Ministry suspends commercial licenses for resident partnerships

• Kuwaiti laws grant “self-sponsor” residency (Article 19) to investors or foreign partners in commercial or industrial activities, requiring a minimum 100,000 dinars share and submission of the last two certified budgets.

• Resident partners must either transfer their residency to Article 19 or exit their ownership within a 6 to 12 month grace period, as per new directives from the Ministry of Commerce.

The Acting Undersecretary of the Ministry of Commerce and Industry issued Resolution No. 11 of 2024, temporarily halting the establishment, renewal, and amendment of all companies and institutions.

According to Al Qabas newspaper, this decision prevents any resident or expatriate, whether a partner or manager, from being entered into the commercial registry unless they fall under Article 19, as specified in the Manpower Book No. 2802 dated 3/1/2023.

The circular stressed the need to suspend all existing licenses where one of the partners or managers does not fall under Article 19 due to incompatibility.

Kuwaiti laws stipulate that a resident may be granted residency in the country as a “self-sponsor” (Article 19), which means granting regular residency to an investor or foreign partner in a commercial or industrial activity. Conditions include that the resident must be a partner with a share in the company of no less than 100,000 dinars and must submit the last two budgets certified by the Kuwaiti Ministry of Commerce and Industry.

45,000 commercial licenses affected by overlapping partnerships with residents

Informed sources in the Ministry of Trade and Industry estimated that approximately 45,000 commercial licenses for various activities involve overlapping partnerships with residents whose residency permits fall under Article 18. These residents are partners either directly or as partner managers.

The sources confirmed that this decision was made at the request of the General Authority for Public Forces, which emphasized the necessity of preventing residents from holding both worker and employer statuses. There is a fundamental difference between these two types of residency: residents under Article 19 are treated as investors, while those under Article 18 are limited to employee or worker roles.

Based on the new directives, resident partners are required to address their status in the companies where they hold shares by either transferring their residency to Article 19 or exiting their ownership. This must be done within a grace period to be announced by the Ministry of Commerce, which may range from 6 to 12 months.

Addressing serious violations

Sources confirmed that this decision aims to address a serious violation that has persisted in commercial licenses and was previously overlooked. Some licenses may have been exploited by resident partners for residency trade, money laundering operations, or even tax evasion on certain types of companies.

The sources indicated that Kuwait welcomes all investors, provided their residency permits, under which they practice work or invest, comply with the laws and regulations governing these activities, whether related to commercial work or labor laws.

Articles 18 and 19 in the executive regulations for the residence of foreigners

Article 18: Regular residency may be granted to work in the private sector based on a work permit issued by the competent government authority. The worker’s residency in this sector cannot be transferred without a permit from the same authority.

The employer must notify the competent authorities when the worker stops working or when the employment contract expires or is terminated, and must return the worker to their home country at the employer’s expense upon the end of employment.

Article 19: Regular residency may be granted to a foreign investor or partner in a commercial or industrial activity based on an application submitted by the concerned party, accompanied by a license to conduct the activity issued by the competent government authority. The license must be submitted when requesting the renewal of residency.