Decree-Law No. 78 of 2026 on Combating Commercial Concealment was published on 9 August 2026 and takes effect six months later, in February 2027. It carries prison terms, fines of up to KD 100,000 or the value of profits, mandatory confiscation, permanent closure and deportation. In this article, Attorney Meshari Obeid Alenezi explains what the law prohibits and how businesses should prepare before it bites.
Key facts
- Instrument: Decree-Law No. 78 of 2026, comprising 14 articles.
- Published: 9 August 2026.
- In force: six months after publication, under Article 14.
- Purpose: to address economic activity carried on without the required licences and to regularise the business environment.
- The window matters: the six months are a chance to correct arrangements, not a suspension of liability afterwards.
What is prohibited
- Definition (Article 1): commercial concealment is enabling any person, natural or legal, to carry on an economic activity that is prohibited to them, whether for their own account, through a partnership, or to circumvent the ownership percentages set for foreigners.
- The ban (Article 2): no one may carry on an economic activity without the appropriate licence from the competent authorities, and no one may enable another to do so by any means.
- Means covered: use of a trade name, a licence, or a commercial register.
- Both sides are caught: the licence holder who fronts and the person operating behind the front.
Penalties under Article 3
| Element | Consequence |
|---|---|
| Imprisonment | One to three years |
| Fine | KD 10,000 to KD 100,000, or the value of profits obtained, whichever is greater |
| Multiple fines | Fines multiply by the number of offenders and by the number of infringing activities |
| Confiscation | Mandatory confiscation of funds and profits |
| Closure | Permanent closure of the establishment and cancellation of the licence |
| Deportation | Deportation of the foreign offender |
| Repeat offence | Penalties double within five years |
Corporate and management liability
- Article 5: the person responsible for the actual management of the offending establishment bears the same penalties where knowledge or breach of duty is established.
- Joint liability: the legal person is jointly liable for fines and compensation.
- Practical effect: a general manager cannot treat the arrangement as the shareholders’ problem alone.
Settlement and whistleblowers
- Article 8: the competent minister may settle before or during proceedings against payment of not less than half the maximum fine, conditional on removing the violation and regularising the legal position.
- Excluded: settlement is not available in cases of repeat offending.
- Article 9: informants who are not participants in the offence may receive a reward of up to ten per cent of the fines collected, on providing evidence and a final conviction.
- What this changes: a reward for informants makes internal arrangements far more fragile than they were.
Overlap with residency law
- Law 114 of 2024 penalises trafficking in residence permits with three to five years imprisonment and a fine of KD 5,000 to KD 10,000.
- Typical fact pattern: a fronted business and irregular sponsorship usually appear together in the same file.
- Cumulative exposure: the two regimes can apply to the same conduct with separate consequences.
- Employer duties: notification deadlines under the residency law are the easiest breaches for inspectors to prove.
How to prepare before February 2027
- Map the reality: identify who actually funds, manages and profits from each activity.
- Review the register: confirm that the licensed activity matches what the business actually does.
- Examine side agreements: undated side letters and undertakings are the documents that establish concealment.
- Regularise through lawful routes: licensed foreign investment structures exist under Law 116 of 2013.
- Check worker files: professions on record should match actual duties.
- Take advice early: correcting a structure before the law bites is far cheaper than a settlement of half the maximum fine.
Frequently asked questions
I am a Kuwaiti licence holder and a foreign partner runs the business. Am I exposed?
That is the core fact pattern the law targets. Enabling another person to carry on an activity prohibited to them is the offence, and the licence holder is squarely within it. The six-month window before February 2027 is the time to restructure through a lawful route rather than to wait and rely on settlement.
Can I settle instead of standing trial?
Article 8 allows settlement before or during proceedings against payment of not less than half the maximum fine, and it requires you to remove the violation and regularise your position. Settlement is excluded for repeat offenders, so it is not a strategy that can be relied on twice.
What if I am a manager but not an owner?
Article 5 extends the same penalties to the person responsible for actual management where knowledge or breach of duty is established, and the legal person is jointly liable for fines and compensation. Being an employee rather than a shareholder is not by itself a defence.
Can a foreigner own a business in Kuwait lawfully?
Yes, through the routes the law provides, including licensed structures under the direct investment law. The offence is not foreign participation as such. It is participation that circumvents the licensing regime and the ownership percentages set by law.
If you need to review a business structure before the law takes effect, you may book an appointment with the office of Attorney Meshari Obeid Alenezi or call 22204490.
Disclaimer: this article provides general legal information and is not a substitute for specialised legal advice.
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