Kuwait Business Registration

Starting a business in the State of Kuwait without proper guidance is quite challenging. One must do thorough research on the country’s trade and investment policy, legal and regulatory requirements, employment matters, tax laws, and regulations. Many foreign companies prefer to have an Agency Agreement with the local Kuwaiti company in order to minimize business setup expenses. It should be noted that any income received as a result of agency operations in Kuwait are subject to corporate tax.

Companies in Kuwait are established under the Commercial Companies Law (CCL). The liability of the shareholder is limited to the extent of the capital invested by the shareholder in such companies. One of the major rules in setting up a business in Kuwait is that the foreigner must have a Kuwaiti partner. The Kuwaiti partner holds at least 51% of the business. The Foreign Direct Investment Law No. 8/2001 allowed foreign companies to incorporate as Kuwaiti companies without having a Kuwaiti partner.

Foreign Company Branches

Under Kuwait laws, a foreign company is not permitted to establish a branch in Kuwait or engage in commercial activities except through a Kuwaiti agent. (Exception: The foreign company has approval from KDIPA or it is a GCC company).

The requirements of establishing a company under KDIPA in order to successfully run entirely foreign-owned Kuwait company are quite difficult to be met. We recommend this form of the business establishment to a big “high-value” corporations.

Kuwait LLC (WLL)

This type of company requires the appointment of at least 1 director who can be of any nationality, but who must have a valid residence of Kuwait and a Kuwaiti national holding 51% or GCC shareholder. Foreign shareholding is restricted to 49%.

This type of Joint Venture in the state of Kuwait is used for trading and manufacturing business activities.

A limited liability company can commence business upon obtaining a trading license from the Ministry of Commerce and Industry. The limited liability company is not permitted to engage in banking, insurance activities, or act as a pure investment fund. The activity of this company is regulated by its Memorandum and Articles of Association and it is required to have a minimum share capital as provided in its articles which must all be taken up at incorporation. The minimum number of shareholders required to make up establishment is 2 and the maximum is 30.

A legal registered address is a must.

A business license is required for the purpose of conducting business and other commercial activities in Kuwait. The Ministry of Commerce and Industry of Kuwait issues this kind of license for general trading, contracting, importing, and industrial activities. Other ministries regulating specific commercial activities might issue a different license along with the one issued by the Ministry of Commerce and Industry.

These licenses are usually issued for a defined duration and are renewable.

Joint Stock Company (KSC/JSC)

A shareholding (joint-stock) company (KSC) must be of Kuwaiti nationality. Shares of KSCs are freely transferable. A Joint Stock Company may be Private, i.e. Closed (its shares are not listed on the Kuwait Stock Exchange) or Public. In the case of an open Kuwait Joint Stock Company, Amiri decree must also be issued before setting up a company. Foreign investors cannot take up more than 49% of the share capital of the company except where the company is licensed under the Foreign Direct Investment. This option is great for big projects which will be financed by raising funds through third-party investors. It is also can be used for Initial Public Offering plans since an open JSC can be listed on the Kuwait Stock Exchange. Joint-stock companies must have a minimum of 5 shareholders and its founders are required by law to subscribe to at least 10% of the capital in the case of public joint-stock companies. Closed joint-stock companies do not offer their shares by a public subscription and are incorporated by an official document issued by the founders.

A shareholding (joint-stock) company must be incorporated in Kuwait and should have its registered office in Kuwait.

Approval from the Ministry of Commerce and Industry must be obtained before initiating registration procedures for the KSC wherein the foreign shareholders are proposed to own the shares of such KSC.

Kuwait Joint Ventures (KJV)

Foreign contractors involved in major projects in Kuwait quite often form a joint venture for the purpose of the specific contract. A joint venture usually transacts business through its individual partners.

Transactions with third parties under the JV is not binding on other partners of the JV unless the company dealt with the third party as a company. In this case, the partners are responsible whether or not they were personally involved in the transaction.

If a non-Kuwaiti partner intends to transact any business on behalf of the Kuwaiti JV, she/he must obtain an Authorization from the Kuwaiti partner.

A joint venture is an entity formed by two or more natural or legal persons who are jointly and severally liable. The major aspects of the JV:

It does not have legal existence;
It does not need to be recorded in the commercial registry of the Ministry of Commerce and Industry;
The partners of the Kuwaiti JV must be separately registered in their own names;
The contract defines the objects and terms of the joint venture. This form of business structure is usually used to carry out construction projects;
In the event the joint venture involves a foreign partner, then the entity conducts operations through the trade license of the Kuwaiti member of the joint venture

Partnerships

The Commercial Companies Laws of Kuwait allows two types of partnerships in Kuwait:

General partnership: An association of two or more persons who are jointly liable for partnership debts to the extent of their personal wealth;
Limited partnership: Has two types of partner i.e. general partners with Unlimited Liability and limited partners with limited liability. Such partnerships take the form of a separate legal entity and may transact business in its own name.

Conducting business in Kuwait through an Agent or Distributor

Contract Agency Agreement

The local agent undertakes to perform the below tasks as set forth in the agreement:

a. Promote the principal’s business on an ongoing basis in the territory;

b. Enter into transactions in the name of the principal in consideration for a fee;

Distributorship Agency Agreement

The local Kuwaiti agent may act as the distributor of the principal’s products in a defined territory in consideration for a percentage of the profit. Distributors are engaged in the promotion, import, and distribution of the products of their principal.

Commission Agency Agreement

Local Kuwaiti agents may act in their own name for the on behalf of the principal and are paid commissions from sales.

Representative offices

The purpose of these offices is to develop market studies and production potential without engaging in actual business activity or the business of commercial agents. Fees of a commercial representative may be paid as a fixed regular amount, a commission, or a percentage of profits.

The minimum share capital requirements to establishing a WLL, KSC, KSC varies depending on the activities of the company and are prescribed by the Ministry of Commerce.

A company incorporated in Kuwait and Gulf Corporation Council (GCC) countries (i.e. Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates) which is wholly owned by GCC citizens is not subject to corporate income tax in Kuwait. GCC companies with foreign ownership are subject to taxation to the extent of foreign ownership.

Our firm is able to complete Kuwait 51% LLC registration by

selecting the most favorable structure for Your business activities in Kuwait;
securing pre-approval reserving a company name;
after pre-approval, preparing a company incorporation application

In accordance with the Kuwait company law, a Kuwait 51% LLC company shall as from the date of its incorporation have a legal registered office in Kuwait, to which all official Government communications may be addressed.

In accordance with the Kuwaiti legislation, each entity must register with the Ministry of Labor, the Ministry of Social Affairs and Employment, with the Ministry of Finance.

Why use local lawyers vs international relocation and “business setup” companies?

We focus on business registrations in the State of Kuwait, and our offices are in downtown Kuwait whereas most of the companies that offer these services are outside of Kuwait.

We have established LLC's in Saudi Arabia, Kuwait, United Arab Emirates, Oman.

If you are thinking of establishing a business a Kuwait, email us about your business, the purpose of setting up a business in Kuwait, your contact details and one of our lawyers will be in touch with the quote.