21 Apr 2022
Kuwait is the industrial and business hub in the Middle East and is the wealthiest country with the strongest currency. Due to its strong position in the world and business-friendly environment, Kuwait has become one of the dream destinations for investors and an attractive market for job seekers. It has a vast number of oil reservoirs and companies, and it is striving to expand its businesses outside the oil industry. It encourages international investors to invest in Kuwait, with its appealing legislation with low tax rates such as income tax on foreign-owned companies is only 15% and efficient incorporation procedures. Its diversified business opportunities have provided investors with an environment to be carefree and confident while investing and incorporating companies in Kuwait. For a foreign investor, it is mandatory to have a Kuwaiti partner having shares of 51% for the formation of a company in Kuwait under Articles 23 of the Kuwaiti Commercial Code. Moreover, Article 24 of the Kuwaiti Commercial Code states that a foreign company cannot establish its brunch in Kuwait without a Kuwaiti agent.
However, after enacting Law Number 8 on Regulating Foreign Capital Direct Investment in Kuwait, it has allowed up to 100% ownership for foreign investors in some sectors. There are various types of companies in Kuwait to set up a business such as General Partnership Company, Limited Share Partnership Company, Joint Venture Company, Limited Liability Company LLC (Known as With Limited Liability Company “WLL” in Kuwait) are one of the companies that could be formed in Kuwait.
The Limited Liability Company WLL is the most famous form of companies owned by foreign investors along with a Kuwaiti national partner as a 51% shareholder in the company. For various businesses, there are different rules and requirements for the incorporation of companies. The company registration procedures are complex and time-consuming and it would be best in interest to have legal personalities at your end, who could carry out the required registration formalities. To set up a company in Kuwait, it is a must to get government approval through Kuwait Direct Investment Authority.
To get a business license, the investor is required to apply to the Ministry of Commerce and Industry.
I. The first and foremost step towards incorporating a company in Kuwait is the submission of an application for registration to the Ministry of Commerce and Industry, which takes a day.
II. After application submission, the investor is required to choose a name for his company and submit an application for approval with the Commercial Register.
III. Then retrieve three notes from the Department of Partnerships (DOP) addressed to the bank, the Criminal Investigation Department, and the Kuwaiti municipality.
To create a company to have the capital is a necessary condition; without fulfilling it, it is not possible to initiate the process of company incorporation; one has to show enough capital to set up a business. For this purpose, the investor shall have to deposit the capital in the bank to prove his eligibility to start up a company. The partners’ criminal record is checked and verified by the Criminal Investigation Department to ensure their clean and clear reputation to be a shareholder in a company, and a certificate would be issued in this regard. The investor’s desired company site shall be visited by the Kuwaiti municipality to ensure its feasibility according to the business type and other specific requirements.
After looking into all prerequisites, a certificate would be issued regarding the business premises approval. Subsequently, the investor shall get a Memorandum of Association form from the Department of Partnerships (DOP). Need to sign the Memorandum of Association, get it notarized, and pay a fee of 20 KWD (Kuwaiti Dinar). The Department of Partnerships (DOP) shall issue a license to commence business after receiving a payment of 40 KWD (Kuwaiti Dinar) from the investor. The Chamber of Commerce and Industry issues a certificate of verification of signature for initial registration and yearly membership. The company has to get membership in the Chamber of Commerce and Industry by paying fees up to 130 KWD (Kuwaiti Dinar) for registration and membership. The Investor is required to register his company in the Civil Data Department to obtain a civil number.
Furthermore, it shall open a labor file with the Ministry of Labour and Social Affairs. Foreign Investors can establish a permanent presence in Kuwait by forming and investing in the following companies in Kuwait.
a. Limited Liability Company (WLL)
b. Closed Joint Stock Company (KSC Closed)
c. Joint Stock Company Limited Liability Company (WLL)
Foreign Investors and corporations can establish a Limited Liability Company (WLL) in Kuwait. It requires Kuwaiti citizen shareholders, with 51% shares, to be a partner in the WLL as per Article 191 of Companies Law. The WLL companies are restricted to carry out business in the banking and insurance sectors or to act as a pure investment fund. Forming a Limited Liability Company (WLL) is not complicated; it takes a maximum period of three months to establish a WLL. Limited Liability Companies (WLL) that do not pay taxes are exempted from tax.
Closed Joint Stock Company (KSC Closed)
A closed Kuwaiti Joint Stock Company (KSC Closed) is one of the companies foreign investors can incorporate. In this type of company, the non-Kuwaiti investors can have 49 % of shares after getting approval from the relevant authorities. The rest are to be held by the Kuwaiti citizen as a partner in this company. It is an exceptional kind of Joint Stock Company formed under Articles 68 and Article 94 of the Kuwaiti Companies Law. The KSC closed company is not allowed to carry out activities in the fields of insurance and banking. Taxes are levied on the Foreign investor running KSC closed company; the company is required to contribute 5% to the Kuwait Foundation for the Advancement of Science. It takes up to six months to establish a KSC Closed company.
Joint Venture Company (JVC)
The Joint Venture Company in Kuwait is formed by a venture of two or more persons or entities. The JVCs are formed through contracts, and its formation procedure is easy and straightforward following Article 57 of the Kuwaiti Companies Law. Article 56 of Kuwaiti Companies Law calls joint ventures as Joint Venture Company. Joint Venture Companies do not have any legal personalities as per Article 59 of the Kuwaiti Companies Law; they do not need to register to the Ministry of Commerce and Industry. The JVCs cannot carry out business in their name; they can only conduct business with third parties’ involvement. The joint venture can be performed on the Kuwaiti national’s license if the other partner is a foreigner. After completing all company formation steps and payment of charges and receiving the certificate to commence business activity, a company is all set to start its operation in Kuwait.