KUWAIT Law and Practice Contributed by: Ezekiel Tuma, John Cunha and Luis Cunha, ASAR – Al Ruwayeh & Partners
8. Duties of Directors 8.1 Principal Directors’ Duties
8.3 Business Judgement Rule Kuwait does not have a precedent system and, there - fore, it is not possible to give a definitive answer as to whether courts in Kuwait defer to the judgement of the board. However, takeover issues do not appear to have been the subject of any significant litigation in Kuwait. 8.4 Independent Outside Advice Both the bidder and the target entity must procure a report that is produced by an independent CMA- approved investment adviser, who must provide their opinion on the offer and present it to the shareholders of the entity that retained the adviser. 8.5 Conflicts of Interest While Kuwait does not have a precedent system, the courts have handled a number of conflict of interest matters. Further, the CMA, through its disciplinary processes, has also handled a number of conflict of interest cases. Although hostile bids are not common in Kuwait, the law currently provides for competitive bids during the takeover process. In addition, where public auctions are utilised, any person can instigate a hostile bid. 9.2 Directors’ Use of Defensive Measures A target company’s board of directors is required to treat any hostile bid as it would a takeover offer. There - fore, by implication, the board is not able to undertake defensive measures in relation to a hostile bid. In addi - tion, conflict of interest provisions preclude a director from voting on a matter in which they may have an interest. 9.3 Common Defensive Measures There are no generally no common defensive meas - ures because hostile bids are treated as takeover bids. 9.4 Directors’ Duties As there are no prescribed defensive measures to enact, directors do not owe any specific duties in this regard. However, see 8.1 Principal Directors’ Duties , 9. Defensive Measures 9.1 Hostile Tender Offers
Pursuant to the CML Bylaws, the members of the board of directors of a target company are prohib - ited from engaging in any of the following activities during an offer period or during the period of initial negotiations on the lodging of an offer if the approval of the shareholders’ general assembly has not been obtained: • issuing new shares; • issuing or granting options; • creating, issuing or permitting the creation or issue of any securities convertible into shares or sub - scription rights to shares; • disposing or agreeing to the disposal of any assets of fundamental value; • signing any contract outside the scope of the com - pany’s regular activities; • taking any measures relating to the company that would lead to the bid not being accepted or to denying shareholders the opportunity to make a decision in this regard; and • having the company take on any significant mate - rial obligations. The directors must also ensure that any notice sent to the shareholders of a target company calling for the convening of a shareholders’ meeting must include complete and accurate information on any offer. All documentation relating to a takeover offer must be accurate, and the information provided must be suf - ficient and fairly presented. The CML Bylaws have conflict of interest provisions that preclude a director, their spouse and relatives up to the first degree from voting on a matter in which they may have an interest. 8.2 Special or Ad Hoc Committees Establishing special or ad hoc committees normally depends on the internal corporate governance struc - ture of the company. However, a board member with an interest in an offer presented to the board would be precluded from voting with respect to that interest.
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