Article · Kuwait
Decree-Law No. 78 of 2026 on Combating Commercial Concealment and the New 15-Day Beneficial Ownership Deadlines
Kuwait has enacted Decree-law No. 78 of 2026 on combating commercial concealment, introducing a comprehensive legal framework targeting business arrangements that obscure the true beneficiary of commercial activities or enable unlicensed persons to conduct economic activities. The UBO Resolution accelerates the flow of ownership and control information to the registrar, and the Concealment Law attaches criminal consequences to arrangements in which the registered position does not reflect the underlying commercial reality.
7 September 2026Abdullah Al-Asousi
Kuwait has enacted Decree-law No. 78 of 2026 on combating commercial concealment, introducing a comprehensive legal framework targeting business arrangements that obscure the true beneficiary of commercial activities or enable unlicensed persons to conduct economic activities. The Law applies to individuals, companies, and commercial licenses registered with the Ministry of Commerce and Industry. It comprises 14 articles and, under Article 14, comes into force six months from the date of publication, in February 2027. It is the first dedicated instrument in Kuwait addressing the practice known as “tasattur”, under which a business is licensed or registered in the name of one person while it is in substance carried on by, and for the benefit of, another.
On 30 July 2026, the Ministry of Commerce and Industry ("MOCI") issued Ministerial Resolution No. 156 of 2026 (the "UBO Resolution"), amending Ministerial Resolution No. 4 of 2023 on the procedures for identifying the beneficial owner (the "2023 Resolution"). It reduces to 15 days three of the periods within which beneficial ownership information must be recorded and filed.
The two instruments are closely connected. The UBO Resolution accelerates the flow of ownership and control information to the registrar, and the Concealment Law attaches criminal consequences to arrangements in which the registered position does not reflect the underlying commercial reality.
Background
Restrictions on foreign participation. Article 23 of the Commercial Code, issued by Decree-Law No. 68 of 1980, provides that a non-Kuwaiti may not carry on trade in Kuwait except through a company in which a Kuwaiti partner holds not less than 51% of the capital. Article 24, as originally enacted, prevented a foreign company from establishing a branch or carrying on commercial activity except through a Kuwaiti agent. These restrictions explain the commercial demand for concealment arrangements.
The lawful alternatives have widened. Law No. 116 of 2013 on the promotion of direct investment, which replaced Law No. 8 of 2001, allows the Kuwait Direct Investment Promotion Authority ("KDIPA") to license foreign ownership of up to 100% in approved activities. Law No. 13 of 2016 removed the exclusivity requirement applicable to commercial agencies. Law No. 1 of 2024, published on 21 January 2024, replaced Article 24 of the Commercial Code so that a foreign company may now establish a branch in Kuwait and carry on its activities without a local agent, by way of exception to Article 23(1), and amended Article 31 of the Public Tenders Law so that a foreign bidder is no longer required to act through a Kuwaiti intermediary.
The position before the Concealment Law. Until February 2027, Kuwaiti law addresses concealment indirectly, through two routes.
The first is civil. The Court of Cassation has treated the restrictions in Articles 23 and 24 as rules of public order, on the basis that they protect an economic interest which prevails over private interest. A contract concluded in breach of them is void absolutely, any interested party may rely on the nullity, and the court must apply it of its own motion. Where a foreign company contracted as a subcontractor in its own name rather than through its Kuwaiti agent, the contracts were held void on that basis (Appeal No. 190 of 2002 Commercial, 19 April 2003), and such contracts cannot found a claim for any obligation arising under them (Appeal No. 1013 of 2003 Commercial, 29 January 2006). A claim has nonetheless been entertained on a restitutionary basis, as equivalent performance founded on unjust enrichment, although without default interest, because the resulting obligation is civil rather than commercial (Appeals Nos. 566 and 577 of 2003 Commercial, 9 October 2004). A joint venture constituted as a muhasasa falls outside the Article 23 prohibition and is not void on that ground (Appeal No. 719 of 2005 Commercial, 11 June 2006).
The second is administrative, under Law No. 111 of 2013 on commercial shop licences, which replaced Law No. 32 of 1969. Article 3(2) requires a natural person applying for a licence to own the capital of the establishment, to be responsible for its management and to manage it for his own account. Article 11 sets out the grounds on which a licence is cancelled, two of which describe concealment: obtaining the licence on the basis of false, forged or sham documents (item 5) and leasing the licence to a third party (item 9). Article 13 provides for administrative closure of the premises in both cases. The penal provision, Article 12, applies only to items 5 and 7, and imposes imprisonment of up to one year and a fine of between KD 1,000 and KD 5,000, or either penalty. Leasing a licence has therefore been a ground for cancellation and closure, but not an offence in its own right.
The beneficial ownership framework. The 2023 Resolution was issued under Law No. 106 of 2013 on anti-money laundering and combating the financing of terrorism and its executive regulations. Article 5 defines the beneficial owner as the natural person who ultimately owns or controls the legal person, through direct or indirect ownership of 25% or more of the capital or voting rights, including through a chain of ownership or control, with a cascade to any natural person exercising control by other means and, failing that, to the person holding the position of senior managing official. Article 8 requires a beneficial owner register to be established and maintained, Article 10 requires a register of partners or shareholders, and Article 11 requires the data to be filed with the registrar. Article 17 has, since 2023, prohibited the grant or renewal of any licence until the requirements of the 2023 Resolution have been satisfied.
The 2023 Resolution has been amended several times, by Ministerial Resolutions No. 41 of 2023, No. 16 of 2025, No. 171 of 2025, No. 37 of 2026 and now No. 156 of 2026. As currently in force, the framework provides for administrative fines of between KD 1,000 and KD 10,000 per violation for failure to disclose the beneficial owner or for inaccurate disclosure, in addition to the licensing condition in Article 17.
The FATF context. Kuwait was added to the FATF list of jurisdictions under increased monitoring on 13 February 2026, following the mutual evaluation report adopted in June 2024, having previously been listed between 2012 and February 2015. One of the three items on the agreed action plan is to ensure that beneficial ownership information held in the registry is accurate and to apply effective, proportionate and dissuasive sanctions where inaccurate information is identified. The evaluation had found the register significantly under-populated and the available sanctions insufficient.
The Concealment Law
Definitions and scope. Article 1(4) defines commercial concealment as enabling any person, whether a natural or a legal person, to practise an economic activity which that person is prohibited from practising under the laws in force in Kuwait, whether for his own account or in partnership with others, or circumventing the ownership percentages prescribed by law for foreign nationals in order to enable him to practise the activity. Article 1(5) defines economic activity as any commercial, investment, industrial, professional, agricultural or service activity, and any activity of an economic character carried on for profit which requires a licence or approval from the competent authorities. Professional firms fall within scope, as do activities requiring an approval rather than a licence.
The definition is not confined to arrangements between Kuwaiti and foreign parties. It applies wherever the person enabled is prohibited from carrying on the activity, which includes a person trading without a licence and a Kuwaiti national disqualified under Article 4 of Law No. 111 of 2013 by reason of bankruptcy or a conviction for fraudulent bankruptcy, commercial fraud, theft, swindling, breach of trust or forgery. The second limb, circumvention of the prescribed ownership percentages, applies to structures which are compliant on their face: a company registered on a 51/49 basis in which side agreements confer the economic return and effective control on the 49% holder falls within Article 1(4) notwithstanding the registered position.
The prohibition. Article 2 contains two limbs. The first prohibits any person from practising an economic activity in Kuwait, for his own account or jointly with others, without the required licence from the competent authority or beyond the limits of the licence granted to him, where the activity is practised through a person who has enabled him to do so. The second prohibits any person from enabling another to breach that prohibition by way of commercial concealment, including by permitting the use of his trade name, licence, approval or commercial register entry, or any other means.
The qualifying words at the end of the first limb are significant. Article 2 is directed at activity carried on through an enabling party rather than at unlicensed trading generally, which remains a matter for Law No. 111 of 2013. Both parties to the arrangement commit an offence, and management agreements or side letters recording the true economic split are capable of evidencing it.
Penalties. Article 3 provides that, without prejudice to any greater penalty under the Penal Code or any other law, a breach of Article 2 is punishable by imprisonment of not less than one year and not more than three years and a fine of not less than KD 10,000 and not more than KD 100,000, or the equivalent of the value of the profits obtained, whichever is greater, or by either penalty. Because the fine may be fixed by reference to the profits where these exceed KD 100,000, the stated maximum does not operate as a ceiling for a substantial business, and because the court may impose one of the two penalties, a custodial sentence is not inevitable. Fines are multiplied according to the number of persons in breach and the number of offending activities, so that the aggregate exposure of a group holding several licences may be considerably higher.
Article 4 punishes a breach of the prohibition in Article 11, described below, with imprisonment of up to six months and a fine of up to KD 10,000, or either penalty.
Liability of managers and legal persons. Under Article 5, the person responsible for the actual management of the offending legal person is subject to the same penalties where his knowledge of the acts is established, where the violation is shown to have occurred as a result of his failure to discharge the duties imposed by his management, or where he contributed to its occurrence. The legal person is jointly liable for any financial penalty or compensation awarded where the violation was committed by one of its employees in its name or for its benefit. The threshold is knowledge, breach of duty or contribution rather than participation in the arrangement, which extends exposure to directors who have not enquired into how a group's holdings are structured.
Consequences of conviction. Article 6 is the provision of greatest commercial significance. Without prejudice to the rights of bona fide third parties, the court must, on conviction, order the confiscation of the funds or profits resulting from the offence and of all tools, equipment and means used in the offending activity, together with permanent closure of the establishment and cancellation of the licence. The foreign offender is ordered to be deported following execution of the penalty, and the final judgment is published. These orders are mandatory rather than discretionary, and for a business operating through a concealed structure the fine is likely to be the least material part of the outcome.
Article 6 is expressed to apply on conviction of any of the offences provided for in the Concealment Law, of which there are two: the Article 3 offence and the Article 4 offence of obstructing an inspector. On a literal reading, a conviction for withholding documents would carry mandatory confiscation, permanent closure and cancellation of the licence. That result appears unlikely to have been intended and may require clarification.
Recidivism and conciliation. Article 7 provides that the penalty for any offence under the Concealment Law is doubled where the offence is repeated within five years of the date on which the earlier judgment became final. Article 8 permits the competent Minister or his delegate to conciliate before the action is referred to the competent court, during its hearing or before a final judgment, against payment of not less than half the maximum prescribed fine. Conciliation is conditional on removal of the violation and correction of the legal position, extinguishes the criminal action, and is not available in cases of recidivism. It does not prevent administrative deportation measures where the national interest so requires. The reference to half the maximum prescribed fine is not free from doubt, since the maximum under Article 3 is itself the greater of KD 100,000 and the profits obtained.
Enforcement and reporting. Article 10 confers judicial seizure capacity on officials designated by decision of the Minister, with powers of inspection and monitoring, and requires the persons and entities concerned to provide all facilities, data, information and documents requested. Article 11 prohibits the obstruction of those officials by any means, including refusal to provide requested information or documents and the provision of incorrect or misleading information. Article 9 provides for a financial reward, fixed by decision of the Minister, of up to 10% of the value of the fines collected, payable to an informant who is not a participant in the offence where the informant has provided evidence capable of being relied upon and a final conviction has been issued.
Procedure and matters left to implementing decisions. The Concealment Law does not establish a specialised court or investigative body, so investigation and trial follow the general rules of the Criminal Procedure Law issued by Law No. 17 of 1960. It contains no presumptions or evidential indicators of concealment, which distinguishes it from the Saudi Anti-Commercial Concealment Law of 2020, whose implementing regulations identify markers of the practice. In Kuwait those questions are left to the implementing decisions to be issued by the Minister under Article 12, which had not been issued as at the date of this article. Article 13 repeals any conflicting provision, although the administrative consequences under Law No. 111 of 2013 do not appear to conflict with the Concealment Law and should continue to apply alongside it.
The UBO Resolution
The UBO Resolution amends Item (1) of Articles 8, 9 and 11 of the 2023 Resolution, reducing each of the relevant periods to 15 days.
| Obligation | Provision | Previously | Now |
|---|---|---|---|
| Establish and populate the beneficial owner register | Article 8(1) | 60 days from implementation or from the date the legal person came into existence | 15 days |
| Notification by a board member who held nominee capacity before publication | Article 9(1) | 30 days from publication | 15 days |
| File the beneficial owner register and the register of partners or shareholders with the registrar | Article 11(1) | 60 days from implementation or from licensing and registration | 15 days |
Two related obligations are unchanged and have at times been reported as new: the obligation to record any change in the register within 15 days of the date on which the legal person becomes aware of the change or should have become aware of it, and the obligation on a board member who acquires nominee capacity to notify the legal person within 15 days of acquiring it. The UBO Resolution does not alter the definition of beneficial owner or the information which must be disclosed.
Two further provisions of the 2023 Resolution are relevant here. A legal person may not register or complete any document relating to a change in its ownership unless the transferee states whether the transfer will result in a change in the beneficial owner, the nature of that change and the details of the new beneficial owner. A legal person which issues shares or quotas in the name of nominees or members of management must disclose the details of those holdings and the identity of the persons concerned to the registrar within 15 days.
Practical implications
Filing has become a post-completion step of the same urgency as commercial register entry. Any transaction which changes beneficial ownership, including a share transfer, a change of control, a restructuring, the death of an owner or the appointment of a nominee, starts a 15-day period which should be allocated to a named person on the completion checklist. The shortened deadline does not increase the administrative fine, but it increases the number of occasions on which the fine may be incurred, and non-compliance continues to prevent the grant or renewal of a licence.
The interval before the Concealment Law comes into force is the period in which arrangements can be reviewed and corrected on advice rather than under investigation. Information filed in the beneficial owner register describes the ownership and control position which Article 2 will shortly make it an offence to misrepresent, and Article 10 gives designated officials a right of access to the underlying documents. Clients should consider:
- Reviewing each licence, shareholding, agency and management arrangement in which the registered position may not reflect the economic position, including side agreements, profit-sharing arrangements, powers of attorney and security over shares.
- Reconciling the beneficial owner register and the register of partners or shareholders against those arrangements, and filing corrections where required.
- Determining, for each arrangement which does not survive that review, whether the appropriate course is a KDIPA licence, a branch under Article 24 of the Commercial Code as amended by Law No. 1 of 2024, a restructuring which records the actual economics, or an exit by the registered licence holder.
- Documenting the position of the person responsible for the actual management of each entity, having regard to Article 5.
- Briefing boards and senior management on the consequences of conviction under Article 6 and on the availability and limits of conciliation under Article 8.
These steps take time to complete, and clients with potentially affected structures should begin the review well before February 2027.
