OMAN Law and Practice Contributed by: Ahmed Said Al Jahwari, Idil I. Kaner and Al Muhalab Al Issai, Dr. Ahmed Said Al Jahwari & Partner Law Firm
7.6 Transactions Voidable Upon Insolvency Transactions at an undervalue and dispositions that are prejudicial to creditors can often be challenged under Oman’s Bankruptcy Law. Common risk areas include granting late security or making preferential repayments shortly before insolvency. Related-party transactions may also be scrutinised and potentially set aside during insolvency proceedings. Lenders are typically advised to mitigate these risks by ensuring early perfection of security, maintaining clear consid - eration trails, and documenting proper board/share - holder approvals to defend against subsequent chal - lenges. 7.7 Set-Off Rights Set-off is generally recognised in Oman upon insol - vency, but its exercise is subject to statutory rules and court supervision. Contractual set-off clauses are commonly used; however, their enforceability in insol - vency depends on the provisions of Oman’s Bankrupt - cy Law. Lenders should plan for court-supervised rec - ognition of set-off rights once insolvency proceedings commence, rather than assuming automatic netting. 7.8 Out-of-Court v In-Court Enforcement A typical private credit out-of-court restructuring often starts at a standstill, followed by information sharing, financial advisor plan, amendments to the plan, and security enhancement. Co-operation from board/ shareholders is required if equity injections, asset sales, and similar solutions involving share secu - rity/control are involved. Compared to out-of-court restructuring, in-court processes can provide a for - mal framework to streamline stakeholder co-operation through a supervised plan. In-court process also pro - vides further advantages such as structured claims verification and regulated asset realisation pathways. 7.9 Dissenting Lenders and Non-Consensual Restructurings Oman’s Bankruptcy Law is designed to facilitate col - lective solutions rather than require unanimous con - sent. Outside of court, dissenting lenders generally cannot be forced into a non-consensual restructur - ing unless contractual provisions expressly provide for it. Within court-supervised proceedings, the treat - ment of dissenting lenders is governed by statutory procedures, which ensure protections such as due
highly protected and prioritised in practice. Secured creditors’ recoveries depend on the perfection and priority of their security. Practical considerations, such as maintaining continuity of supply and customer con - fidence, can create pressure to make payments to other stakeholders, which is often managed through out-of-court settlements. 7.3 Length of Insolvency Process and Recoveries The duration of insolvency proceedings in Oman var - ies significantly depending on factors such as case complexity and the extent of disputes. Voluntary liqui - dations, however, are generally subject to a maximum three-year duration, which may only be extended with the approval of the competent authority. The process remains an evolving area of practice, with ongoing reforms aimed at improving efficiency. Recoveries for creditors are highly dependent on whether value is preserved through restructuring rather than liquida - tion, with courts often favouring rescue mechanisms. Secured creditors generally have better prospects of recovery when their security is properly perfected and underlying assets are identifiable. In cases involving heavy litigation, both timelines and recoveries can become less predictable. 7.4 Rescue or Reorganisation Procedures Other Than Insolvency Out-of-court solutions are commonly used in Oman to avoid court delays and preserve the going-concern value of the company. Typical measures include waiv - ers, maturity extensions, covenant resets, and secu - rity top-ups. Where solutions involve equity injections, corporate governance changes, or enforcement of share security, board/shareholder co-operation may be required, which can slow down the process if the necessary quorum is not achieved. If the par - ties cannot reach an agreement, they may turn to the restructuring/preventive composition procedures under Oman’s Bankruptcy Law to formalise a plan and achieve the next best outcome. 7.5 Risk Areas for Lenders See 6. Enforcement for enforcement risks and 7.2 Waterfall of Payments for priority dilution risk.
218 CHAMBERS.COM
Powered by FlippingBook