KUWAIT Law and Practice Contributed by: Yousef Al Shereedah, Abdulrahman Al-Roumi and Bashayer Al-Tuwais, International Counsel Bureau – Lawyers and Legal Consultants
aims to remedy these shortcomings by estab - lishing a more structured system for managing insolvency proceedings. Role of the CBK in a bank’s insolvency In spite of the Bankruptcy Law authorising the CBK to issue executive regulations organising the bankruptcy, resolution, restructuring, or pre - ventative settlement of a CBK-Regulated Entity, to date, no directives have been issued in this respect. Apart from the Deposit Guarantee Law (which, as explained in 6.1 Deposit Guarantee Scheme (DGS) , guarantees the obligations of banks towards customers’ deposits), there is no special insolvency, recovery, and resolution framework for banks in Kuwait that sits outside the regime of the Bankruptcy Law. Nevertheless, no petition concerning insolven - cy proceedings of a CBK-Regulated Entity may proceed unless the CBK has been provided with a written notice on the same not less than ten days prior to such petition being made. Insolvency resolution The Bankruptcy Law provides several pathways designed to manage the financial distress of companies among which are the following: • Restructuring: Debtors retain control of their assets, albeit under the supervision of a court-appointed bankruptcy trustee. The trustee oversees the implementation of a restructuring plan and may place restrictions on the debtor’s ability to manage or dispose of assets. • Preventative settlement: Debtors are able to continue operating their businesses and man - aging their assets without interference unless the Bankruptcy Court determines otherwise. This early intervention allows distressed com - panies to negotiate settlements with creditors
before the situation escalates into full insol - vency. • Declaration of bankruptcy. When this occurs, a court-appointed trustee takes control of the debtor’s assets for liquidation purposes. Both creditors and regulatory authorities have the right to petition the Bankruptcy Department to initiate bankruptcy proceedings or impose a restructuring plan. Debtors themselves can also request to be placed under any of these legal mechanisms, depending on their circumstances. In addition, it is important to note that a certain threshold of creditors’ approval is necessary for restructurings and preventative settlements. Institutional framework of the insolvency regime The Bankruptcy Law established new insti - tutional frameworks to manage and oversee bankruptcy matters. Central to this framework are specialised bodies tasked with ensuring the law’s smooth application. At the core is the Bankruptcy Court, a dedicated judicial body that holds exclusive authority over disputes arising under the Bankruptcy Law. This court is empowered to hear cases and make decisions in line with the law’s provisions. Supporting the Bankruptcy Court is the Bank - ruptcy Department, a judicial division responsi - ble for managing the administrative functions of the court. It plays an essential role in ensuring the court’s decisions are executed effectively, streamlining the insolvency process. Complementing these judicial bodies is the Bankruptcy Commission, which plays a techni - cal advisory role and is composed of experts qualified to serve as bankruptcy trustees. More importantly, the insolvency proceedings con -
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