New decree law issued amending Article 116 of Kuwait Companies Law

Amendment to Article 116 of Kuwait Companies Law allowing increased flexibility for Limited Liability Companies (W.L.L.) in Kuwait in their requirements for issuing decisions in extraordinary general assemblies.

Kuwait Decree-Law No. 106 of 2024 was published in the Official Gazette (Kuwait Al-Yowm) on 20^th October 2024 and also came into effect the same day. The Decree-Law amends Article 116 of Kuwait Law No. 1 of 2016 on the issuance of the Companies Law (Companies Law).

Summary of the amendment: the old text

The amendment replaces the text of Article 116 of the Companies Law, which previously provided the requirements for the validity of holding the extraordinary general assembly and issuing decisions for the W.L.L.’s.

The old text provided that the extraordinary general assembly shall not be valid unless attended by a number of partners who own three-quarters of the company capital, and the decisions of the extraordinary general assembly shall not be issued except with the approval of the partners who own three-quarters of the company capital.

Summary of the amendment: replaced text

The now replaced text of Article 116 of the Companies Law states the following:

Quote

The extraordinary general assembly shall not be valid unless attended by a number of partners who own three-quarters of the capital. If this quorum is unavailable, the invitation shall be addressed to a second meeting which shall be valid if attended by partners representing more than half the capital. The decisions shall be issued in all cases by a majority exceeding half the total of the company capital.

Unquote

As per the old provision, for the extraordinary general assembly to be valid, a quorum of partners owning at least three-quarters of the capital had to be present, and decisions could only be issued with the approval of partners owning three-quarters of the capital.

The new text still requires that in order for the first meeting to be valid it has to be attended by a number of partners who own three-quarters of the capital, however now if this quorum is not available, then a second meeting shall be called and this meeting will be valid if attended by partners owning more than one half of the capital. In all cases, decisions are issued by a majority owning more than half of the total capital, rather than three-quarters which the previous text required. This amendment of Article 116 now makes the quorum requirements for convening the extraordinary general assembly of W.L. L’s similar to that applicable to the Shareholding Companies (Article 217).

Significance: increased flexibility

The amendment was introduced to meet the practical challenges faced by W.L. L’s in a number of cases in which the interests of partners were affected as a result of the high quorum requirements for holding valid meetings or taking decisions. These challenges would delay or prevent companies from taking the needed management decisions timely and efficiently. With the new amendment reducing the quorum requirements needed for issuing decisions, all companies may benefit from taking decisions more effectively, particularly those who have partners that may not physically be present at the same time, reflecting the requirements similar to the Shareholding Companies.

The amendment also tasks the Ministry of Commerce and Industry with the authority to invite the extraordinary general assembly should the company manager refrain from doing so, provided that a request is submitted by the partners holding not less than half of the company’s capital.