KUWAIT Law and Practice Contributed by: Yousef Al Shereedah, Abdulrahman Al-Roumi and Bashayer Al-Tuwais, International Counsel Bureau – Lawyers and Legal Consultants
requirements for board members, ensuring that directors meet specific qualifications, experience levels, and integrity standards to effectively fulfil their governance roles (see 4.2 Registration and Oversight of Senior Man- agement ). • Conflict of interest: The CBK Corporate Gov - ernance Guidelines and Companies Law set rules to manage conflicts of interest. Board members and senior executives must dis - close any personal interest – whether direct or indirect – in contracts, transactions, or arrangements involving the CBK-Regulated Entity. Once disclosed, these individuals are barred from participating in discussions or voting on matters related to the conflict. Addi - tionally, directors are prohibited from engag - ing in activities that compete with the bank, unless expressly approved by the general meeting of shareholders. Failure to obtain such approval may result in the bank seek - ing compensation or claiming the benefits of the competing business as its own. Banks are also required to keep a detailed record of all related-party transactions, which must be accessible to shareholders. • Minority shareholder protection: The cor - porate governance framework in Kuwait includes several mechanisms that aim to protect minority shareholders. Independent directors are required to act without influence from major shareholders, preventing undue control. Under the default rules of the Com - panies Law, key decisions, such as mergers, liquidation, disposal of major assets, and share capital increases, require shareholder approval, ensuring minority shareholders are involved in significant actions. Article 30 of the Companies Law allows shareholder agreements to regulate relationships and voting rights, while the CMA By-laws require
disclosure of private voting arrangements and parties acting in concert. Additionally, Article 3-12 of Module 9 of the CMA By-laws, under the chapter governing acquisi - tions, allows minority shareholders (holding between 5% and 30% of shares) to submit objections to the CMA against resolutions spe - cifically related to acquisitions. These objections must be submitted within 15 days of the acquisi - tion resolution and demonstrate that the reso- lution constitutes an abuse of minority rights. Minority shareholders also have the right to file derivative action lawsuits to address misman - agement or misconduct by the board, as well as unfair prejudice lawsuits if company decisions disproportionately harm their interests. Transparency and disclosure obligations CBK-Regulated Entities are required to: • Submit to the CBK detailed governance reports covering board composition, inde - pendence, conflict-of-interest management, board and executive compensation, share - holder agreements, voting rights, and the structure of key committees (audit, risk, remu - neration). These reports must be included in the annual report, which is made publicly available. • Provide financial and prudential reports to the CBK, including quarterly and annual finan - cial statements, capital adequacy reports, liquidity coverage ratios (in line with Basel III), and details on non-performing loans (NPLs), including provisions and management actions. • Submit compliance and risk reports to the CBK, covering AML and CFT, and the results of stress testing and risk manage - ment assessments. (See 5.1 AML and CFT Requirements )
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