Muscat, Oman - The Financial Services Authority (FSA), regulator of Oman’s capital market and insurance sector, has announced that it has appealed a Primary Court ruling in Muscat that effectively acquitted three board members of publicly listed Sweets of Oman SAOG, while imposing a substantial financial penalty on one board member and several executive management staff in an embezzlement case.

The appeal, filed on 29 July 2025, is in response to the ruling of the Primary Court issued on 30 June 2025 in the suit brought against members of the Board of Directors of Sweets of Oman SAOG for their term of office from 2017 to 2019, along with a number of the company’s executive employees. The case concerned a criminal matter related to serious violations that caused financial harm to the company and its shareholders, committed by one board member in collaboration with several executive management employees.

The Primary Court, in its verdict, ordered certain members of the board and executive management to return an amount of OMR 5 million in favor of the company and its shareholders, in addition to bearing court fees and expenses. It however acquitted three board members from liability, citing the lack of a causal link between them and the proven damages, as determined in the court’s reasoning. This acquittal now been contested by the Authority through its appeal filed recently.

The court’s ruling followed reports confirming that the company’s losses and damages resulted from gross negligence in fulfilling the Board’s legal and oversight duties, with major shortcomings in five key areas: failure to oversee bank loans, including obtaining loans without assessing their feasibility or impact and recording them at non-genuine values in the financial statements; approval of financial statements without internal audit review and confirmation of fictitious inventory at a branch; addition of financial assets without legal approval, a board resolution, or clear funding sources; failure to apply policies for writing off doubtful debts in accordance with International Accounting Standards; and suspicions of collusion by certain executive employees in inflating revenues and understating liabilities, coupled with the Audit Committee’s failure to fulfil its duties in line with corporate governance principles for public joint-stock financial companies.

The Authority emphasized that these practices resulted in the presentation of inaccurate and misleading financial data, harming the company’s financial position and the interests of its shareholders.

This ruling reflects the Omani judiciary’s affirmation of the principle of personal liability for members of boards of directors of public joint-stock companies, which does not end with the expiry of their term of office but extends for five years from the date of the act or omission, in accordance with Article (18) of the Commercial Companies Law.

The Authority also stressed the necessity for board members to carry out their legal and oversight responsibilities with competence and awareness, ensuring proper guidance of executive management without excessive interference in daily operations or neglect in follow-up and monitoring, thereby safeguarding financial procedures and protecting shareholders’ rights.

This approach is reinforced by Article (206) of the Commercial Companies Law, which states: “The members of the Board of Directors shall be jointly liable towards the company, shareholders, and third parties for damages resulting from their joint actions in violation of the law, actions exceeding their powers, or any fraud, forgery, or error they commit during the performance of their duties, as well as for failing to act with the care of a prudent person under given circumstances.”

It is noteworthy that the ruling was issued after the court merged two lawsuits filed against the company’s board members and certain executive employees. The Financial Services Authority filed the first lawsuit in December 2022, followed by a second lawsuit filed by several major shareholders in July 2023.

The Authority reaffirms its full commitment to promoting the principles of governance, transparency, and accountability, and to exercising its regulatory role in monitoring compliance by companies under its supervision and their boards of directors with applicable laws and regulations, based on the powers granted to it under the Commercial Companies Law No. (18/2019), including Article (207).

It also calls on all parties to strictly comply with the applicable laws and regulations, and to refrain from any practices that could undermine the integrity and efficiency of markets or harm the rights of shareholders and investors.