Preventive Composition in Oman: How It Works

Preventive composition is the middle road between restructuring and bankruptcy, governed by the Omani Bankruptcy Law, Royal Decree 53/2019: an agreement a financially troubled trader concludes with their creditors under the court’s umbrella, shielding them from a bankruptcy declaration and preserving the business, in exchange for a binding payment plan. Said Ibrahim Ambusaidi Advocates (SIA), based in Al Khoudh, Muscat, handles preventive-composition files — petition, negotiation, and dispute.

How is preventive composition requested?

The petition is submitted to the competent court, with the trader setting out the causes of the business disturbance, the composition proposals, and the guarantees for implementing them, supported by documents — including a certificate from the commercial registrar confirming compliance with the trader’s registration obligations — as detailed by the law in Articles 27 and following. A trader may not, while an existing composition is being implemented, request another, under Article 27.

The route is interlocked with the others: opening preventive-composition proceedings bars a later restructuring application under Article 7 of the law, which is why choosing the right track from the start is a strategic decision with no easy way back.

What happens after the proceedings open?

The balance preventive composition strikes is precise: under Article 39, after the judgment opening the proceedings the debtor trader continues to manage their assets, but under the supervision of the composition trustee, and may carry out the ordinary transactions their business requires. In return, donations are prohibited and have no effect against the creditors — protecting the common security from leakage.

The court and the composition judge supervise the proceedings, and Article 36 sanctions whoever deliberately obstructs the composition judge’s decisions with a fine of up to one thousand Omani rials. The composition proposals are then put to the creditors for a vote under the prescribed quorum; once approved and ratified by the court, they become binding.

How does it differ from restructuring and bankruptcy?

The differences are practical. Restructuring is administrative in character, begins confidentially before the competent department, and leaves the trader managing their assets without supervision. Preventive composition is a public judicial procedure in which the trader still manages, but under a trustee’s supervision and with restrictions on their dealings. Bankruptcy divests the debtor entirely under Article 109, strips certain capacities under Article 108, and liquidates the assets for distribution to creditors.

The earlier a trader moves, the wider the options and the greater the control retained; the longer they delay, the narrower the options, until only liquidation remains.

Key facts

• Preventive composition is governed by the Bankruptcy Law RD 53/2019 and shields the trader from bankruptcy in exchange for a court-supervised payment plan.
• The petition goes to the court with the causes of distress, the proposals, and supporting documents, under Articles 27 and following.
• No new composition may be requested while an existing one is being implemented, under Article 27.
• After opening, the trader manages under the composition trustee’s supervision; donations are barred and ineffective against creditors, under Article 39.
• Deliberate obstruction of the composition judge’s decisions attracts a fine of up to OMR 1,000, under Article 36.
• Opening preventive composition bars a later restructuring application, under Article 7.

When to involve a lawyer

Choosing the track — restructuring, preventive composition, or otherwise — requires a precise legal and financial diagnosis of your position: the size and nature of the debts, the stance of the major creditors, and the viability of the business. The file then needs realistic composition proposals that persuade both the creditors and the court, and vigilant representation in the voting meetings and implementation disputes.

At Said Ibrahim Ambusaidi Advocates (SIA) we diagnose the distressed trader’s position and choose the best track together, prepare preventive-composition petitions and proposals, and represent debtors and creditors in the proceedings before the courts across Oman. The first consultation is free by phone or WhatsApp on +968 9706 3030. We are based in Al Khoudh, Seeb, Muscat, and work Sunday to Thursday, 9:00 to 13:00 and 14:00 to 17:00, in Arabic and English.

This article is general legal information, not legal advice.