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Legal issue
Sale or closure of a sole proprietorship does not release its proprietor from its debts; transfer of liabilities to a new proprietor requires the creditor’s separate consent.
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Published principle
The Arabic text published by the Supreme Court is the primary source. The English translation was published by the Technical Bureau; Russian and Chinese are unofficial Smart Global Capital editorial translations.
This is a published legal principle—an extract selected by the Supreme Court of Oman Technical Bureau—not the full text of the judgment.
A sole proprietorship is directly appurtenant to its proprietor, who is deemed a merchant, receives its profits and bears personal liability for all obligations owed to third parties. Sale or dissolution does not release the proprietor from outstanding debts. Those debts do not pass to the purchaser merely under the sale agreement, even if it purports to transfer all rights and obligations; a valid transfer of debt requires the creditor’s separate consent.
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Applicability
The principle concerns a sole proprietorship and should not be transposed to an LLC or another separate legal person. The applicable debt-transfer rules, creditor consent, notices and asset allocation must be checked for the transaction.
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Related instruments
- Commercial Law rules governing sole traders
- Civil Transactions Law rules on assignment of debt
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