Student Identification

LLC and SAOG Company in Oman

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Undergraduate Business Programme Business Structures and Regulations 2018

 Table of Contents
Question 1:..................................................................................................................................................3
Introduction:...............................................................................................................................................3
Structure of Shaksy LLC.:.........................................................................................................................3
Structure of Omani Packaging:................................................................................................................4
Authority of Shaksy LLC.:.........................................................................................................................6
Authority of Oman Packaging..................................................................................................................7
Responsibility:.........................................................................................................................................7
Shaksy LLC.:.............................................................................................................................................7
Oman Packaging Company:.....................................................................................................................7
Conclusions:................................................................................................................................................8
Question 2:..................................................................................................................................................8
Introduction:...............................................................................................................................................8
Business Structure:..................................................................................................................................8
Relevant laws for smooth deal:...............................................................................................................9
Due diligence Activities:.........................................................................................................................11
Provisions for legal contract:.................................................................................................................14
Conclusions:..............................................................................................................................................15
References:................................................................................................................................................16

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Question 1:

Introduction:

The first business under consideration in this essay is Shaksy Group. It is a privately owned

company existing in Oman. The major businesses of Shaksy are real estate, construction and also

working as oil and Gas Company. The business has 1,500 employees, who are working very hard

to deliver quality products and services to their valuable clients. The business was initiated in

1976. Then after working for approximately 40 years the Group is able to develop a reputation

and trust in the market. The Shaksy group is making all possible efforts for growth in the region

and sustainable progress (Shaksy, 2018).

Oman packaging Company is registered as SAOG. The major working of SAOG is production

and sale of paper packaging materials in Oman. The business is manufacturing different paper

packaging products including different cartons, bottom boxes and also wax lined cartons for

packing the frozen products. The company was founded in 1993 and its headquarters are situated

in Muscat (Bloomberg, 2018).

Structure of Shaksy LLC.:

Composition: The composition of Shaksy is LLC. When the business is LLC, it requires two

shareholders only, whereas in SAOG minimum three shareholders are required. LLC. is

managed by a single manager or the board of directors. The manager is either appointed by the

shareholders themselves or according to business laws.

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 Organizational Chart:

Board of Directors

Chairman

Vice Chairman

CEO

Group Operations Group Financial Group Chief Internal Group Human

Manager Controller Auditor Resource Manager

Structure: The management of Shaksy is delegated to one or more than manager of business

whose existence as partner is not mandatory. The managers in the business like Shaksy are

appointed for limited or unlimited period of time, this duration of appointment of managers is

according to Memorandum of Association of the business. If the manager is not incompliance

with the agreement he has signed, then in that case he/she can be removed by the decision of

other partners. If the manager is also the partner in the company then in that case Shaksy’s

manager would not be able to participate in the voting meeting arranged for his/her removal. The

manager in Shaksy can also be removed from his post if the Authority Committee of

Commercial Dispute Settlement, found him the accused of the cause of removal.

Structure of Omani Packaging:

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Composition: Omani Packaging is SAOG, which is a Joint-Stock Company. According to the

laws of Oman the in Joint-Stock company the authority is delegated to Broad of Directors. Unlike LLC

company in which the authority is delegated to Manager.

Organizational Chart:

Chairman

Deputy Chairman

Director

CEO

General Manager

Manager

Assistant Manager

Structure:

Like public limited business, in SAOG the number Board of Directors and term of their office is

mentioned in Article of Association of the Company. On the other hand the responsibilities of

Manager is mentioned in MOA. Omani Packaging have more than five and less than 12 members
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as Board of Directors in its organizational structure. The term of Board of Directors is not more

than three year. There is a chance that member may be re-elected more than once.

In the General Meeting, the Board of Directors should be elected according to the Laws and

according to Articles of Association.

Authority of Shaksy LLC.:

Role of BOD:

The Managers of LLC should perform according to the business objective of Shaksy, as their

authority to practice is restricted by the Memorandum of Association of Shaksy. It is also

restricted that managers of Shaksy should not perform the following acts unless they are

authorized to do so or if it is mentioned in Memorandum of Association:

1. The manager is not allowed to accept donations, if the donations are for business then it

is allowed.

2. Manager is not allowed to sell the portion of Company’s assets.

3. He is not allowed to pledge or mortgage the assets of the business

4. He also does not have the authority to guarantee the debts for third parties asking for

debentures etc. from the business.

Role of BOD in Business Strategy:

The major decision making body in LLC. is board of director. The board directors appoints the

managers. The manager of Shaksy LLC is liable to the Company, its business partners and also

to the third parties if has done any kind of damage or has violated the laws or he has misused his

power, also if he has shown any kind of negligence in terms of his responsibilities. If a particular

responsibility is liable to more than one manager in LLC business like Shaksy then the matter is

handed over to the Authority Committee for Commercial Disputes.

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Authority of Oman Packaging.

Role of BOD:

In Omni Packages the Board of Directors should present a report in ordinary General Meeting.

This report includes the comprehensive details of amounts and other benefits each member of the

Company is receiving. The Board of the Directors have the authority to fulfill the requirements

of the management in order achieving the desired business goals. BOD should also have the

authority to implement the resolutions undertaken in the General Meeting.

Role of BOD in Business Strategy:

The major authority in SAOG. business lies with the board of directors. The authorities of BOD

are similar to that of the Managers in LLC, except the difference is their code of conduct is

mentioned in Memorandum of Association, whereas for BOD the similar code of conduct in

described in the Article of Association (Commercial Companies Law. 1996).

Responsibility:

Shaksy LLC.:

In LLC Company like Shaksy LLC. summoning the meetings of membership is considered as

the responsibility of the manager. He can call the meeting whenever it is required by the Law or

mention in the MOA of Shaksy. If the manager is not able to summon the meeting of

members/partners of the Company, then any member can request the Dispute resolving

Authority to appoint the person who can call the desired meeting and also prepare the relevant

outline of the meeting. In this meeting the partners are informed about the current working of

Shaksy.

Oman Packaging Company:

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It is the responsibility of Public Joint-Stock Company SAOG, to prepare half-yearly accounts,

including the balance sheet, profit and loss account and lastly cash-flow statement.

Conclusions:

We can conclude that in SAOG Company, the business structure is more formal, whereas in

LLC. Company the major responsibility is on the manager, who is either the partner or he may

be appointed by the partners. The manager is more responsibility where business performance in

LLC. whereas, in case of SAOG the Board of Directors should have the awareness business

performance. The authority of major decision making is of a manager in LLC, but SAOG is more

formal, therefore, the elected Board of Directors are major decision makers.

Question 2:

Introduction:

According to the commercial company law of Oman, a business under liquidation can merge

with another Company which may have the same of different corporate form. This merger of the

two companies can be placed according to the following two methods i.e. incorporation and

consideration. The merger resolution should be developed when both the merging parties i.e.

Firm A and Firm B are agreeing and wishing to merge with each other according to the specified

amendments mentioned in the Memorandum and Article of Association of both businesses. By

law the consent and permission of specified law authority is required for merger resolution to

take place. Similarly the legal form of the business can be transformed or altered without the

permission of lawful authority.

Business Structure:

In my opinion the Firm should not continue with the business structure of Limited Liability

Company. Although it’s the case in Oman that most popular form of business structure is LLC,

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but there are also few other corporate structures in Oman which are more sophisticated than

LLC. One of the example of such business structure us SAOC, which is also known as closed

jointly stock company. In my opinion rather than remaining LLC, Firm A should change its

corporate structure to SAOC. SAOC is abbreviation of “Societe Anonyme Omanaise Close”.

SAOC as a corporate structure it is more regulated and formalized structure, it is not as formal as

SAOG, which is offering its stocks to general public, still is more structured than LLC. The level

of formality and diligence of SAOC is higher than LLC. Some businesses also adopt this form of

corporate structure as Oman does not permit to go for LLC rather the government authorities

encourages the business to go SAOC. In this case if Firm A also adopts this kind of business

structure, it will be able to gain the support of the government as well (Sarrayrih and Sriram,

2015).

There few major differences which mark SAOCs better than LLC. As SAOC is more formal

therefore, it requires at least three shareholders, this means Firm A which is an LLC, only has to

add one more shareholder to become SAOC. Second difference is that LLC can be managed by a

manager appointed by shareholders, whereas in SAOC Board of Directors are required for

managing the business. These board of directors are elected according to the business laws of

Oman. Lastly there is more capital requirement for SAOC than LLC, therefore, when there is

more capital i.e. RO 500,000, then there will be more expansion of business operations. Also in

LLC Firm has fully paid up the share capital at the beginning of the business, on the other hand

when Firm A will transform to SAOC then it can offer all shares for sale and pay some of the

capital at initial stage and later additional capital can be paid off. SAOC has more formal

meeting structures than LLC. These meetings should be held at set intervals according to laws in

Oman (Oman Law Blog, 2010).

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Relevant laws for smooth deal:

According to the commercial company law of Oman, a business under liquidation can merge

with another Company which may have the same of different corporate form. This merger of the

two companies can be placed according to the following two methods:

1. The first method for merger of two businesses is incorporation. This includes the

dissolving of one or more Companies and transferring their liabilities to the existing

Company.

2. The second method for method for merger of two or more companies is known as

Consideration. According to this method, two or more companies are completely

dissolved and a brand new Company is established. The liabilities of the both dissolved

companies would be transferred to the newly established company.

The case we are considering is that Firm A is incorporating the business of Firm B, in other

words we can say that this kind of merger is through incorporation method. The following steps

should be followed in order to make the deal smooth.

 When two firms i.e. Firm A and B are announcing the merger, it should be announced in

two daily newspapers in two consecutive issues. The merger should also be registered at

the office of Commercial Registrar.

 The merger should not be taken into effect before three months period of time, starting

from the registry of merger in Commercial Registrar. This is because the creditors of the

incorporated business i.e. Firm B will have the right during this period of time to object

the merger by registering a letter to the company. If any creditor do so, then the merger

remain postponed until the creditor withdraw his complaint. Also the issue can be

resolved if the Authority of Settlement of Commercial Disputes overrules the objection of

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 the creditor. Also if the company pays off the debt of the creditor, then the merger will

take place. If there is no objection by any stakeholder within three months period, then

the status of merger is considered to be final, therefore, the incorporating company will

acquire the rights and liabilities of incorporated company (Furr and Furr, 2013).

 It also mentioned in Commercial Company law of Oman that the management which is

deciding to merge shall remain in the business until the merger takes place lawfully.

 When the merger resolution is passed by the incorporated company, then it is clear that

all the rights and liabilities of this business are transferred to the incorporating business in

accordance to the agreed terms and conditions of merger (Commercial Companies Law,

1996).

Due diligence Activities:

In order to ensure the due diligence is carried, some of the important legal due diligence

activities should be followed by the two parties which are having merger and acquisition

transaction. When the incorporating business is able to plan and anticipate the relevant activities,

then the business can successfully merge through the method of incorporation. Following are due

diligence activities which should be followed by both the parties:

1. Financial Matters: The buyers i.e. Firm A should be evaluate and gain information about

the Firm B’s financial statements. Firm A should be concerned about the future

investments of the business. For financial matters the following queries should be

considered:

a. What are the financial figures shown in the Firm B’s monthly, quarterly and

annually presented financial statements? Also Firm A should show interest in

analyzing the financial statements of last three years

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 b. Firm A should also take notice of the confidentiality of the business.

2. The incorporating firm should have complete understanding of the company’s customers’

profile. It should know about the percentage of each customer contributing towards the

sales of the business.

3. The Firm A should not only worried about the future performance of the incorporated

business as a separate entity, rather Firm A should also evaluate the strategic fit of Firm

B with Firm A on a large scale.

4. The most sensitive and critical part of due diligence is to inquire about all the agreements

and commitments of the incorporated business.

5. The issues related to management are very important for mergers. Firm A should

incorporate important management issues when carrying out due diligence. Some of these

matters are:

a. Firm A should have complete information about the organizational structure of

Firm B

b. Firm A should be aware of labour issues of Firm B

c. The buyer firm should have the information about the previous labour strikes.

d. Firm A should have the knowledge of all concerning employment agreements.

6. Firm A should take an overview of any kind of loans, litigations undertaken by the

incorporated business.

7. Due diligence about the tax matters is significant for buyer firm. The buyer firm should

know about the income tax liabilities of the incorporated firm i.e. Firm B.

8. For acquiring the business, the Firm A should review the insurance policies of Firm B

before merging with it.

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 9. The important environmental issues should also be analyzed by the buyer firm, as the

environmental issues faced by target business may influence the scope and progress of

the business.

10. It is the duty of the target company to compliance with all set regulations and laws. The

buyer firm i.e. Firm A should thoroughly study the all relevant regulatory requirements

for incorporated business and also check whether they have compliance with these

regulations or not.

11. To carry out due diligence smoothly, the Firm A should review all the property details of

target business.

12. Firm A should be aware of the competitors of Firm B in the market, in order to make the

business more progressive and successful.

13. Firm B should develop a compatible and informative online data for the buyer (Firm A).

In this way the incorporating firm will be able to conduct due diligence effectively and

resourcefully, when it has much of the data available.

14. A comprehensive and detailed disclosure schedule should be developed by the target

business. This disclosure schedule should have all relevant topics of diligence. The

preparation of this disclosure schedule is a time consuming task but it is very important

for both the businesses. Target Company should revise and update the schedule on

regular basis. It is advisable for Firm B to develop this document in early stages when it

is planning to merger with Firm A.

In short it can be concluded that it is the requirement of mergers and acquisitions to carry out due

diligence in a professional manner, for this buyers should have professional counsellors and

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accountants. It is recommended to both parties i.e. Firm A and Firm B should be well prepared

for due diligence activities in order to make merger a successful merger.

Provisions for legal contract:

The case we are considering is that Firm A is incorporating the business of Firm B, in other

words we can say that this kind of merger is through incorporation method. The following steps

will be followed when the merger is through incorporation:

1. The resolution of merger should be generated by Firm B. It should specify in the

resolution that it is going to dissolve and incorporate its legal identity into the

incorporating business which is Firm A.

2. The net assets of the incorporated business i.e. Firm B should be evaluated according to

the last audit conducted for its final accounts i.e. balance sheet. Also the shares should be

evaluated according to the law and regulations in Oman.

3. Once the assets of the Firm B i.e. incorporated business are evaluated, then incorporating

Firm A should release a resolution informing an increase in its capital value.

4. Further after the increase in the capital of Firm A, it should be divided among the

partners of incorporated Company according to their share percentage.

5. If the shares are in the form of stocks, and it’s the case that two years have gone since the

formation of the incorporating Company, at that point of time the stocks may be

negotiable as soon as the Company issues them (PWC, 2016).

At the time of merger Firm B should assign number of shares equal to the share of the new

Company in the capital. These kind of shares are divided among the partners of each

incorporated Company i.e. Firm B, according to their shares in the incorporated company.

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Conclusions:

It can be concluded by this report that the two firms are merging with each other through the

method of incorporation. It is recommended that after merger, the Firm should adopt the business

structure of SAOC. SAOC as a corporate structure it is more regulated and formalized structure,

it is not as formal as SAOG, which is offering its stocks to general public, still is more structured

than LLC. When the Firm A is merging with Firm B, both firms should pass a resolution. Firm B

should highlight in the resolution that it is selling all its assets and liabilities to Firm A. Both

firms should use due diligence activities in order to avoid any kind of dispute.

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References:

Bloomberg. 2018. Company Overview of Omani Packaging Company SAOG. [Online]. [5

November2018]. Available from:

https://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapId=20385430

Commercial Companies Law. 1996. Chapter 2: Merger of Companies. [Online]. [5

November2018]. Available from: http://images.mofcom.gov.cn/om/table/gsf.pdf

Furr, R.C. and Furr, J.L., 2013. Draconian bankruptcy laws inhibit entrepreneurship in Bahrain,

Oman and the UAE. American Bankruptcy Institute Journal, 32(9), p.38.

Oman Law Blog. 2010. Doing business in Oman FAQ: What is the difference between an SAOC

and an LLC? [Online]. [5 November2018]. Available from:

https://omanlawblog.curtis.com/2010/02/doing-business-in-oman-faq-what-is.html

PWC. 2016. Doing business in Oman, A tax and a legal guide. [Online]. [5 November2018].

Available from:

https://www.pwc.com/m1/en/tax/documents/doing-business-guides/doing-business-

guide-oman.pdf

Sarrayrih, M.A. and Sriram, B., 2015. Major challenges in developing a successful e-

government: A review on the Sultanate of Oman. Journal of King Saud University-

Computer and Information Sciences, 27(2), pp.230-235.

Shaksy. 2018. Group Overview. [Online]. [5 November2018]. Available from:

http://www.shaksygroup.com/about-us.html

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