KUWAIT CITY, Nov 20: The Ministry of Trade and Industry has temporarily banned expatriates with Section 18 residency from setting up companies, acting as partners or managing partners, or to register in the commercial register unless their status complies with the regulations of Article 19. This measure, informed sources indicated, aims to prevent the combination of worker and employer roles and will remain in in force until new regulatory controls are implemented.

Data from the Public Workforce Authority reveals that around 9,600 private sector employees holding Section 18 residencies are listed as partners or managing partners in limited liability companies, linked to nearly 44,500 commercial licenses.

The Department of Commerce is currently working with the Department of Home Affairs and the Workforce Authority to design mechanisms to address the status of Section 18 residency holders involved in commercial partnerships. The proposed changes include revising the requirements of Article 19, such as increasing the minimum contribution value by KD100,000 and the three-year ownership requirement. Additional recommendations suggest prohibiting Section 18 contributing businesses from opening multiple branches unless operational needs warrant expansion.

While regulatory reviews are underway, existing companies with section 18 shareholders will continue to operate without change. New rules should protect the legal and financial rights of stakeholders while providing a one-year grace period for affected partners to transition to Article 19 or adapt to the updated conditions.

The Executive Regulation of the Law on the Residence of Foreigners grants, under Article 19, status to expatriates as investors or partners under specific conditions. These new arrangements aim to encourage foreign investment, improve the business environment in Kuwait and curb residential trade.

Difference between Article 18 and Article 19

Article 18: Workers under this residency are subordinate to their employers, as defined by the Private Sector Employment Act of 2010, which classifies them as employees working under the supervision and direction of employers in exchange for a salary.

Article 19: Residency is granted to foreign investors or partners carrying out commercial or industrial activities if they hold a share of at least KD 100,000, reflected in their last three certified budgets.

The ongoing reforms are part of a broader initiative to attract serious investors while maintaining market stability and protecting the rights of stakeholders.