SHAMSHER KHAN
Kuwait has introduced tougher measures to combat commercial concealment, sending a clear message that businesses must operate transparently and in accordance with their officially registered ownership, licences and commercial activities. The new legislation is expected to have a significant impact on businesses that rely on informal ownership or management arrangements.
Decree-Law No. 78 of 2026 on Combating Commercial Concealment targets situations in which individuals or entities conduct economic activities without the required legal authorisation or conceal the person who actually owns, manages or benefits from a business.
Importantly, commercial concealment is not limited to arrangements between Kuwaitis and expatriates. It may also apply when two Kuwaitis are involved. For example, if a commercial licence is registered in one person’s name but another individual actually runs the business and receives its profits, the arrangement could come under scrutiny.
In simple terms, commercial concealment occurs when a person allows someone else to operate a business through a commercial licence, register or trade name that legally belongs to another person. A typical example is the informal “renting” of a commercial licence in return for a fixed payment. However, simply having a business relationship with an expatriate does not automatically constitute concealment. The key issue is whether the actual ownership, management and financial benefits correspond with the legally registered structure.
The new framework also clarifies that expatriates may hold shares in companies within legally permitted limits. An Article 18 resident may, where permitted, own up to 49 per cent of a company’s capital. This provision applies to companies and should not be confused with the separate rules governing individual establishments.
One of the most significant aspects of the legislation is greater coordination among government authorities and financial institutions. The Ministry of Commerce and Industry may work with the Ministry of Interior, Public Prosecution, Kuwait Financial Intelligence Unit, banks, exchange companies, electronic payment providers and other institutions to identify suspicious discrepancies. Authorities may therefore examine financial transactions and the flow of profits, rather than relying solely on commercial documents.
The penalties are severe. A convicted offender may face imprisonment for one to three years and a fine ranging from KD10,000 to KD100,000, or either penalty. Where illegal profits exceed KD100,000, the fine may rise to the value of those profits. Authorities may also confiscate proceeds and equipment connected with the offence. Repeat offenders can face doubled penalties.
The consequences may extend to business closure, cancellation of licences and, in the case of foreign offenders, deportation. Companies and responsible managers may also face liability where violations are committed for the company’s benefit or knowingly permitted.
Businesses have an important window to put their affairs in order. Enforcement is expected to begin following the issuance of executive regulations and the applicable six-month period. During this time, business owners should review ownership structures, licences, management arrangements, profit distribution and financial transactions.
The message from Kuwait’s new law is straightforward: the reality of a business must match what is written on paper. For compliant businesses, the legislation offers greater clarity and a more transparent marketplace. For those relying on concealed arrangements, the period before enforcement should be used to regularise their affairs rather than delay action.
