KUWAIT


nationality). The board must consist of a minimum of three directors, who are elected by the shareholders.


A Kuwaiti WLL requires at least two partners and can have a maximum of 50 partners. It requires 51% Kuwaiti participation in the company’s capital, and the objects of the company will determine its capital requirement. The MOCI has developed a list of activities that a WLL can engage in, and the corresponding capital requirement for such activities. Certain activities cannot be combined, and WLLs can not engage in certain activities including banking or insurance. The entire capital of a WLL must be paid up prior to incorporation.


The management of a WLL is given to one or more managers who may be named in the company’s constitutive documents or appointed by the general assembly. The manager is liable to the company, the shareholders and third parties for breach of the provisions of the law, the company’s constitutive documents and for mismanagement.


The form of articles of association for both a KSC and WLL are in a standard form issued by the MOCI. The shareholders in these companies often also enter into a form of shareholders agreement to regulate the management and affairs of the company.


3. Investment approval


3.1 For foreign investment approval (including national security review) explain the following: a) The regulator/s’ name, factors it must consider when making its decisions, and how much discretion it has; If investing via a commercial company, the MOCI will consider the company incorporation application in coordination with the relevant sector regulator, to determine whether the company may be incorporated and so licensed.


For investments under the FDI Law, an application will have to be submitted to KDIPA created under the FDI Law. The KDIPA will be mandated to set the criteria against which investors’ applications will be evaluated.


b) Any investment caps and other legislative restrictions; The law makes no reference to any investment caps and opens all areas to FDI, except those exempted by Council of Ministers Resolutions. The executive regulations are expected to provide more guidance on this matter. We are not aware of any such ministerial resolution being issued as yet.


c) Which party must notify and when/if notification is mandatory or voluntary; The executive regulations (once issued) shall give the procedures for submitting applications for investment licences. The executive regulations will also contain the information and data that will be required in the application and the related fees.


d) What information must be included with notification and what is the review fee; See answer to c) above


e) How long does the review and approval process take, and are there any fast-track options; The FDI Law provides that the licence application will be decided within 30 days from the date of submission of the application. If achieved, this will be an enormous improvement to the previous system.


f) Is there the ability to consult on a named or unnamed basis; See answer to c) above


g) Does notification/review occur pre- or post-closing, and are there any pre- or post filing requirements unique to FDI; See answer to c) above


h) What is the position if no response is received on an application for approval and are there any rights of appeal from disapprovals? The FDI Law provides that the KDIPA will give its decision in writing with justification for any rejection. The decision may be challenged by the applicant.


Note that if investing via an agent, there is no regulatory approval required. The agent would typically have all the business licences required for the principal to operate in Kuwait.


3.2 Briefly explain the investment restrictions for any special/restricted sectors. There are certain sectors that have restrictions (mainly concerning the ownership of such entities) with respect to foreign participation and these include (but are not limited to):


• establishing printing presses and publishing houses; • establishing newspapers and magazines. • pilgrimage and Omra services; and • commercial agencies.


Additionally, with respect to banks, following the enactment of Law 20 of 2000 and its implementing regulations, foreign investors (ie both companies and individuals) are entitled to purchase unlimited shares in the capital of joint stock companies listed on the Kuwait Stock Exchange except with regard to Kuwaiti banks where restrictions on ownership generally still apply.


Furthermore, direct and indirect interests in five percent or more in the shares of a listed company, and any change in such interests, must be carried out and disclosed in compliance with specific regulations and laws concerning the same.


3.3 Which authority oversees competition clearance, when is notification mandatory, and briefly explain the merger clearance process? Competition is regulated by Law 10 of 2007 Regarding the Protection of Competition. Article 4 of the Competition Law provides that any ‘agreements, contracts, practices or decrees, which are harmful to free competition, are prohibited’ and persons in a ‘control position’ are further prohibited from engaging in certain enumerated transactions that are considered anti-competitive, or abuse their control position. A control position is defined in the law as a: ‘position through which a person or a group of persons, that work with each other directly or indirectly, can control the products market. This is through possessing more than 35% of the volume of the intended market’. The law further regulates mergers and acquisitions that could potential affect free competition. Article 8 provides for the requirement of any persons or entities engaging in merges or acquisitions that will lead to a control position or increase an existing control position, to notify the Competition Authority who will examine the proposed action and either permit or reject the same. This review will cost the applicant 0.1% of the paid capital or total value of the assets in question up to a maximum amount of KD100,000 ($353,000).


The Competition Authority established under Law 10 of 2007 has been recently established, and given its infancy, it is yet to be seen how effective this body will be.


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IFLR REPORT | FOREIGN DIRECT INVESTMENT 2014


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