Introduction to Kuwait Business Registration
It is very difficult to start a business in Kuwait without knowing all Company Formation details on the country’s trade and investment policy, legal and regulatory requirements, employment matters, tax laws, and regulations.
In Kuwait Company Formation is possible under the Commercial Companies Law (CCL) where the liability of the shareholders are limited to the extent of share capital invested by them.
Without having a Kuwaiti sponsor, one can’t form a company in Kuwait. The Kuwaiti partner must hold at least 51% of the business shares. Without having a Kuwaiti partner,a foreign company can incorporate a Kuwaiti company as perThe Foreign Direct Investment Law No. 8/2001. But it is highly restricted under Kuwaiti law and, therefore, only recommended for big multinational corporations.
Steps to start a business in Kuwait
- Have a local (51%) partner
- Establishment of a business in Kuwait;
- Kuwait License Registration
Company Legal Structures in Kuwait
- Limited Liability (W.L.L – With Limited Liability)
- Branch Office
- Commercial Agency
- Representative Trade Office
- General Partnership Company
- Limited Share Partnership Company
- Holding Company
- Public Share Holding Company
- Joint Venture
What is Kuwait LLC (WLL)?
In this type of Company Formation, should have at least one director of any nationality, having a proper residence of Kuwait and a Kuwaiti national holding fifty one percentage or GCC shareholder. In this Company Formation, Foreign shareholding is limited to forty nine percentage which means a foreigner can’t ownmajor shares.
This form of Company is commonly using for trading and manufacturing business activities.W.L.L. formation in Kuwait is controlled and managed by the Ministry of Commerce and Industry.
After getting a license for trading from the Ministry of Commerce and Industry, one can commence a limited liability company in Kuwait. This form of Company is not allowed to do business which involves banking, insurance activities, or act as a pure investment fund. The business activities of this form of Company is managed and controlled by its Memorandum and Articles of Association and it is required to have a minimum share capital mentioned in its articles. The minimum number of shareholders required is two and the maximum is thirty.
The shareholder of this form of company is not liable for payment of personal or corporate income tax. However, foreign investor is required to pay corporate tax as per the Kuwait tax laws.
For doing or executing business and other commercial activities in Kuwait, one must have business license.The Ministry of Commerce and Industry of Kuwait is regulating or managing license for the purpose ofgeneral trading, contracting, importing, and industrial activities. For other different licenses, one must approach other ministries which regulates specific commercial activities and are usually issued for a specific period and are renewable.
In Kuwait, without a Kuwaiti agent, a foreigner is not allowedto commence a branch operationor engage in commercial activities. (There may be exceptions based on approvals from KDIPA or a GCC company).
For starting a branch in Kuwait, one has to facemore complicated requirements and regulations from the concerned authority. Companies with origin of Gulf Cooperation Council or companies owned and managed by GCC citizens are the only permitted to open a branch office in Kuwait.
But after getting special approval from the Kuwait Investment Promotion Agency (KDIPA), one can commence their branch office in Kuwait for the following business types.
- A wholly-owned subsidiary in Kuwait;
- A Licensed Branch;
- A Licensed Representative Office.
In Kuwait, one can carried out his activities in one of the following forms:
- A joint venture
- Establishing a Kuwaiti company
- By a Commercial agent, under registered Kuwaiti agent sponsorship
- Through a Commercial representative, under the sponsorship of a commercial representative
It is very difficult to successfully run entirely foreign-owned Kuwait Company after meeting all the requirements of establishing a company under KDIPA.This form of Company is most suitable for big corporate bodies.
Joint Stock Company (KSC/JSC)
Only Kuwaiti nationality can form this type of company. Shares of KSCs are freely transferable. Foreign investors cannot take up more than forty nine percentage of the share capital of the company except where the company is licensed under the Foreign Direct Investment. Joint-stock companies must have a minimum of five shareholders and its founders are required by law to subscribe to at least ten percentage of the capital in the case of public joint-stock companies.
Before starting registration procedures for the KSC,approval from the Ministry of Commerce and Industry must be obtained.
As the shares of the KSC will be listed on the Kuwait Stock Exchange, the Kuwait Stock Exchange must be informed in cases where the shareholding of any single shareholder reaches five percentage of the total issued capital and when the shareholding consequently changes.
Kuwait Joint Ventures (KJV)
This form of company is commonly useful for a specific contract by foreign contractors of major projects in Kuwait.
The roles and responsibilities of a joint venture are as per the contract or agreement, or the Memorandum of Association.
A joint venture is an entity designed by two or more natural or legal persons who are jointly and severally liable. The major aspects of the JV:
- It does not have legal existence;
- Recorded in the commercial registry of the Ministry of Commerce and Industry, is not required;
- The partners of the Kuwaiti JV must be registered in their own names;
This entity can be set up within 1.5 months and requires a local Kuwaiti partner holding 51% of the shares. Foreign ownership is limited to 49%.
In this form of company also requires the appointment of at least 1 director of any nationality but must hold a Kuwaiti residency permit.
A legal registered address is a must.
There are two types of partnerships in Kuwait as per Commercial Companies Laws:
- General partnership: An association of two or more persons who are jointly liable for partnership debts to the extent of their personal wealth;A business should have at least two partners.
- Limited partnership: In this form, there are two types of partner i.e. general partners having Unlimited Liability and limited partners with limited liability. Such partnerships enjoys a separate legal entity and can transact business in its name.
There can be both limited and general partners. But for making investment, limited partner is required. But general partner is responsible for handling business activities and have unlimited liability towards the business. Terms of work, responsibilities and P & L sharing depend on the arrangements between the partners.
Establishment of Holding Company
A Holding company in Kuwait is started in order to manage and own other business in Kuwait.
Kuwait Shareholding Company (Public Shareholding Company)
This form of company is a public shareholding company in Kuwait. In this company form, they issue public share offers for ownership. For starting a Kuwait Shareholding Company, Approval from the Ministry of Commerce and Industry is compulsoryand must have at least three board of directors.
Contract Agency Agreement
The local agent undertakes to execute the below tasks as set forth in the contract:
- Boost up the principal’s business on an ongoing basis in the region;
- Execute transactions in the name of the principal in consideration for a fee;
A foreign business may appoint a local agent for issuing goods or engaging with local customers. A Kuwaiti citizen or a Kuwaiti company can be the local commercial agent. A signed contract between the parent company and the commercial agent is compulsory.
Distributorship Agency Agreement
Distributor of the principal’s products may be of Local Kuwaiti. They will enter into business activities in a defined region. They will charge a percentage of the profit as consideration. They are responsible for promotion, import, and distribution of the products of their principal.
Commission Agency Agreement
In this company type, local Kuwaiti may act in their own name and on behalf of the principal. They will be paid commissions for sales. The principal’s name will be revealed only after getting their consent.
About Representative offices
This form of company is mainly concentrate to improve market studies and production potential without engaging in actual business activity or the business of commercial agents. Fees of a commercial representative may be paid in the form of fixed regular amount, a commission, or a percentage of profits.
Based on the activities of the company,the minimum share capital requirements for establishing a WLL, KSC, KSC differs and are approved by the Ministry of Commerce.
The incorporation of KSC naturally can take six months to complete. A WLL may be set up earlier.
Both Foreign companies and investors can open representative trade offices in Kuwait to carry out their company activities but not allowed to make profit.
According to the Kuwait organization law, a Kuwait 51 rate LLC organization will as from the date of its joining have a lawful enlisted office in Kuwait, to which official Government communications may be addressed. We can support your company with securing a Kuwait office address with the best lease terms.
Your company will be responsible for paying monthly rental to the landlord.
In accordance with the Kuwaiti rule, each unit must register with the Ministry of Labor, the Ministry of Social Affairs and Employment, with the Ministry of Finance.
Corporate tax in Kuwait is a flat fifteen percentage.
What do our legal services include?
- We assist in selecting the finest company structure in Kuwait;
- Help you to set-up business in Kuwait according to your requirements;
- Make sure timely submission of essential documentation to avoid interruptions in processing;
- Help with the issuance of needed licenses for your new undertaking in Kuwait