Exceptions (Disclosure) and Compliance Requirements in Kuwait by Lawyer Abdulrahman Alhouti

As part of the Kuwaiti government’s accelerated steps towards economic reform and removing obstacles for foreign companies operating in the Kuwaiti market, it recently reviewed the ministerial decision that requires companies registered in the country to disclose their beneficial owners in compliance with international agreements on anti-money laundering and counter-terrorism financing.

In this context, the Minister of Commerce and Industry issued a decision exempting companies listed on local and international stock exchanges, along with their subsidiaries, from beneficial ownership identification procedures. This provides the necessary legal flexibility to support the state’s efforts in encouraging foreign investments, considering that these types of companies are already subject to disclosure requirements that ensure sufficient transparency regarding the true ownership of the company or commercial establishment.

Based on the ministerial decision, the exemption framework from beneficial ownership disclosure does not include unlisted foreign companies. Foreign companies operating in Kuwait that are not listed on local or international stock exchanges are still required to identify their beneficial owners, as well as their subsidiaries that are not majority-owned by a listed company on any of these exchanges.

Disclosure requirements also apply to private companies without qualifying foreign government ownership stakes for exemption, mixed companies where foreign governments hold minor shares, companies not licensed under the Direct Investment Promotion Law (16 of 2013), and investment entities licensed under the aforementioned law that have not previously submitted beneficial ownership data, making them subject to disclosure procedures.

Regarding branches of foreign companies operating in Kuwait that are neither listed on local or international exchanges nor subject to any international disclosure systems, they are legally required to comply with disclosure procedures and reveal beneficial ownership identity.

As for legal obligations on foreign companies that do not fall under exemption categories, they must submit beneficial ownership data according to the guidelines set by the Ministry of Commerce and Industry. Delayed compliance may result in escalating legal measures, ranging from financial penalties to procedures affecting their operational continuity in Kuwait.

It is worth noting that Kuwait, through its reform decisions in this aspect, seeks to balance meeting international agreement requirements in anti-money laundering and counter-terrorism financing, including monitoring beneficial ownership in investment institutions where owners might attempt to hide behind nominal beneficiaries, necessitating companies to disclose actual beneficial ownership to prevent the use of formal ownership structures to conceal true identities.

Implementing these legal procedures achieves several positive aspects related to enhancing transparency and increasing trust among all parties in commercial operations, which leads to long-term improvement in the business climate within the country.

The Kuwaiti government has been keen to exempt foreign official entities and companies that already disclose information due to their classification as listed companies on exchanges, as the state doesn’t require additional disclosures from these companies. This aims to avoid potential negative impacts on the foreign investment environment and prevent the decision from hindering external financial and investment flows into the country, which is one of the prominent goals announced within Kuwait’s Vision 2035 economic framework.

Abdul Rahman Ibrahim Saad Alhouti is a distinguished lawyer and managing partner at one of Kuwait’s leading law firms.

With extensive experience litigating before all Kuwaiti courts, he is also a certified arbitrator by the Ministry of Justice and several prestigious arbitration centers, including the Arbitration Center of the Kuwait Lawyers Association and the Commercial Arbitration Center for the Gulf Cooperation Council States.

He holds a bachelor’s degree in law from Kuwait University (2002), a master’s degree from Middle East University in Amman (2011), and is currently a PhD researcher at the University of Jordan.

Specializing in commercial arbitration and financial and banking dispute resolution, he previously served as a legal researcher at the Ministry of Interior.

He is an active member of numerous international legal organizations, including the International Bar Association and the Arbitration Center of the Kuwait Accountants Association.

Stay informed with the latest legal developments at Global Law Experts