Muscat: In what is billed as a first under the recently promulgated Commercial Companies Law issued via Royal Decree 18/2019, the Capital Market Authority (CMA) has dissolved the Board of Directors of the beleaguered Omani listed firm, Al Hassan Engineering Co SAOG, and replaced it with an interim board. The landmark step was actioned via an Administrative Decision issued by the regulator last Thursday, aimed at propping up the financially embattled, yet operationally viable, engineering and contracting firm, and returning it to “sustainable” health.
CMA Executive President Abdullah bin Salim al Salmi issued the decision in exercise of his powers vested in him under Article 148 of the Commercial Companies Law promulgated by Royal Decree 18/2019. The CMA Board of Directors, at its meeting held on August 28, 2019, also approved the measure, based on a memorandum submitted by the Authority setting out reasons for the decision.
Citing the “public interest”, the regulator appointed a new 7-member board chaired by Ali Mohammed Juma al Lawati, authorising it to “take necessary actions, steps, organisational changes, etc, to ensure continuity of operations, financial stability and mitigate risks to shareholders”. Commenting on the announcement, well-known market expert Lo’ai Bataineh, Chief Executive Officer – Ubhar Capital (U-Capital), said the decision was a reflection of the CMA’s increasingly important role in supporting the growth of a robust and stable capital market in the Sultanate.
“Government decisions over the last couple of months related to the issuance of bankruptcy, investment and public-private partnership (PPP) laws have been the cornerstones for the CMA’s decision to support the ailing Al Hassan Engineering, which has witnessed profits dwindling because of mounting receivables from its customers,” said Bataineh. “Such a decision is a vital stabilising development for Al Hassan Engineering and it marks the beginning of a new chapter in the company’s history and in the financial market of Oman,” he explained.
The appointment of the new board, said the banking sector veteran, will ensure the company’s continued operations, help maintain customer confidence and morale, restore investor trust and protect the interest of all stakeholders — employees, consumers and investors.
This is not the first time that the Omani regulator has intervened in the public interest, he said, adding that the CMA has stepped in in the past where companies faced financial and management challenges or their Boards were ineffective in turning around these firms.
Regulatory interventions of this nature, while commonplace in the development world, underscore the CMA’s desire to entrench best practices in the local market, as well as bring Omani laws and regulations at par with global trends, said Bataineh.
“Such interventions will ensure that the regulator is hands-on with developments in the corporate world and will leave no stones unturned in reviving any ailing company,” the expert noted.
Al Hassan Engineering’s ongoing challenges are primarily attributable to a liquidity crunch, fuelled in part by delayed payments from clients. Although a viable enterprise operationally, going by the gross profits it has garnered against many successfully delivered projects, the company is weighed down by cash flow constraints and mounting claims from lenders, suppliers and vendors.
This dilemma was summed up in the Chairman’s statement in the 2018 Annual Report: “The major challenge faced by the company during 2018 was to maintain progress on projects, despite severe liquidity constraints. The company successfully completed six projects during the year and progressed three ongoing projects after continuous and strenuous efforts while balancing conflicting objectives of lenders, vendors and clients.”