KUWAIT: The new Companies Law No. 25/2012 has brought in some changes, which seem to be complex but have solved many issues that were not addressed by the past law, due to which it was not previously possible to resolve many conflicts that reached the court. Now, companies need to make some changes in their status so as to comply with the modified law.
For instance, the new law has regulated not only the transfer of promissory notes into shares but also electronic underwriting, thereby legalizing the transactions of Islamic companies. Other changes have been incorporated into the new law, too, in order to simplify it. The procedure of establishing a company depends on the type of the company.
Basically, there are three categories of companies: Individual Establishments, Personal Companies, and Shareholding Companies.
The second category comprises three subcategories: Joint Liability, Simple Recommendation, and With Limited Liability (WLL).
The third category has two subcategories: Closed Sharing companies and General Sharing companies. All companies have to apply for registration at the Ministry of Commerce.
Each category of company engages in about 1,000 different commercial activities. "The most significant factor while establishing the company is the limit of capital required to establish the company, which differs according to the activity it engages in.
Companies falling under the first category usually require at least KD 3,500. Those under the second category need a minimum of KD 10,000 now, while previously the figure was KD 7,500. And for companies belonging to the third category, the minimum required capital has been decreased from KD 250,000 to KD 150,000, because license is now only issued for 'General Trading' and not 'General Trading and Contracting', as was the case in the past," Mohammed Al-Raamzi from the Ministry of Commerce told the Kuwait Times.
The latest changes affect companies under the three categories in many other ways. "For instance, the individual establishment should be established by only one person, who is either retired, or is a housewife, or is an employee working in the private sector and is a Kuwaiti more than 21 years of age.
The applicant can apply for a license to found such an establishment at any branch of the Ministry in the different governorates. But Personal Companies and Shareholding Companies can only apply at the Ministry's headquarters," added Al-Raamzi. The responsibility for losses also varies among the companies. "At a Joint Liability company, all partners share the losses, while in case of 'Simple Recommendation company', only the manager carries the responsibility. And in the case of a WLL company, only the company carries the responsibility, so the personal property and bank accounts of the partners remain safe," he further said.
Any company should have at least two partners, of which at least one should be Kuwaiti. "The company with all Kuwaiti partners can choose the percentage of sharing for each partner. For the companies with mixed partners, the Kuwaiti partner should own at least 51 percent of the company. The Kuwaiti partner can't be working in the public sector. The manager should always be Kuwaiti, but a non-Kuwaiti can replace him later after the company is established. Also for the Simple Recommendation company, at least one of the partners should be a minor, that is under 21 years of age," Al-Raamzi explained.
Certain commercial activities are exclusive to citizens, such as those in the field of media or real estate. Even GCC citizens are not allowed to own companies engaged in these activities. Foreign companies are not allowed to launch new branches in Kuwait. "GCC companies can open a branch only after fulfilling certain conditions: Their founding contract must be at least three years old and all their partners should be from the GCC. Foreign companies can open their branches through partnership with a Kuwaiti individual or a Kuwaiti company, with a maximum shareholding of 49 percent as in the case of founding a company," Al-Raamzi stated. "Applicants should bring along the rent contract and the proof that rent is being paid for the place where the company will be operating from.
They will also have to bring the electronic number of the company. Foreign partners should also bring an approval from their sponsors for establishing a company and also a copy of their work permit from the sponsors. After signing the agreement, they choose a name for the company. Then, they must get an approval from the municipality of their location.
Also, if any of the partners had debts, they should clear it and get an approval from the Ministry of Interior - which can be done online. Then they get an official letter from us and deposit the capital at the bank account, which is frozen for a few days until the license is issued," concluded Al-Raamzi.
© Kuwait Times 2013
