How Kuwaiti law views corporate management in the financial market

21/12/2025

By what means would the technology-minded be able to shift the locally habitual way of doing business, to open the door for them to take the financial risks and become investors in practical innovations? The entrepreneur and investment landscape of Kuwait has seen a quick expansion, especially in startup, single-person companies, and family businesses, which are transforming to formal corporate entities.

That upturn, however, has been accompanied by an uptick of partner and shareholder litigations, most of which have as a root cause one single issue: poor financial governance. Management Under Kuwaiti Law: A Legal Trust Law in Kuwait governing the operation of businesses requires the managers to exercise due prudence and care and act in the best interests of the business.

The reality is that a significant number of managers in Kuwait happen to be partners or founders as well, and as a result, there exists a very risky misunderstanding that the status of partnership entitles one to an unlimited draw of company funds.

As a matter of law, this is false. Bank Details as Legal Evidence: The Commercial Law of Kuwait mandates that proper accounting documentation should be maintained by the companies so that they accurately mirror their financial status. What courts dealing with real market disputes find most of the time are:

• Personal withdrawals from company accounts

• Bank cards used for personal expenses

• Lack of properly documented accounting entries. Such practices are far from being regarded as mere administrative negligence; rather, they are treated as signs of gross managerial misconduct.

Real Market Implications: On various occasions, the resolution of partnership disputes through the court system is accompanied by the court, designated financial investigators coming to the conclusion that while the businesses did generate income, profits were never duly recorded, or that financial statements were misrepresenting the reality.

In these situations, Kuwaiti courts consistently decide that the mixing of financial matters should result in managers losing their shield of corporate liability and, therefore, they should be held personally liable. Governance and the Financial Market: With the improvement of corporate governance and disclosure standards in Kuwait, the financial aspect of a business is not merely a matter of choice anymore; transparency and proper separation of finances are required by law.

These provisions are the foundation for:

• Investor confidence

• Regulatory compliance

• Sustainable growth

Firms failing to conform to these norms face funding withdrawal and denial of legal protection as possible consequences.

No Shield Against Gross Negligence: Wherever in a contract a clause is found which implies that a manager should not be held responsible for actions of which he is guilty of fraud or gross negligence, such clause is considered null and void in accordance with the law of Kuwait. It is in agreement with the intention of the legislature to support market stability and commercial trust that this provision is there.

A Final Message to Entrepreneurs: In the competitive Kuwaiti market, apart from innovation, the winning formula includes legal discipline as well. Good governance, financial transparency, and accountability are not barriers; they represent the groundwork for long-term security and reputation.

By Attorney Shaikha Al Julaibi