Convertible instruments are enforceable in Oman. The market just stopped asking.

Since Investment Development Oman began operating as the Sultanate's first venture capital firm in 2016, followed by the Oman Technology Fund, local funds have consistently favoured convertible instruments as their primary investment vehicle. Yet a persistent belief has shaped how those instruments are used: that Omani law cannot reliably accommodate them. The practical result is that funds often restrict convertibles to foreign-domiciled companies, pushing Omani founders offshore to raise money for businesses built at home.

Our position is that the caution is misplaced. Convertible notes, SAFEs and KISS notes are valid and enforceable under Omani law, provided they are drafted with the precision the law demands.

The starting point: agreements must be kept

The Civil Transactions Law, issued by Royal Decree 29/2013, is built on the principle that contracts bind the parties who make them and must be performed in good faith. Nothing in the Law prohibits an agreement under which money advanced today converts into shares tomorrow. The legal question is not whether such a bargain is permitted. It is whether the bargain is stated clearly enough to be enforced.

Future events are not fatal uncertainty

A convertible instrument depends on something that has not happened yet: a qualified financing round, a sale, a maturity date. Article 118 of the Civil Transactions Law permits contracts whose subject matter is determined by a future event, provided that event is sufficiently designated. A conversion trigger defined as "the company's next equity financing of not less than a stated amount" is a designated future event. A trigger left as "a future fundraise on terms to be agreed" is not, and that difference is where enforceability is won or lost.

Gharar and Jahala are drafting instructions

Two Shariah concepts inform how Omani courts read uncertainty in contracts. Gharar concerns excessive risk or uncertainty in the bargain; Jahala concerns ignorance of the subject matter. Neither prohibits a convertible instrument. Both demand that the valuation mechanics, the trigger events and the conversion formula be stated so a court can identify exactly what was promised.

Treat Gharar and Jahala not as obstacles but as a drafting standard: if a stranger can compute the conversion from the document alone, the instrument is doing its job.

The Oqal Note: a structure built for this jurisdiction

Regional practice has produced an adaptation worth adopting: the instrument is split into an interest-free loan agreement with preset valuation triggers, paired with a separate promise to issue shares on conversion. Each component is familiar to an Omani court on its own terms, and together they reproduce the commercial effect of a SAFE while sitting comfortably within the Civil Transactions Law. Saudi Arabia and the UAE have used modified convertible structures along these lines; Oman's legal environment is similarly supportive.

What happens when a company refuses to convert

Enforceability is only worth discussing if the remedy works. Article 258 of the Civil Transactions Law governs specific performance: an Omani court will order a party to perform what it promised, unless the debtor asks for relief and demonstrates that performance would impose an undue burden. Courts approach these disputes through the parties' contractual intent, which is precisely why the drafting standard above matters. A clearly drafted conversion mechanic gives the court something to enforce.

Arbitrate, and say so in the document

For venture disputes we favour a contractual arbitration clause: seated in Muscat, conducted in English, under the Law of Arbitration in Civil and Commercial Disputes (Royal Decree 47/1997, as amended by Royal Decree 3/2007). Arbitration allows the parties to select arbitrators who understand venture capital norms, and to run procedures matched to the pace of a financing dispute.