KUWAIT Law and Practice Contributed by: Yousef Al Shereedah, Abdulrahman Al-Roumi and Bashayer Al-Tuwais, International Counsel Bureau – Lawyers and Legal Consultants
CBK requirements As the primary banking regulator, the CBK plays a crucial role in overseeing acquisitions that could alter the control structure of any bank. • Approval for ownership changes: According to Article 57 of the CBK Law, any individual or entity intending to acquire more than 5% of a bank’s capital must obtain prior approval from the CBK. • Feasibility study: The CBK mandates that a feasibility study be conducted by a special - ised, independent financial institution with the necessary expertise (in practice, applicants appoint a CMA-licensed investment adviser to ensure simultaneous compliance with CBK and CMA rules) before approving any bank merger or acquisition. This study must assess whether the acquisition will contribute to the long-term financial health and stability of the bank. For cross-border acquisitions, the study must also address compliance with foreign regulatory standards and any potential risks related to the operation of subsidiaries abroad. • Regulatory co-ordination between CBK and CMA: Effectively, the core of the regulatory approvals’ process of a change of control concerning a CBK-Regulated Entity lies with the CBK. This co-ordination surrounding potential regulatory overlap is the subject of a Memorandum of Understanding between the CBK and CMA dated 17 of January 2018 (MOU). For example, the MOU states that the process of approving change of con - trol should start at the CBK where the bulk of regulatory assessments, especially with respect to the market impact of any potential transaction, is carried out. The CMA’s role in this instance would be a minimal “desktop” review to ensure compliance with the form of
investment management, investment advisory, custodian, subscription agent, or brokerage ser - vices. These activities are licensed and regulated by the CMA. 3. Changes in Control 3.1 Requirements for Acquiring or Increasing Control Over a Bank Overview of the Regulatory Authorities The process of acquiring or increasing control of a bank is subject to stringent regulatory over - sight to ensure financial stability, transparency, and competition in the market. The process is governed by three primary authorities, each with a distinct role in regulating and approving certain activities and transactions. These authorities are the CBK, CMA, and the Competition Protection Agency (CPA). In addition, certain regulatory requirements under the Boursa Kuwait Rulebook are applicable. Requirements Governing Changes in Control When seeking to acquire or increase control of a company in Kuwait, it is essential to understand the regulatory framework governing “Control” and “Effective Control”, as defined under the CMA By-laws. Control is established by hold - ing 30% or more of a listed company’s trad - able shares. However, Effective Control may also arise through arrangements that enable a party to appoint most board members or influ - ence decisions made by the company’s general assembly. The CMA applies the same regula - tory scrutiny to such arrangements as it does to direct ownership. The following requirements must be satisfied when pursuing control:
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