Law Regulating Leasing and Investment Companies

Law No. 12 for the Year 1998

The law provides that a license may be granted to a company established for leasing and investment activities in Kuwait, the share capital of which is subscribed fully or partly by Kuwaitis or foreigners. Such a company would be required to be a Kuwaiti shareholding company, recognized under the Commercial Companies Law No. 15 of 1960. The registered office of such company should also be within the State of Kuwait.¹

The Memorandum and Articles of Association of such company should be approved by the Ministry of Commerce and Industry and the Central Bank of Kuwait.²

A tax exemption has been granted for the first five years from the date of incorporation of the company in respect of the income accruing to the foreign shareholder in such a company.³

An exemption has also been granted to such company from the provisions of Articles 68, 69, 99, 118 and 119 of the Commercial Companies Law.⁴ In order to avail of the exemption from the above articles, the consent of the Central Bank is required.⁵

The Explanatory Memorandum to the said law provides that the intention of the legislature in promoting leasing and investment companies in the State of Kuwait is mainly to realize the following benefits:

• The existence of leasing and investment companies would amount to providing complementary services to those already provided by financial institutions and intermediaries and thereby complete the existing economic system in the country.

• To encourage foreign investments in Kuwait and make Kuwait a center for financial services.

• To create alternative forms of financing (through leasing) and alleviate the financial burden on the state budget by undertaking financing of various projects in the public domain of the state.

• To promote and develop the private sector and its participation in the field of development.

• To give momentum to the Kuwaiti economy by allowing leasing companies to participate in its reconstruction and by creating new investment opportunities.

• To minimize monopolies in the field of leasing and investments and to open new areas of competition and encourage small investors.

   

1 Article 1, Law No. 12/1998
2 Article 2, Law No. 12/1998
3 Article 3, Law No. 12/1998
4 Article 68 of the Commercial Companies Law (CCL) requires that Kuwaiti companies should have at least 51% of its share capital subscribed by Kuwaiti shareholders. Article 69 of CCL requires the share capital of Kuwaiti shareholding companies to be in Kuwaiti Dinars and not less than K.D.500,000/- for companies inviting public participation. Companies that do not have public participation (closed shareholding comapnies), the minimum share capital requirement is K.D. 100,000/-. Articles 118 and 119 of CCL impose certain restrictions on the issue of debentures by shareholding companies in Kuwait.
5 Article 5, Law No. 12/1998