Recent amendments to Kuwait’s Public Funds Protection Law, approved by the Council of Ministers last week, have stirred significant concern within government agencies and private sector companies in which the state holds stakes, both domestically and abroad.
The amendments redefine “public employee” under Article 3, Paragraph (e), to include “members of boards of directors, managers, and employees of institutions, companies, associations, organizations, and establishments if the state, public bodies, or public institutions contribute a share to their funds in any capacity.”
Critics note that this change conflicts with Law No. 1 of 2016, which regulates the responsibilities, violations, and penalties for company boards and managers, and may destabilize the legal status of affected entities, reports Al-Jarida daily.
The amendments also apply to foreign companies where the Kuwaiti government, through investment arms or sovereign funds, holds shares. This raises concerns about the independence of companies listed on the Kuwait Stock Exchange, as board members and employees could be treated as public employees depending on government investment decisions.
Further complicating matters, Article 13 bis introduces severe penalties for public employees who intentionally harm the funds or interests of the entities they serve, including imprisonment from five to seven years depending on the severity of the damage.
Observers warn that these provisions could discourage both local and foreign companies from maintaining operations or listing on the Kuwait Stock Exchange, potentially undermining shareholder confidence and impacting the national economy.
The amendments also pose challenges for foreign companies with Kuwaiti sovereign fund investments. For instance, board members of Mercedes-Benz, in which Kuwait owns shares, could theoretically fall under Kuwait’s asset protection law, creating legal conflicts with foreign jurisdictions.
Experts recommend forming a joint committee of relevant government agencies — including the Public Investment Fund, Public Institution for Social Security, Kuwait Direct Investment Promotion Authority, the Public Authority for Minors Affairs, and the Public-Private Partnerships Authority — to develop a cohesive approach.
The goal would be to safeguard public funds while preserving a favorable investment climate, ensuring companies can operate independently and maintain investor confidence. Although the Cabinet has approved the amendments, there remains scope for consultation and adjustment before final ratification.
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