MUSCAT : Issued under Royal Decree No. 53/2019 and implemented in July 2020, the Bankruptcy Law represents a major reform in Oman’s business framework. The legislation aims to regulate bankruptcy procedures with transparency, provide legal protection to debtors and creditors, and offer distressed companies viable alternatives to liquidation through mechanisms such as preventive settlement and restructuring. By reducing the stigma traditionally associated with bankruptcy, the law has opened pathways for economically viable companies to reorganise and return to normal operations.
The law sets out clear procedures to protect all concerned parties, starting with early legal and financial intervention to limit damage. These include requests for restructuring, protective settlement from bankruptcy, and, where no solution is possible, formal declaration of bankruptcy. Importantly, the law ensures competitive fairness in asset distribution and safeguards priority rights, including employee entitlements and tax obligations, reinforcing trust in the overall system.
Over the long term, the legislation is expected to enhance Oman’s standing in international business activity rankings and signal its commitment to transparency and equal opportunity, strengthening its appeal as an investment destination. With the rise of startups and entrepreneurship, the law is viewed as a strategic instrument that balances creditor protection with business continuity.
Mohammed bin Salem Al Hashmi, Director of the Department of Control of Commercial Establishments at the Ministry of Commerce, Industry and Investment Promotion, said the Bankruptcy Law is a cornerstone of the business environment, playing a vital role in market protection and stability while enhancing investor confidence. Speaking to the Oman News Agency, he noted that the law has redefined bankruptcy as a process for restructuring debts rather than a terminal failure, positively impacting competitive fairness and ensuring priority for employee and sovereign rights.
Al Hashmi explained that commercial bankruptcy is legally defined as a merchant’s inability to meet commercial obligations due to business disruption, requiring regulated legal measures to preserve the rights of all parties. He identified key causes of bankruptcy in the Omani market, including failure to adapt to modern marketing methods, high operating costs, liquidity constraints, global economic crises, and volatile energy prices, factors that particularly affect small and medium enterprises.
He added that weak financial planning, poor cash flow management, limited governance, high borrowing, weak internal controls, and low legal awareness of bankruptcy protections remain major contributors to business failure. Challenges also include delays in settling dues and limited access to liquidity, which widen the competitive gap between local firms and foreign companies with stronger financial and logistical backing.
According to Al Hashmi, the law offers multiple solutions for financial distress, from restructuring and protective settlement through the courts to bankruptcy declaration where assets are inventoried, assessed, and liquidated according to approved priorities. He stressed that the law’s effectiveness in the next phase depends on stronger legal awareness, improved judicial and digital infrastructure, and deeper cooperation between government and financial institutions.
Echoing these views, Dr. Khalid bin Saeed Al-Amri, Chairman of the Board of Directors of the Omani Economic Association, said Oman’s economic legislation is undergoing a qualitative transformation aligned with the Oman 2040 vision. He described the Bankruptcy Law as a fundamental pillar for market stability and sustainable growth, particularly amid global economic shifts.
Dr. Al-Amri noted that effective management of commercial bankruptcy had previously posed challenges to attracting investment, but the law now serves as a strategic enabler for resolving disputes and managing financial distress efficiently and transparently. He highlighted its benefits in protecting stakeholder rights, encouraging restructuring over liquidation, safeguarding jobs, and enhancing transparency, thereby providing investors with a clear legal roadmap during financial crises.
He concluded that the Commercial Bankruptcy Law builds institutional confidence, encourages capital inflows, and strengthens Oman’s competitiveness as a regional investment hub.
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