KUWAIT Law and Practice Contributed by: Michel Ghanem, Patrick Obeid and Michel Ata, Meysan
funds justified dissolution and compensation for losses. The amount was calculated for the loss of profits and additional civil compensation. • A corporate joint venture is solely governed by its contract and dissolves automatically if a partner dies unless continuation is agreed with the heirs, pursuant to commercial circuit session Decision on appeal by cassation No 767 of 2016 dated 11 February 2025. The court held that because no such agreement with the heirs existed (under the corporate joint venture), the venture ended on the partner’s death, and the appellant could only claim its share and was not permitted to continue the business. • Another critical factor distinguishing joint ventures from incorporated companies, as highlighted under Commercial Circuit Decision on appeal by cassa - tion No 3215 of 2021 dated 17 December 2024, is that the restriction provided under the Companies Law for a foreign partner ownership to be limited to 49% does not apply to contractual joint ventures, and due to the lack of a separate legal personal - ity the assets and liabilities are upon the partners directly and are not subject to any corporate liqui - dation for any debts owned. In summary, these judgments reaffirm that corporate joint ventures are treated as contractual arrangements rather than separate legal entities, unless incorporat - ed, subject to dissolution, enforcement and remedies like any other contract. 5. Negotiating the Terms 5.1 Preliminary Negotiation Instruments and Practices In Kuwait, joint ventures typically start with the execu - tion of a short, confidential term sheet or heads of terms. This preliminary document outlines the key commercial elements of the transaction – such as the scope of the joint venture, valuation methodology, break fees, and an exclusivity period usually ranging between 30 to 60 days. It is commonly preceded by a mutual non-disclosure agreement (NDA), often drafted in bilingual Arabic/ English format to avoid any translation discrepancies
before local courts. In cases involving sensitive intel - lectual property or proprietary know-how, particularly in technology, franchising, or similar sectors, the NDA expressly excludes publicly available information and designates the Kuwaiti courts as the competent forum for injunctive or interim relief. Where the joint venture relates to a regulated indus - try (eg, telecoms, banking, or oil services), the par - ties often exchange a regulatory compliance checklist to confirm eligibility for the required sector-specific licences. 5.2 Disclosure Obligations Other than the disclosure obligations outlined herein, corporate joint ventures in Kuwait are not subject to any formal disclosure obligations. Where the joint ven - ture is incorporated as a legal entity, typically a WLL, its articles of association are registered with the MOCI. By contrast, any separate contractual arrangements between the shareholders (such as governance frame - works, deadlock resolution mechanisms, or exit provi - sions) are treated as private agreements. These do not require notarisation or registration and are generally kept confidential unless disclosure is required in the context of a dispute or upon request from a compe - tent authority or regulator. 5.3 Conditions Precedent, Material Adverse Change and Force Majeure Conditions Precedent Under Kuwaiti market practice, a joint-venture agree - ment does not enter into force until the agreed condi - tions precedent (CPs) have been satisfied or expressly waived. The CPs most often seen in Kuwaiti joint-ven - ture agreements are as follows. • Regulatory clearances – a KDIPA foreign-invest - ment licence: (a) when a non-GCC shareholder will hold more than 49%; (b) for any sector-specific approvals (eg, the Central Bank for fintech, the Ministry of Oil for downstream services, and CITRA for telecoms); and (c) when the statutory thresholds are met, result- ing in a no-objection certificate from the CPA.
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