Law No. 2 of 2021 on the Rescue of Small and Medium Enterprises Affected by the Repercussions of the Coronavirus Crisis

Law No. 2 of 2021
on the Rescue of Small and Medium Enterprises Affected by the Repercussions of the Coronavirus Crisis

Chapter One – Definitions

Article 1

For the purposes of applying the provisions of this Law, the following words and expressions shall have the meanings assigned to each of them:
– Central Bank: the Central Bank of Kuwait.
– Local Banks: Kuwaiti banks and branches of foreign banks registered with the Central Bank.
– Affected Clients: small and medium clients, including owners of start-up enterprises, who were operating with operational efficiency and whose activity has been partially or wholly harmed as a result of the Coronavirus (COVID-19) crisis, resulting in their inability to cover the required basic contractual periodic expenses.
– Small Client: a client whose number of workers in his enterprise does not exceed fifty workers, whose enterprise assets do not exceed KD 250,000, and whose revenues do not exceed KD 750,000 annually.
– Medium Client: a client whose number of workers in his enterprise is not less than fifty-one workers and does not exceed one hundred and fifty workers, whose enterprise assets do not exceed KD 500,000, and whose revenues do not exceed KD 1,500,000 annually.
– Financing: loans and financing operations provided by Local Banks to Affected Clients in accordance with this Law.
– Cash Flow Deficit: the difference between the cash inflows of the Affected Client from the revenues of his activity, of all types of such revenues, and the outflows in the form of contractual periodic expenses required to be covered.

Chapter Two – Granting of Financing

Article 2

Special financing shall be granted to Affected Clients, the value of which shall be determined by the Local Bank on the basis of the outcome of a study of the Affected Client’s credit position, and in accordance with an assessment of his actual needs to cover the Cash Flow Deficit for contractual periodic obligations, provided that the Financing granted to the Affected Client does not exceed two hundred and fifty thousand Kuwaiti Dinars (KD 250,000).

Article 3

A client who was not regular in repayment as at 31/12/2019 shall not benefit from the Financing, and irregularity shall be determined in accordance with the instructions of the Central Bank.
Affected Clients who are owners of start-up enterprises established before 12/3/2020 shall be excepted from this.

Article 4

The Local Bank shall provide the Financing in instalments that coincide with the periodic needs required to close the actual Cash Flow Deficit incurred by the Affected Client.
The client shall use this Financing to finance working capital to cover the deficit in the required contractual operating expenses (such as salaries, rents and any payments due in respect of any obligations).

Article 5

The Affected Client shall be bound to use the Financing for the uses set out in the preceding Article.
The granting Local Banks shall take all necessary measures and arrangements to monitor the disbursement and the client’s use of the Financing, in accordance with the instructions issued by the Central Bank.
Coordination shall be observed between the bank granting the Financing and other banks to transfer dues such as (the salaries of the client’s employees, rent and other contractual expenses) from the Financing provided to the client, and to deposit them directly into the accounts of the beneficiaries at the banks, and the Financing shall not be disbursed to the client in cash.

Article 6

The principal of the Financing and the return shall be repaid within a period not exceeding eight years after a grace period of two years from the date of grant.
The Local Bank shall determine the repayment term in accordance with the expected cash flows, and it shall cover the principal of the debt and the interest or return.

Article 7

A fixed rate of interest for conventional banks, and of return for Islamic banks, shall apply to the Financing throughout the Financing period, up to a maximum of 1% above the discount rate announced by the Central Bank at the time of grant, and shall be calculated on the declining balance of the Financing. The cost of the Financing during the repayment period shall be distributed as follows:
– The State Treasury shall bear the interest and returns accruing on the Financing of Affected Clients during the first and second years from the date of grant.
– The State Treasury shall bear 90% of the interest and returns accruing on the Financing of Affected Clients during the third year from the date of grant.
– The State Treasury shall bear 80% of the interest and returns accruing on the Financing of Affected Clients during the fourth year from the date of grant.
The client shall bear all interest and returns not borne by the State Treasury in all years of repayment.

Article 8

If the Affected Client fails to pay any of the instalments due from him for a period of 90 days, the State Treasury shall cease to bear any part of the cost of the Financing from the date of the failure.
He shall be prohibited from making any cash distributions of profits except after paying in full the instalments due for the previous financial year.
In all cases, the client shall submit a certificate from the Local Bank evidencing the payment of all instalments due on the Financing.

Chapter Three – Guarantee of Financing

Article 9

The State shall guarantee 80% of the principal of the Financing provided to Affected Clients, excluding interest or returns, during the term specified in Article (6) of this Law, up to a maximum of five hundred million Kuwaiti Dinars for the total new Financing provided within six months from the date this Law comes into force.
The Central Bank shall monitor the compliance of Local Banks with the maximum limit for total new Financing.

Article 10

A guarantee issuance commission, in consideration of administrative costs, shall be calculated on the outstanding guarantee balance of each bank at the rate of 0.25% annually, which the banks shall remit to the account of the Ministry of Finance at the Central Bank no later than three working days from the end of each quarterly period.

Article 11

If it becomes apparent to the Central Bank that a borrowing client has defaulted in repaying the Financing obtained under this Law, the value of the State guarantee shall be set at 80% of the remaining balance of the principal of the defaulted Financing.

Article 12

The Central Bank may, upon authorisation from the Minister of Finance, issue bonds, tawarruq or sukuk to the Local Bank in the value of the guarantee, with a maturity period not exceeding five years. These bonds and sukuk shall be amortised from the State’s share of any amounts collected from the portfolio of this Financing.
A return determined by the Central Bank may be paid on the bonds and sukuk.

Article 13

Local Banks shall be responsible for following up collection from clients who have defaulted in repaying the Financing, taking the necessary legal and judicial measures in this regard, and carrying out any other acts provided for in this Law and the resolutions issued in implementation thereof.
The Central Bank shall determine the mechanism for collecting the State’s share of any amounts recovered from this Financing.

Chapter Four – Obligations of Borrowing Clients

Article 14

Borrowing clients shall be prohibited from using the Financing for the purposes of speculation or trading in real estate and securities, or for paying instalments or charges of credit facilities outstanding against the client at the time of issuance of this Law and provided by banks or any other granting entities, or for any uses other than those provided for in this Law.

Article 15

Borrowing clients shall maintain the national workforce employed by them as at 31/12/2019, and shall also comply with reaching the national workforce percentage prescribed for the activity in which they operate by 31/12/2021.
In the event of non-compliance therewith, the State Treasury shall cease to bear any part of the cost of the Financing from the date of non-compliance.

Chapter Five – Penalties and Final Provisions

Article 16

Without prejudice to any more severe penalty provided for by another law, any person who conceals an existing fact, fabricates a debt or a document, or acts contrary to the truth for the purpose of benefiting himself or others from the provisions of this Law shall be punished by imprisonment for a period not exceeding five years and by a fine of not less than two thousand dinars and not more than ten thousand dinars, or by either of these two penalties.
The court passing the sentence may order the refund of the amounts obtained without entitlement as a result of the violating acts set out in this Article.

Article 17

The same penalty set out in the preceding Article shall apply to any person who submits or gives to any bank or official entity incorrect data or information in a manner giving the false impression that it is true, for the purpose of benefiting himself or others from the provisions of this Law.

Article 18

Without prejudice to any more severe penalty provided for by another law, any person who discloses a secret that came to his knowledge by virtue of his work, or exploits for himself or others any information or data that reached him regarding the application of the provisions of this Law, shall be punished by imprisonment for a period not exceeding one year and by a fine of not less than one thousand dinars and not more than three thousand dinars, or by either of these two penalties.
The offender may be sentenced to dismissal if he is a public official.

Article 19

The Public Prosecution shall have the power of investigation, disposition and prosecution in respect of the crimes set out in this Law.

Article 20

The Central Bank shall issue the resolutions and instructions necessary for the implementation of this Law.
The sanctions set out in Article (85) of the aforementioned Law No. (32) of 1968 shall apply to any of the Local Banks that violates the provisions of this Law.
The Central Bank may also suspend the State guarantee for the violating Financing.

Article 21

The Central Bank shall submit to the National Assembly a semi-annual report and another annual report on the application of the provisions of this Law.

Article 22

The Prime Minister and the Ministers, each within his own competence, shall implement this Law, which shall come into force from the date of its publication in the Official Gazette.

Issued on 12 April 2021 and published in the Official Gazette Kuwait Al-Youm on 18 April 2021.