Can a Lender Become a Beneficial Owner?
Kuwait’s New Guidance Looks Beyond Shareholding
By Legal Counsel Suha Alsahli
Emtithal Law Firm
Special to The Times Kuwait
Kuwait’s new guidance on beneficial ownership is placing greater emphasis on a question that companies may easily overlook: who actually controls the business?
Beneficial ownership is commonly associated with shareholding. A person owns a significant percentage of a company and is therefore identified as its beneficial owner. Kuwait’s August 2026 guidance makes clear that the analysis can extend considerably further.
Under Kuwait’s AML/CFT framework, a beneficial owner must ultimately be a natural person. The first test looks at individuals who own or control 25 percent or more of a company’s capital or voting rights. Where no such person can be identified, or where there is doubt that the person identified through ownership is the true beneficial owner, the analysis moves to individuals exercising control “through other means.”
This distinction can have important consequences for companies whose ownership appears straightforward on paper.
A shareholder may hold less than 25 percent of a company and still exercise sufficient control to qualify as a beneficial owner. Equally, someone with no shares at all may potentially fall within the definition if that person exercises ultimate control over the company’s decision-making.
Kuwait’s guidance defines control in this context as the ability to make relevant decisions within a legal person or legal arrangement and to impose those decisions. The focus therefore shifts from the percentage appearing on a shareholder register to the practical governance of the company.
Control through loan covenants
One of the more notable examples identified in the new guidance concerns loan covenants.
Financing agreements commonly contain conditions designed to protect a lender. In ordinary circumstances, such protections form part of the commercial relationship between lender and borrower. However, the guidance specifically identifies situations where loan covenants restrict management’s financial and operational decision-making to such an extent that substantial decision-making authority is effectively transferred to the lender.
In those circumstances, the financing relationship may become relevant to the beneficial ownership analysis.
Consider a company in which no shareholder owns 25 percent or more. The company obtains substantial financing from a lender, and the financing terms give that lender extensive authority over important financial and operational decisions. If management cannot effectively make significant decisions without the lender’s approval, the latter may be considered to have the ultimate control over the company, and therefore, the beneficial owner according to the August 2026 Guide.
The existence of a loan does not itself make a lender a beneficial owner. The decisive issue is the degree of actual control exercised.
There is also an important distinction where the lender is itself a company, bank or other legal entity. Kuwait’s definition ultimately requires the beneficial owner to be a natural person. Accordingly, the analysis cannot simply end by recording a corporate lender as the beneficial owner; the relevant inquiry remains whether a natural person ultimately exercises the required level of control.
Looking beyond the shareholder register
Loan covenants are only one example. Kuwait’s new guidance also identifies minority shareholders acting through agreements or informal arrangements, contractual relationships, individuals capable of appointing or removing management, strategic advisers influencing decision-making and senior executives exercising effective control as circumstances that may require closer examination.
For businesses and compliance teams, the practical implication is significant. A beneficial ownership review cannot always be completed by requesting the commercial licence, incorporation documents and shareholder register and checking whether someone crosses the 25 percent threshold.
Where the ownership test does not reveal the person exercising ultimate control, companies and regulated businesses conducting customer due diligence may need to examine financing arrangements, governance rights, contractual relationships and the actual manner in which important decisions are made.
Kuwait’s 2026 guidance therefore reinforces a broader approach to beneficial ownership: ownership is only one route to control, but it is not the only one.
