Doing business in Kuwait as a foreign, or British Company until recently was pretty simple – strictly speaking you couldn’t... International businesses had to:
• Establish a new Kuwaiti Company,
• Set up a Joint Venture, or
• Appoint a Kuwaiti Commercial Agent or a Kuwaiti Commercial Representative.A Kuwaiti Citizen’s share of the new business has to be no less than 51% (though the share of profits can be split differently). That all changed in 2013 with a new Foreign Direct Investment law allowing for the first time international companies to establish 100% fully foreign owned business in Kuwait and the creation of the Kuwait Direct Investment Promotion Authority (KDIPA). Notable investors in Kuwait under this new law include Microsoft, IBM, Huawei and Selex Galileo. The Kuwait British Business Centre has established a Memorandum of Understanding with KDIPA to handle the investor application process on behalf of UK companies. The Kuwait British Business Centre can also support UK companies choosing to do business in Kuwait via a more traditional route.
Establishing a Company in Kuwait
Limited Liability Company
The quickest and easiest way of setting up a new Kuwaiti company for UK business and individuals is to establish a Limited Liability Company (WLL). The share of a Kuwaiti citizen or Kuwaiti company in the new WLL Company must be at least 51%. The process of forming a WLL is pretty simple and having been through it, KBBC can support you. It takes approximately three months. This type of company offers limited liability, with different levels of liability depending on the company objectives you incorporate under.
Closed Joint Stock Company
UK businesses can also establish a Closed Kuwaiti Joint Stock company (KSC Closed). Only Kuwaiti citizens may be shareholders of a joint stock company. However, the British business may own up to (49%) of the share capital, after attaining approval. KSC Closed companies cannot be established in banking or insurance. The process of forming a KSC Closed company takes up to six months.
Establishing a Joint Venture:
Joint venture companies do not have a legal personality in Kuwait. These companies may not conduct business in their own name. Business has to be done through the Kuwaiti Citizen forming the joint venture. In this case a British Company is personally responsible for the transactions they enter into with any third party. The liability of the transacting partner to the third parties is unlimited. Meanwhile, the liability of the non-transacting partner (the Kuwaiti) is confined to their share in the joint venture. The Kuwaiti partner in the new JV Company must guarantee the transacting partner, if the latter is a non-Kuwaiti citizen. The joint venture partners are exposed to unlimited joint liability, if the joint venture company deals with third parties in its own name. It makes no difference whether the joint venture partners were personally involved in the transaction or not.
Appointing a Kuwaiti Commercial Agent
Only Kuwaiti Citizens may act as Commercial Agents and they are broken down into three specific types.
First Type – Contracts Agency
In this type of agency agreement, the local agent undertakes to do the following under the contract:
a) Promoting the principal’s business on a continuous basis in the territory,
b) Entering into transactions in the name of the principal in return for a fee.
The agency contract must be written. Items of contract must define: the territory covered, the agent’s fees, the agency term, the product or service that is the subject of the agency, and any relevant trademarks. If the agent should establish showrooms, workshops, or warehouse facilities, the contract must be valid for a period not less than five years.
Second Type - Distributorship
Under this agency agreement, the local agent may act as the distributor of the principal’s product in a defined territory and in return for a percentage of the profit.
Third Type – Commission Agency
In this type of agency agreement, the agent concludes contracts in his/its own name. The principal’s name may not be revealed without his consent.
A commercial representative is a Kuwaiti individual or entity engaged by a foreign company to represent its business interests in Kuwait. Usually, the authority of a commercial representative is more limited than that granted to an agent. Fees may be paid as a fixed regular amount, a commission, or percentage of profits. Foreign companies accept full liability for all of the actions of its commercial representative, provided that all the actions are carried out or incurred within the scope of representation.
About the Kuwait British Business Centre
We exist to support and develop UK companies into doing business in Kuwait.
• We run a Subscriber Service, allowing British companies to access the advice of trusted providers here in Kuwait City.
• We offer a fully connected and professional Business Centre Service adjacent to the British Embassy for use by British Companies for a day, a month or a year.
• Our Trade Services offer more information or support in your specific sector whether that’s market research, support for a market visit of a list of distributors, agents or potential partners. For more information please see our website www.kbbcentre.com