World Intellectual Property Organization

Kuwait

Law on Commercial Companies (as amended on 19th October 1960)

 

 


LAW OF COMMERCIAL COMPANIES
(AS AMENDED ON 19TH OCTOBER, 1960)

Article 1. - All commercial companies shall be governed by the law
and commercial practice.

Article 2. - All companies, other than joint ventures, shall have
legal personality.

Article 3. - Actions brought by the creditors of any commercial
company against a partner shall be time-barred after five years from
the winding-up of the company or from the date of retirement of a
partner, if the action is brought against such partner.
Time limitations shall run from the date of expiry of the month in
all cases when the month is reckoned, and from the closing date of
the liquidation, if the matter relates to cases arising out of the
liquidation itself.

PART 1
COLLECTIVE NAME PARTNERSHIPS

Article 4.- A collective name partnership is one formed by two or
more persons under a certain specified name in order to carry on
commercial activities; the partners thereof shall be jointly liable
to the extent of all their property for all the obligations of the
partnership.

CHAPTER 1
INCORPORATION OF A COLLECTIVE NAME PARTNERSHIP

Article 5.- A collective name partnership shall have an incorporation
Deed, which shall contain the following particulars:

i. Style and trade name (if any) of the partnership;

ii. The location of the partnership head office;

iii. Names and surnames of the joint liability partners, one of whom
at least, shall be a Kuwaiti national;

iv.
Names and surnames of the joint liability partners, one of whom
at least, shall be a Kuwaiti national;
v.
Managers, whether partners or not, who are authorized to manage
and sign for the partnership;

vi. The amount of the capital and each partner's contribution,
provided the percentage of the Kuwaiti partners' holdings in
partnerships that are formed after the operation hereof, shall not be
less than 51 (fifty-one) per cent of the capital;

vii. The method of distribution of profits and losses to the
partners;

viii. The term of the partnership;

ix. Any other particulars which the partners deem should be included
in the incorporation deed.

Article 6.- The incorporation deed shall be written on an official
document.

Article 7.- The partnership name shall consist of the names of all or
of one or more of the partners followed by the words "AND PARTNERS"
or any words denoting the same meaning; the partnership name shall
always be consistent with its existing body.
Article 8.- A person outside the partnership who agrees, voluntarily,
to have his name included in the partnership name, shall become
liable for its obligations towards any person who bona fide relies on
said name.

Article 9.- The partners may prepare articles for the partnership,
written on an official document, which shall lay down the detailed
provisions agreed by the partners for the management of the
partnership; a copy of said articles shall be attached to the
incorporation deed.

Article 10.- The partnership managers shall carry out the
registration proceedings in conformity with the provisions of the
Register of Commerce Law. The partnership shall, in regard to a third
party, be deemed to exist from the date on which the registration
proceedings have been completed; actions begun by the partnership
shall not be accepted by the courts if the registration formalities
have not been effected; however, third parties may adduce the
existence of the partnership even when the registration formalities
have not been carried out.

Article 11.- The partner in a collective name partnership shall
acquire the capacity of a trader and shall be deemed to carry on
trading activities under the partnership name; the bankruptcy of a
partnership leads to the bankruptcy of each of its partners.

Article 12.- A partner may assign his holdings in the partnership to
an outsider subject to the consent of all the partners, save when the
incorporation deed provides otherwise; a Kuwaiti partner may not
assign his holding in a partnership which is incorporated after the
operation hereof to a non-Kuwaiti person, if such assignment will
reduce the holdings of the Kuwaiti partners to less than 51 (fiftyone) per cent of the partnership capital. The advertising formalities
shall be carried out in conformity with the provisions of the
Register of Commerce Law.
However, a partner may cede to a third party the benefits and fruits
of his holding in the partnership, provided that the cession
agreement shall operate only between the contracting parties.

Article 13.- If it is agreed that a partner shall neither receive
profits nor suffer losses, the partnership deed may be rescinded upon
application being made by the partner who does not have the right to
receive profits, or by any of the partners who are to bear the
losses.

Article 14.- A partner's holdings may not merely be the influence
which he enjoys his financial credibility.

CHAPTER 2
MANAGEMENT OF A COLLECTIVE NAME PARTNERSHIP AND THE RIGHTS OF
CREDITORS

Article 15.- The manager of a partnership shall manage
the business as may be necessary, according to the stipulations laid
down in the incorporation deed and the articles of the partnership.

Article 16.- In case of the plurality of management and in the
absence of any relevant provision in the incorporation deed or the
articles, resolutions shall be passed by an absolute majority, except
when a manager raises an objection based on the fact that such
business is in violation of the partnership objects, as set down in
the incorporation deed, in which case the matter shall be referred to
the court to determine the issue. Resolutions which amend the
incorporation deed or the articles shall be passed unanimously by the
partners.

Article 17.- A partnership shall be bound by the acts of the managers
which are within the scope of their powers, if they do so under the
partnership name, even when the transaction is for their personal
benefit, provided the third party who dealt with them did so in good
faith.
Article 18.- Partners, who are not mangers, may not manage the
partnership but may have personal access to the partnership books and
documents; any agreement providing otherwise shall be null and avoid.

Article 19. - Neither a partner nor the manager of a partnership may
enter into a contract with the partnership for his personal account,
unless he obtains the prior approval of all the partners for each
transaction. However, a general approval may be granted for one year
which may be renewable.

Article 20. - Neither a partner nor the manager of the partnership
may carry out any act which is detrimental to the partnership or
which is inconsistent with the objects for which the partnership was
formed, unless the prior consent of all partners has been obtained;
neither of the aforementioned persons may carry on any activity which
is similar to the activities of the partnership, without a prior
permit approved by all partners; such consent shall have to be
renewed each year.

Article 21. - A partnership manager may not be dismissed from his
office except by majority opinion of the partners. However, a manager
may be discharged from his position by judgment of the court, entered
upon application being made by a partner, if there are reasonable
grounds to justify the dismissal. The dismissal of a manager, as well
as the appointment of a new manager, shall be advertised in
conformity with the Register of Commerce Law.

Article 22. - The creditors of a partnership are entitled to have
recourse to the partnership's assets as well as to the personal
assets of a partner who was, at the time of contracting, a member of
the partnership; all partners shall be jointly liable to the
creditors of the partnership; however, execution may not be effected
against the personal assets of a partner unless notice to pay has
been served on the partnership, which has failed to pay within the
reasonable time-limit fixed by the creditor.

Article 23. - When a partner has incurred personal debts, the
partnership creditors may compete with his personal creditors in
claiming against the personal assets of such partner; such personal
creditors of the partner may not, during the existence of the
partnership, recover their dues from the holdings of said partner in
the partnership capital, but may receive their dues from his share of
the profits. After the liquidation of the partnership, such creditors
may receive their dues from the share which belongs to their debtor
out of the assets of the partnership, after deduction of the
partnership debts.

CHAPTER 3
THE LAPSE OF A COLLECTIVE NAME PARTNERSHIP

Article 24. - A collective name partnership shall lapse on the
occurrence of any of the following events:

i. expiry of the fixed term of the partnership.

ii. completion of the business for which the partnership was formed.

iii. loss of all of the partnership's assets or of a large part
thereof in consequence of which its existence is rendered useless;

iv.
declaration of the partnership's bankruptcy;
v.
declaration of the bankruptcy of a partner or when a partner is
placed under interdiction;

vi. unanimity of the partners to dissolve the partnership;

vii. entry of a court judgment of dissolution of the partnership.
Article 25. - If the partnership term is extended after the expiry
date of its fixed term, it shall be deemed to be a new partnership,
but its existence shall remain in force, if the extension is effected
before the expiry date of its initial term.

Article 26. - If a partner is placed under interdiction or declared
bankrupt, the other partners may resolve to continue the partnership,
provided that the formalities of advertising are dully effected as
laid down in the Register of Commerce Law.

Article 27. - If a partner dies, the partnership shall continue with
the surviving partners and any one of the deceased partner's heirs
may apply to be considered a dormant partner, save when the
incorporation deed or the articles provide otherwise.

Article 28. - A partnership shall be dissolved by a court judgment,
upon the application of a partner when he alleges that a partner has
failed to perform his commitments of when he adduces any other cause
which the court considers so grave as to warrant dissolution; any
agreement to the contrary shall be null and void.

Article 29. - The partners may apply to the court for judgment to
dismiss a partner whose activities may be such as to justify the
dissolution of the partnership, in which case the partnership shall
continue among the other partners.

Article 30. - The rights of a deceased partner's heirs who do not
become dormant partners, the rights of a partner who has been
interdicted or declared bankrupt, if it is resolved to keep the
partnership in existence, or the rights of a dismissed partner, shall
be assessed according to their value on the date of the fact which
led to the cessation of the partner's membership, in accordance with
a specially prepared inventory, and the sum shall be paid to him in
cash; such a person shall not be entitled to any new rights that
accrue to the partnership thereafter unless such rights are the
result of transactions made before such event, save when the
incorporation deed or articles of the partnership stipulate otherwise
CHAPTER 4
DISSOLUTION AND DIVISION OF THE ASSETS OF A COLLECTIVE NAME
PARTNERSHIP

Article 31. - If a partnership lapses, its assets shall be liquidated
and divided among the partners in the manner stipulated in the
incorporation deed or in the articles of the partnership; in the
absence of a provision to that effect, the following shall be
applied.

Article 32. - The powers of a manager of a partnership shall cease on
the lapse of the partnership, but its legal personality shall be
maintained as long as is necessary for, and until the completion of,
the liquidation.

Article 33. - If the partners fail to agree on a liquidator, the
court : shall, upon application by a partner, appoint a liquidator;

until the liquidator is appointed the managers shall, in regard to
third parties, be deemed to have the status of a liquidator.

Article 34. - The liquidator shall prepare an inventory of the
partnership assets; in order to do so he may seek the assistance of
the managers.

Article 35. - The liquidator may not commence any new activities of
the partnership except those required to complete a prior activity.
The liquidator may not dispose of the trading premises unless all the
partners have vested him with prior power to do so.

Article 36. - The liquidator shall collect all the debts of the
partnership due from third parties and from the partners, pay off all
the partnership debts, and carry out the activities required for the
liquidation.

Article 37. - The liquidator may sell the movable and immovable
assets of the partnership by auction of through negotiation, save
when the order establishing his appointment restricts such authority;
however, he may not sell more than that part of the partnership
assets which is required to pay off its debts, unless the partners
agree otherwise.

Article 38. - The liquidator shall give to the partners all the
information which they require regarding the state of the
liquidation, but the partners may not arbitrarily create
unjustifiable obstacles to the liquidation.

Article 39. - The liquidator may receive fees for his work; if the
order appointing him does not specify his fees the court shall do so.

Article 40. - After paying the creditors dues and after setting aside
an amount to pay the un matured or disputed debts, the partnership
assets shall be divided among all the partners. Each partner shall
receive a share equal to the value of his contribution to the
partnership capital as stated in the incorporation deed; any balance
remaining thereafter shall be apportioned to the partners, each
according to his share of the profits. If the net assets of the
partnership are insufficient to pay the partners share, the amount of
the loss shall be apportioned among them according to the percentage
agreed for the allocation of losses.
Article 41. - In dividing the partnership assets, the rules
prescribed for the division of common property shall be applied.

PART II
COMMENTATE PARTNERSHIPS
Article 42. - A commentate partnership comprises two categories or
partner namely: 1. Active partner who shall manage the partnership
and be jointly liable to the extent of their personal assets for all
the obligations of the partnership; and 2. Dormant partner, whose
role is confined to the contribution of money to the partnership, and
shall be liable only for the partnership obligations up to the amount
of his contributions. Said partnerships shall have to recorded in the
Register of Commerce according to law.

Article 43. - A commentate partnership is of two kinds; a simple
commandant partnership and a commentate partnership by shares.

CHAPTER 1

SIMPLE COMMENTATE PARTNERSHIPS

Article 44. - A simple commentate partnership shall be governed, even
in regard to the dormant partners, by the rules prescribed for a
collective name partnership in regard to incorporation, management,
lapse and liquidation, due consideration being given to the
following:

Article 45. - The partnership name shall comprise the names of the
active partners only; if there is one active partner liable to the
extent of all his property, the word "AND PARTNERS" shall be added
after his name. A dormant partner may not have his name in the
partnership name lest he become liable as an active partner towards a
bona fide third part.

Article 46. - A dormant partner may not involve himself, even
pursuant to a procreation, in the management of the partnership, but
if he does he shall be jointly liable with the active partners for
the commitments that arise out of his management activities; he may
be made liable for all, or for a number, of the partnership
obligations, depending upon the volume an repetition of the
activities and the confidence placed in him by third parties because
of such activities. Control exercised over the activities and
opinions given to the managers of the partnership, as well as the
authorization for them to carry on activities which are beyond the
scope of their authority, shall not be deemed to be acts of
involvement.

Article 47. - The incorporation deed of the partnership shall state
the names of the partners and their status, i.e. active or dormant;
one at lea of the active partners shall be a Kuwaiti national, and
not less than S1 (fifty-one) per cent of the capital of any
partnership, which is incorporated after the operation date hereof,
shall be owned by partners of Kuwaiti nationality.
CHAPTER 2
COMMENTATE PARTNERSHIP BY SHARES

Article 48. - A commentate partnership by shares shall be governed by
the same rules which govern a simple commentate partnership, due
consideration being given to the following:

Article 49. - The capital of a commentate partnership by shares shall
be divided into shares; a dormant partner shall be bound by the legal
prescriptions which are applicable to a shareholder in a joint stock
company, to such extent as shall not be inconsistent with the terms
laid down for a commentate partnership by shares.

Article 5O. - The management of a commentate partnership by shares
shall be assigned to one or more active partners; the incorporation
deed and articles of the partnership shall set down the names of the
managers and their powers.
Persons assigned to manage the partnership shall, as regards
liability, have the status of the promoters and directors of a joint
stock company.

Article 51. - A commentate partnership by shares shall have a Board
of Control made up of at least three shareholders or other persons;
the Board may require the managers to give an account of their
management and in order to do so, the Board may examine the books and
documents of the partnership and inventory the cash, financial

securities, instruments establishing the rights of the partnership
and the available stocks of goods.

Article 52. - The Board of Control may give an opinion on matters
referred to it by the partnership managers and may grant permission
for any transactions to be carried on, which under the partnership
articles require its permission.

Article 53. - The Shareholders General Meeting may not transact
business pertaining to the relationship of the company with third
parties nor may it amend the partnership articles, except with the
approval of the managers, save when the partnership articles provide
otherwise.

Article 54. - The words "COMMENTATE PARTNERSHIP BY SHARES" shall be
shown next to its name on contracts, invoices, stationery and
publications.

Article 55. - A commentate partnership by shares shall terminate on
the death of the partner who has charge of its management, unless the
articles provide otherwise. The Board of Control may appoint an
interim manager to carry on the urgent managerial business until the
General Meeting is convened; such interim manager shall, within
fifteen days from the date of his appointment, convene the said
meeting according to the proceedings laid down in the partnership
articles.

PART III
JOINT VENTURES

Article 56. - A joint venture is a commercial partnership formed
between two or more persons, provided that the partnership shall be
confined to the relationship between the partners and shall not be
valid in regard to third parties.

Article 57. - The deed of a joint venture shall neither be entered in
the Register of Commerce nor shall it be advertised; the deed shall
be executed by the partners to set down their rights and obligations
and to fix the method of sharing profits and losses as well as any
other terms and conditions. Said deed shall be governed by the
general principles which are laid down in the partnership deed.

Article 58. - A joint venture shall not have legal personality; the
legal relationship of third parties in the business of the
partnership shall be restricted to the partners with whom such third
party has entered into contract. Thereafter, the partners shall have
recourse against each other regarding the partnership business to the
extent of their relation therewith and according to each partner's
share of the profit and loss, in conformity with the agreement set
down in the deed which was executed by them.

Article 60. - By exception to the provisions of the preceding
Article, a third party may adduce the partnership deed, if the
partnership transacted business with him as such.

Article 61. - If a partner who deals with a third party is not a
national of Kuwait, he shall be required to have a guarantee in such
dealing from a Kuwaiti.

Article 62. - A joint venture may neither issue negotiable shares nor
debentures.

PART IV
JOINT STOCK COMPANIES

Article 63. - A joint stock company is formed by a number of persons
who subscribe for negotiable shares and those persons shall not be
liable for the commitments of the company except to the extent of the
face value of the shares subscribed for.

Article 64. - A joint stock company is 'anonymous' if it is devoid of
names, but shall be given a certain specified commercial name to
denote its object and describe it. Such name may not originate from
the name of a natural person, save when the object of the company is
the exploitation of a patent of invention which is legally registered
in the name of such person. The company name shall, whenever it
occurs, be followed by the words 'JOINT STOCK COMPANY'.

Article 65. - A joint stock company may not have the same or similar
name of another company, save when such name belongs to a company in
liquidation which has endorsed the use of such name. A company who
claims that another company has taken its same or similar name may
apply to the competent government department to require such company
to change the same; if the application is rejected, it may refer the
matter to the court, requesting the change of the name and claiming
compensation.

Article 66. - A joint stock company may by a resolution passed by an
extraordinary general meeting change its name; the new name shall be
entered in the Register of Commerce in accordance with the law and a
notice to that effect shall be inserted in the Official Gazette. The
change of a company's name shall have no adverse effect on the
company's rights and obligations nor on the legal proceedings which
have been initiated by it or against it.

Article 67. - A joint stock company may be for a certain specified
term as stated in the Memorandum and Articles of Association; if the
object of the company is the carrying out of a certain specified
work, the expiry of its term may be fixed to coincide with the
completion of such work. The specified term of a company may not be
extended impliedly by including a provision to that effect in the
Memorandum and Articles of Association;
such specified term may be extended by a resolution passed by an
Extraordinary General Meeting.

Article 68. - Every joint stock company, which is incorporated in
Kuwait, shall be of Kuwaiti nationality; all partners shall be
Kuwaiti and the company's head office shall be in Kuwait. However, as
an exceptional measure, a number of persons who are not Kuwaiti
nationals may be partners in a joint stock company (but not banking
and insurance companies) if it is necessary to invest foreign capital
or exploit foreign expertise, provided that the capital holdings of
Kuwaitis shall not be less than 51 (fifty-one) per cent and provided
also a license to that effect is obtained from the government
department concerned.

Article 69. - The government department concerned may issue an order
setting down a pro-forma of the Memorandum and Articles of
Association of joint stock companies, who shall have to comply with
the same.

CHAPTER 1
INCORPORATION OF A JOINT STOCK COMPANY?

A. INCORPORATION PROCEEDINGS

Article 70. - The Memorandum and Articles of Association shall be
made out on an official paper; the Memorandum of Association shall
give the following particular:
1 - company name;
2 - company head office;
3 - the objects for which the company is formed;
4 - the names of the promoter shareholders whose number may not be
less than five companies formed by the Government are excluded from
the foregoing provision and the Government may, either alone or with
a lesser number of persons than that specified above, form a joint
stock company;
5 - the amount of the company's capital and the number of shares into
which it is divided;
6 - particulars of contributions other than in cash and all the
relevant conditions, as well as the name of the contributor and the
rights of pledge and privileges devolving on said contribution;
7 - the privileges which are determined for the promoters and the
causes therefore;
8 - an approximate estimation of the costs, fees and expenses which
the company pays, or is bound to pay, because of its incorporation.

Article 71. - The promoters shall submit an application to the
government department concerned for the issue of a decree for the
incorporation of the company, and shall attach to such application an
official copy of its Memorandum and Articles of Association. The
application for incorporation shall give sufficient particulars of
the company, to be extracted from the Memorandum and Articles of
Association.

Article 72. - The government department concerned shall, within one
month from the date of submission of the application for an
incorporation decree, satisfy itself that the incorporation of the
company is not prejudicial to public order or morality, that it is
built on sound bases and that the Memorandum and Articles of
Association do not violate the provisions of the law.

Article 73. - If the incorporation of the company is rejected, the
promoters may not submit another application for a licence until the
expiry of six months from the date of the decision of rejection.

Article 74. - If a decree authorizing the incorporation of the
company is issued, it shall be published in the Official Gazette and
the company shall acquire its legal personality from the date of
enactment of the decree.

Article 75. - When the decree has been promulgated in the Official
Gazette, the promoters shall commence the proceedings of subscribing
for shares.

Article 76. - The promoters shall, when inviting public subscription,
publish a prospectus giving the following particulars:
1 - a summary of the Memorandum and Articles of Association of the
company stating the company objects, the name of the promoters, the
amount of the capital, the number of shares, the value of each share
and the amount payable on account of the shares, the contributions in
kind and the expenses, fees and costs incurred for the incorporation
of the company.
2 - the maximum number of shares which each person may subscribe for;

3 - the number of shares that qualify a shareholder to become a
director as well as the emoluments and benefits that may be acquired
by the directors;
4 - the date, place and conditions of subscription;
5 - all other matters that tend to have an effect on the financial
position of the company. Such prospectus shall be published in the
Official Gazette and a copy thereof shall be sent to the government
department concerned.

Article 77. - Subscriptions shall be made in one or more of the
accredited banks, to which shall be paid the amounts payable on
subscription; all such amounts shall be entered in an account to be
opened in the name of the company. Subscriptions shall remain open
for a period not less than ten days nor more than three months. (As
amended by Law No. 3 of 1965) The promoters may not subscribe,
directly or indirectly, for more shares than the number stipulated in
the Memorandum; any subscriptions otherwise shall be null and void.

Article 78. - Subscriptions shall be in writing, giving the number of
shares subscribed for and stating that the subscriber accepts the
Memorandum and Articles of Association of the company, and he shall
give the elected domicile, which shall be in Kuwait, and any other
particulars which may be incumbent on him to give. The subscriber
shall deliver said particulars, and pay the amounts payable, to the
bank against a receipt, signed by the bank giving the subscriber's
name, his elected domicile, the date of subscription the number of
the shares subscribed for, and the installments paid thereon. The
subscription shall be deemed to be final when the subscriber receives
said receipt.

Article 79. - A printed copy of the Memorandum and Articles of
Association shall be delivered to the subscriber and the fact shall
be stated in the receipt. Article 80. - The bank shall keep all
amounts received from the subscribers and may not deliver them except
to the first board of directors.

Article 81. - The promoters shall subscribe for shares of a value
being not less than ten per cent of the company capital and shall
pay, before publishing the subscriptions prospectus, the amount which
is equal to the amount to be paid on subscription by the public for
each share subscribed for; the payment of such amount shall be stated
in the prospectus.

Article 82. - If, within the time-limit set for subscribing, all the
shares offered to the public are not subscribed for, the promoters
may extend the time-limit for a further period not exceeding three
months; if, on the expiry of the extended period, all the shares have
not been subscribed for, the promoters shall either cancel the
incorporation or reduce the capital of the company.

Article 83. - In case of cancellation of the incorporation of the
company, the promoters shall refund to the subscribers the full
amount they have paid; they shall be jointly liable for the refund of
said amounts and the payment of the expenses incurred for the
incorporation of the company.

Article 84. - In the case of the reduction of capital, the
subscribers may cancel their subscriptions within a time-limit which
may not be less than the initial time-limit allowed for
subscriptions, but if they fail to cancel their subscriptions within
said time-limit, the subscriptions shall be deemed to be irrevocable.

Article 85. - If all the shares have been subscribed for, during the
time limit set for subscribing, the door of subscriptions shall be
closed provided that this is not done before the lapse of ten days
from the commencement of subscriptions. If after closing the door of
subscriptions it is revealed that the number of shares subscribed for
exceeds the number of the offered shares, the shares shall be
allocated to the subscribers proportionally to the number subscribed
for and the allocation shall be made to the nearest full share.
Article 86. - When the subscriptions violate the foregoing
provisions, any interested person may apply to the courts to decree
the nullification of the subscriptions; the initiation of an action
for nullification shall prescribe at the same time as that for the
prescription of a criminal case; if the act is not punishable under
the Criminal Law, the action for nullification shall prescribe after
three years from the date of closing the subscriptions.

Article 87. - (As amended) The promoters shall file, during three
months of the date of closing subscriptions, with the government
department concerned a statement showing the number of shares
subscribed for, that the subscribers have paid the amounts payable on
such shares as well as the names and addresses of the subscribers and
the number of shares subscribed for, the value of each share and the
amount paid thereon and also the names of subscribers whose
subscriptions have been nullified as a result of sorting out the
applications for subscriptions. The government department concerned
may, if it finds that some of the provisions hereof regarding
subscriptions on the allocation of shares have not been observed
report the same to the Constituent General Meeting and shall report
further the violation to the authorities concerned.

Article 88. - The promoters shall, within the time-limit set down in
the preceding Article, serve on subscribers notice of the Constituent
General Meeting, and have a copy of the notice sent to the government
department concerned; but, if on the expiry of such time limit, the
promoters fail to send such notice, the government department
concerned shall do so. The Constituent General Meeting shall have a
quorum if those persons who hold, in person or by proper proxy, more
than one-half of the number of shares subscribed for, are present.
One of the promoters shall be elected by the Meeting to preside at
it.
Article 89. - The promoters shall place before the Constituent
General Meeting a report giving full particulars of all the
incorporation formalities together with the supporting documents. The
Meeting shall satisfy itself of the conformity of said particulars to
the facts, the law, and the Memorandum and Articles of Association of
the company.

Article 90. - The Constituent General Meeting shall elect the first
directors and the first auditors and declare the legal incorporation
of the company.

Article 91. - When the company has been legally incorporated, the
directors shall cause the company to be entered in the Register of
Commerce in conformity with the law; failure to carry out said
registration nullifies the company or the particulars which were not
registered; the directors shall be held jointly liable for such
nullification.

Article 92. - The company Articles shall be posted in its offices;
any person may obtain a true copy thereof against payment of a fair

price. The name, kind, head office, date of incorporation, the amount
of the capital subscribed for, as well as the paid-up capital and any
increase or reduction of the capital of the company and the
registration number of the Register of Commerce, shall be clearly
stated on all contracts concluded by the company and on all the
letters, circulars, notices and other publications issued by it.

Article 93. - The directors shall, within two months of the date on
which the General Meeting approves the accounts, publish in the
Official Gazette the balance sheet of the expired financial year and
a list stating the names of the directors and the auditors.
Article 94. - By exception to the above provisions, joint stock
companies, other than concessionary and monopoly companies which do
not invite the public to subscribe for shares, may, without obtaining
a decree, be incorporated by official document issued by all the
promoters, whose number may not be less than five; such document
shall contain the Memorandum and Articles of Association and the
following acknowledgements:
i - that the provisions of both the Memorandum and Articles conform
to the pro-forma provided for in Article 69 (if any);
ii - that the promoters have subscribed for all the shares, have paid
the legally prescribed amounts in respect thereof and placed the
amounts so paid at the disposal of the company in an accredited bank;
iii - that contributions in kind are in conformity with the law and
have been satisfied in full;
iv - that the promoters have constituted the relevant administrative
bodies of the company.
A copy of the supporting documents and papers of the foregoing
acknowledgements shall be attached to and kept with the official
document.
Article 95. - A company which is incorporated in conformity with the
provisions of the preceding Article shall not have legal personality
and may not commence business until the incorporation has been
recorded in the Commercial Register and the official document issued
for its incorporation has been advertised in the Official Gazette.

Article 96. - When a joint stock company has been illegally
incorporated, any interested person may, within five years of its
date of incorporation, serve notice on it requiring the completion of
any formality which has been omitted; if the company fails, within
one month of the notice, to effect the required rectification, such
interested person may apply for a judgment of nullification and the
company shall be liquidated as though it is a de facto company.
However, the shareholders may not adduce the nullity of the company
against third parties.

Article 97. - When the company incorporation is illegal, any
interested person may, within the time-limit set for the
nullification action in the preceding Article, bring an action for
joint liability against the promoters, the first directors and first
auditors.

B. CAPITAL

Article 98. - The company capital shall be sufficient for the
implementation of its objects and shall be in the currency of Kuwait,
provided it is not less than five hundred thousand rupees for
companies who invite subscriptions from the public, and not less than
one hundred thousand rupees for companies who do not invite the
public to subscribe for shares.

Article 99. - (As amended by Decree Law No. 3/75) The capital of a
company shall be divided into equal shares at a nominal value of not
less than one Dinar nor more than seventy-five each; a share is
indivisible but may be co-owned by two or more persons provided they
are represented in relation to the company by one of their number;
the co-owners of a share shall be jointly liable for the commitments
arising from such ownership.

Article 100. - Shares shall be issued at their nominal value and may
not be issued at a lower value; if they are issued at a higher value,
the premium shall be applied in the first place for payment of the
expenses of the issue and secondly for the reserve or redemption of
the shares (conversion into stock).
Article 101. - The shares of a company incorporated in Kuwait shall
be nominative; if the company is authorized to have other than
Kuwaiti shareholders the shares held by Kuwaitis shall be nominative.
However, the divided vouchers, whose form and conditions shall be set
down in the Articles of Association, may be either nominative or to
bearer.

Article 102. - The value of shares shall be paid either in cash in
one payment or by installments; the first call payable on
subscription may not be less than twenty per cent of the share value;
in all cases, the full value of a share shall be paid within five
years of the date of the Incorporation Decree.

Article 103. - The company shall issue, at the time of the
subscription, provisional bonds showing the number of the shares
subscribed for, the amount paid in respect thereof and the remaining
installments; such bonds shall replace the ordinary shares until
payment of all calls, when they shall be replaced by shares.

Article 104. - If a shareholder fails to pay the calls, within the
prescribed time-limits, the company may, after serving notice on him,
offer his shares for sale by public auction or at the stock exchange
(if any); the unpaid calls, interest and expenses, shall be collected
from the sale price and have priority over all creditors, and the
balance shall be paid to the shareholder; but if the sale price is
insufficient, the company shall have a right of recourse against the
personal assets of such shareholder for recovery of the difference.

Article 105. - (As amended) The company may give shares in kind in
consideration of payment other than in cash or evaluated rights; the
promoters shall apply to the President of Al Kulliya Court to appoint
an expert to verify whether such shares have been properly evaluated;
such evaluation shall not become final until approved by the
numerical majority of the subscribers who hold two-thirds of the cash
shares, after the exclusion of the cash shares held by the
contributors of shares in kind, in which case the latter shall not be
entitled to vote on such approval.
Contributions in kind may not represent other than shares of which
the values are fully paid up.
The foregoing provisions shall apply if the Memorandum and Articles
of Association of the company provide for the purchase of non-cash
property or rights evaluated by a promoter, his spouses, or relations
up to the second degree, even when such promoter has contributed cash
shares.

Article 106. - Shares and provisional bonds may not be disposed of
until the company has issued its first balance sheet for twelve
months at least; any disposal made shall be void; any interested

person may adduce such nullification and the Court shall of its own
accord, determine the nullification. After the issue for the
aforesaid balance sheet, disposal is allowed; disposal shall not have
effect against the company unless it is entered in the od hoc
register kept by the company. The registration shall be effected in
the presence of both contracting parties and a company delegate; the
transferee shall be a Kuwaiti if the transferred shares or
provisional bonds are held by a Kuwaiti national.

Article 107. - Shares and provisional bonds may be pledged, donated
or disposed of in any other way; such disposal shall be effected in
accordance with the provisions of the preceding Article.

Article 108. - The company assets may not be attached to satisfy
debts due from a shareholder, but the shares and dividends of a
debtor are subject to attachment and an inscription to that effect
shall, upon notice issued by the competent authority, be made against
the record of said shares in the od hoc register which is kept by the
company; such inscription may not be crossed out except pursuant to
notice to that effect issued by the same authority. Resolutions
passed by the General Meeting shall apply to the distrainer and the
mortgager as they apply to the shareholder whose shares are attached
or the mortgage, but the former shall not have the rights which
attach to a member of the company.

Article 109. - The promoters may not dispose of their shares within
two years from the date of the legal incorporation of the company.
Any disposal effected otherwise than aforesaid shall be null and
void. Any interested person may adduce such nullification and the
Court shall, of its own accord, so determine.

Article 110. - The capital may not be increased unless calls on the
original shares have been paid up; the nominal value of the new
shares shall be equal to the nominal value of the old shares; the
original terms of subscriptions shall apply in respect of the new
shares.

Article 111. - Every shareholder has a priority right of subscribing
for a number of the new shares commensurate with the number of shares
already held by him; a time-limit, being not less than fifteen days,
shall be granted for the exercise of the said priority right as from
the date of notifying the shareholders accordingly.

Article 112. - The company may reduce the capital if it is in excess
of its needs, or when a loss is suffered and the company deems it
proper to reduce the capital to its actual value, provided the
reduction shall be by a resolution passed by an Extraordinary General
Meeting.

Article 113. - The reduction may be effected in either of the
following two ways:

  1. by reduction of the nominal value of the shares by canceling the
    obligation to pay the unmatured calls;
  2. by reduction of the nominal value of the shares by canceling part
    of their paid-up price equivalent to the loss (if any), or by
    refunding part thereof, if the company considers that the capital is
    in excess of its needs.

Article 114. - The company may not, without the sanction of the
several Meeting, buy its own shares, in which case the purchase money
shall be taken from the voluntary reserve and the value of shares

shall be paid in full; the shares so purchased shall be deemed to be
redeemed shares.

Article 115. - The company shall grant shares to be termed "redeemed
shares" to the shareholders whose shares have been purchased
according to the provisions of the preceding Article. Holders of
redeemed shares shall enjoy the same rights as those of ordinary
shareholders, except with regard to the recovery of the nominal value
of the share, in case of the liquidation of the company.

Article 116. - The company may borrow money against the issue of
negotiable debentures of equal nominal value to be given to
subscribers against the 1-25 amounts loaned to the company; the loan
shall be raised by invitation to the public to subscribe for
debentures.

Article 117. - The debentures vest the holders thereof with a right
to receive a certain specified rate of interest payable on a fixed
date and with a right to recover the amounts of his debt from the
company assets.

Article 118. - The company may not issue debentures unless the
following conditions have been satisfied:
I- the subscribed capital has been paid in full;
ii- the value of the debentures issued by the company shall not
exceed the amount of its capital, exception being made for real
estate, industrial and agricultural banks;
iii- the General Meeting has passed a resolution to issue debentures.

Article 119. - Before issuing an invitation to subscribe for
debentures, the directors shall publish in the Official Gazette a
prospectus signed by and giving the address of each director
containing the resolution of the General Meeting which approved the
issue of the debentures, the number, nominal value, rate of interest
and the maturity date, its conditions and securities of the debenture
to be issued, as well as the number of debentures issued previously
by the company and the securities therefore, the amount of the
company capital, the value of the contributions in kind, the results
of the latest approved balance sheet and the purpose for which the
loan is issued.
The above particulars shall be stated on all notices and publications
pertaining to the loan and on the debentures when issued.
If the foregoing conditions are not satisfied, the subscribers for
debentures may cancel their subscriptions and recover the amounts
which they had paid.

Article 120. - If the price of a debenture has not been paid in full
on subscription, and the subscriber fails to pay on maturity the
calls made on him by the company, the company may sell the debenture
by public auction or at the price of the stock exchange market
valuation according to the pro visions of Article 104.

Article 121. - Debentures may be issued with a premium payable on
redemption or the refund of the value of the debentures; lottery
debentures may not be issued except pursuant to a decree.

Article 122. - The company shall refund the value of debentures in
conformity with the conditions of the issue; the date of the refund
may neither be advanced nor delayed.

Article 123. - The company may accept its debentures in repayment of
the debts due to it, even though repayment is made before the date
fixed for their redemption; the company may re-offer such debentures
for subscription unless the same is forbidden by stipulation in the
company's Articles of Association or when such debentures have been
redeemed to satisfy a commitment binding on the company to recover
them.
When redeemed shares are re-offered for re-subscription according to
the provisions of the preceding paragraph, such offer shall not be
deemed to be one for subscription for a new loan but shall have the
same status as the debentures subscribed for in the relevant issue;
if subscribed for, the subscribers shall have the rights which attach
to such issue.

Article 124. - The company shall keep a register, wherein shall be
entered the particulars of every debenture issue, and it shall show
the number thereof subscribed for, the amounts paid in respect
thereof and the particulars of redemption or repayment thereof.

Article 125. - The debenture holders of every issue shall form one
single body and the resolutions passed by them shall apply to
dissenting and absent members.
The company shall, within two weeks of the date of closing the
subscription, call said body to d meeting to approve its Articles of
Association and to elect its representatives.

Article 126. - Said body shall hold its meetings pursuant to a
convocation by its representatives, or by its company directors or
upon the request of a number of debenture holders representing at
least five per cent of the value of such debentures; the notice of
such meeting shall contain the agenda of the meeting and be published
in the Official Gazette.

Article 127. - The resolutions of said body shall not be valid unless
the number of the debenture holders present in the meeting represents
two-thirds of the debentures issued; if this quorum is not present, a
notice containing the same agenda shall be sent to the members for a
second meeting, in which the presence of debenture holders
representing one-third of the debentures shall be sufficient for the
transaction of business.

 

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