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Wednesday , August 10 2022

Business license at risk – Submit 3-year financial records

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KUWAIT CITY, March 7: The Ministry of Commerce and Industry (MoCI) is running an inventory of the companies that have not submitted their financial statements for the past 3 years, in preparation for taking deterrent punitive measures against them, which may end up in their licenses being suspended, reports Al-Rai daily. The daily quoting sources said a wide-ranging oversight for the violating companies will be activated giving powers to the ministry in line with the Companies Law, to force these companies to submit their financial statements, specifically those who do not have a legal excuse that exempts them from doing. The sources stated the ministry will begin with companies that have not submitted their financial statements for 3 years.

They will be called to adjust their positions within a specified period, and in the event they do not respond, their licenses will be suspended, which means all their transactions with the MoCI and with government and related agencies will be suspended. While the sources said the number of companies which have failed to submit their financial statements is unknown so far, they are likely to be in the hundreds. It indicated that stopping the license will result in a ban on carrying out transactions, such as not extracting board certificates, not recording any amendments in the memorandum of association and articles of association, or with regard to site transactions, and other procedures that need to be approved by the MoCI.

Suspending the license will also result in suspending the file of the violating party with the Public Authority for Manpower, and then disrupting the residency procedures of its workers, as well as freezing its transactions that require authentication from the ministry, such as certifying authorized bank signatures. The sources pointed out that the punitive measures in this regard will not be limited to companies that are late in submitting their financial statements for 3 years only, but punitive measures will be taken against the concerned people for failing to inform the regulatory authorities that they had activated their supervisory role and asked the officials of the concerned companies indicating the reasons for their delay in providing them with the required financial data for more than one year. The sources indicated the MCI had earlier received a petition from the concerned party stating that it was not interested in urging the company to submit its financial statements to the ministry, claiming that this decision belongs to the company itself.

Auditors
She noted that the ministry officials believe that the position of auditors should not be limited to their traditional accounting role, and be satisfied with auditing the data provided to them, noting that their responsibility should be more comprehensive, that is to inform the regulatory authorities of periodic reports alerting the failure of the officials of the contracting companies to provide the data required for them to be checked. The sources explained that the shareholders are the ones who elect the auditors in the general assemblies, what they need, based on the standards of governance and transparency, to play a broader accounting role that ensures the help of the regulatory authorities in protecting shareholders, and that the owners who are not administratively ruling in these companies are aware of the reality and future of their rights.

The sources stated that in the event of discovering collusion by the auditor, he will be referred to the disciplinary board, according to the violation, especially if it is proven that the companies do not have any real business in place, or if the delay in submitting the financial statements is due to reasons related to the seizure of shareholders’ funds or tampering with it, and that the auditor did not convey his fears about this matter to the supervisory authorities in sufficient time. In 2015, the Ministry of Commerce resorted to activating a legal provision to write off companies that had lost 75% of their capital or more, if they did not respond to convening a general assembly, through which it would approve a plan to do good their losses, by reducing capital, then raising it, and taking decision to continue. Despite the momentum that the procedure enjoyed at the time, its glory did not last long, as the MCI stopped activating this legal text all the past years, which created an urgent regulatory need to reactivate the text after the accumulation of companies that lost the majority of their capital. The ministry officials believe that the high percentage of companies late in approving their financial statements in the recent period, especially for 3 consecutive years, negatively affects the market and dealers, as it leads to manipulation by those in charge of the company to the detriment of shareholders, as a result of not presenting business results to shareholders; not knowing the progress of the company’s performance on a quarterly basis; harming the shareholders may provide an opportunity to manipulate those in charge of the company’s management and the inability to hold those responsible accountable.

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