Business


CMA mulls lowering minimum capital for company listing



Muscat: The Capital Market Authority (CMA) is actively considering lowering the minimum capital of OMR2 million required for a listed company, in an apparent move to encourage family-owned firms to convert their businesses into joint stock companies.

Dr Ali bin Masoud Al Sunaidi, Minister of Commerce and Industry, suggested that the minimum capital can be brought down to OMR1 million. "However, the Muscat Securities Market has to decide on bringing down the minimum capital. In Germany, the minimum capital for listing a company is very minimum," added Dr Al Sunaidi, on the sidelines of a conference on family-owned business.

The minister noted that a proposal to bring down the minimum stipulated capital dilution for family-owned businesses for floating initial public offerings (IPOs) to 25 per cent from 40 per cent is still under the active consideration of the cabinet.This move, aimed at encouraging family-owned companies to go public, is part of a major amendment in the Commercial Law.

He said that the government will consider a 25 per cent capital dilution as a special case, if family-owned businesses are interested in listing their companies.

"However, people are not coming forward." Oman Arab Bank partners are in an advanced stage to dilute their ownership to the extent of 25 per cent in favour of investing public.
The minister also suggested that the family businesses can look at converting their companies into closed joint stock firms initially, before listing shares on the market. The management can think of bringing in corporate governance and transparency during the transition period.

Advantages of converting family businesses into listed companies include continuity in business and access to capital for expansion. In the case of family-owned businesses, there is no surety that the business will continue after the death of the main promoter. Further, public companies can raise capital from the market for funding their expansion projects, which is all the more important to withstand competition from outside the country.
Family businesses

However, the minister said that there are concerns among promoters of family businesses on losing their control on the company, after partly diluting ownership. "The second problem is that they do not want others to interfere in the functioning of the company."
Important role

Addressing the conference earlier, Yahya Said Al Jabri, Chairman of the Capital Market Authority (CMA), said that the family businesses play an important role in the economy not only in Oman, but also in the entire Gulf region.

  "In the GCC region, family businesses constitute 90 per cent of total number of companies. It helps in creating employment opportunities for youths," noted Al Jabri, who is also the chairman of Duqm Free Trade Zone.

Al Jabri also said that family businesses constitute 70-90 per cent of total companies, contributing 70 per cent of total GDP in the European Union.

Citing recent study findings, he said one third of family businesses fail when these firms enter the second generation.

Giving examples of successful family concerns that grew into conglomerates, he said Nokia now employs 105,000 people across the world, while Samsung has employee strength of 264,000. Apple is another example of successful family business, which became the largest technology company with a profit of $10 billion in 2012.
Ahmed Saleh Al Marhoon, Director General of the Muscat Securities Market, also addressed the conference.

Senior government officials, top-level executives from the private sector, senior management members from Muscat Securities Market, Capital Market Authority and brokerage firms also attended the conference.

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