Oman Bankruptcy Law – Lexology


Prior to the new Bankruptcy Law (Royal Decree 53/2019) (the “Bankruptcy law“) came into effect in Oman, the laws and regulations governing bankruptcy were limited and simply dealt with in laws such as Commercial Law (Royal Decree 55/1990 (as amended)) (the “Trade Law”) and the Commercial Companies Law (Royal Decree 18/2019) (the “Commercial company law”). These laws regulated only the bankruptcy of a person and the liquidation of insolvent companies.

The Bankruptcy Law came into force on July 7, 2020 and introduced a new framework for bankruptcies in Oman. It supersedes Part 5 of the Trade Act and all other laws contrary to it. Bankruptcy law provides three procedures for debtors (legal or natural persons) – restructuring, preventive composition and bankruptcy, which we will briefly consider in this article.

I. Restructuring:

The bankruptcy law introduced a new concept of restructuring. The restructuring process aims to help debtors overcome their financial difficulties and avoid liquidation by agreeing on a restructuring plan.

The restructuring plan process begins following a request from the debtor which is filed with the Ministry of Trade, Industry and Investment Promotion. The ministry will then determine whether the various requirements of a restructuring plan have been met, including:

  • the restructuring request must be submitted by the debtor within six months of the occurrence of the financial difficulties;

  • the debtor must have exercised the profession concerned continuously for the two years immediately preceding the application; and

  • the debtor has not committed any fraud.

Then, the request for a restructuring plan is examined by a committee of experts formed by the ministry. The committee will study the debtor’s request and work out with the debtor an appropriate restructuring plan to overcome its financial difficulties. At the same time, the committee will try to agree on a settlement between the debtor and his creditors. If such an agreement is reached, the committee will submit the restructuring plan to the court for approval, which will make it binding on all parties. The restructuring plan must be implemented within five years or less.

II. Preventive composition:

The second new concept for Oman is the preventive arrangement which is used when the debtor seeks redress when faced with financial difficulties which they may not be able to repay or satisfy. The purpose of the preventive arrangement is to reach a settlement with the creditors in order to avoid bankruptcy. Like the restructuring plan, the debtor must have exercised the profession concerned continuously during the two years immediately preceding the application. However, here the request for preventive composition is submitted to the court and if approved by the court, the court will appoint a trustee who will help the debtor by arranging meetings with creditors, giving advice on how the debtor could settle its debts and ensures the overall supervision of the preventive composition process. The preventive arrangement may consist in extending the period for payment of the debts by the debtor and/or reducing the amount of the debts.

The preventive composition required that the majority of the creditors who participated in the preventive composition had approved it, provided that these creditors also represented two thirds of the amount of the debts. Creditors who did not participate in the approval process nor their debts are counted. The preventive arrangement is then ratified by the court.

The advantage of the preventive composition, if successful, is that it will suspend all legal proceedings and enforcement proceedings of these creditors against the debtor.

III. Bankruptcy:

Finally, if a restructuring plan or a preventive arrangement does not achieve the desired objective of maintaining the activity and avoiding bankruptcy, an application for bankruptcy must be submitted to the court within 15 days from the date of cessation of payments by the debtor. It must state the details of the debts and it can be made either by the debtor or by his creditors.

The court will then review the bankruptcy application and appoint a liquidator, who will be responsible for managing and overseeing the bankruptcy process. The liquidator is responsible for safeguarding the debtor’s assets.

The liquidator must publish a summary of the bankruptcy judgment in the Official Journal and creditors must be asked to provide details of the debts owed to them by the debtor. Then, the liquidator must settle the claims of the creditors.


Overall, the bankruptcy law is a positive step that will ensure transparency for local and foreign investors and encourage more investment in Oman. Omani courts are gaining the experience required to handle cases under bankruptcy law. In addition, the experts available to assist the courts in these procedures are also developing their skills, such as composition trustees and to act within the committee of experts for restructuring.

Even though the bankruptcy law has been in place for more than 18 months, few cases have gone through the restructuring and preventive composition processes, so it is still difficult to predict exactly how the courts and experts will handle these proceedings.

Article co-authored by Abdullah Al Rawas, trainee lawyer at CMS Muscat.


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