KUWAIT Law and Practice Contributed by: Michel Ghanem, Patrick Obeid and Michel Ata, Meysan
The Most Common Contractual Exits Put/call options exercisable after a lock-up or on trigger events After an agreed lock-up (typically three to five years) or on pre-defined trigger events – such as a change- of-control of a shareholder, a sustained deadlock, or a material breach – either side may force the other to buy (put) or sell (call) its shares. The price is normally set by an independent valuer using International Valuation Standards or by a formu - la that escalates over time. The option window is usu - ally 30–60 days from notice, giving the parties enough time to arrange funding and complete the statutory share-transfer registration at the MOCI. If the purchasing shareholder is foreign, sensitive sec - tors (telecoms, oil services and security) still require public authority approvals before the transfer is effect - ed. Drag-along allowing holders to compel a sale to a third party A drag-along lets holders of a qualified majority – most often 75%, mirroring the articles’ super-majority – compel the remaining shareholders to sell if the major - ity accepts a bona-fide third-party offer. The minority must receive the same price and terms as the majority. Tag-along for minorities on sales If a controlling shareholder wishes to sell a significant portion of the company shares, minority holders may tag their shares into the same sale on identical terms. Drafting almost always includes a “same price, same terms” covenant to stop the seller from hiding earn- outs or deferred consideration. Liquidation As a last resort, shareholders can vote (usually with the same 75% super-majority) to wind up the compa - ny and auction its assets if no buyer emerges through the other exits. A well-structured Kuwaiti joint-venture often layers these tools: first a drag-along, then a tag-along to protect holdouts, and finally liquidation if neither sale mechanism produces a buyer.
after settling inter-company balances and filing deregistration documents with the MOCI. Early Termination Early termination arises when a breach, insolvency, regulatory failure, or another contract-specified risk entitles one or both parties to invoke the termination clauses and bring the venture to an end before its agreed expiry date, including the following: • Uncured material breach – if a shareholder fails to perform a material obligation and does not rem - edy within a certain remedy period after notice, the non-defaulting party may terminate the joint venture. • Insolvency or bankruptcy of a shareholder – the shareholders may terminate the joint venture in case one of the shareholders becomes bankrupt or enters into a restructuring procedure. • Failure to close by the long-stop date – if condi - tions precedent (regulatory, financing, KDIPA licensing, etc) are not satisfied by the agreed cut- off date, either party can withdraw from the joint venture or request its termination. 9.2 Asset Redistribution and Transfers Assets originally contributed by shareholders (eg, land and trade marks) revert to the contributor unless expressly sold to the joint venture. Assets generated or purchased by the joint venture (plant, inventory, and customer lists) are divided according to: • proportionate shareholding; • the economic risk bearing pattern; or • a pre-agreed allocation matrix (common in infra - structure projects where one party takes hard assets and the other intangible rights). 9.3 Exit Strategy Kuwaiti law gives shareholders considerable freedom to craft exit routes, subject to pre-emption rules in the Companies Law and CMA approval for listed- company disposals.
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