Initial Public Offering - Oman
The Muscat Securities Market (MSM) was established in 1988 with the aim to develop methods and measures to deal with securities, and raise awareness about the market. MSM allows trading in joint stock companies, government bonds, corporate bonds, investment funds and financial instruments approved by MSM.
To cope with the growing international market, the Capital Market Law (CML) restructured the MSM to enhance control and regulation of market activities, protect investors and create an environment that attracts investment.
Legislative and Regulatory
Two separate entities have been created by the CML in order to overlook and regulate all market activities, namely:
- CMA- it is a regulatory authority incorporated to overlook and organize issuance of trade securities in Oman.
- MSM- it functions independently of the CMA, but is subject to its supervision.
The laws and regulations established in order to govern admissions to listing and ongoing disclosure obligations in the Market include:
- The CML- is responsible for the creation of CMA, and includes a myriad of provisions and regulations.
The CML was further amended in November 2014 to include provisions for violations of CML with increased penalties for the following:
- False statements or announcement that could potentially misguide investors
- Carrying out activities in the market without a license
- Insider trading/ disclosing confidential market information
- Making unrealistic demands for securities/ creating circumstances that make potential investors believe that prices of securities may fluctuate
- Furnishing false or inaccurate information in the prospectus of a joint stock company
- The Executive Regulation of CML (ER 1/ 2009)- aims at implementing the CML and consolidating directives that regulate the capital market sector
- The Listing Rules contained in ER 1/ 2009
- Royal Decree No. 82/ 1998 – established the Muscat Depository and Securities Registration Company (MDSRC)
- The Commercial Company Law (CCL) – this law applies to all commercial companies that operate within the limits of the Sultanate of Oman.
After the repeal of the Ministerial Decision No. 4/ 2001, the sole power for regulation of MSM was vested in the CMA. For public joint stock companies the provisions of CCL, CML and ER 1/2009 apply, whereas the CCL alone applies to private joint stock companies and limited liability companies.
Retail Offer and Institutional Offer
A retail offer caters to individual investors who are non-professional and invest in shares for their own personal accounts, however, an institutional offer caters to insurance companies, investment banks, etc.
There is a distinction between retail and institutional offers on the basis of target investors. The retail is open to the public at large, whereas an institutional offer, invites only certain categories of people to subscribe to the shares of a joint stock company.
Though an institutional offer can be availed by a certain category of people, that category is not expressly defined unlike other jurisdictions. Regardless of the type of offer, a prospectus must be issued, in accordance with the requirements of the CMA.
Eligibility for IPO
There are three markets within MSM wherein the issuer can list securities being offered, based on their characteristics, these securities must meet the requirements laid down in Royal Decree No. 80/98 & ER 1/ 2009 in order to be eligible which are as follows:
- The Regular Market:
- The paid up capital should not be less than RO 5 million
- Shareholders’ equity should not be less than 120% of the paid up capital
- Ratio of free float shares or units is 40% of the paid up share capital as minimum
- The company has achieved net profit during the last two years at 5% of the paid up capital
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- Parallel Market:
- Public joint stock companies and investment funds listed for the first time
- Public joint stock companies and investment funds who failed to satisfy the requirements of the Regular Market
the ER 1/ 2009 lists companies only if they are eligible as follows:
- It is a newly established joint stock company
- The shareholders’ equity in the joint stock company is not less than 50% of the paid up share capital
- The public joint stock company has not satisfied the requirements of the Regular Market
- Third Market:
- Closed joint stock companies
- Investment funds offered in private placement
Further, the ER 1/ 2009 lists companies if they are eligible as follows:
- If the entity is a private joint stock company
- The shareholders’ equity of the private joint stock company is less than 50% of the paid up share capital
- If the entity is not eligible to be listed under the Regular Market
Additional Requirements by the CMA:
Please refer publication
Foreign Ownership and Sector Specific Restrictions
The CMA’s approval is not mandatory for a foreign investor to own securities of a listed company in Oman. However, there are certain regulations and restrictions imposed as follows:
- Foreign shareholding- These shareholdings must not exceed 70% of the issue share capital of the issuer. This restriction is not applicable to those companies that are enumerated under the Oman Free Trade Agreement.
- Restrictions that apply to the AoA of a Joint stock company listed in the MSM - the AoA may specify limitations or prohibitions with regards to the shareholdings
- Government - owned joint stock companies are barred from offering their shares to foreign investors
- As per the Banking Royal Decree 114/2000 the approval of the CBO is mandatory for transfer of any securities, in cases when the issuer is a bank or an establishment engaged in banking business
Dual/ Secondary Listings
The MSM is permitted to enter into cross- listing agreements with other stock exchanges keeping adhering to the conditions that are applicable in that regard.
Licensed brokers outside Oman and the GCC can also purchase and sell Omani listed companies.
The Initial Public Offering (IPO) process allows privately owned businesses to open up to the public by offering its securities in the Stock Market viz. the Muscat Securities Exchange.
First, the issuer is required to take the approval of the Promotes and the Board of Directors. Once the approval is taken appropriate advisors (lawyers, accountants, underwriters,etc) must be appointed.