The Times Kuwait Report
Kuwait is preparing to impose a tougher legal framework on businesses operating through concealed ownership arrangements, warning that individuals who use another person’s commercial license to run an unauthorized business could face imprisonment, substantial financial penalties and the permanent closure of their establishments.
Decree-Law No. 78 of 2026 on Combating Commercial Concealment introduces penalties of one to three years in prison and fines ranging from KD10,000 to KD100,000, or an amount equivalent to the profits obtained through the violation, whichever is greater. Courts can also order the confiscation of illegal proceeds and equipment used in the offence, cancellation of commercial licenses and the deportation of foreign offenders after conviction.
The legislation marks a significant tightening of Kuwait’s approach to commercial concealment, a practice in which the person whose name appears on a business license may not be the individual actually operating the enterprise or benefiting from its profits.
By targeting such arrangements, the law seeks to establish greater transparency in business ownership, protect legitimate entrepreneurs and ensure that commercial activities are conducted within the country’s licensing and ownership rules.
The law is particularly significant for small and medium-sized enterprises, retailers, contractors and service providers, where businesses operating outside the prescribed regulatory framework can gain an unfair advantage over competitors who bear the full costs of licensing, staffing, rent and regulatory compliance.
Under the new provisions, commercial concealment is not limited to arrangements involving Kuwaiti citizens and expatriates. It can also arise between individuals of the same nationality, including family members, if one person enables another to conduct an economic activity in violation of the law. The central issue is whether the actual operation of the business complies with the applicable licensing and ownership requirements.
The prohibition extends to allowing another person to use a commercial license, trade name or commercial registration to carry out activities for which they are not legally authorized. It also addresses arrangements intended to circumvent statutory restrictions on foreign ownership.
Accountability extends beyond the license holder
An important feature of the legislation is its emphasis on accountability across the business structure. The person responsible for the actual management of a company may face the same penalties if it is established that the violation occurred with their knowledge, resulted from a failure to discharge management duties or involved their contribution to the offence.
Companies may also be held jointly liable for financial penalties or compensation when violations are committed by employees in the company’s name or for its benefit. The consequences of a conviction extend beyond imprisonment and fines. Courts are required to order the confiscation of funds and profits generated through the offence, along with the tools, equipment and means used in the illegal activity. The establishment may be permanently closed and its commercial license cancelled, while foreign offenders may face deportation after serving their sentences.
Repeat offenders face doubled penalties if they commit another offence within five years of a final judgment in an earlier case. The legislation also provides for fines to be multiplied according to the number of people or activities involved in the violations.
Stronger inspections and public reporting
The law strengthens the enforcement powers of designated officials, who will be able to inspect suspected violations and request the documents, information and records needed to investigate them.
Obstructing inspectors, withholding requested information or providing false or misleading data can constitute a separate offence, punishable by up to six months in prison and a fine of up to KD10,000, or either penalty.
The legislation also introduces a financial incentive for reporting violations. Individuals who are not involved in the offence and provide credible evidence leading to a final conviction may receive a reward of up to 10 percent of the fines collected, subject to the applicable rules.
At the same time, the law provides a settlement mechanism for certain cases before a final court judgment. Settlement requires payment of at least half the maximum prescribed fine and the removal of the violation through the regularization of the business’s legal status. Repeat offenders are not eligible, and settlement does not rule out administrative deportation where considered necessary in the national interest.
Businesses urged to review their arrangements
The decree-law was published in the Official Gazette on August 9, 2026, and is scheduled to enter into force six months after publication, on February 9, 2027.
The intervening period provides businesses and license holders with an opportunity to review their ownership structures, licensing arrangements, management responsibilities and financial practices before the new framework takes effect.
For Kuwait’s business community, the legislation sends a clear message: commercial activity must reflect the ownership, authorization and licensing arrangements recognized by law. The objective is not simply to punish violations, but to create a more transparent market in which legitimate businesses can compete on fair terms, investors can operate with greater confidence and responsibility for commercial activities is clearly established.
The post Kuwait tightens grip on commercial concealment, violators face up to KD100,000 in fines appeared first on Times Kuwait.