Issued in response to the Royal Directives of His Majesty Sultan Haitham bin Tariq, the new Code of Corporate Governance seeks to improve the performance of State-Owed Companies and raise their efficiency.
Al Salmi explained that the CMA had prepared the Code for Corporate Governance for state-owned companies based on Article 20 of the Commercial Companies Law promulgated by Royal Decree 18 / 2019. The Code was formulated in consultation with the relevant entities and will broad societal participation.
These principles are based on the concept that the state-owned companies are companies that operate according to commercial and economic principles and are subject to all laws that regulate the work of commercial companies in the Sultanate unless the government specifies other principles. Therefore, the Code stresses the importance of stating and reviewing the purpose of these companies, he said.
The principles of the Code set out the minimum practices that must be followed as a frame of reference in drafting the governance systems for state-owned companies of various legal names. This would help these companies to formulate their internal governance systems to include a series of clear and specific policies, processes and procedures that are consistent with the provisions of this Code provided that these companies are concerned with following up the implementation of the provisions of the Code.
Significantly, the Code is based on best practices adopted by the Organisation for Economic Cooperation and Development (OECD), while also taking into account the legislative and regulatory environment of the Sultanate. The principles recommended by the Organization for Economic Cooperation and Development (OECD) emphasise the importance of unifying the ownership of state assets and the state-owned companies under one specialized umbrella that acts as a holding company and has sufficient power to set governance standards for its subsidiaries and the group, and follow up implementation of these standards.
In this context, CMA sought to establish principles for corporate governance for state-owned companies where a general national framework that represents the minimum of governance practices on which some entities such as the Oman Investment Authority will rely on. Oman Investment authority as a sovereign investment entity that enjoys broad powers and specialisations would use this framework in setting its own standards for companies under its management consistent with these principles.
Al Salmi indicated that state-owned companies will be obligated to disclose their unaudited quarterly or annual audited financial statements to the public through the company’s website or through the electronic publishing platform that the CMA will approve for disclosure purposes. Transparency and disclosure are one of the fundamentals in the implementation of corporate governance due to its importance in enhancing levels of integrity and in highlighting the financial position of companies in a way that contributes to obtaining facilities and contracts from the relevant parties.
The Code includes eleven principles of good governance, notably (a) that the state-owned companies are commercial companies, and they must operate according to commercial and economic principles and are subject to all laws that regulate the work of commercial companies in the Sultanate. (b) a government company must have an effective regulatory and legal framework, and that it should be applied with care and diligence (c) the government is considered an owner and a shareholder in the company and has the right to act according to this principle.