Rights of creditors during company liquidation in Oman

Under Royal Decree 18/2019, the Commercial Companies Law provides a strong safety net for those owed money, ensuring they are not forgotten when a business dissolves. When a company enters liquidation, whether by shareholder decision or court order, creditors are given clear rights that put them first in line before anyone else gets paid.

In an exclusive interview with Times of Oman, Dr. Mohammed Ibrahim Al Zadjali, Founding Partner of Mohammed Ibrahim Law Firm, explains that “the moment a company dissolves, a licensed liquidator takes over. Their main responsibility is to settle the company’s obligations. A key part of this process is protecting the rights of creditors. This liquidator must immediately notify all known creditors by letter and publish a public announcement. Creditors then have 180 days from the publication date to submit their claims. This gives everyone who is owed money enough time to come forward and register what the company owes them.”

“Creditors also have the power to stop a company from making moves that could interfere with the settlement of their claims. If a struggling company tries to merge with another or change its legal form, creditors can object within 30 days. Once an objection is filed, the process stops until the company either pays the debt or provides a guarantee that satisfies the creditor. This right prevents companies from using restructuring to escape their debts,” he said.

Dr. Mohammed stated that “when the time comes to distribute the company’s assets, creditors stand first in line. The law requires that liquidation expenses and the liquidator’s fees be paid first, and thereafter all valid debts be settled in accordance with their statutory ranking before any money goes to shareholders. Shareholders are only entitled to receive any remaining assets after creditors’ claims have been fully satisfied.”

“Once all debts are settled, any remaining assets go to shareholders. The liquidator then prepares a final report for approval by both creditors and shareholders before the company is formally removed from the commercial register,” Dr. Mohammed noted.

“This system ensures that creditors are protected throughout the entire process, maintaining trust in Oman’s business environment, he concluded.”

(Mohammed Ibrahim Law Firm ([email protected]), (+968 244 87 600) was established on 14th December 2006 and is serving clients through its offices in Muscat and Sohar, as well as operating on a request basis in other areas. It offers legal representation across a wide range of practice areas that include Labour Law, Corporate, Commercial, Contracts, Banking and Finance, International Trade, Foreign Investment, Insurance, Maritime Law, Construction and Engineering Contracts, International Arbitration, Intellectual Property and more).