Article · Kuwait
CMA Decision No. 56 of 2026: What Changes for Boards Under Module Fifteen
The Capital Markets Authority has amended Module Fifteen of its Executive Bylaws and replaced the corporate governance report form. The independence test in Article 2-3 is materially wider and runs on its own timetable. Everything else must be regularised by the end of 2026.
10 July 2026Mishary Al-Asousi
In brief
- Decision No. 56 of 2026 was issued on 6 May 2026 and takes effect from the date of issuance under Article 3. Annex 1 amends Module Fifteen; Annex 2 replaces Appendix 2, the structure of the corporate governance report form.
- Companies subject to Module Fifteen must regularise their position by the end of 2026.
- The amended independence criteria in Article 2-3 apply from the election of a new board after the current board’s term expires, at the first ordinary general assembly convened for that purpose at least three months after the date of the Decision.
- Under Article 1-1 a company that gives an insufficient or unjustified explanation for a departure is treated as non-compliant, and unacceptable justifications do not prevent supervisory action.
- The Internal Control Report under Article 6-9 must be filed with the CMA within 90 days of the end of the financial year.
Background
The Capital Markets Authority (the “CMA”) issued Decision No. 56 of 2026 (the “Decision”) on 6 May 2026, following the resolution of its Board of Commissioners at meeting No. 18 of 2026. Article 1 amends Module Fifteen (Corporate Governance) of the Executive Bylaws of Law No. 7 of 2010 in accordance with Annex 1. Article 2 amends Appendix 2 of Module Fifteen, the structure of the corporate governance report form, in accordance with Annex 2. Article 3 provides that the Decision applies from the date of its issuance and is published in the Official Gazette.
This is an amending instrument rather than a rewrite. Many of the items tighten wording or align terminology. Three carry real consequences: the independence criteria, the enforcement of comply or explain, and the timing of the Internal Control Report.
Transitional provisions
| Provision | Applies from |
|---|---|
| General regularisation under the Decision | From issuance, and no later than the end of 2026 |
| Amended Article 2-3, independent member criteria | On election of a new board after expiry of the current board’s term, at the first ordinary general assembly convened for that purpose at least three months after the date of the Decision |
| Amended Article 13-1, forms submitted through the governance system on the CMA electronic portal | From the date of the Decision |
A sitting director who no longer meets the amended test therefore does not lose their seat mid-term.
Scope
Article 1-3 applies Module Fifteen to companies listed on the Exchange and to licensed shareholding companies, whether listed or unlisted, excluding units subject to Central Bank of Kuwait supervision, listed companies subject to the Insurance Regulatory Unit, and non-Kuwaiti companies listed on the Exchange when Module Fifteen was issued. The Decision adds a fourth exclusion: branches of licensed foreign companies whose parent company is subject to governance rules at comparable regulatory authorities.
Independence of board members
Article 2-3 continues to require independent members to make up at least 20% of the board and no more than half. That is unchanged. What has widened is the list of circumstances that negate independence.
Three existing grounds are extended. The 5% shareholding test in Article 2-3(1)(a) now also captures shares in another company within the group. Kinship under (b) extends to the second degree and now reaches the principal related parties of the company. The disqualification under (c) for sitting on the board of a group company now also covers executive management, and extends to the related parties of the company.
Two grounds are new. Under (f), independence is negated where the independent member, or a relative up to the first degree, holds a direct or indirect interest in contracts and projects concluded with the company or its group during the membership period. Under (g), membership may not exceed two consecutive terms unless a break of at least three consecutive years has passed, after which the member may be re-nominated.
A new Article 2-3(3) requires the independent member to submit an annual declaration to the nomination and remuneration committee confirming that the Article 2-3 criteria are met, and to notify the committee immediately if independence lapses. The requirement in Article 2-3(2) for qualifications, experience and technical skills suited to the company’s activity already existed; the amendment ties it expressly to the independent board member.
Article 4-3 gives the nomination and remuneration committee the matching duties. It must verify that independence has not lapsed, using the information available to it and the member’s annual declaration under Article 2-3, and, where an independent seat falls vacant, recommend to the board a replacement who meets Articles 2-2 and 2-3.
Comply or explain
The allocation in Article 13-3 is unchanged. Comply or explain applies to Rules 1 (except Article 2-3), 2, 3, 6 (except Articles 5-7 and 7-7), 9, 10 and 11. Rules 4, 5, 7 and 8, together with Article 2-3 and Articles 5-7 and 7-7, remain mandatory and carry the penalties provided in the Law and the Bylaws. Independence sits on the mandatory side, so a shortfall cannot be explained away.
What changes is the quality of the explanation and where it goes. Under Article 1-1 as amended, a company departing from a rule must identify the rule and article and provide justifications acceptable to the CMA within the forms prescribed by Article 13-1. A company that provides an insufficient or unjustified explanation is treated as non-compliant, and unacceptable justifications do not prevent the CMA taking supervisory action. Article 13-3 is amended to the same effect, moving the detail from the governance report into the Article 13-1 forms.
Article 13-1 now prescribes two filings through the governance system on the CMA electronic portal: the corporate governance follow-up form, annually and within no more than 10 business days from 30 June each year; and the form on satisfaction of the corporate governance report requirements, accompanied by a copy of the governance report and the audit committee’s report, before the date of the ordinary general assembly. Where a requirement in either form is not met, the company must identify the rule and article, state the reasons, and give the expected date of compliance.
Board meetings
Under Article 2-5, six meetings a year remains the floor, with at least one each quarter, unless the company’s articles require more. The Decision adds that resolutions passed by circulation do not count as a board meeting, that the minimum must be complied with, and that meetings may be held using modern means of communication. The deputy chairman may convene an ordinary meeting in the chairman’s absence, and the chairman or his substitute may call an emergency meeting on his own initiative as well as on the written request of two members, provided the emergency character of the meeting and the justification for holding it are recorded in the minutes.
Risk management and internal audit
The Decision replaces the department, office or unit formulation with an independent administrative unit within the company’s organisational structure, for both risk management under Article 6-3 and internal audit under Article 6-7.
Outsourcing is expressly accommodated. Where an external party is engaged to perform the functions of the risk unit under Article 6-3(4), or of the internal audit unit under Article 6-7(2), the company is relieved of the obligation to appoint staff to that unit, provided the external party holds the necessary professional competence and technical capability.
Article 6-9 carries the timing change. An independent audit office must be engaged to assess and review the internal control systems and prepare an annual Internal Control Report, which must be provided to the CMA within no more than 90 days from the end of the company’s financial year. The separate three-yearly review of the internal audit unit’s performance by another audit office is unchanged, with a copy to the audit committee and the board. Article 6-8, the internal audit unit’s own report on internal control systems, is amended for terminology only.
Investor relations and the company website
Article 8-7 replaces the investor affairs unit with an investor relations administrative unit within the organisational structure, reporting to executive management, for example to the chief executive officer, his deputy or the finance director. It sets four minimum duties: introducing the company’s activities, vision, strategy and financial performance; responding to enquiries from shareholders and from current and potential investors; facilitating shareholders in exercising their right to attend and vote at general assemblies; and putting forward appropriate recommendations to develop the services provided to investors.
Article 8-8 replaces the requirement for a governance section on the website with an obligation to establish a company website, updated and maintained regularly and permanently, carrying nine items as a minimum: a note on the company, its vision, mission and field of business; the management structure, board members, chief executive officer and executive management; the company’s annual report; annual financial statements for at least the last five years; the annual governance report; minutes of general assembly meetings for at least the last three years; contact details for the officer responsible for the investor relations unit; a note on social responsibility; and company contact details. Items 3, 4 and 6 do not apply to licensed unlisted companies.
The governance report form
Annex 2 replaces Appendix 2, the structure of the corporate governance report form. Two points matter for the next reporting cycle. Under Rule 1, the board attendance table must include every board meeting held during the year, and the independent member’s declaration of independence must be attached to the report. Under Rule 3, the remuneration tables now split fixed and variable benefits between the parent company and subsidiaries, and the senior executive table is capped at five to seven executive positions, covering the five highest paid senior executives plus the chief executive officer and finance director where they are not already among them.
What this means in practice
Independence is the item that changes board composition, and it sits on the mandatory side of Article 13-3, so a shortfall cannot be disclosed away. The Article 2-3 test should be run against every sitting independent director now. Second-degree kinship, executive roles at a related party, a 5% holding anywhere in the group, a contractual interest held by a first-degree relative, and tenure beyond two consecutive terms are all new or newly widened grounds. Article 4-3 sets out what follows: the nomination and remuneration committee verifies independence and recommends a replacement when a seat falls vacant.
The Article 1-1 amendment is the enforcement change. A departure now has to be justified to the CMA’s satisfaction inside a prescribed form, and a thin justification is itself non-compliance. Governance policies need to be evidenced rather than simply adopted.
The remainder is operational and dated. The Internal Control Report is due 90 days after the financial year end, the follow-up form within 10 business days of 30 June, and the website and report form changes land in the next reporting cycle.
How we can help
Emtithal Law Firm advises listed companies, CMA-licensed entities and their boards on governance, disclosure and regulatory compliance in Arabic and English. On this Decision that work includes Article 2-3 independence assessments for sitting and prospective directors, gap analyses against the amended Module Fifteen requirements, preparation of comply or explain justifications for the Article 13-1 forms, and revision of board and committee terms of reference ahead of the end of 2026.
