While many recent joint-venture agreements do not expressly reference geopolitical or macroeconomic risks, their structure reflects a clear sensitivity to external uncertainty. Capital contributions are frequently phased or conditional on milestones, and reserved matters include broad financial and operational decisions, suggesting a focus on investor protection.

Exit mechanisms, through put-and-call options or default-triggered termination, are consistently embedded, even in equal-share joint ventures, offering flexibility in light of potential market disruption. These trends reflect cautious deal-making, particularly in response to inflation, supply chain volatility, and shifting regional dynamics, though not always explicitly acknowledged in the documentation.

Among the most active sectors in recent Kuwaiti joint ventures are retail, logistics, F&B (food and beverage), and entertainment, often tied to mixed-use developments. These ventures typically involve a foreign partner contributing brand, intellectual property (IP), or operational know-how, and a local partner contributing infrastructure or regulatory facilitation.

Several agreements contain detailed IP provisions, including ownership of trade marks and restrictions on use outside the joint venture. While emerging technologies such as AI and data localisation are not yet a dominant feature, some recent agreements, particularly in the food and entertainment sectors, address data usage, digital platform control, and system ownership.

These provisions reflect early stage responses to the growing commercial role of digital operations, even in the absence of comprehensive regulation.

For 2026, it is expected that joint-venture structuring in Kuwait will evolve further, with more explicit terms governing data, IP, and liability allocation, especially as digital services become more embedded in the operational models of retail and consumer-facing ventures.

Corporate Structure

Joint ventures within Kuwait are commonly structured as a with limited liability company (WLL) or as a contractual joint venture formed through a collaboration agreement between the parties without creating a separate legal entity. Although the preferred vehicle is a WLL, a closed shareholding company (CSC) may also be considered. The selection between these preferred structures depends on the commercial objectives, regulatory requirements, and desired level of formality.

Limited liability company

A WLL is established as a separate legal entity, with two or more partners, with liability limited to capital contributions per partner. The Companies Law No 1 of 2016 (“Companies Law”) sets out the legal structure governing how membership interests are managed and how the company is operated, while also permitting some flexibility by allowing these rules to be modified through contractual agreement such as the articles of association.

Under Article 19 of Kuwait Residency Law No 114 of 2024, a WLL must have at least one initial manager who is either a Kuwaiti citizen or holds valid residency. This practice continues to evolve, with the Ministry of Commerce and Industry (MOCI) currently requiring that a Kuwaiti citizen serve as the company’s first manager. The establishment of the WLL is subject to registration in the commercial register, along with other incorporation procedures, which extend the timeline and increase costs payable to the government authorities. The WLL may only carry out activities after procuring the required trading or business licences from the MOCI and other required approvals (if needed).

Closed shareholding company

Although the WLL is the most commonly used vehicle to incorporate a joint venture, a joint venture may also be incorporated as a closed shareholding company.

A CSC requires a minimum capital of KWD10,000 and a minimum of five shareholders, does not attain legal personality but requires proclamation (registration and publication in the official gazette) before starting operations. Pursuant to current practice under Boursa Kuwait, a shareholding company may have its shareholder count fall to two after incorporation.

Contractual Joint Venture

Pursuant to Article 77 of the Companies Law, a contractual joint venture is formed by two or more partners concluding a company contract. Such joint ventures are not recognised as separate legal entities distinct from their participants and are exempt from registration in the companies register. This private agreement is valid, binding and limited in effect to the parties involved.

A contractual joint venture in Kuwait, governed solely by a private agreement between the participants, has the flexibility to contract freely with no incorporation restrictions on matters such as capital requirements, management, formal registration, public disclosure of financials or terms of the company contract, and termination automatically on contractual terms, or project completion, or death of a partner unless agreed otherwise between the parties.

A contractual joint venture lacks the capacity to independently own assets, initiate legal actions, or enter into contracts. Only the individual partners can engage in these activities on behalf of the joint venture, but they must be registered separately in their own names. This limitation stems from the joint venture’s absence of legal personality, preventing it from acting independently in legal or financial contexts. For any activity to be conducted by the joint venture, the partners shall have valid licences and approvals as necessary to be issued by the respective authority for each of the activities.

Also, the contract joint venture operates without a statutory governance or dispute resolution framework; partner relations and conflicts are governed solely by general contract law principles. Critically, partners bear unlimited personal liability for all obligations arising from the joint venture and are jointly liable to third parties for any liabilities incurred in its operations.

Liability

The main distinction lies in the limitation of liability: in a corporate structure, liability is limited to each party’s proportion of share capital, whereas in a contractual joint venture, all partners are exposed to unlimited, joint liability.

Control, decision-making and management structure

Contractual joint venture

While contractual joint ventures are primarily governed by the company’s contract, the participants have the freedom to determine obligations of each participant and adjudicate independently to determine the capital, distribution of loss and profit accounting procedures, management, termination, liquidation, transformation, and all other terms and conditions of the joint-venture company, provided that the terms of their agreement are consistent with applicable public policy principles.

However, there is no statutory framework to resolve any disputes between participants except under the Companies Law, governing general contractual matters unless the company contract provides otherwise.

Limited liability company

A WLL is managed by one or more managers, who are appointed either through the company’s articles of association or by resolution of the partners at a general meeting. The company is also required to appoint a statutory auditor to examine and provide an independent report on its accounts and financial statements. The partners make decisions during general meetings, which are usually divided into two types depending on what needs to be discussed.

• Ordinary general meetings, which handle routine matters such as approving annual accounts, distributing profits, and appointing or removing managers.
• Extraordinary general meetings, which consider more fundamental changes such as amending the company’s articles of association, increasing or reducing capital, or dissolving the company.

Neither meeting may validly transact business unless the statutory quorum is present; while the company’s articles of association may increase this threshold, it may never set it below the legal minimum.

Profit sharing

Under the Companies Law, entities are allowed to determine profit-and-loss allocations that differ from each shareholder’s or partner’s capital contribution; however, no partner or shareholder may be wholly exempted from sharing in profits or losses, and any clause seeking such exemption is void under Article 18 of the Companies Law.

Tax provisions

Kuwait does not impose any tax on wholly owned companies by Kuwaiti or GCC (Gulf Cooperation Council) nationals. However, the introduction of the Domestic Minimum Top-Up Tax (DMTT) Law No 157 of 2024, imposes a 15% tax rate on all companies, subsidiaries or joint ventures that are part of multinational groups (presence in Kuwait and another country) and that declare over EUR750 million in global revenue in consolidated financial statements.

Under Kuwait Tax Law No 2 of 2008, Kuwaiti entities that engage foreign companies or contractors for services must withhold 5% of the payment until the foreign entity obtains a tax clearance certificate from the Kuwait Tax Authority. This is primarily applied as a compliance and enforcement mechanism to ensure that foreign companies operating in Kuwait fulfil their income tax obligations. The 5% retention may be released upon issuance of a No Objection Certificate by the Kuwait Tax Authority confirming tax compliance.

For most joint-venture purposes in Kuwait, an incorporated vehicle, such as a WLL, is preferable: it limits each partner’s liability to their share of capital, provides clear governance through statutory managers, and offers built-in dispute-resolution mechanisms.

Several regulatory authorities oversee joint ventures in Kuwait, depending on the objectives, structure, and parties involved. Although a contractual joint venture in Kuwait does not trigger separate incorporation requirements, it remains subject to a comprehensive regulatory framework that governs the activities and compliance obligations of the participating entities.

Competition Protection Authority

The main authority overseeing this area is the Competition Protection Authority (CPA), which enforces compliance with the Competition Protection Law (Law No 72 of 2020), including provisions governing economic concentrations that also apply to joint ventures, when triggering certain thresholds.

Subject to certain thresholds being met as provided under Resolution No 26 of 2021, a joint venture classifies as an economic concentration under Article 10 (c) of the Competition Protection Law and requires submission of an application to the CPA by persons involved in economic concentrations within 60 calendar days from signing the joint-venture agreement.

Ministry of Commerce and Industry

While the MOCI plays a key role in company formation, commercial licensing, and maintaining the register which is relevant for WLL and CSC structures, its role is limited for a contractual joint venture as such joint venture does not require registration.

The incorporated companies will be required to follow all formal procedures including the relevant business/trade licences by the MOCI, registration in the Commercial Register and announcement (if applicable).

Boursa Kuwait and Clearing Companies

Boursa Kuwait regulates all aspects of CSC share transfers, including the mechanism, timing, and documentation required.

Kuwait’s framework for anti-money laundering and counter-terrorist financing are primarily established under Law No 106 of 2013. This legislation provides a robust regulatory structure aligned with international standards set by the Financial Action Task Force. It imposes specific obligations on financial institutions and designated non-financial businesses and professions.

This legislation imposes preventative obligations, including customer due diligence for high-risk relationships, suspicious transaction reporting (STR), and also requires record retention for a period of five years. Oversight on such matters is distributed among the Central Bank of Kuwait, the Capital Markets Authority (CMA), the MOCI, and the Kuwait Financial Intelligence Unit which operates as the independent national centre for receiving, analysing, and disseminating STR.

Restrictions on Business Partners

The restrictions on co-operating with joint-venture partners include the Boycott Law (Law No 21 of 1964) which prohibits any dealings of a commercial nature with the residents or nationals of Israel, and, as a non-permanent member of the UN Security Council, adherence to its sanctions list may be required. However, apart from these lists, Kuwait does not have a separate or autonomous sanctions list.

Foreign Participation

Joint ventures through foreign direct investment in Kuwait are not subject to any national security review process, although certain strategic sectors such as oil and gas exploration and defence contracting remain reserved for government entities. Foreign direct investment in a joint venture must be structured through a Kuwaiti-incorporated company formed under the Companies Law and established specifically for the joint-venture.

The incorporated Kuwaiti company may attain 100% foreign ownership, as an exception to the 49% (foreign partner) and 51% (Kuwaiti/GCC partner) ratio, if the legal form of the company is a shareholding or WLL as provided under Article 8 of the Ministerial Decision No 502 of 2014 (“Ministerial Decision”) and Article 12 of Kuwait Direct Investment Promotion Authority (KDIPA) Law No 116 of 2013.

The foreign investor that participates as a partner in a joint venture and anticipates to hold more than 49% of the company shareholding must secure an investment licence from the KDIPA before it can legally commence operations through the joint venture in Kuwait. The KDIPA licence application must include, in accordance with Article 14 of the Ministerial Decision, an initial project feasibility study detailing the proposed activity, legal form, investment size, financial structure and sources, and any anticipated economic or social impacts.

Restricted Sectors and Industries

Pursuant to the Council of Ministers Decision No 75 of 2015, foreign direct investment is expressly prohibited in sectors classified under the International Standard Industrial Classification, including:

• extraction of crude petroleum and natural gas;
• manufacturing of coke oven products, fertilisers, and nitrogen compounds;
• distribution of gaseous fuels through mains;
• real estate activities (excluding privately developed building projects); and
• security, investigation, and defence services.

Competition Protection Law and CPA

The Competition Protection Law (Law No 72 of 2020), its Executive Regulations, and Resolution No 26 of 2021, provide an effective oversight to regulate economic concentrations, including transactions such as joint ventures. CPA approval must be obtained by the parties involved in the joint venture. The procedure includes an economic concentration application submitted no less than 60 days before executing the draft agreement; however, approval is only required if the transaction satisfies the applicable thresholds.

CPA Approval Thresholds

The following thresholds are based on the most recent audited financial statements. As stipulated under Resolution No 26 of 2021, joint-venture partners must obtain CPA approval if any of the following thresholds are met in Kuwait:

• any individual party’s annual sales exceed KWD500,000 (approximately USD1,639,000);
• the combined annual sales of all parties exceed KWD750,000 (approximately USD2,459,400); or
• the total registered assets of all parties exceed KWD2.5 million (approximately USD8,190,000).

Any listed entity participating in a joint venture in Kuwait is governed primarily by the CMA and Boursa Kuwait. The regulatory framework is set out under Resolution No 72 of 2015, which introduced the executive by-laws for the CMA under Law No 7 of 2010. These executive by-laws are organised into 16 modules that dictate the conduct of listed companies, including any conflict of interest, corporate governance, disclosures, and securities dealings.

Further, the Companies Law requires a shareholding company listed on the Boursa to have a minimum capital of KWD25,000 which must be maintained. Pursuant to the above regulations, a listed company’s activities, including participating, may require disclosure or approval by the CMA or Boursa as applicable.

Pursuant to Resolution No 4 of 2023 issued by the MOCI, all companies (including joint ventures) registered in Kuwait are required to disclose the ultimate beneficiary owner(s) (UBO). A UBO is defined under Article 5 of the aforementioned resolution, as any individual who directly or indirectly holds 25% or more of a company’s share capital, controls 25% or more of its voting rights, or otherwise exercises decisive influence (for example, by appointing or dismissing a majority of the board of directors), and must be recorded as a UBO.

In compliance with Articles 8 and 10 of the Resolution, the joint venture must establish and maintain both an “actual beneficiary register” and a “partner/shareholder register”, documenting each UBO’s personal data, ownership or voting percentages, and the grounds, duration and circumstances of exercising control. Both registers must be submitted to the MOCI’s registry within 60 days of incorporation of the company. The registrar also requires notification of any amendments within 15 days of their occurrence.

These mandated disclosures are exempted for entities regulated by the CMA (listed companies), and wholly owned government entities.

There have been no significant new laws or regulations specifically addressing joint-venture companies in Kuwait, but a few notable court decisions are worth highlighting.

• In accordance with the Commercial Circuit Decision on appeal by cassation No 1773 of 2021 dated 15 April 2025, the court confirmed that a contractual joint venture lacks legal personality and is governed by general contract principles, so it can be rescinded for breach like any binding contract. It held that seizing the business and diverting funds justified dissolution and compensation for losses. The amount was calculated for the loss of profits and additional civil compensation.
• A corporate joint venture is solely governed by its contract and dissolves automatically if a partner dies unless continuation is agreed with the heirs, pursuant to commercial circuit session Decision on appeal by cassation No 767 of 2016 dated 11 February 2025. The court held that because no such agreement with the heirs existed (under the corporate joint venture), the venture ended on the partner’s death, and the appellant could only claim its share and was not permitted to continue the business.
• Another critical factor distinguishing joint ventures from incorporated companies, as highlighted under Commercial Circuit Decision on appeal by cassation No 3215 of 2021 dated 17 December 2024, is that the restriction provided under the Companies Law for a foreign partner ownership to be limited to 49% does not apply to contractual joint ventures, and due to the lack of a separate legal personality the assets and liabilities are upon the partners directly and are not subject to any corporate liquidation for any debts owned.

In summary, these judgments reaffirm that corporate joint ventures are treated as contractual arrangements rather than separate legal entities, unless incorporated, subject to dissolution, enforcement and remedies like any other contract.

In Kuwait, joint ventures typically start with the execution of a short, confidential term sheet or heads of terms. This preliminary document outlines the key commercial elements of the transaction – such as the scope of the joint venture, valuation methodology, break fees, and an exclusivity period usually ranging between 30 to 60 days.

It is commonly preceded by a mutual non-disclosure agreement (NDA), often drafted in bilingual Arabic/English format to avoid any translation discrepancies before local courts. In cases involving sensitive intellectual property or proprietary know-how, particularly in technology, franchising, or similar sectors, the NDA expressly excludes publicly available information and designates the Kuwaiti courts as the competent forum for injunctive or interim relief.

Where the joint venture relates to a regulated industry (eg, telecoms, banking, or oil services), the parties often exchange a regulatory compliance checklist to confirm eligibility for the required sector-specific licences.

Other than the disclosure obligations outlined herein, corporate joint ventures in Kuwait are not subject to any formal disclosure obligations. Where the joint venture is incorporated as a legal entity, typically a WLL, its articles of association are registered with the MOCI.

By contrast, any separate contractual arrangements between the shareholders (such as governance frameworks, deadlock resolution mechanisms, or exit provisions) are treated as private agreements. These do not require notarisation or registration and are generally kept confidential unless disclosure is required in the context of a dispute or upon request from a competent authority or regulator.

Conditions Precedent

Under Kuwaiti market practice, a joint-venture agreement does not enter into force until the agreed conditions precedent (CPs) have been satisfied or expressly waived. The CPs most often seen in Kuwaiti joint-venture agreements are as follows.

• Regulatory clearances – a KDIPA foreign-investment licence:
1. when a non-GCC shareholder will hold more than 49%;
2. for any sector-specific approvals (eg, the Central Bank for fintech, the Ministry of Oil for downstream services, and CITRA for telecoms); and
3. when the statutory thresholds are met, resulting in a no-objection certificate from the CPA.
• Funding evidence – documentary evidence that any in-kind assets (land, IP and equipment) have been transferred or are ready for transfer.
• Corporate and third-party consents – board or shareholder resolutions of each venturer together with any waivers or approvals required from lenders, landlords, franchisors or other key counterparties.

Material Adverse Change

A material adverse change (MAC) clause is routinely included either as its own CP (no MAC has occurred between signing and closing) or as a separate walk-away right exercisable after the CPs are met but before the share transfer.

To be actionable, the event must have a disproportionate adverse impact on the venture. Typical triggers cited in Kuwaiti agreements are major currency devaluation, withdrawal of government subsidies, the imposition of sanctions or the outbreak of regional hostilities.

Force Majeure

Force majeure clauses follow Article 215 of the Kuwaiti Civil Code. They list events that are unforeseeable and beyond the parties’ control – government measures, epidemics, serious supply-chain disruption, extreme oil-price shocks or natural disasters.

The clause usually suspends the parties’ obligations for a short grace period; if the force-majeure event continues for 60–90 days and still prevents closing, either party may terminate the agreement without liability.

Joint-Venture Vehicles and Legal Set-Up

Joint ventures in Kuwait can be structured either as a purely contractual arrangement or by incorporating a new company to serve as the joint-venture vehicle. In practice, most joint-venture parties prefer to incorporate a Kuwaiti company for their venture – typically a WLL.

The WLL is the most common joint-venture vehicle in Kuwait. It can be formed with up to 50 shareholders, with each member’s liability limited to their capital contribution. A WLL is relatively quick to set up – the articles of association are auto-generated and registered with the MOCI.

The minimum capital for a WLL is very low: the legal floor is KWD100 (about USD330) in nominal capital. In fact, Kuwaiti law fixes a nominal value of KWD100 for each membership interest, so the total stated capital must be a multiple of 100. In practice, however, the MOCI often requires a higher capital commitment (typically approximately KWD1,000 or more) depending on the business activity.

Foreign Ownership Restrictions and Participation

By default, Kuwaiti company law restricts foreign participation in local companies. Traditionally, foreign investors were limited to 49% ownership of a Kuwaiti company, with the remaining 51% held by Kuwaiti nationals (or wholly Kuwaiti-owned entities). In other words, without special approval, any joint-venture vehicle must have a Kuwaiti (or GCC) partner owning at least 51% of the equity. This rule applies to both WLLs and CSCs in most sectors.

Under KDIPA Law, a foreign investor can apply for an investment licence from the KDIPA to own up to 100% of a Kuwaiti company. If the joint venture’s activities are in a permitted sector and meet KDIPA’s criteria (economic benefit to Kuwait, job creation, technology transfer, etc), the foreign party can be licensed to hold the entire equity. Many sectors such as technology, healthcare, education, logistics and others are open to 100% foreign ownership with a KDIPA licence.

However, activities in oil and gas extraction and other strategic areas are generally off-limits to full foreign ownership, so in those industries a Kuwaiti majority partner is still mandatory.

In Kuwait, joint-venture agreements are typically structured to address both corporate and contractual aspects, depending on the nature of the joint-venture vehicle. Where the joint venture is incorporated, most commonly as a WLL, the relevant terms are reflected in both the articles of association and, more substantively, in a detailed joint-venture or shareholders’ agreement.

The articles of association, while formally required, are largely system-generated by the MOCI and offer limited flexibility for amendment. As a result, the joint-venture or shareholders’ agreement plays a more critical role, governing the relationship between the parties and addressing key commercial, financial, and operational matters. It also serves to fill any gaps left by the articles of association.

In cases where the joint venture does not involve the incorporation of a separate legal entity, the joint-venture agreement itself acts as the principal governing document, setting out the parties’ respective rights, obligations, and the governance framework for the venture.

Key elements typically addressed in joint-venture agreements include a clear definition of the joint venture’s purpose and business scope, along with the identification of each party’s capital contributions.

The agreements set out detailed governance frameworks, including decision-making procedures, quorum requirements, voting thresholds, and a list of reserved matters that require either unanimous or super-majority approval. These agreements also often contain provisions for capital raising and financing, mechanisms to resolve deadlock situations, and the terms governing exit or dissolution of the joint venture by one or more parties.

In addition, most joint-venture agreements provide robust clauses dealing with share transfers, such as pre-emption rights, rights of first refusal, drag-along and tag-along provisions, as well as call-and-put options in certain predefined events such as breach, insolvency, or change of control. Confidentiality undertakings, non-compete clauses, and exclusivity provisions are also frequently included to safeguard the competitive interests of the parties.

In one example, a Kuwaiti shareholders’ agreement between a majority investor and a minority strategic partner contained highly structured terms around business plan approvals, with the parties agreeing to annual strategy sessions to review performance and adjust targets. Key performance milestones were also contractually linked to additional capital calls and management incentive schemes.

The governance structure of joint ventures in Kuwait is generally aligned with the shareholding ratios of the parties, unless a key minority partner is involved. Governance is typically exercised through a board of managers or directors responsible for overseeing the operational and strategic affairs of the joint venture.

Board composition and appointment rights are usually proportionate to each party’s equity stake. However, in cases where shareholding is unequal, it is common for minority shareholders to negotiate enhanced governance rights to protect their interests.

In the context of WLL companies, Kuwaiti law does not provide for a board of directors. As such, joint-venture agreements often establish a contractual board of directors, accompanied by a detailed authority matrix, to ensure effective oversight and decision-making outside the statutory framework.

Enhanced governance rights often take the form of veto rights or consent requirements over reserved matters. These typically include approvals for changes to the joint venture’s business plan or annual budget, issuance of additional shares, incurrence of significant indebtedness, appointment or removal of senior management, and major capital expenditures.

In some structures, a dedicated Operational Governance Committee (OGC) may also be established alongside the board. Comprised of representatives from each joint-venture partner, the OGC provides an additional layer of oversight and facilitates day-to-day co-ordination. Its responsibilities typically cover operational matters such as execution of the agreed business plan, procurement decisions, technical inputs, and performance monitoring.

This model is particularly effective where one party contributes specific industry know-how, proprietary technology, or operational capabilities. By separating strategic oversight (reserved to the board or manager) from day-to-day operations (managed by the OGC), this dual-layer governance approach enhances responsiveness, fosters alignment, and reduces decision-making bottlenecks.

In practice, the OGC often meets more frequently than the board and serves as a pragmatic forum for addressing operational challenges in real time, while allowing the board to retain control over higher-level strategic decisions.

Overall, joint-venture governance frameworks in Kuwait are carefully structured to achieve a balanced allocation of authority, ensuring operational autonomy where needed, while preserving strategic oversight. This is particularly critical in joint ventures involving international investors or those operating in regulated sectors, where compliance with local requirements is essential.

Funding of joint ventures in Kuwait generally involves a combination of initial equity contributions and shareholder loans. The method and timing of these capital injections are normally specified in the joint-venture agreement, often broken down into tranches linked to specific milestones such as licensing, facility completion, or customer acquisition targets.

Future funding obligations can be structured in a variety of ways. Some agreements require all shareholders to contribute pro rata according to their ownership interests upon receipt of capital calls. Others give shareholders the option, but not the obligation, to contribute to additional capital needs.

In the latter case, mechanisms are often included to address the consequences of a shareholder’s decline or inability to participate in future funding. These may include dilution of the non-contributing party’s interest, reclassification of unpaid equity into debt, or even triggering buyout rights.

In one Kuwaiti joint venture, a failure to meet capital call obligations within a defined grace period resulted in the loss of certain governance rights, such as voting on budgetary matters, until the default was cured. This structure incentivised timely compliance with funding obligations while preserving flexibility for the partners.

Deadlocks can arise in joint ventures where decision-making authority is shared equally or where critical decisions require unanimity. The manner in which deadlocks are addressed varies depending on the commercial relationship and the desired level of continuity.

A common approach is to adopt a multi-tiered dispute resolution process. This typically begins with good-faith negotiations between senior executives of the joint-venture partners, followed by escalation to each party’s designated representatives. If the deadlock remains unresolved, the matter may then be referred to an independent expert or arbitrator, depending on the nature of the dispute.

Other contractual mechanisms used to resolve deadlocks include structured buy–sell arrangements designed to compel a decision between the parties. Under these provisions, one party may offer to purchase the other party’s interest at a specified price. The receiving party must then either accept the offer and sell its stake or elect to purchase the offering party’s stake at the same price.

These mechanisms are particularly effective in 50:50 joint ventures where there is no majority shareholder, as they create a clear pathway to resolve impasses and potentially exit the venture in a fair and balanced manner.

In one example, a Kuwaiti joint-venture agreement provided that, in the event of a board deadlock persisting beyond three scheduled meetings, the matter would first be referred to a neutral director for determination. If the neutral director failed to render a decision within a prescribed timeframe, or if the parties disputed the scope or enforceability of that decision, the issue could then be submitted to arbitration.

In another case, a joint-venture agreement established a structured, multi-tiered mechanism for resolving deadlocks at both the board and operational committee levels. In the event of a deadlock at the board level, a formal notice would be issued, and the matter would be escalated to the OGC composed of equal representatives from both shareholders.

If the OGC was unable to resolve the deadlock within a defined timeframe, the matter would then be referred to the shareholders for resolution. In parallel, the shareholders could appoint a third-party expert to provide non-binding advice on the issue, taking into account the nature of the deadlock and the relevant expertise required.

Joint-venture arrangements are typically supported by a suite of ancillary documents that complement the main agreement. These documents are essential to implement the transaction and regulate the ongoing relationship between the parties.

Among the most common ancillary agreements are IP licensing arrangements, whereby one or both parties license trade marks, technology, or proprietary know-how to the joint venture. These are especially important in the consumer goods, healthcare, and technology sectors.

Other commonly encountered documents in joint-venture structures include services agreements, particularly where one party is responsible for providing day-to-day operational or management services to the joint venture.

In one example, a detailed services agreement governed the deployment of dedicated personnel, their compensation, and the scope of services to be provided in support of the joint venture’s operations.

Additional ancillary documents may include technical support agreements, sublease or premises use agreements (especially where one party contributes office space or facilities), and confidentiality or non-disclosure agreements to safeguard sensitive commercial and technical information.

The rights and obligations of joint-venture partners are largely driven by the commercial arrangements agreed upon and the structure of the joint ventures. In most equity-based joint ventures, rights to profits and obligations to bear losses are distributed in proportion to the respective shareholdings, unless otherwise commercially agreed.

Joint-venture partners typically enjoy the rights of access to financial information, board-level participation, and the ability to veto key strategic decisions.

In some agreements, particularly where one party holds a minority interest, enhanced information rights and reporting requirements are included to ensure transparency. In several agreements, the minority partner had the right to appoint internal auditors or receive periodic business performance reports prepared by an independent third party.

On the obligation side, partners are often required to act in good faith and to promote the best interests of the joint venture. Non-compete obligations are frequently included, prohibiting the parties from engaging in competing businesses within the defined territory or market segment.

With respect to liability, in the case of incorporated joint ventures, the partners’ exposure is generally limited to their equity participation. However, parties may agree to provide guarantees or bear joint and several liabilities in respect of third-party financing, regulatory compliance, or indemnity undertakings.

Such provisions are typically negotiated in light of the relative bargaining power of the parties and the regulatory environment in which the joint venture operates.

Minority shareholders in Kuwaiti joint ventures often seek enhanced protection to ensure their interests are not overridden by the majority partner. These protections may be embedded in the shareholders’ agreement and reflected in the company’s constitutional documents (to the extent possible).

Typical minority protection mechanisms include veto rights over a defined list of reserved matters, such as amendments to the articles, changes to the business scope, capital increases or reductions, liquidation, or entry into related-party transactions. These rights help ensure that the minority shareholder has a say in decisions that could materially affect its investment.

Other contractual rights often include information rights, pre-emption rights on new issuances, and tag-along rights in the event of a transfer of shares by the majority partner. In some joint ventures, the minority shareholder is granted a seat on the board or a supervisory committee with the authority to review major operational and financial matters.

In practice, minority protections are sometimes further strengthened by provisions requiring consensus at the operational committee level, thereby embedding mutual oversight and promoting collaboration at all levels of governance.

The choice of law and dispute resolution forum is a key consideration in cross-border joint ventures involving Kuwaiti entities. While Kuwaiti law is commonly selected when the joint venture operates primarily in Kuwait or involves significant local regulatory interaction, foreign law (most often English law) is sometimes preferred where the investors are based outside the region or where greater predictability and neutrality are desired.

Dispute resolution clauses typically provide for arbitration, often under ICC or LCIA rules, seated in a neutral jurisdiction such as London, Paris, or Dubai. Where Kuwaiti law is selected, parties may choose arbitration within Kuwait or resort to the Kuwaiti courts, depending on the enforceability concerns and procedural requirements.

Kuwait is a signatory to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“the Convention”), which significantly facilitates the enforcement of foreign arbitral awards in the country. In practice, however, enforcement remains subject to compliance with certain local procedural requirements under Kuwaiti law.

Once these formalities are satisfied, the party seeking enforcement must file a petition before the Kuwaiti courts for the recognition and enforcement of the award. The court will review the request primarily for procedural compliance but may also consider whether any of the limited grounds for refusal under the New York Convention or public policy under Kuwaiti law apply.

In most cases, the court’s role is not to revisit the merits of the dispute but to ensure that enforcement does not contradict Kuwaiti public order or mandatory rules. The entire process must be conducted in Arabic, and while Kuwait’s accession to the Convention has improved predictability for foreign parties, practical enforcement may still face delays depending on the complexity of the case and the responsiveness of the local judiciary.

As indicated previously in this chapter, the composition and structure of the board in Kuwaiti joint ventures is generally driven by the negotiated balance of power between the shareholders, often reflecting, but not strictly following, their respective equity holdings.

In many cases, including high-profile international joint ventures, the board is structured with equal representation for each party to ensure shared decision-making and governance parity, even where shareholding ratios differ.

The joint-venture agreement typically governs the appointment, removal, and replacement of directors, as well as the frequency of board meetings, quorum rules, and chairmanship. In some arrangements, the chairperson does not hold a casting vote, ensuring that no single party can unilaterally control board decisions. Instead, escalation mechanisms (such as referral to an OGC or the shareholders themselves) are used to resolve deadlocks.

Kuwaiti law does not prohibit the appointment of non-Kuwaiti nationals to the board of a company. However, residency requirements must be satisfied. Additionally, where directors are appointed as managers of the WLL, certain restrictions may apply to non-Kuwaitis with respect to the scope of their powers. For instance, a non-Kuwaiti national may not, inter alia, make donations, sell real estate, or borrow.

While weighted voting rights are not a statutory feature under Kuwaiti corporate law, contractual arrangements may provide for super-majority voting thresholds on key decisions. In practice, some joint ventures require a two-thirds board majority for strategic resolutions. This contractual structuring helps safeguard the interests of minority strategic investors while reinforcing collective governance.

Directors appointed to the board of a Kuwaiti joint-venture company owe fiduciary duties to the company itself, including duties of loyalty, care, and diligence, irrespective of the fact that they are typically nominated by a specific shareholder. Under Kuwaiti law and prevailing practice, these duties require directors to act in the best interests of the company as a whole, even where this may diverge from the interests of the appointing shareholder.

To address the practical challenge between shareholder nomination and fiduciary responsibility, joint-venture agreements often include detailed conflict-of-interest provisions.

In one example, directors and committee members are expressly required to disclose any actual or potential conflicts and to abstain from voting on matters in which they or their appointing shareholder have a conflicting interest. Where disagreement arises over whether a conflict exists, the matter may be escalated to the OGC or ultimately to the shareholders for resolution, often with the support of independent expert advice.

The board is typically charged with setting the strategic direction of the company, overseeing senior management, and monitoring performance, in accordance with the powers defined in the shareholders’ agreement and the accompanying authority matrix.

Day-to-day operational oversight is often delegated to executive management, and in some structures, an OGC is established to assist the board in reviewing business plans, financials, and operational execution. The OGC’s role may be advisory or decision-making, depending on the agreement and authority structure.

Directors are also responsible for ensuring compliance with statutory reporting obligations under Kuwaiti law. These include the preparation and approval of annual financial statements, the convening of general assemblies, and the submission of filings with the Ministry of Commerce and other relevant regulators.

While the legal duties of directors are grounded in statute, joint-venture agreements often expand and clarify these obligations to suit the specific governance and oversight needs of the parties.

Conflicts of interest are a recognised risk in joint ventures, particularly where directors are aligned with, or employed by, one of the shareholders. To manage this, well-structured joint-venture agreements often establish formal mechanisms for identifying and resolving conflicts, beyond mere abstention from voting.

In one Kuwaiti joint venture, the agreement sets out a multi-layered process for dealing with potential conflicts at both the board and committee levels. Where a director or committee member is believed to have a conflict, the matter is not left to the individual’s discretion.

Instead, a third-party determination process is triggered: if the existence of a conflict is disputed, the issue may be referred to a body within the joint-venture governance structure, such as the OGC, or ultimately escalated to the shareholders for a final decision.

The agreement also allows for the appointment of an external expert to provide non-binding advice on whether a conflict exists, offering an objective check where internal consensus is lacking. This mechanism ensures that allegations of conflict do not paralyse decision-making or devolve into shareholder disputes.

Notably, the shareholders retain the power to remove and replace their nominated directors without cause, which serves as an additional means of ensuring that conflicts do not undermine governance continuity. The structure promotes transparency while balancing the rights of shareholders with the need to protect the integrity of the board’s deliberations.

When setting up a joint venture in Kuwait, each partner typically retains ownership of its pre-existing intellectual property (brands, software, and know-how) and licenses those assets to the joint venture for use in Kuwait. This ensures the original owner (often a foreign partner) keeps control of its core IP while enabling the joint venture to operate locally.

Any new IP created by the joint venture (such as a new trade mark, domain name, or software developed during the collaboration) should have its ownership clearly defined in the joint-venture agreement – either owned by the joint-venture entity or assigned to one of the partners according to agreed rules. It is important to record any exclusive IP licence or assignment with the Kuwaiti IP Office to make it binding on third parties and protect the joint-venture rights.

A key decision is whether to license IP to the joint venture or assign it outright. Licensing is often preferred by the contributing partner because it allows the original owner to retain ownership and control.

The downside is that the joint venture (where it takes the form of a registered entity) will not own the IP asset, which could be a concern for investors or lenders if the joint venture’s business relies on that IP. By contrast, assigning (transferring) the IP to the joint venture makes it the owner, which strengthens the joint venture’s balance sheet and is looked upon favourably by local lenders who see the IP as part of the joint venture’s assets.

However, assignment means the original owner gives up direct ownership, which may be undesirable for strategic technology or brands.

Environmental, social and governance (ESG) compliance is increasingly central to corporate governance in Kuwait, particularly in regulated sectors or where international partners are involved. The key legal frameworks include the following:

• Environment Law No 42/2014 – requires large industrial ventures to file annual environmental impact reports and comply with environmental licensing obligations.
• Module 15 of the CMA Law – encourages listed companies to adopt board-level ESG policies covering transparency, stakeholder rights, risk, and corporate social responsibility.

In practice, joint-venture agreements increasingly include ESG clauses – such as commitments to sustainable operations, anti-bribery policies, and labour rights audits – to align with both regulatory expectations and investor demands. These clauses can help attract bank financing, meet procurement standards, and demonstrate alignment with Kuwait’s Vision 2035.

A Kuwaiti joint venture can come to an end in one of two ways: (i) normal termination, when the venture reaches its natural end, or (ii) early termination, triggered by specific events set out in the agreement.

Normal Termination

Normal termination covers situations in which the joint venture winds down in accordance with its original design or by unanimous choice, without any party being at fault, including the following:

• Expiry of the agreed term – the joint venture dissolves automatically on the expiry date unless the parties formally extend it.
• Accomplishment of the venture’s purpose – once the defined project objective (eg, completion of a plant or an IT rollout) is achieved and accepted, the joint venture will wind up.
• Mutual written agreement – the parties may terminate at any time by unanimous written consent, after settling inter-company balances and filing deregistration documents with the MOCI.

Early Termination

Early termination arises when a breach, insolvency, regulatory failure, or another contract-specified risk entitles one or both parties to invoke the termination clauses and bring the venture to an end before its agreed expiry date, including the following:

• Uncured material breach – if a shareholder fails to perform a material obligation and does not remedy within a certain remedy period after notice, the non-defaulting party may terminate the joint venture.
• Insolvency or bankruptcy of a shareholder – the shareholders may terminate the joint venture in case one of the shareholders becomes bankrupt or enters into a restructuring procedure.
• Failure to close by the long-stop date – if conditions precedent (regulatory, financing, KDIPA licensing, etc) are not satisfied by the agreed cut-off date, either party can withdraw from the joint venture or request its termination.

Assets originally contributed by shareholders (eg, land and trade marks) revert to the contributor unless expressly sold to the joint venture.

Assets generated or purchased by the joint venture (plant, inventory, and customer lists) are divided according to:

• proportionate shareholding;
• the economic risk bearing pattern; or
• a pre-agreed allocation matrix (common in infrastructure projects where one party takes hard assets and the other intangible rights).

Kuwaiti law gives shareholders considerable freedom to craft exit routes, subject to pre-emption rules in the Companies Law and CMA approval for listed-company disposals.

The Most Common Contractual Exits

Put/call options exercisable after a lock-up or on trigger events

After an agreed lock-up (typically three to five years) or on pre-defined trigger events – such as a change-of-control of a shareholder, a sustained deadlock, or a material breach – either side may force the other to buy (put) or sell (call) its shares.

The price is normally set by an independent valuer using International Valuation Standards or by a formula that escalates over time. The option window is usually 30–60 days from notice, giving the parties enough time to arrange funding and complete the statutory share-transfer registration at the MOCI.

If the purchasing shareholder is foreign, sensitive sectors (telecoms, oil services and security) still require public authority approvals before the transfer is effected.

Drag-along allowing holders to compel a sale to a third party

A drag-along lets holders of a qualified majority – most often 75%, mirroring the articles’ super-majority – compel the remaining shareholders to sell if the majority accepts a bona-fide third-party offer. The minority must receive the same price and terms as the majority.

Tag-along for minorities on sales

If a controlling shareholder wishes to sell a significant portion of the company shares, minority holders may tag their shares into the same sale on identical terms. Drafting almost always includes a “same price, same terms” covenant to stop the seller from hiding earn-outs or deferred consideration.       

Liquidation

As a last resort, shareholders can vote (usually with the same 75% super-majority) to wind up the company and auction its assets if no buyer emerges through the other exits.

A well-structured Kuwaiti joint-venture often layers these tools: first a drag-along, then a tag-along to protect holdouts, and finally liquidation if neither sale mechanism produces a buyer.