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Executive Regulations of the Capital Markets Law in Kuwait 

From MENA to the WORLD

With Suzan Taha

In 2018, the Kuwaiti government issued Decree No. 128 to amend the Executive Regulations of the Capital Markets Law. This introduced a new section that regulates partial tender offers in the context of public mergers and acquisitions. The Amendment is aimed at increasing transparency and fairness in the process of PTOs. 

LegalcommunityMENA sat down with senior associates Samar Jrade and Hassan El Sayed from Meysan Partners, who walked us through the recent changes and their impact on businesses. 

How does this new law change existing laws or regulations? 

Decree No. 128 of 2018 was issued to amend the Executive Regulations of the Capital Markets Law No. 7 of 2010 (the “Executive Regulations”) by way of introducing a new section regulating partial tender offers (“PTO”) in the context of public M&As (the “Amendment”). 

Prior to the Amendment, the Executive Regulations did not recognize partial tender offers and only regulated voluntary and mandatory tender offers. 

This amendment is a significant change since the Executive Regulations only regulated voluntary and mandatory tender offers before. A partial tender offer now refers to an offer to acquire a minimum of 5% of the share capital of a listed company on Boursa Kuwait, resulting in the offeror holding between 30% and 50% of the Share Capital after the transfer of shares.

The offer must be made to all the shareholders of the company, and the shares held by participating shareholders will be distributed pro rata based on the percentage offered to be acquired by the offeror. The payment for the offer must be in cash.

What is the purpose of this new law? 

PTOs are currently regulated by most of the developed capital market authorities across the world. Accordingly, the position of the Kuwaiti Capital Markets Authority as one 

of the developed authorities and pioneers in the region raised the need to regulate PTOs in Kuwait. 

As opposed to the voluntary and mandatory tender offers that were regulated under the Executive Regulations prior to the Amendment, and according to which the offeror must offer to takeover 100% of the shares in the share capital of the relevant listed company, PTOs allow the relevant bidders the flexibility and freedom to offer the acquisition of less than 100% of the relevant shares (within the shareholding range elaborated above). 

How does this new law impact business? 

PTOs grant the relevant controlling shareholders the opportunity to gradually increase their shareholding in listed companies and offering the selling shareholders participating in the PTO competitive prices in return for their divestment and, in particular, the shareholders of the relevant listed companies wishing to increase their shareholding percentage above the mandatory tender offer threshold (i.e. 30%) up to 50% without actually triggering a mandatory tender offer in respect of 100% of the shares in the relevant listed companies. 

Are there any potential challenges or difficulties that might arise in implementing this new law or amendment? 

Although there are no specific potential challenges or difficulties that might arise in the implementation of the Amendment. However, it seems, at least from a practical perspective, that the appetite of the investors/shareholders to make PTOs was not as expected by the relevant regulators in Kuwait. This is reinforced by the fact that the first PTO in Kuwait was executed in June 2022 (i.e. after almost 4 years from the effective date of the Amendment). 

About Samar Jrade 

With over 13 years of experience, the senior associate at Meysan Partners specializes in Corporate/M&A and has advised on a diverse portfolio of cross-border M&A and joint venture transactions in various business sectors, such as technology, financial services, and mobile telecommunications. Additionally, Jrade has experience in reorganization and restructuring of groups, as well as in banking and finance and capital markets practice. 

About Hassan El Sayed 

The Senior Associate at Meysan Partners has eight years of experience in Corporate/M&A and has provided legal representation for clients in a number of significant domestic and cross-border transactions, including joint ventures and corporate restructurings. In addition to this, El Sayed has extensive experience advising clients on various day-to-day corporate matters, as well as issues related to capital markets, anti-money laundering regulations, trademarks, and labor law. 

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