The much-anticipated law which removes significant restrictions on foreigners doing business in Kuwait was finally published earlier today as Law 1 of 2024.
Under this new Law, Article 24 of the Law of Commerce and Article 31 of the Tenders Law have been amended to provide that, as exceptions to the restrictions in Article 23 of the Law of Commerce (i.e. the restriction on foreigners from doing business save with a Kuwaiti partner who has a 51% interest in such business):
- A foreign party may now establish a Kuwaiti branch (under the amended Article 24 of the Law of Commerce).
- A foreign party appropriately registered as a service provider/contractor may participate in Government tenders directly and without a Kuwaiti agent/partner (under the amended Article 31 of the Tenders Law)
Significantly, the amendment only provides for a foreign party establishing a branch; it does not address the incorporation of a wholly owned Kuwaiti subsidiary company (as addressed under the Foreign Direct Investment Law 116 of 2013). However, there are structuring options available that would help ring fence the liability arising from operating a branch and would obviate the need for establishing a Kuwaiti subsidiary company. We also expect regulations will be issued to address how such a branch is established including possible requirements which may apply (e.g. akin to what is currently required from GCC companies who seek to establish a branch in Kuwait).
Further, a question arises as to whether the existing rules that apply to foreigners for registration with the Central Agency for Public Tenders would suffice or whether the branch of the foreign entity should be established and licensed on the Kuwaiti commercial registry prior to such participation in tenders.
There are a host of pertinent questions but these developments are ushering in a new dawn for foreigners seeking to do business in Kuwait and would only make Kuwait a more competitive and attractive investment destination.
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