Division of Companies under Kuwait Law: Conditions and Procedure

The Ministry of Commerce and Industry (“MOCI”) issued Resolution No. 60 for the year 2023 in the Kuwait Gazette dated 16 April 2023 (“Resolution 60/2023”) , which amends Decree No. 287 for the Year 2016 (“Executive Regulations”) of Law No. 1 of 2016, promulgating the Companies Law (“Companies Law”).

What is new?

Division of companies is not a new concept and has been addressed in the Companies Law and its Executive Regulations.

Chapter (3) of the Companies Law (Articles 263-265) deals with division of companies and provides that a company may be divided even if it is in the liquidation phase, into two or more companies, resulting in winding up the company or its continuance. The companies created from the division may take any of the legal forms stipulated in the Companies Law. If a company wants to be divided, an extraordinary general assembly must be convened to take a resolution to divide, determining the number of shareholders or partners, their names, shares/units of each one of them in the companies created from the division, the rights and obligations of such companies and method of distribution of assets and liabilities among them.

Resolution 60/2023 has now been introduced as per Article 263 of the Companies Law to provide for the procedures, terms and conditions for the division of companies.

What does this mean for companies in Kuwait?

The manager of a company or the board of directors, as the case may be, shall present a detailed division report including assets and liabilities which belong to the dividing company as a result of such division to be submitted at the extraordinary general assembly of the company in line with Article 117 of the Companies Law.

In addition to the detailed division report, the following documents should be presented :

1. Reasons for such division;
2. Auditor’s report;
3. Draft amendment to the memorandum of association/articles of association;
4. Agreements relating to the rights of creditors following the division of the company; and
5. Approval of the relevant regulatory authority,

The dividing company and its shareholders have the right to object to the division in accordance with Article 220 of the Companies Law.

The MOCI will accept division requests that fulfill the requirements of Resolution 60/2023, the Executive Regulations and the Companies Law.

Once the division of the company has been approved by the MOCI, a publication will be issued in the Kuwait Gazette with a (30) day objection period.

For further information regarding Resolution 60/2023 please feel free to reach out to Ola Saab and Lulwa Alhammad.