Starting a Business in Kuwait

SETTING UP BUSINESS IN KUWAIT

Kuwait is an attractive business venue for most businesses because there are:

• Opportunities for major contracts, particularly in the oil industry.
• Requirement for imported goods, labour and technical expertise.
• Excellent communication and sophisticated trade infrastructure.
• The benefits that rise from having an actively pro-business Government.
• Advantages in the extensive use of English as the language of business.

For many companies the simplicity of operating within a system where taxes are for the most part non-existent, and everything is open negotiations, will have major attraction.

Kuwait’s modern economic history began with the discovery of oil in 1938, and soon after the Second World War, Kuwait became a major oil exporter.

When the oil prices rose in 1973, Kuwait experienced a construction boom that lasted until the early 1980’s. This provided opportunities for foreign contractors and investors. Despite the setbacks caused by the Iraqi invasion in 1990, Kuwait has:

• Commercial and Industrial Ports
• Desalination plants which provide a continuous water supply
• Electric Power Generation and Distribution
• An International Airport
• Roads and Freeways
• Merchant Shipping Fleet
• National Airline
• General and Specialist Hospitals and Clinics
• Schools and Universities
• Public Administration Buildings
• Public and Private Sector Housing
• Shopping Complexes and Office Buildings

International and Local Communication Network, Television and Radio Network and Internet Services

Kuwait is currently concentrating on several important economic goals, all of which are aimed at decreasing dependence on oil revenues, these include:

• Encouraging the private sector to assume responsibility for the economic development of the country. This includes the privatisation of certain Government operations
• The introduction of a Counter Trade Offset Programme

Overseas Investment

For almost two centuries Kuwaitis have been traders, and it is because of this trading background and the presence of an active merchant community in Kuwait that there is a marked tendency to give business preference to Kuwaitis. The economy is dominated by locally owned companies.

There are, however, business opportunities for foreign companies, as it is recognised that a major foreign contribution will be necessary to meet the Government’s objectives. While the intention will undoubtedly be, to retain Kuwaiti control of ventures in which foreign companies are involved, this should not prevent such companies from having profitable operations in Kuwait.

PRIVATISATION

The decline in oil prices had an adverse effect on the economy. A recent World Bank study has strongly recommended that the Kuwait Government should consider the privatisation of many of its agencies. Among the more likely targets for such a programme are:

1. Over 90 petrol filling stations that are owned and operated by the Kuwait National Petroleum Company (KNPC)
2. Some of the services provided by the Ministry of Communication (MOC)
3. The Ministry of Electricity and Water (MEW) facilities

 

The Kuwait Government faces a number of hurdles in implementing privatisation as:

1. Many of the above services are subsidised by the Government and are provided at very low cost to the user.
2. Many Kuwaitis are employed in the target industries and it is almost inevitable that privatisation will bring about job losses

One of the possible routes being proposed for privatisation is to grant concessions to the private sector. This will see marked improvement in service levels.

Limited Liability Company (WLL)

Procedure 1. File with the Department of Partnerships (DOP) at the Ministry of Commerce (MOC) an application to set up the company

Time to complete:

1 day.

Cost to complete:

No charge.

Comment:

To set up the company, the founders must file an application with the Department of Partnerships (DOP) at the Ministry of Commerce and Industry (MOCI). The application form is obtained from the Companies’ Department at the Ministry. This application must indicate the name of the founding partners, the company capital, the percentage of ownership by each partner, the company business, the identity of company management, the company’s scope, duration and business objective. then MOCI stamps the application and give it a number then the director at DOP signs it. As for the submitted documents, these include the Company’s Memorandum of Incorporation, certificate of incorporation, any required resolutions as per the company’s Memorandum of Incorporation requested for the establishment of a new company and any additional documents that might be requested in light of the type and nationality of the Company. In addition, a certificate issued by the social security institution is requested from the Kuwaiti partners in order to verify that they are not civil servants.

Procedure 2. Pick a name for the company and file an application with the Commercial Register in this regard

Time to complete:

1 day.

Cost to complete:

No charge.

Comment:

The founding shareholders must select a company name and file an application with the Commercial Register. If the name already exists or resembles an existing company name, the Commercial Register will inform the applicant and request an alternative name.

Procedure 3. Retrieve from the Department of Partnerships the notes addressed to the bank, the municipality, and the Criminal Investigation Department

Time to complete:

1 day

Cost to complete:

No charge.

Comment:

Upon successfully filing the application for company name with the Commercial Registrar and after having already filed the registration application with DOP, the applicant must go back to DOP to retrieve three notes issued by DOP and addressed to the bank, the Criminal Investigation Department, and the Kuwaiti municipality.

Depending on the scope of the company’s activities, the Companies’ Department issues letters to the founders addressed to the relevant government agency: the municipality, Commercial Bank chosen by the founders for the deposit of the capital, and if the founders are individuals only, the Criminal Investigation Department. Depending on the scope of business, letters are issued in some cases to other governmental agencies or departments: for example, to the fire department for restaurants or cafés, to the Ministry of Health for food establishments, to the Ministry of Commerce for information technology firms, to the Ministry of Oil and Energy for the oil industry, and so forth.

Procedure 4. Deposit the legally required initial capital in a bank and obtain deposit evidence

Time to complete:

1 day

Cost to complete:

No charge.

Comment:

The note from DOP to the bank instructs it to accept the deposit of capital in an account opened in the company’s name. Once the capital is deposited, the bank issues issues a detailed bank statement on the amount deposited by each partner against his/her share in the company. When credited to the account, the capital stays frozen in the account opened with the bank in the company name, and the founders cannot withdraw from the money deposited in the account until they submit the commercial license to the bank.

Procedure 5. Procure extracts of the criminal record of the founding shareholders in preparation to the registration formalities with the Commercial Registry

Time to complete:

2 days.

Cost to complete:

No charge.

Comment:

The note addressed to the Criminal Investigation Department instructs it to check the criminal record of the partners, if individuals. The department issues a certificate attesting that the criminal record is clear of any crimes that would preclude an individual from becoming a company shareholder.

Procedure 6. The Municipality Inspects the company’s premises and issues a certificate

Time to complete:

7 days.

Cost to complete:

No charge.

Comment:

The note from the DOP to the municipality instructs it to inspect the company premises to check whether they comply with health and safety regulations. The founders must submit a lease contract for the company’s premises to the municipality and the Fire Department as well as a receipt for the payment of the rent and a certificate from the Public Authority for Civil Information stating that the premises are registered with the Authority are also requested. The Fire Department inspects the premises to check for fire regulation compliance and then issues a document which is a fire department license in the name of the company before the issuance of the certificate from the municipality. This process usually takes 7 to 10 days. Eventually, the municipality issues a certificate indicating that the offices conform to regulations.

Procedure 7. Obtain a memorandum of association form from the Department of Partnership

Time to complete:

1 day.

Cost to complete:

No charge.

Procedure 8. Sign and notarise the memorandum of association before a public notary

Time to complete:

1 day.

Cost to complete:

KD15 for a 10 page Memorandum (KD1.5 per page).

Comment:

Upon receiving a standard memorandum of association from the DOP, the founding partners or their representatives must go to the Public Notary Department at the Ministry of Justice and sign and notarise the document before a notary public. The founders’ lawyer must amend the memorandum of association if the partners wish to make changes to the standard document. This additional step can take more than a day, depending on the lawyer and the number of changes. When the memorandum of incorporation is signed and notarised, the Ministry of Justice issues three copies, one for the Ministry of Commerce and the other two for the founders (even if there are more than two).

Procedure 9. Obtain from the Department of Partnerships a license to start activity

Time to complete:

2 days.

Cost to complete:

KD 37.

Comment:

After a public notary at the Ministry of Justice notarises the memorandum of association, the applicant gives the Department of Partnerships at Ministry of Commerce a signed and notarised copy of the document, a copy of the lease contract for the company premises, and a receipt showing that the initial rent was paid. DOP issues the company a license to start activity.

Procedure 10. Register with the Commercial Registry

Time to complete:

1 day.

Cost to complete:

No charge.

Comment:

The applicant registers the company with the Commercial Registry in person. Once the company is registered, the Registry issues a certificate indicating the registration date and number.

Procedure 11. Register with the Kuwait Chamber of Commerce and Industry

Time to complete:

1 day.

Cost to complete:

KD 65 initial registration, then yearly KD55 for renewal of membership.

Comment:

Once registered, the company must first certify a signature specimen for the company representative with the Kuwait Chamber of Commerce and Industry, which provides a special form for this purpose. The chamber will require this certified specimen in its dealings with other governmental bodies and entities such as the banks. To this end, the company must register as a Chamber of Industry and Commerce member.

Procedure 12. Register with the Civil Data Department

Time to complete:

15 days.

Cost to complete:

KD 5.

Comment:

The company must register with the Civil Data Department to obtain a “civil number,” which is required in dealings with other governmental bodies.

Procedure 13. Open a company’s labour file at the Ministry of Labour and Social Affairs

Time to complete:

15 days (simultaneous with procedure 12).

Cost to complete:

No charge.

Comment:

The Ministry of Labour may inspect the premises to determine whether the premise size and the business scope are commensurate with the number of employees registered with the Ministry and to identify the number of non-national employees.