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Incorporation

Setting up a company in Kuwait

When setting up a company you may want to consider these factors:

  1. Business Factors

    From 2014 to 2015, Kuwait made starting a business more difficult by increasing the minimum capital requirement and by increasing the commercial license fee. On the other hand, in 2016 Kuwait made starting a business easier by reducing the minimum capital requirement.

    Kuwaitis characterised by a complex business environment, which requires flexibility, patience, and persistence. Many exporters and investors in Kuwait are challenged by inconsistent, sometimes contradictory policies, lack of transparency in decision-making, reversal of tenders once awarded, and a judiciary that heavily favors the local population.

    On top of that, the government does not implement anti-corruption laws effectively, and public officials reportedly engage in corrupt activities with impunity.

    The State of Kuwait, however, is undergoing significant expansion in the building and construction industry and the traditional import sectors of automotive, oil and gas, computers/ICT, telecommunications equipment and construction equipment remain strong.

  2. Religion

    Islam is practiced by the majority of Kuwaitis and governs their personal, political, economic and legal lives. Despite over 95% of the population are Muslim, Kuwait is known for its religious tolerance.

  3. Ethnicity

    There are different types of ethnicities in Kuwait that must be considered while doing business, such as Kuwaiti 45%, other Arab 35%, South Asian 9%, Iranian 4%, other 7%.

Your Options

In 2012, the companies law in Kuwait, was updated providing a more realistic and practical perspective than the previous companies law.

In addition, the Companies Law provides more types of companies that can be established in Kuwait, such as:

  • company with limited liability;
  • shareholding company (public and closed);
  • limited partnership or;

Each of these business forms has distinct advantages and disadvantages, as well as differing scope of business activities, registration requirements and minimum capital requirements.  In most cases it will depend on the degree of commitment a company has to Kuwait and the planned business activity.

Limited Liability Company

This is the most common corporate entity in Kuwait, and the main route adopted by foreign companies or investors to enter the market.

Register at the Department of Companies of the Ministry of Commerce and Industry (MOCI)

To register, the entrepreneur must submit a completed standard application form to the Department of Companies of the Ministry of Commerce and Industry (MOCI), accompanied by the following documents:

– Copy of the entrepreneur’s identity card (ID)

– Certificate issued by the Social Security Authority attesting that the Kuwaiti partners are not civil servants

– Lease contract, a receipt of rent payment, and a certificate from the Public Authority for Civil Information (PACI) confirming that the premises are registered with PACI.

The completed application have to include the following:

  • names of the founding partners and their respective shares;
  • the capital, scope and objective of the company; and
  • the name of the manager.

Once the application is approved, it is stamped and signed by the Department of Companies, and allocated a reference number. The MOCI electronically sends an inspection request to the Municipality to proceed with the inspection of the company premises at the relevant point of incorporation process and a request to the Ministry of Interior to run background checks verifying that the founding partners do not have a criminal record.

Reserve a unique company name  

The entrepreneur submits a company name reservation application to the Commercial Registry. The Commercial Registry searches the computer database to ensure that the proposed company name does not already exist or resemble other reserved names.

The Commercial Registry has certain guidelines to follow with respect to the company name selection, such as: the chosen name must not be in breach of “public morals.” Once approved, the Commercial Registry issues a letter confirming the proposed name and reserves it for 3 months.

Retrieve the letter addressed to the bank from the Department of Companies

The entrepreneur must return to the Department of Companies to retrieve the necessary letter addressed to the commercial bank of choice where the paid-in capital of the company will be deposited.

The Department of Companies may further issue additional letters addressed to different government authorities depending on the scope and activity of the company in order to obtain their approval of the company formation. For example, for restaurants and food establishments, a letter addressed to the Ministry of Health is issued; for the oil industry, a letter addressed to the Ministry of Oil and Energy is issued, and so forth.

Deposit the capital at the bank and obtain proof thereof

In deference to the Department of Companies’ letter, the bank opens an account in the name of the company with the term “under formation” annexed to the account. The deposited capital remains frozen until the bank receives the notarized deed of incorporation and the commercial license of the company, following which the term “under formation” is removed and the account is activated. The bank issues a deposit certificate in the name of the company addressed to the Ministry of Commerce and Industry, detailing the amount deposited by each partner against his/her share in the company.

Receive inspection of the company premises by the Municipality

Once the municipality receives the request for inspection of the company premises from the Ministry of Commerce and Industry, it contacts the entrepreneur to schedule an inspection date in order to verify that the premises comply with municipal health and safety regulations. This includes an inspection by the Fire Department to check for compliance with fire regulations. If the company premises successfully pass inspection, the municipality issues a certificate of no objection in the name of the company, allowing the use of the indicated premises as the company location. This process usually takes 5 to 14 days.

Obtain the approval of the memorandum of association from the Department of Companies

The entrepreneur proceeds to the Department of Companies to submit the draft memorandum of association. If the entrepreneur does not use the standard form of the memorandum of association, the amendments or additions to the standard memorandum must be accepted by the MOCI before it approves the company incorporation. Once the final draft is signed, the Department of Companies issues a letter addressed to the Ministry of Justice (MOJ) requesting the authentication of the company incorporation, accompanied by the draft memorandum of association.

Notarise the memorandum of association before a public notary

The entrepreneur submits the draft memorandum of association along with Department of Companies’ letter and the bank capital deposit certificate to the Notary Public Department at the Ministry of Justice. The officer verifies that the required documents are complete and schedules an appointment for signing before the notary public at the Company Formation Department of the Ministry of Justice, during which the memorandum of association is signed by the founding partners and notarised on the set date in 3 originals: one for the company, one for the Ministry of Justice, and one to be field with the Ministry of Commerce and Industry.

Register with the Commercial Registry

The entrepreneur files a signed and notarised copy of the memorandum of association at the Department of Companies of the Ministry of Commerce and Industry. A copy thereof is then submitted to the Commercial Registry and a certificate of registration is obtained. The certificate of registration includes the company’s full name and commercial registration number.

Obtain the commercial license from the Department of Companies

Once the commercial registration certificate is issued, the entrepreneur obtains the commercial license from the Department of Companies.

Register with the Kuwait Chamber of Commerce and Industry

The company must apply for membership at the Chamber of Commerce and Industry by submitting copies of its commercial license and memorandum of association, and filling out a specimen signature form signed by the company’s authorised signatories. The membership is a pre-requisite to dealing with other government authorities, banks and participation in public tenders.

Register with Public Authority for Civil Information (PACI)

The company must register with the Public Authority for Civil Information (PACI) in order to obtain a civil number, which is required in dealing with other governmental bodies.

Register at the Ministry of Labor and Social Affairs

The Ministry of Labor may inspect the premises to determine whether the size of the company premises and its business scope are commensurate with the number of employees declared at the Ministry.

Processing Time: Approx. 1 month

Cost: KWD 323 (Approx. USD 1,000)

Shareholding Company

Shareholding companies are either public or closed. They must be composed by at least five shareholders. The Kuwait shareholding company (SAK or KSC) is similar to a common law limited liability company, with a board of directors and share certificates.

It can engage in any form of activity, but has a higher capital requirement of KWD 100,000 or more. Foreigners are allowed to participate in the formation and ownership of public shareholding companies within the 49% limit indicated above, except where 100% ownership is permitted in accordance with the foreign direct investment law. The founders of a public shareholding company are required to subscribe to at least 10% of the capital.

(SAKC or KSCC) are joint stock companies that do not offer their shares to the public. Regulations concerning foreign participation in such companies are broadly similar to those applicable to Kuwait shareholding companies.

On a different note, a closed shareholding company may take the form of a holding company (sharika qabida ) in accordance with law number 117/1992. A holding company may own shares in Kuwaiti and non-Kuwaiti companies, including limited liability companies and may take part in the founding of such companies, provide loans to them and guarantee them against third parties in accordance with limits specified in the law.

Incorporation Process (Public)

  • Prepare and submit an application stating the activities to be performed to the MOCI,
  • MOCI would communicate advice to the:
    • Legislative,
    • Ministry of Councils,
  • Promoter’s would deposit 30% of the capital,
  • Publish the Articles of Incorporation and Articles of Association in the official Kuwait Gazette,
  • Obtain promoters signatures on Articles of Incorporation and Articles of Association,
  • Start public subscription and allotment process,
  • Issue of share certificate,
  • Manage the General Assembly of the newly incorporated company.

Incorporation Process (Closed)

  • Prepare and submit an application stating the activities to be performed to the MOCI,
  • Promoter’s and shareholder’s would deposit capital,
  • Prepare and submit the Articles of Incorporation and Articles of Association to the MOCI,
  • Obtain signatures of promoters and shareholders on the Articles of Incorporation and Articles of Association,
  • Publish the Articles of Incorporation and Articles of Association in the official Kuwait Gazette,
  • Issue of share certificate,
  • Manage the General Assembly of the newly incorporated company.

Processing Time: If a licence is granted, incorporation typically takes six months.

Partnership

The Commercial Companies Law also governs the formation of partnerships, both general and limited. A general partnership is an association of two or more persons formed under a specific name to carry on commercial business. It has a separate legal personality, but its members are jointly and separately liable for its obligations to the extent of their entire personal property.

There are two types of limited partnership: the simple limited partnership and the partnership limited by shares. A simple limited partnership consists of joint liability members (general partners), who are jointly and separately liable for the partnership debts to the extent of all their assets, and sleeping members (limited partners), who are liable only to the extent of their respective contributions. A partnership limited by shares is a limited partnership whose capital is divided into shares. Members are generally subject to the same rules as shareholders in a shareholding company.

Branch

Foreign corporate bodies are not entitled to set up a branch in Kuwait (except in specific cases where the foreign corporate body has obtained an approval from KDIPA). If the foreign corporate bodies do not wish to do business in Kuwait through a participation in a shareholding company or a limited liability company, it can engage in business in Kuwait only through a Kuwaiti commercial agent or a Kuwaiti service agent (as explained below).

Under the CCL a branch is not a recognised legal form for foreign investors. It should be noted however that for the purpose of tax filing and certain other practical purposes, it is convenient to refer to Kuwait operations of foreign corporate bodies as “branch” operations.

Outsourcing Employment Through a GEO Employer of Record Service

Whether to incorporate in Kuwait, and what sort of entity to setup are just two of the many choices companies must make when expanding into a new market.

If the company intends to have staff in Kuwait they must also decide whether they will administer that employment internally or use a Global Employment Organization to handle payroll and Employer of Record responsibilities.  A GEO Employer of Record solution is an attractive alternative where

– the company is looking to setup an office quickly

– the company wants to work within a defined budget

– the company wants to limit its initial commitment in Kuwait

– the company needs help with tax, employment, immigration and payroll compliance in Kuwait

The complexity of employment regulations in Kuwait makes the use of a GEO advisable coupled with local legal counsel to ensure full compliance with employment laws, for example the drafting of local contracts for workers.

Shield GEO provides a comprehensive service in Kuwait allowing companies to deploy their staff quickly with reasonable, clearly stated costs and timeframes. The company contracts directly with Shield to employ and payroll their staff on their behalf in Kuwait.

Shield GEO then becomes the Employer of Record. Shield GEO assumes the legal responsibility for these employees, sponsoring them on work permits, complying with local employment law and running their monthly payroll. Using Shield GEO is the fastest and most cost effective way to deploy local and foreign workers into Kuwait. Read more about outsourced employment through Shield GEO.

Kuwait

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