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WLL and Closed Joint Stock Companies
Another form of doing business in Kuwait is to
form a legal entity with independent personality and limited liability.
Under Kuwaiti law, there are two such company forms that are open
to non-Kuwaitis. The first is the limited liability company (WLL).
The use of this type of entity was limited by
Article 195 of the Kuwait Company Law, to individuals, excluding
corporate bodies. However, by a recent amendment4 corporate bodies
are now able to hold shares in a WLL. Article 191 of the same
law provides that at least 51% of the WLL shareholding must be
owned by a Kuwaiti.
A WLL is quite easily formed, the approximate
time needed for its incorporation is three months.
The WLL provides the limited liability shield
and prior to the recent amendment used to be nontaxable5 since
Kuwait has no individual income tax and its corporate tax applies
only to non-Kuwaiti corporate bodies.
A closed Kuwaiti joint stock company (KSC Closed)
is the other type of company open to non-Kuwaiti entities. Articles
68 and 94 of the Kuwait Company Law provide for this type of company
as an exceptional kind of joint stock company. A joint stock company's
shares are publicly traded6 and its shareholders must be Kuwaitis.7
The general rule is that the shareholders of joint stock companies
must be Kuwaiti nationals. As an exception, foreigners may own
49% of the share capital of a KSC Closed after obtaining the approval
of the concerned authorities. The incorporation of KSC Closed
may take up to six months.
Basically, the effect of Articles 68 and 94 is
to allow foreign companies, whenever there is need for capital
or foreign expertise, to invest in a KSC Closed provided the Kuwaiti
shareholding is not less than 51 percent. This type of company
provides the foreign entity with limited liability and the ability
to function as an entity, hence allowing it to benefit from its
goodwill and trade name. The limitation in using this form of
business, however is that, over and above the tax levied on the
profits made by the foreign company as a shareholder in KSC Closed
Company, the KSC Closed Company is itself subject to the 5% contribution
to the Kuwait Foundation for the Advancement of Science.
4. Amendment No. 28 of 1995.
5. Including the five-percent tax for the Kuwait Foundation for
the Advancement of Science ("KFAS").
6. KCL, Art. 63.
7. KCL, Art. 68.
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