KUWAIT – Kuwait’s new companies law to drive investment

January 2013

DLA Piper has welcomed the long-awaited Companies Law for Kuwait, which was recently published in the Official Gazette (Kuwait Al-Yom). The new law introduces a raft of new concepts and principals set to shape the way commercial entities operate in Kuwait. Abdul Aziz Al-Yaqout, a Kuwaiti national and regional managing Partner at DLA Piper Middle East and Tarek Yehya, senior legal consultant in DLA Piper’s Kuwait office, were involved in the drafting of the new law.

The new law has been drafted to encourage investment in Kuwait and to provide comfort to investors and organisations looking to expand their operation in the state. Key aspects of the new law include the following:

» The introduction of the concept of a ‘one stop shop’ for the incorporation and licensing of a company through a single department at the Ministry of Commerce and Industry

» Requirement on the part of companies to adhere to best practices of corporate governance

» The separation of the board of directors from the executive management and an expansion of the powers of managers and directors

» An expedited process of the valuation of in-kind contributions to the capital of companies

» The introduction of corporate regulations regarding Sukuks, bonds and convertible bonds

» The elimination of minimum shareholding requirements and security shares for members of the board of directors of stock companies

» Adoption of the cumulative voting system for the election of board members

» Simplification of the transfer of membership interests in limited liability companies

“This is a significant step forward for businesses in Kuwait as the new law is set to dramatically improve the way companies are structured and how they operate, ultimately creating a more level playing field and enhancing the confidence of investors in Kuwait as a solid growth market,” commented Al-Yaqout. “The new law brings with it greater clarity in terms of the powers of Boards of Directors and, unlike its predecessor the Commercial Companies Law of 1960, the Companies Law will require Kuwaiti companies to adopt more stringent adherence to best practice with regards to corporate governance.”

The principle of Kuwaiti dominance remains however, maintaining the Kuwaiti interest at a minimum of 51 per cent in the capital of a Kuwaiti company. This is in line with other GCC countries.

The new law was finalised with the participation of the Ministry of Commerce and Industry, the Central Bank of Kuwait, the Capital Markets Authority, the Kuwait Investment Authority, private sector representatives and lawyers from DLA Piper. It came into force with its publication.