Therefore, to keep pace with the economic developments around the world and attract the largest number of international companies, the legislations related to foreign investment had to be investigated. In this light, it was noticed that there were legislative shortcomings that led to Kuwait’s lack of attracting giant foreign investments. Some changes had to be introduced to create opportunities for global investors, which would be an essential complement to the state’s budget in its development revival.
Prior to the Commercial Law’s modification in 2024, international businesses had to work with a Kuwaiti partner or entity that owned at least 51% of the company’s shares and to operate through a local agent. Under the Commercial Law, these agents are given preferential treatment when it comes to ending the agency connection and other issues that can deter foreign investment. As an exception, 100% foreign ownership was permitted in the case of Kuwait Direct Investment Promotion Authority free zone (for example in the case of hospitals and insurance).
Now, the modified article stipulates that “as an exemption from the provisions of article (23) clause (1), a foreign company may establish its branch in Kuwait and commence business therein without the need for a local agent” (Law (1) of 2024 amends Article 24 of the Commercial Law and Article 31 of the Public Tenders Law). This amendment gives foreign companies the option to have a Kuwaiti agent or not to have a Kuwaiti agent (100% foreign owned) if they decide to begin their business or open a branch in Kuwait.
The promising consequence of such an amendment would be the encouragement of foreign investors to launch a company in Kuwait for the following reasons:
Firstly, the non-requirement of a local sponsor would mean that investors would have maximal control over the company’s decisions, image and operations. Having such an amount of flexibility and independence would be attractive for foreign investors.
Secondly, investors would also observe a reduction in their companies’ setup costs, which makes it tempting to launch a business in such conditions.
Additionally, having to find an agent that shares the same values and ideas as the foreign investor is time consuming and tricky. Therefore, not being required to do so increases the simplicity of opening a business.
To conclude, recent legal reforms depict the Kuwaiti parliament as an entity that takes into consideration the barriers that used to stop foreign investors from entering the Kuwaiti market. In Kuwait’s race against the clock to meet its aspirational 2035 Vision, such pro-investment measures form a solid ground for the flourishment of the economy.
BY Egli HAXHIRAJ, Anamaria MESHKURTI, Jonida GJUZI and Noor ALI
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