Under the Law of Commercial Companies (Law NO. 15/1960) there are three relevant major types of companies in Kuwait.
Joint Stock Companies
The Joint Stock Company ("KSC") is equivalent to the Societe Anonyme in the continental system. The shareholder in such a company can be a natural or corporate person whose liability is limited to his equity in the company. The equity is represented by a share certificate that can be traded in or pledged. The number of founding shareholders must be at least five. A KSC can either be public or closed. No foreign shareholders are allowed to own shares in a public company; no such restriction exists in the case of a closed company.
Holding Companies
This type of companies is recently introduced. It is like the KSC type except that the Holding Companies can own other subsidiary companies.
Limited Liability Companies
Another major type of companies is the so-called With Limited Liability ("WLL") company. The partners can be natural persons as well as corporate bodies according to the recent amendment of the Companies law. As in the case of the KSC, liability is limited to the partner's equity participation. Equity is not represented by a share certificate but is evidenced by the Memorandum of Association and the books of the company. Although shares (in this type called "parts") are not evidenced by a certificate, they can be sold or pledged. The number of partners may not be less than two (husband and wife are deemed one person), nor may they exceed thirty persons. WLL companies cannot engage in the business of insurance, banking or portfolio management.
Foreign shareholders of a KSC or a Holding Company must be approved by a Ministerial decree, whereas foreign partners in a WLL only require approval by the Undersecretary of the Ministry of Commerce & Industry, a less time-consuming process.
Foreign equity may not exceed 49% of the total share capital of all type of companies. Foreign shareholders can be represented on the Board of Directors proportionate to their equity participation.
Documentation:
To form a KSC or a Holding Company, the following documents are required from each foreign shareholder:
- The Articles of Association or the equivalent of each corporate shareholder (preferably in English to avoid translation from any other foreign language);
- The balance sheets for the last two fiscal years;
- A Board Resolution: (a) approving participation in the KSC or Holding Company, (b) defining the percentage of equity sought, and (c) nominating one or more officers to execute all documents relating to the incorporation of the KSC or Holding Company and to attend the constituent General Assembly. It is recommended, but not obligatory, that the same Resolution nominates the Directors to represent the foreign shareholders on the KSC and the Holding Company Board. The Resolution must be authenticated by a Notary Public in the Country of Origin, attested by any Kuwaiti consulate; and
- A certificate of good standing from the applicable Chamber of Commerce
B. STEPS FOR FORMING THE KUWAITI WLL COMPANY:
The administrative steps of forming the Kuwaiti WLL company are:
1. An application to be submitted to the Directorate of Companies and Insurances of the Ministry of Commerce & Industry (the "Ministry") on the standard form of the Ministry (a copy whereof is attached herewith). This form, as you will notice, contains the following information:
- Names of partners, their nationality and identity card numbers thereof;
- Objects of the Company;
- The capital of the Company;
- Management of the Company; and
- The proposed name of the Company.
2. When the Ministry approves the above, it will write to your Kuwaiti Bank requesting the Bank to accept payment of the capital for the WLL under incorporation and provide the Ministry with two certificates evidencing the payment of the capital. The Bank will also be requested not to dispose of the capital until the WLL is finally incorporated.
3. The Ministry will also write to the Municipality of Kuwait to approve the location (the premises) of the WLL.
4. The draft Memorandum of Association is thereafter presented to the Ministry for its initial approval.
5. When initially approved, the draft Memorandum of Association is presented to the Notary Public for notorization.
6. The notarized Memorandum of Association is submitted to the Ministry in order to register the WLL in the Commercial Register. The Ministry will then issue the necessary license for the WLL to finally assume the contemplated business in Kuwait.
For further information, please contact Al-Saleh & Partners - Tel No: (965) 246 7670 3 or Fax No: (965) 243 1039 or enter text search 'Al-Saleh & Partners' and 'Business Monitor'.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
