Legal milestone: judicial ruling enhances investor safeguards

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KUWAIT CITY, May 22: A significant judicial ruling, recently underscored the legal safeguards protecting investors’ funds and shareholders’ interests in Kuwait’s financial market, reports Al-Jarida daily. The ruling, issued on appeal in a case filed by Al-Tijari (Capital Markets) against a delisted company, marks a milestone in enhancing economic and investment security.

The ruling emphasizes the pivotal role of the Capital Markets Authority in ensuring strict supervision, with investors empowered to seek recourse through litigation in cases where their funds are jeopardized by board of directors’ practices. In this instance, the court ruled in favor of compensating an injured shareholder for violations committed by the delisted company’s board, enhancing the market’s reputation and bolstering investor confidence. Crucially, the ruling establishes the principle of shareholders’ right to hold board members accountable for mismanagement, as mandated by Article 201 of Law No. 1 of 2016.

This provision holds board members responsible for fraud, abuse of power, violations of law or company contracts, and managerial errors. Shareholders are entitled to seek compensation for financial and moral damages resulting from such actions. Furthermore, the ruling clarifies that liability under Article 201 may be individual or shared among board members. Those objecting to decisions leading to liability can be exempted from responsibility if their objection is recorded. Notably, joint-stock companies have the right to file liability lawsuits against board members for damages caused by fraud, abuse of power, or managerial errors. This landmark ruling affirms shareholders’ rights to pursue legal action against board members for clear errors or negligence in company management, ensuring maximum protection for investors and promoting compliance with regulatory standards.

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