsibility.