- New Law targets hidden business ownership, illegal profits; moves against businesses operating under other people’s licenses effective from February 2027
Kuwait will introduce tougher measures against commercial concealment in February 2027, targeting arrangements in which individuals conduct business using commercial licenses registered in other people’s names. The new legislation aims to curb unfair competition, protect legitimate businesses and ensure that commercial activities comply with ownership and licensing regulations.
Decree Law No. 78 of 2026, issued on August 2, addresses a practice commonly referred to as “incorporation,” in which a person leases or uses another individual’s commercial license to operate a business and retain its profits, while the establishment remains legally registered under the license holder’s name.
The practice has come under increasing scrutiny because it can allow businesses to operate through arrangements that bypass applicable rules, placing entrepreneurs who comply with licensing requirements and bear the full costs of running their businesses at a disadvantage.
For many small-business owners, those costs include rent, employee salaries, equipment, government fees and compliance with regulatory requirements. Businesses operating through unauthorized arrangements may gain an unfair advantage, particularly in sectors where prices and narrow profit margins determine competitiveness.
Retail, contracting, services, vehicle maintenance and craft-based activities are among the sectors identified as particularly exposed to this form of competition, given the large number of establishments operating in them.
What the law prohibits
The legislation prohibits enabling a person to conduct an economic activity that they are not legally permitted to undertake. This includes using another person’s trade name, commercial license or registration, or other arrangements intended to circumvent the rules governing business operations and ownership. The law also addresses compliance with foreign ownership requirements, which the source article states cannot exceed 49 percent.
The law introduces substantial criminal and financial penalties for commercial concealment. Offenders may face imprisonment for a minimum of one year and a maximum of three years, alongside a fine ranging from 10,000 to 100,000 dinars, or an amount equivalent to the value of the profits obtained, whichever is greater. The law also allows either of the two penalties to be imposed, as provided for in its provisions.
Fines may be multiplied according to the number of people or activities involved in the violations. Additional measures include confiscation of funds and profits generated through the offence, seizure of tools and means used to commit it, permanent closure of the establishment and revocation of its commercial license.
Foreign offenders may be deported after serving their sentences. Repeat offenders face doubled penalties if the new offence occurs within five years of a final judgment in the earlier case.
Stronger enforcement and reporting incentives
Beyond punishment, the legislation strengthens enforcement by granting judicial authority to designated personnel. It also provides for the accountability of the person responsible for the actual management of a legal entity when the conditions for legal liability are met.
The law further allows informants who were not involved in the offence to receive a reward of up to 10 percent of the fines collected, subject to the applicable regulations. The reward is linked to providing evidence and securing a final conviction.
The measures are intended to address commercial concealment not merely as a licensing violation, but as a practice that can distort competition and undermine businesses operating within the law. By targeting the use of licenses to conceal who actually runs a business, the legislation seeks to make compliance, management efficiency, service quality and business performance the basis of competition in Kuwait’s market.