Law No. 1 of 2016
on the Promulgation of the Companies Law

DISCLAIMER AND NOTICE

Please note that Al-dostour law Firm does not warrant that the attached translation is an accurate translation of the source text, and it shall not be responsible for any loss or damage suffered by you or third parties as a result of the translation, whether in contract or otherwise. It should be noted that the choice of terms used in legal translations is frequently a matter of preference, and the MOCI shall not be liable for any such variations.

Headers to articles, which are in italics, and the table of contents do not constitute part of the Companies Law and have been inserted for ease of reference only. Similarly, footnotes do not constitute part of the Companies Law; they reflect interpretive comments in respect of the translation and should not be interpreted as part of the Companies Law or as legal advice.

Companies Law No. 1 of 2016


on the Promulgation of the Companies Law1

  • – Having reviewed the Constitution;
  • – and Decree No. (3) of 1955 regarding Kuwaiti Income Tax as amended;
  • – and Decree No. (1) of 1959 regarding Commercial Registration as amended;
  • – and Decree No. (5) of 1959 promulgating the Real Estate Registration Law as amended;
  • – and the Criminal Law promulgated by Law No. (16) of 1960 as amended;
  • – and the Criminal Procedures and Trials Law promulgated by Law No. (17) of 1960 as amended;
  • – and Law No. (4) of 1961 promulgating the Authentication Law as amended by Law No. (1) of 1965;
  • – and the Law on Insurance Companies and Agents promulgated by Law No. (24) of 1961 as amended;
  • – and Law No. (30) of 1964 on the Establishment of the Audit Bureau as amended;
  • – and Law No. (37) of 1964 regarding Public Tenders as amended;
  • – and Law No. (49) of 1966 regarding Lending to Kuwait Shareholding Companies;
  • – and Law No. (32) of 1968 on the Currency, Central Bank of Kuwait and the Regulation of the Banking Profession as amended;
  • – and Decree Law No. (31) of 1978 regarding the Regulations for Preparing Public Budgets, Monitoring their Execution and Final Accounts as amended;
  • – and the Civil and Commercial Proceedings Law promulgated by Decree Law No. (38) of 1980 as amended;
  • – and Decree Law No. (39) of 1980 regarding the Law of Evidence in Civil and Commercial Matters as amended;
  • – and the Civil Law promulgated by Decree Law No. (67) of 1980 as amended;
  • – and the Commercial Law promulgated by Decree Law No. (68) of 1980 as amended;
  • – and Decree Law No. (5) of 1981 regarding the Practicing of the Auditing Profession as amended;
  • – and Decree Law No. (20) of 1981 regarding the Establishment of a Division in the Court of First Instance for Adjudicating Disputes as amended by Law No. (61) of 1982;
  • – and Law No. (42) of 1984 regarding the Disposition and Trading of shares in Kuwait Shareholding Companies and Securities;
  • – and Decree Law No. (33) of 1988 regarding Permission of Gulf Cooperation Council Citizens to hold Shares in Kuwait Shareholding Companies;
  • – and Decree Law No. (23) of 1990 regarding the law Regulating the Judiciary as amended;
  • – and Decree Law No. (31) of 1990 regarding the Regulation of Securities Trading and the Establishment of

Investment Funds;

  • – and Law No. (12) of 1998 on Licensing the establishment of Leasing and Investment Companies;
  • – and Decree Law No. (5) of 1999 regarding Intellectual Property Rights;
  • – and Law No. (19) of 2000 regarding the Support and Encouragement of National Labour to Work in Non- Governmental Entities;
  • – and Law No. (5) of 2003 on the Approval of the Unified Economic Agreement between the Gulf Cooperation Council Countries;
  • – and Law No. (46) of 2006 regarding Zakat and the Contribution of Public and Closed Shareholding Companies in the State’s Budget;
  • – and Decree Law No. (2) of 2009 regarding the Enhancement of Financial Stability in the State;
  • – and Law No. (6) of 2010 regarding Working in the Civil Sector;
  • – and Law No. (111) of 2013 regarding the Licensing of Commercial Stores;
  • – and Law No. (116) of 2013 regarding the Promotion of Direct Investment in the State of Kuwait;
  • – and Law No. (116) of 2014 regarding Public Private Partnerships;
  • – and Law No. (7) of 2010 regarding the Establishment of Capital Market Authority and the Regulation of Securities Activities;
  • – and Law No. (37) of 2010 regarding the Regulation of Privatization Programs and Operations;
  • – and Decree Law No. (25) of 2012 as amended by Law No. (97) of 2013 on the promulgation of the Companies Law;
  • – and Law No. (22) regarding the amendment of certain regulations of Law No. (7) of 2010 regarding the Establishment of Capital Market Authority and the Regulation of Securities Activities;
  • – the National Assembly approved the following law, which we have ratified and issued:

Article 1

The provisions of the attached Companies Law shall come into effect and its provisions shall apply to companies established in the State of Kuwait or on those whose headquarters are located in the State of Kuwait.

The principles of commercial custom shall apply in respect of matters not addressed in the provisions of this law or other commercial laws.

Article 2

The executive regulations shall specify the principles and criteria for adjusting the situation of existing companies in accordance with the provisions of the new law.

Article 3

The Minister of Commerce and Industry shall issue the executive regulations to this law as well as the resolutions necessary to implement the provisions of this law within two months from the date of its publication in the Official Gazette. The other Supervisory Authorities shall issue during the said period all resolutions with which they are

charged according to the provisions of this law. The executive regulations to Decree Law (25) of 2012, as amended, shall continue apply until the executive regulations to this law become effective.

Article 4

The aforementioned Decree Law and any amendments thereto shall be repealed.

Article 5

The ministers, each in their respective capacity, shall implement this law, which shall become effective as of 26 November 2012, with the exception of the regulation of Chapter 2 of Section 13, which shall be come effective as of the date as issuance2. It shall be published in the Official Gazette.

Emir of Kuwait Sabah Al Ahmad Al Jaber Al Sabah

Issued at Seif Palace on 14 Rabee’ Al-Aakhar Al-Muharram 1437 H Corresponding to 24 January 2012 G

Companies Law

Section One General Provisions

Definitions Article 1

Definitions

In the application of this law, the following phrases and words shall bear the meanings corresponding to each of them3:

Announcement4:

Authority: Company Contract5:

Incorporator:

Minister: Ministry: Publication6:

Proclamation7:

Registration8: Supervisory Authorities:

The announcement in two daily local newspapers which are published in the Arabic language and on the company’s electronic website, if available.

Capital Markets Authority.

The memorandum of incorporation or the memorandum of incorporation and articles of association, if applicable.

Anyone who takes actual part in the incorporation of the company, executes the contract thereof in person or through a representative and participates in the capital of the company with a cash or in-kind share.

The Minister of Commerce and Industry. The Ministry of Commerce and Industry.

The publication in the Official Gazette (Al Kuwait Al Yawm).

The Registration along with the Publication in the Official Gazette.

Registration in the commercial register.

The Ministry, the Authority or the Central Bank of Kuwait in respect of companies that are subject to the supervision of any of them, or any other authorities determined by the law.

Article 2

Scope of General Provisions

The provisions stipulated in this section shall apply to all companies taking into account the special provisions related to each form of company provided for in this law.

Article 3

Definition of the Company

The company is incorporated by virtue of a contract by which two or more persons undertake to participate in a profit-making project with each of them offering a contribution in assets or labour, to divide what is generated from the project in profits and losses.

A company – under the circumstances stipulated in the provisions of this law – may be incorporated according to the unilateral intention of one single person9.

Companies whose purpose is not the generation of profit may also be incorporated by virtue of a contract or articles setting out the partners’ rights and obligations as well as any other terms. The transfer of partners’ interests shall be subject to the partners’ right to redemption pursuant to the specific terms regulated by the Company Contract in addition to the provisions established in this law. The company shall not issue negotiable bonds or Sukuk and shall not receive donations. The company shall have a name of its own relevant to its purpose that may include the name of a partner or more. The executive regulations shall set out the regulations of these companies and the template of their memorandum of incorporation provided that they take one of the forms provided for in Article 4 that suits their nature on condition that they do not take the form of a Public Shareholding Company.

Article 4

Forms of Companies

A company shall take one of the following forms:

  1. General Partnership Company.
  2. Limited Partnership Company.
  3. Partnership Limited by Shares.
  4. Joint V enture Company
  5. Shareholding Company.
  6. Limited Liability Company.
  7. Single Person Company.

Parties to an agreement, which does not constitute any one of the forms indicated in the previous paragraph shall be held personally and jointly liable for the obligations arising therefrom.

Article 5

Approval of the Ministry to the Incorporation of a Company and Its Objectives

The Ministry shall notify the Incorporators of the incorporation of the company within three working days as of the date of submission of the documents and completion of the procedures as per the provisions of this law and the executive regulations thereto.

The executive regulations shall regulate the procedures of incorporation of a company and the amendment of its Company Contract, as well as the issuance of the licenses required to practice the activities of the company or any other procedures or approvals required by more than one authority in a manner that ensures that all such procedures are completed through a special department at the Ministry that includes representatives of the relevant governmental authorities.

Article 6

Approval of the Supervisory Authorities

The approval of the Central Bank of Kuwait or the Authority, as applicable, is required with regard to the incorporation of companies and to the Company Contract, which are subject to the supervision of either of them.

Article 7

Authentication of the Company Contract

With the exception of the Joint Venture Company, the Company Contract shall be written in an authenticated document10, or else, it shall be null and void.

The partners11 may among themselves object to the validity of the Company Contract due to it not being written in the manner stated in the previous paragraph. However, they may not object such validity towards third parties. Third parties have the right to object the validity of the Company Contract towards the partners. If a judgment is rendered invalidating the Company Contract pursuant to the request of a third party, the company shall be deemed null and void12 towards such third party. However, if a judgment is rendered invalidating the Company Contract pursuant to the request of one of the partners, such invalidation shall only have effect towards such partner as of the date of filing the claim.

Article 8

Liability Due to Invalidity of the Company Contract

The company’s Incorporators or partners – as the case may be – shall be held jointly liable towards the company, its partners or third parties for damages incurred due to the invalidity of the Company Contract.

Article 9

Proclamation of the Company Contract

With exception of the Joint Venture Company, the Company Contract and any amendments thereto shall be Proclaimed in accordance with the provisions of this law. If the Company Contract is not Proclaimed in the stated manner, it shall be rendered ineffective towards third parties. If the lack of Proclamation is limited to one or more statements that are to be Proclaimed, only these statements shall be ineffective towards third parties. However, bona fide third parties shall be able to assert the existence of the company or any amendments to the Company Contract even if these have not been Proclaimed.

The company’s managing directors or board members shall be jointly liable towards the company, its partners or bona fide third parties for damages incurred due to the lack of Proclamation.

Article 10

Memorandum of Incorporation and Articles of Association

The Company Contract of the two forms of Shareholding Companies shall include the memorandum of incorporation and articles of association. Other forms of companies – with the exception of the Joint Venture Company – shall have a memorandum of incorporation and the partners may also establish articles of association. The company’s articles of association – if applicable – shall be considered part of the Company Contract.

The executive regulations shall include the template of the memorandum of incorporation and articles of association for the companies stated in this law. Such template shall set out the information and the terms stipulated by the law and the executive regulations. It shall further set out the terms that partners and Incorporators may not agree to in contravention of the law and the executive regulations. The partners shall have the right to add such terms that do not contravene the mandatory provisions of this law and the executive regulations.

Article 11

Valuation of In-kind Contributions

If the capital includes – at the time of incorporation of the company or of a capital increase – in-kind contributions, an auditing firm approved by the Authority shall assess such contributions. The executive regulations shall determine the basis and criteria of the valuation of in-kind contributions. Such valuation shall not be final unless the partners, constituent meeting or the general meeting approves it, as the case may be. The party making the in-kind contribution shall not have the right to vote on the approval of the valuation, even if it holds cash shares or cash membership interests13.

If the value of the in-kind contribution is ascertained to be less than one-tenth of the value it was contributed for, the company shall reduce its capital by an amount equivalent to such difference. The party making the in-kind contribution may also pay the difference in cash or may refrain from the subscription through the in-kind contribution.

In all cases, in-kind shares may only represent fully paid shares or membership interests.

Article 12

Name of the Company

The company may not bear the name of another company or a similar name if such name belongs to a company that practices the same activity, except if such company is in liquidation and has approved the use of the name.

The company, which claims that another company is using its name or a similar name, shall seek the Ministry to instruct the other company to change such name. The Ministry shall decide on the request within 60 days as of the date of its submission; or else, it shall be deemed rejected.

The executive regulations shall set out the requirements for the request as well as the documents required to be attached thereto.

Article 13

Change of the Name of the Company

The company may change its name as per the procedures required to amend the Company Contract. The new name shall be Proclaimed.

The change of the company name shall not affect the company’s rights or obligations or any legal action initiated by

or against the company.

Article 14

Objectives of the Company

The company shall have one or more specified objectives to which it shall remain restricted to the objectives indicated in the Company Contract. However, the company may perform activities that are similar, complementary, necessary or associated to the stated objectives.

The company may amend its objectives even if this leads to a change in the company’s activities, provided that it shall follow the procedures of amending the Company Contract in accordance with the law.

It is permitted to incorporate companies with the specific objective of issuing Sukuk or other such securitization activities or any other objective. The executive regulations shall state the criteria and specific regulations in this regard.

Article 15

Companies that Operate in Accordance with Islamic Shari’a

Without prejudice to the provisions of the aforementioned Law No. (7) of 2010 regarding Licensed Persons14 who operate in compliance with Islamic Shari’a, companies whose objectives are set to be in accordance with Islamic Shari’a shall perform their activities in compliance with Islamic Shari’a. Such companies shall form an independent Shari’a supervisory board to supervise the company’s operations. The members of this supervisory board shall not be less than three and shall be appointed by the partners’ meeting15. The Company Contract shall refer to this supervisory board, set out the method of its formation, its competencies and the way it functions. In case any dispute arises between the members of the Shari’a supervisory board in respect of any Shari’a provision, the company may refer such dispute to the Fatwa and Legislation Department at the Ministry of Awqaf and Islamic Affairs, which shall be considered the final arbiter in the matter.

The Shari’a supervisory board shall submit an annual report to the company’s general meeting or partners’ meeting. Such report shall state the supervisory board’s opinion to what extent the business of the company is compliant with Islamic Shari’a in addition to any other remarks it may have. This report shall be included in the company’s annual report.

In all cases, if the activities of a company are within the objectives of the company and comply with the principles of Islamic Shari’a type contracts, the provisions of Articles 508, 992 and 1041 of the Civil Law16 and Article 237 of the Commercial Law17 shall not apply.

Article 16

Term of the Company

The company shall be incorporated for the term, which the Incorporators specify in the Company Contract. Such term may be extended prior to its expiry by virtue of a resolution issued by the general meeting of the partners or shareholders holding more than half of the capital.

If no resolution of extension is issued and the company continues its activities, the term shall be automatically extended for another period equal to that specified in the Company Contract and in accordance with the same terms. A partner18, who does not wish to remain in the company following the expiry of its term, may withdraw from the company. In such an event, the rights of such partner shall be assessed in accordance with the provisions of the first paragraph of Article 11 of this law.

Article 17

Share in the Company

The partner’s19 share may be a certain amount of money (cash contribution), an in-kind contribution or labour that may serve the company’s objectives. The partner’s contribution shall not be in the form of his reputation, influence or financial standing. Furthermore, only cash contributions and in-kind contributions shall constitute the company’s capital.

Unless otherwise agreed upon by agreement or custom, the partners’ contribution shall be of equal value and shall relate to property ownership and not only the usufruct.

Article 18

Division of Profit and Loss

All partners20 shall share the profits and losses in proportion to their share in the capital in accordance with the following principles:

  1. If the Company Contract does not specify the portion of a partner’s participation in the profits and losses, each partner shall participate in the profits and losses in proportions equal to their respective share in the capital.
  2. If the Company Contract includes a provision that excludes a partner from sharing in the profits or exempts a partner from sharing in the losses of the company, such provision shall be null and void and the Company Contract shall remain valid.
  3. If the Company Contract only specifies a partner’s share in the profit, such partner’s share in the loss shall be equal to that in the profit. The same shall apply if the Company Contract only specifies the partner’s share in the loss.

Any provision granting a partner fixed interest income for his share in the company shall be null and void.

Article 19

Contribution in the Form of Labour

If the partner’s21 contribution is in the form of labour and his participation in the profit and loss is not specified in the Company Contract, such partner shall have the right to request a valuation of his labour. Such valuation shall be the basis on which the partner’s share in the profit and loss shall be determined in accordance with the aforementioned principles.

It may be agreed that a partner who provides his participation only in labour shall be relieved from participating in the losses, provided that such partner is not paid for his labour.

If a partner, in addition to his labour, provides a cash or in-kind contribution, he shall be deemed to have a share in the profits and losses for his labour and a separate share for his cash or in-kind contribution.

Article 20

Distribution of Fictitious Profits

Fictitious profits shall not be distributed, or else, the creditors of the company may demand repayment of such profits from the partners22 and whoever else has benefited from them, even if such benefiting person was bona fide. The company’s managing director or the board of directors that has recommended the distribution of such fictitious profits shall be held jointly liable for the repayment of such profits.

A partner23 shall not be obligated to repay real profits received, even if the company incurs losses in the following years.