This document is prepared to describe and explain legal systems’ requirements and the gulf’s overall legal environment. Particularly the Sultanate of Oman for comparison with the impact of the legal system on a company from a developing country, for the said comparative analysis, we have chosen the companies from the same sector as food and beverages sector is leading business around the globe; therefore, we have selected this sector for the said purpose. We have chosen Asaffa Foods from Oman and the Ahana Foods & Beverage Company from Bangladesh for analysis of the legal system on food companies.
Details of Both Companies:
The Ahana Foods & Beverage Company was established in 2015 to produce and distribute a wide range of food products and quality mineral water; furthermore, it is engaged in the production of baby food, oil products and stationery products; it's located at Dhaka Road No. 20 Industrial estate, 1206, Bangladesh.
The Assafa Foods was established in 2001 and deals in the production, distribution and export of the poultry products, frozen vegetable and fruits and processed seafood; the companies operate farms at a location 40km from Thumriat and also have a state of the art plant for the processing of food and slaughtering animals.
Basis of Selection:
Since both companies are operating in food, water and beverages and belong to group sectors, therefore, we will get an in-depth insight into the performance of the companies by analyzing the impact of the overall legal environment of the gulf on the business operating in The Sultanate of Oman by comparing it to the effects of laws on Bangladeshi Company a developing country entity. Both companies were selected because both belong to the food industry. Both are leading businesses in the sultanate of Oman and Bangladesh; therefore, we have used them as both companies have their financial statements available for users.
This document is prepared by using different accounting ratios to analyze both companies' performance using multiple accounting ratios, which will show the impact of government legislation such as taxation, labour laws, and safety laws.
Both companies were selected from the same sectors, and their financial statements were analyzed for the previous five years and showed the impact of the overall legal environment on the performance of both companies and challenges business entities face due to the legal environment in force in the gulf and a developing nation Bangladesh for the time being and the changes required therein, to cope the challenges of the rapidly changing and innovating business processes and
The legal environment means the legal impact of different laws and consequences for non-compliance with these laws. Laws, regulations, rules or by whatever name called are the means of regulating people for various purposes to ensure the things work correctly, and nobody comes to deprive others of their fundamental rights. All the persons, whether real or artificial persons such as companies, partnerships, and associations of persons act in a way that the government intends to by ensuring that people abstain from working from something or promote some activity desired by the rulers to secure their sovereignty is not challenged. The peace of that particular geographical area doesn't affect in any way. (Ramanathan, 2004)
This also means to empower some individuals by giving them authorities that others don't have to control masses from ill practices. The legal environment means all the laws and frameworks in force for the time being in a particular geographical area. The legal ground for businesses and the entities requires sources majority of the legal frameworks have historical sources such a tradition, customs and values of that area; however, religion plays a crucial role in establishing the legal environment, particularly in Middle Easterners, Central Asian, South Asian, Eastern Europe and Southeast Asian countries. (Fernandez, 2013)
Impact of religion on Legal framework and environment of The Sultanate of Oman:
Oman is part of Arab Muslim countries where there is a strong influence of Islam and Islamic practices; therefore, Shari'a Law has significant implications in the sultanate's necessary code of governance. Along with the Basic Statute of the state 1996. According to the fundamental law, the state religion is Islam, and any law should not be made, which is contrary to Islam's teachings. The courts are empowered to translate the law; therefore, the agreement between two parties upon their free will may also be decided upon the judges' best judgment in the court of law. They may amend the agreement between two parties executed on their free will. (A, 2012)
Bangladesh is also a Muslim country like Oman, but it has a secular government; therefore, their business laws are a bit relaxed when it comes to deal with Halal food and beverages; there is no restriction on Non-Halal Food in Bangladesh for Non-Muslims as compared to Oman where it is strictly prohibited.
As per rules for the formation of a Limited Liability Company in the Sultanate of Oman, if a foreigner individual wishes to form a limited liability company, he can't do so without prior approval from the concerned authorities, and the foreigner nationals should only be allowed to create a company within the Sultanate of Oman if he forms a joint venture with an Omani national with at least 30% share in the company so formed. (A M., 2017) This means the 30% of the revenue earned shall rest with the Omani national, and he obtains a significant voting power and representation on the board of the company so formed. However, if a national of any other GCC country wishes to open a limited liability company, there is no joint venture requirement. Both the companies Asaffa Foods and the Ahana Foods & Beverage Company are limited liability companies.
Without commercial registration in the sultanate, foreign companies may do the business only with collaboration with commercial agents to do the business. The agent shall be responsible for the operations of the entities and owners residing outside Oman. The agency's contract shall be jointly and severally liable for the agent's acts and the person obtaining services of the agent. However, there is no such requirement in Bangladeshi Companies. (Bangladesh, Corporate Fate 2012)
Both companies were analyzed based on their performance in the last five years to have a detailed analysis of the legal environment's impact on account of both entities. For research, we have considered the income statement and balance sheets of both companies from 2013 to 2017. We have calculated both companies' financial ratios related to liquidity, solvency, profitability, and market values. (Alshubiri, 2017)
Mergers and acquisition also required to be monitored; this was the case with the Ahana Foods & Beverage Company, which acquired several beverage and mineral water companies to penetrate the beverage market; as the country is located in the Bay of Bengal, the overall temperature of the country remains high throughout the year; therefore, there is a massive demand of cold drinks, mineral water and beverages, on the other hand, Asaffa Foods deals in various food products including chicken, processed meat, vegetables and processed vegetable products and also exports the products to different gulf countries.
Oman is playing in profit as Oman's geographic benefits by providing a sustainable competitive authority when looking at shipment routes. Sultanate of Oman had gained more advantage from this strategic planning as they have introduced the ports; they have categorized the ports into three. These ports have become the primary source for trading and business activities as all the business are done through these ports (Pauceanu, 2016). A significant amount of investments are received from various links and had gained profit more than expected; the considerable investments are from the railing, highway and marine. Oman is looking to grow in food and beverages. They aim to develop themselves in profitable meetings, inducements, discussions, presentations and expositions; Oman's construction of their resolution and their exhibition organizations are proceeding rapidly. (Oman, 2004)
Many government developments are playing a vital role in improving the Sultanate of Oman's business environment and appeal to provincial and worldwide stockholders and shareholders to set business within the country. The Sultanate of Oman's government had presented a new way an online business registering portal for trades and industry to speed up the procedure. This procedure evidence itself as tremendously beneficial as generating an up to date and a modernized way to write and apprehend all legal necessities is relatively easy. According to the research, mostly for trade and business trained and skillful labours from abroad have been hired, As Sultanate of Oman aims to have some workers from different countries who have expert skills, extensive experience and are dedicated towards a specific task. Though government administration had engaged some effective procedures to organize Omani inhabitants by skills and aptitudes to replace emigrant labour/ workers progressively, overseas citizens' engagement in specific positions and occupations is restricted. (Al-Hinai, 2013)
The government had made registration for the nationwide labour force. No organization can hire any interviewee until the applicant had registered himself with the procedure of Domestic labour work registration. Every employee is obliged to make well aware of ne employee about registration and make sure they had written themselves within the specified period. Business commandment or trade law in the Sultanate of Oman is the same as all the other western nations. The business is done as limited accountability procedures, as a private corporation or any different business nature.
Setting up a business or trading can be proved a lot multifaceted to avoid such kind of hurdles. For a smooth start-up, a legal advisor is required who can handle all your legislations, standard procedures and adequately fulfill your registration regulations that business can quickly be executed. The one who is professional and has extensive expertise is as worthy as that citizen but unlikely they are not able to enjoy same benefits and incentives as the payment of overseas labours is associated as of what they do presume to earn in their motherlands, that is unvaryingly a lot higher for the western citizens. Although this process, the condition had started to change, specifically in the technology field. (Oman K. S., 2008)
An authoritative guarantor or business partner is a powerful weapon for administration and bureaucracy. His extensive knowledge and immense experience would be a great source of learning business skills. However, the establishment is mostly supportive and doesn't incline problematic unless they need to raise some complications that have been identified or have a good reason to submit a query. Working lifespan in the Sultanate of Omanis relatively easy compared to other nations; you need to be polite and patient.
You have to listen to every advice from the Omanis, and you would find that Arab's are very helping in nature; hiring of the overseas workforce is a costly implementation for bosses as it includes recruiting of staffs expenses, consultancy charges, permit charges, legal security fee, travelling charges and somewhere even living expenses. Sometimes, the outcome is that few bosses put the investment in danger as they risk their money by mistreating their labours. It has been discovered that a significant number of emigrants do grow and succeed in the Sultanate of Oman for several years, an extended period. (Al-Adawi, 2014)
Many of the individuals devour their business in Oman, which is very successful and is providing a good revenue; numerous business persons are running profitable organizations in Sultanate of Oman, as the authorities highly reinvigorate innovative and original set-ups, and if you had a local partner than That person would be a beneficial source for your company as their devotedly support will help you to understand Omanis environment and way of working which would result as your company would grow more and would get settled quickly. Industrial business based companies and Trading companies, the one who does exports are fully supported by the government, mainly in acquiring land where a company would be built. Such a business can be made in a permitted free-trade region, as there are special exemptions from exports and import duties, profit-making taxes, commercial liability, building charges, and property tax. One more way is to have your business in Sultanate of Oman is to buy an ongoing company that is the most straightforward process as you directly get the ownership without involving in any sponsorship or doing any registration as in this process, all you had to do is to agree at a certain amount of price and get the ownership of the company as the owners would transfer the ownership documentation on your name. (Awaidy, 2018)
Oman's developing prosperous population and low-cost economy offer various business opportunities and invite other organizations to benefit from options all over the world. All the foreign enterprises that are willing to be part of the Omani marketplace have to go through some procedures to sustain their structure in Oman. As per Omani law, it is obligatory for any organization doing business in the Sultanate of Oman that they should have a lawful appearance as legally they should be present in Oman. For foreign organizations, they must be registered as a legal entity of Oman. Approval is required, which shows that the Sultanate had permitted them to work, to do business in Oman. Any organization can have its regular appearance by:
Forming a business with an Omani partner,
Engaging an Omani mediator;
We are launching a branch in Oman.
The companies' liquidity ratios suggest that Asaffa Foods foods' position was extraordinary during the last five years. However, the liquidity position of Ahana Foods & Beverage Company was not at par during the years 2013 to 2016. Still, the company was able to improve its place in the latest the financial year 2017. The current and acid test ratio of Asaffa foods remained above two during the last five years, representing an excellent liquidity position of the company. While the current and acid test ratio of Ahana Foods & Beverage Company remained below 0.7 during the last four years, representing its weak liquidity position. However, the company could increase the current ratio to 1.77 and the acid test ratio to 1.35 during the year 2017. The work in the year 2017 is entirely satisfactory and represents the excellent liquidity position of the company. (Pajoohi, 2012)
The Water Management and Federal Municipalities Ministry has launched a massive campaign to monitor food quality and ensuring hygiene standards. In this regard, many awareness campaigns have been found in different universities of the Sultanate by using electronic and print media along with social media. A'Saffa Food SOAG has a substantial business of processing meat; therefore, it has to follow strict guidelines about slaughtering methods using Islamic practices as the company deals with Halal Food. The company has to make massive capital expenditures for upgrading and modernizing its slaughterhouses.
A'Saffa has to spend hefty amounts to ensure proper training of the personnel to handle the animal properly and monitor the entire process of slaughtering; this includes the purchasing healthy animals from the farms and the further to incur expenditure on maintenance of a proper storage facility for processed animals before it is packed and sent in the market through its distributors.
Due to Price Control regulations of the health authority, the entity must ensure the price that is not too excessive for the customers, yet it has to maintain its profitability.
On the other hand, Ahana Foods & Beverage Company has to deal with laws to ensure that all the beverages meet with the Bangladesh Food Authority's standard. All the nutrient and micro minerals are added in the required way so that the drinks containing carbonated water do not affect the masses' health. The mineral water is pure from all sorts of contamination. (Sufian, 2016)
Both companies have to ensure compliance with all health and safety laws to ensure that employees don't have to work in an unpleasant working environment and their lives are not prone to danger. Proper safety equipment such as hamlet, masks, fire alarms and fire extinguishing systems are in place. Both entities ensure that they reduce the wastage and other pollutants originating from their business activities due to increased stress on both countries' environmental laws. (Masum, 2015)
The detailed comparative analysis of legal implication on the financial health of both companies, we have concluded that both entities from the same food and beverages sectors have a remarkable difference in the financial performance whereby, the company in Oman outperformed the company from a developing country Bangladesh the difference is due to availability better legal system in Oman.
Being an entity from a developing nation has to face many challenges: major one being the ineffective implementation of general laws and inadequate corporate legislation. (Biswas, 2013)
Overall Gulf and particularly the Sultanate of Oman have an excellent legal framework for the business entities operating as compared to the developing economies such as Bangladesh, as evident from the legal and financial analysis of both companies; however, there is still a need for identification and minimization of the loopholes in the legal framework to ensure that Oman has further ease of doing business. (Samman, 2015)
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