Kuwait’s business environment is both dynamic and adaptable. Kuwait’s construction industry is evolving and expanding rapidly, and the new company law provides a more realistic and practical perspective than the previous company code. Kuwait’s commercial rules have changed dramatically in recent years, and it seems clear that this trend will continue.
Legal Structures of Company
The first decision to make before starting a business in Kuwait is to establish a legal business structure. For optimum growth, every firm requires a unique business structure. In Kuwait, companies can be formed in a variety of ways, but the most frequent and appropriate company structure for foreigners is the “Limited Liability Company.” Aside from this corporate structure, Kuwait has several legal business structures by which a company can be established.
- Limited Liability Company
- Branch Office
- Commercial Agencies
- Representative Trade Offices
- General Partnership Company
- Limited Share Partnership Company
- Holding Company
- Public Share Holding Company
- Joint Venture
Limited Liability Company Formation (WLL)
“With Limited Liability” (WLL) is another term for a Limited Liability Company (LLC). A limited liability company has two directors and two stockholders, as well as a local business partner that owns a 51 percent stake in the company. Despite deregulation, foreign entities are still prohibited from owning large shares. The Kuwaiti partner can work for the company as a secretary, manager, or both. The Limited Liability Company (LLC) is the most straightforward and practical company structure, with formation and completion taking only three months.
Branch Offices
A branch office in Kuwait is frequently required for a foreign company. This business structure is appropriate for those in the financial or engineering industries. Only a foreign firm incorporated with another ‘Gulf Co-operation Council’ or owned by a native GCC person can register a Branch Office in Kuwait. Obtaining approval from the Kuwaiti Investment Promotion Agency (KDIPA) is another route to building a branch office in Kuwait.
Commercial Agencies
The best option for establishing a legal presence in Kuwait is to use a commercial agency. Kuwait’s Commercial Agency Law No. 36 of 1964 rules and specifies how to conduct business in Kuwait. This business form is for people who do not want to have Kuwaiti stock in their company or make further business investments. A commercial agent in Kuwait is required to represent and work on behalf of its parent company or a foreign company. A Commercial Agent can help a parent firm promote its products in Kuwait and negotiate on its behalf.
Representative Trade Offices
The Foreign Direct Investment Law of 2013 in Kuwait allows foreign enterprises to establish and register their Representative Office in Kuwait. A Representative Trade Office is not permitted to engage in any profit-generating activity, hence this sort of business structure is not ideal for people seeking monetary gain or profit in Kuwait.
The parent company can only promote its business in Kuwait through a Representative Trade Office. A Kuwaiti national must be selected as RTO’s manager. If the parent firm wishes to increase FDI investment, KDIPA must first get clearance.
General Partnership Company
A general partnership company is a legal corporate structure in which participants have unrestricted liability, which might include their assets. A General Partnership Company must have at least two Board of Directors and Promoters. The maximum number of partners, on the other hand, is unrestricted.
Limited Share Partnership
Foreigners can register a Limited Share Partnership Company in Kuwait under Kuwaiti legislation. A local person should be included as a business partner because this business form requires two or more partners to incorporate a corporation (unless special approval is granted from KDIPA). With the mutual agreement of both or all partners working together in the business, a partnership deed is signed and registered. It covers all information about a partnership business, such as profit/loss share, partner obligations, capital investment, and so on.
Holding Company
A holding company is formed in Kuwait to invest in international or Kuwaiti businesses by purchasing shares, units, or interests; or contributing to the formation of businesses and funding them. A holding company can be formed as a sole proprietorship, a closed shareholding business, or a limited liability corporation.
Public Share Holding Company
Kuwait Shareholding Company is also known as a public shareholding company in Kuwait (KSC). To start a business in Kuwait, a Public Shareholding Company must first get commercial registration. It is a fantastic business alternative for those searching for third-party investment in their company through an IPO (Initial Public Offering). KSC requires a huge quantity of capital investment and a long time to earn acceptable profit margins from the market, hence it’s best for major projects.
Joint Venture
Association in Participation is another name for a joint venture. Joint Ventures are by their very nature simple arrangements that do not require any formal corporate formation. It is controlled by Article 57 of the Kuwait Companies Law. A Joint Venture is not a legal company and cannot operate a business in its name, according to Article 59 of Kuwait Companies Law. As a result, it can only transact with third parties through a single venture that can be held accountable for the actions taken.
