ARTICLES & UPDATES

On November 26, 2023, the Kuwaiti newspaper Al-Qabas reported that the Ministry of Justice had declined to register properties under the names of joint-stock companies with non-Kuwaiti shareholders. This decision is based on Law No. 74 of 1979, Article (8), which prohibits real estate ownership by commercial companies with non-Kuwaiti partners.

When Law No. 74/1979 was issued, it aimed at prohibiting commercial companies with non-Kuwaiti partners, particularly those with a 49% ownership or similar structure. The legislation focused on these companies, excluding joint-stock entities, as, at that time, joint-stock companies were limited to Kuwaiti ownership.

It’s essential to distinguish between a ‘partner’ and a ‘shareholder.’ In a limited liability company, partners actively control the company, unlike shareholders in joint-stock companies. Transferring shares in limited liability companies involves complex processes.

Law No. 20/2000 marked a significant change, allowing non-Kuwaitis to own shares in joint-stock companies. This occurred while Law No. 74/1979 was still in effect, indicating a deliberate exclusion of joint-stock companies from its application.

Non-Kuwaiti ownership of shares is indirect and doesn’t grant direct control over property, with the law mandating immediate property disposal upon company liquidation.

Under the law, non-Kuwaitis are not entitled to own or retain ownership of the property. If ownership is transferred to them during the company’s liquidation, the law requires immediate property disposal, as it cannot be registered in their name. Furthermore, upon liquidation, there is no in-kind distribution of the company’s assets; instead, they are sold and distributed in cash.

The management structure in joint-stock companies differs from other commercial entities, highlighting strict control in joint-stock company setups. The provision of Law No. 74/1979 is intended for commercial companies where non-Kuwaitis might exert more influence over control and management. Joint-stock companies operate as separate legal entities, with founders’ roles diminishing after share distribution.

In conclusion, Law No. 74/1979 was directed at commercial companies with non-Kuwaiti partners, and Law No. 20/2000 was enacted while Law No. 74/1979 was still in effect, suggesting an intentional exclusion of joint-stock companies from its application. Non-Kuwaiti ownership of shares is indirect and doesn’t grant direct control over the property of the company, with the law mandating immediate property disposal upon company liquidation.

For any questions or concerns, please reach out to us at info@arazzaqlaw.com.