Kuwait extends ban on expatriate partners under Article 18 residency
Officials are discussing a new mechanism for Article 18 expatriates as partners, including revisions to Article 19’s contribution limit of 100,000 dinars and the three-year ownership period, while the temporary ban remains in effect until new regulations are in place.
• Most Article 18 residency holders are partners in limited liability institutions, with 9,600 individuals holding partner or managing partner status across 44,500 licenses.
• The executive regulations grant non-citizen residents’partner or investor status under Article 19, with efforts underway to transition Article 18 expatriates, offering a one-year grace period to avoid forced sales and market distortions.
• Article 19 allows ordinary residency for foreign investors or partners with a minimum 100,000 dinar share, and ownership must be shown in the last three certified budgets approved by the Ministry of Commerce and Industry.
The Ministry of Commerce and Industry maintains its prohibition on Article 18 residency holders, including residents and expatriates, from establishing companies or institutions as partners or managing partners, or being listed in the commercial register.
Exceptions apply only if their status aligns with Article 19, as it is deemed incompatible to combine the roles of worker and employer. Sources informed Al-Rai newspaper that this temporary ban will remain in effect until more specific and effective regulatory controls are implemented.
The sources revealed that the majority of shareholders with Article 18 residency are partners in limited liability institutions. According to the database of the Public Authority for Manpower, approximately 9,600 individuals working in the private sector under Article 18 work permits have obtained the status of partner or managing partner across about 44,500 licenses.
The sources indicated that officials from the Ministry of Commerce and Industry, in coordination with the Ministry of Interior and the Public Authority for Manpower, are discussing the development of a new mechanism to address the status of Article 18 expatriates as partners or managing partners in companies, both at the time of establishment and in existing entities. These discussions include recommendations to review the requirements of Article 19, particularly regarding the minimum contribution value, currently set at 100,000 dinars, and the ownership period, which is three consecutive years.
The sources added that one of the proposed measures under consideration is to restrict companies with Article 18 contributors from opening more than one branch unless regulatory authorities verify that the company is operational and requires expansion due to its activities. They also hinted that there is currently no objection to allowing Article 18 residents to contribute to companies as managing partners in the future.
Ownership structures
The sources emphasized that until the finalization of regulatory controls on this matter, all existing companies and institutions with ownership structures that include Article 18 shareholders will be allowed to continue operations without any changes. They stressed that any forthcoming amendments will safeguard the legal and financial positions of current owners.
The sources further explained that the executive regulations of the Foreigners’ Residence Law grant non-citizen residents the status of partner or investor under Article 19. Arrangements are now underway to develop a new mechanism to transition expatriate partners holding Article 18 residency to Article 19 status, or to retain them under new conditions currently being prepared.
A grace period of up to one year is likely to be granted to facilitate this transition, ensuring that property owners unable to adjust their status are not forced into defensive sales that could harm their rights or distort market evaluations by artificially increasing supply.
Executive measures
The sources noted that the general direction of the regulatory authorities is to encourage foreign investors and expand their local participation, rather than limit it. They indicated that the executive measures to address the current situation are part of a broader plan, spearheaded by the Ministry of Commerce and Industry in collaboration with relevant authorities, to improve the local business environment. This initiative aims to attract serious investors to establish companies in Kuwait while combating practices related to trading in residency permits.
Difference between Article 18 and Article 19 Residency
Residency under Article 18 of the Executive Regulations of the Foreigners’ Residence Law, issued by Ministerial Decree No (957) of 2019, applies to individuals employed under work permits. These individuals are subject to the supervision and authority of their employers.
Article 1 of Law No (6) of 2010 concerning private sector employment defines a worker as: “Every male or female who performs manual or intellectual work for the benefit of an employer and under their management and supervision in exchange for remuneration.” It also defines an employer as: “Every natural or legal person who employs workers for wages.”
In contrast, Article 19 stipulates that “it is permissible to grant ordinary residency to an investor or foreign partner in a commercial or industrial activity.” This is subject to conditions, including that the expatriate must be a partner with a minimum share of 100,000 dinars, and their ownership must be reflected in the last three certified budgets approved by the Ministry of Commerce and Industry.
