KUWAIT Law and Practice Contributed by: Sam Habbas, Luis Cunha, Hisham Al-Quraan and Mustafa Sayed, ASAR – Al Ruwayeh & Partners
“Commercial Code”) requires that foreign entities conducting business in Kuwait do so either through a local agent or through a Kuwaiti “partner” (typical - ly facilitated through the establishment of a Kuwaiti company with Kuwaiti or GCC participants owning at least 51% of the capital). Significantly, Article 24 of the Commercial Code was amended (under Law No 1 of 2024) to allow for the establishment of a Kuwaiti branch of a foreign business (an “Article 24 Branch”). Under these reforms, a foreign entity can, strictly speaking, operate in Kuwait without the need for a Kuwaiti sponsor or an agent (assuming they operate through a branch). In this regard, the authorities are currently in the process of formulating new regula - tions setting out the relevant practices and rules for its implementation and the establishment of such an Article 24 Branch. At present, these reforms are not being implemented in practice. An exception to these conduct of business rules is the establishment of a company or branch under Law No 116 of 2013 (the “Foreign Direct Investment Law” – FDIL). The primary purpose of the FDIL is to improve the overall investment climate in Kuwait with respect to foreign investors, and to encourage foreign invest - ment in Kuwait by offering certain benefits to foreign investors (owning up to 100% of a Kuwaiti entity, tax credits, etc). The Kuwait Direct Investment Promo - tion Authority (KDIPA) was also established under the FDIL, and has regulatory oversight over matters relat - ing to the FDIL. To obtain an investment licence from KDIPA, the prospective foreign investor must satisfy the criteria set out under Article 29 of the FDIL (see 2.2 Procedure to Obtain Approval and Sanctions for Non-Compliance ). Certain activities are excluded from benefiting under the FDIL but these are narrowly defined activities relating to certain sectors, such as the extraction of petroleum and natural gas, security and investigative services and the manufacture of fertilisers. GCC individuals and GCC companies wholly owned by GCC nationals may establish branches of their businesses in Kuwait and/or own more than 51% of the shares of a Kuwaiti company (see Ministerial Resolutions No 141 of 2002 and No 237 of 2011 – the “GCC Exemption”). Except in limited instances, GCC
nationals are afforded the same rights to establish and to do business in Kuwait as Kuwaiti nationals. 2.2 Procedure to Obtain Approval and Sanctions for Non-Compliance Any approvals that may be required will depend on the nature of the investment and how it will be made. As a general premise, the following may be of significance. Requirements to Open a Wholly GCC-owned Company Under the GCC Exemption GCC nationals and GCC companies wholly owned by GCC nationals may take advantage of the GCC Exemption to open a Kuwaiti company or a Kuwaiti branch of their operations. The process and timing will vary, depending on various factors such as the desired corporate form and the relevant activities to be undertaken. During the establishment process, the authorities will also seek to confirm that the relevant investor is a GCC national or a GCC company wholly owned by GCC nationals. This is typically evidenced by the rel - evant identification documents in the case of GCC nationals (ie, the passport of the GCC national, etc) and/or the constitutional documents of the GCC com - pany (including the shareholder details). See also 3.2 Incorporation Process for details of the process gen - erally followed to establish certain Kuwaiti companies. Requirements to Open a Branch Under the GCC Exemption Foreign investors must satisfy the following conditions in order to open a branch under the GCC Exemption. • The relevant GCC entity must be wholly owned by GCC nationals, whether directly or indirectly. If at any time a non-GCC shareholder acquires an interest in the relevant GCC entity, the Ministry of Commerce and Industry (MOCI) may cancel the branch licence. • The relevant GCC entity must have been in exist - ence for at least three years before the submission of the branch establishment application to the MOCI. • The activities of the relevant GCC entity must be permitted in the GCC region, and the Kuwaiti
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