The Kuwaiti Minister of Commerce and Industry amended under Resolution No. 60/2023 (MOCI Resolution) specific provisions of the Kuwait Companies Law No 1/2016 (“Law No 1/2016”).
By virtue of the MOCI Resolution, provisions addressing companies’ spinoff were introduced. Under this note, we will explain the purposes of the MOCI Resolution, its defined procedures and how would this benefit the Kuwait legal environment.
Intro. Generally, spinoffs occur when a company splits off a portion of its business into a separate company and distributes shares of the new entity to the parent company’s shareholders.
Major features of the MOCI Resolution. Article 1 of the MOCI Resolution defines spinoff as the separation between the company’s assets or activities and the associated liabilities and property rights in two or more separate companies, each of which has an independent legal personality. This implies that the parent company establishes and capitalizes a subsidiary as a stand-alone independent business.
Standalone company. the new company resulting from the spinoff will follow the same standard procedures for establishing companies.
Inheritance of liabilities. the new company shall succeed the parent company within the limits of rights and obligations set out under the general assembly resolution which triggered the spinoff. The new company shall include a provision in its articles setting out the relationship between the new company and its parent.
Spinoff procedure. We summarize below the basic provisions of the MOCI Resolution.
Generally, spinoffs tend to increase returns for shareholders because the newly independent companies can better focus on their specific products or services. Given the current economic climate in Kuwait in particular with companies busier going public, it remains to be seen how the resolution will benefit small and family businesses.
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