KUWAIT Law and Practice Contributed by: Yousef Al Shereedah, Abdulrahman Al-Roumi and Bashayer Al-Tuwais, International Counsel Bureau – Lawyers and Legal Consultants
cerning CBK-Regulated Entities are directly entrusted to the supervision of the Bankruptcy Commission. Practical challenges in implementing the Bankruptcy Law Although the Bankruptcy Law has been enacted and its regulatory bodies established, its practi - cal implementation is still in the formative stages, with numerous provisions remaining untested in real-world scenarios. In contrast to the former bankruptcy framework, the current law restricts the ability to utilise set- off (ie, netting) between debtors and creditors. This limitation can lead to protracted and less efficient liquidation processes, as allowing set-off could facilitate quicker resolutions and streamline the overall insolvency proceedings. A critical point of confusion pertains to when the insolvency officially begins. This determination is particularly significant for establishing pref - erence periods in bankruptcy cases. The law currently aligns the onset of insolvency with the suspension of debt payments, but this correla - tion may not serve as a definitive indicator of a debtor’s financial distress. Furthermore, this approach does not align with established inter - national standards where a “cash flow test” is typically utilised by bankruptcy courts to ascer - tain the point at which a person becomes unable to pay their debt as it falls due. Another issue is the jurisdictional overlap among the Bankruptcy Court, Bankruptcy Department, and Bankruptcy Commission. Since the law’s implementation, these bodies have had a vary - ing interpretation of their jurisdiction and scope. This resulted in shifting oversight back and forth between such bodies. At times, such bodies have declined to take on cases. This indetermi -
nacy results in a bureaucratic deadlock, causing delays that adversely affect both creditors and debtors alike. Additionally, the bankruptcy bodies established under the Bankruptcy Law adopted an inventive interpretation of the law whereby priority is given to judgement-creditors (those whose debts have been determined by a court) over others of equal rank, even though the legislation does not spec - ify such a distinction. Protection of depositors In addition to the Deposit Guarantee Law, the Bankruptcy Law protects depositors’ inter - ests by allowing for the retraction of any funds deposited in accounts held with a bank in the event the latter is subject to insolvency proceed - ings. A depositor may make a request for the recoupment of their funds to the Bankruptcy Department. CBK-Regulated Entities in Kuwait are expected to integrate ESG considerations into their opera - tions through a combination of voluntary report - ing and encouraged sustainable practices. This framework is outlined by the CBK, CMA, and Boursa Kuwait, and promotes alignment with international standards and Kuwait Vision 2035. While the ESG framework is largely voluntary, the CBK mandates that ESG elements must be considered in the annual risk reports submitted by CBK-Regulated Entities, ensuring a formal integration of sustainability into risk manage - ment. 9. ESG 9.1 ESG Requirements
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