The Offset Business Venture
In order to fulfill his offset obligation the foreign contractor must establish an offset business venture (OBV) with Kuwaiti businesses, entrepreneurs and/or Kuwaiti private citizens in general as equity partners. The OBV must be duly organized and exist under the Laws of Kuwait (as per the Ministry of Commerce and Industry's Department of Corporations). It must be a viable, ongoing business concern with potential for growth.
The OBV shall be required to maintain financial and accounting records according to International Accounting Standards (IAS).
During the performance stage, the OBV will be required to file bi-annual Offset Progress Reports (OPR) with PEO as per the format designed for the OBV. The purpose of these reports is to provide a performance update to the PEO. The PEO does not intend to interfere with the micro-management of the OBV, through these reports.
In addition to OPR's, the OBV will file its yearly audited financial statements with the PEO. These statements include but are not limited to:
- Income Statement
- Balance Sheet
- Statement of changes in financial position (cash flow statement).
These statements will be the basis upon which the current and future credits are calculated. The PEO reserves the right to perform yearly audits of records and the OBV is required to maintain all such records for a period of four years.
Legal and Equity Structure:
The foreign contractor and the Kuwaiti national is at liberty to choose the type of legal structure for the OBV so long as it is in conformity with Kuwaiti Commercial and other applicable laws. The onus lies on the foreign contractor to verify the said conformity.
Third-Party Offset Arrangement:
The foreign contractor may with the prior consent of the PEO designate a third party to perform his offset obligation. The primary responsibility to fulfill the offset obligation rests with the foreign contractor, notwithstanding that a third party has been designated to fulfill the same.
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