Bankruptcy and Insolvency Law likely this year

Conrad Prabhu -

Muscat, May 6 -

A keenly anticipated Bankruptcy and Insolvency Law, seen as key to shoring up Oman’s global Ease of Doing Business (EoDB) rankings, is expected to be enacted before the end of this year.

A special task force comprising representatives of various stakeholder entities collaborating in the delivery of this new statute has been constituted to facilitate its fine-tuning and progress through the legislative process, according to the Implementation Support & Follow-up Unit (ISFU) of the Diwan of Royal Court. ISFU, as its title suggests, is driving the coordinated and expeditious implementation of a substantial portfolio of projects and initiatives proposed by various Tanfeedh Labs in support of Oman’s economic diversification goals.

“By allowing businesses to restructure and adapt their business level when facing financial issues, this law will be beneficial to the business environment in Oman,” said ISFU in new a report on this initiative. “Bankruptcy is the process wherein an individual or an entity applies to gain a legal status in the event of non-payment of their debts. Insolvency is a procedure that companies go through when liquidating their assets,” it explained.

ISFU has been collaborating with a number of government ministries and public institutions in the drafting and delivery of the proposed law. Participating in this endeavour are the Ministry of Commerce and Industry (MoCI), Oman Chamber of Commerce and Industry (OCCI), Ministry of Legal Affairs (MoLA), Capital Market Authority (CMA), The Council of Ministers, Central Bank of Oman (CBO), and the Oman Council.

The proposed Bankruptcy & Insolvency Law is part of a suite of new statutes planned by the government to help boost the investment climate and business environment in the Sultanate, according to market pundits. In particular, it has the potential to improve the Sultanate’s ranking on the ‘Ease of Doing Business’ Index monitored by the World Bank. Local investor confidence will be boosted as there will be certainty in the course of action in the event of a bankruptcy being reported as opposed to waiting for the courts to issue an order which is typically a long drawn-out process, say experts.

The proposed statute will set out the rights and responsibilities of the creditors and the sequence of the settlement process to be followed. It will define the role of various parties involved in the process.

Most importantly, a bankruptcy law provides greater comfort to investors and creditors when it comes to making important investment and lending decisions. When investors look to invest in a country they certainly look at the overall legal framework and the litigation process available to them to recover their investments. A Bankruptcy Law generally provides for a mechanism to settle the creditors in the event a bankruptcy is declared. The Bankruptcy order would be issued by a court which would set out the priority of settling the creditors (secured and unsecured).

“The law is expected to be enacted in 2019 as it is in the final stages of the legislative process,” the latest report by ISFU stated.