Ministry of Commerce and Industry Resolution No. 161 of 2020 Issuing the Regulations Governing Professional Law Companies

Ministry of Commerce and Industry Resolution No. 161 of 2020
Issuing the Regulations Governing Professional Law Companies

Chapter One – Definitions

Article 1

The following words, wherever they appear in these Regulations, shall have the meanings set out opposite each of them:
The Law: Companies Law No. (1) of 2016.
The Regulations: the Executive Regulations for Professional Law Companies.
The Minister: the Minister of Commerce and Industry.
The Ministry: the Ministry of Commerce and Industry.
The Licence: the document issued in accordance with the provisions of the Law, the aforementioned Regulations and these Regulations, which entitles its holder to practise the legal profession through a professional company.
The Professional Law Register: a register kept by the Lawyers Association in which professional law companies are entered.
The Professional Law Company: a company with an independent legal personality, founded by two or more persons — depending on the form of the company — from among the persons legally licensed to practise the legal profession, and whose purpose is to practise that profession.

Chapter Two – General Provisions

Article 2

Kuwaiti lawyers entered in the General Roll of Practising Lawyers (B – Court of First Instance –, C – Court of Appeal, D – Constitutional Court and Court of Cassation) may establish professional law companies, after submitting a certificate from the Kuwait Lawyers Association.
Commercial companies may not be established to practise legal work or legal consultancy.

Article 3

A professional law company shall take one of the following forms of company:
General partnership.
Closed shareholding company.
Limited partnership.
Limited liability company.

Article 4

A professional law company shall be named after one or more of the partners with the addition of the phrase (“and Partners” or “and their Partners”), or it may adopt an original name for the conduct of its activity, depending on the form of the company. In all cases, the name of the professional company shall be followed by the phrase “Professional Law Company”, provided that a certificate of the Lawyers Association on the name is submitted.

Article 5

Professional law companies shall be subject to the supervision of the Lawyers Association, with which a special register shall be established in which the professional law companies established in accordance with the provisions of the Law, the aforementioned Regulations and these Regulations shall be entered, and the following particulars shall be recorded therein:
The name and address of the company.
The names and domiciles of the partners.
The number, type and paid-up value of the shares or interests owned by each partner.
The names and powers of the managers or the Board of Directors.
Any changes to the particulars recorded in the Professional Law Register.
The Kuwait Lawyers Association may issue certificates of the particulars entered in the register referred to in the preceding paragraph.

Article 6

The Ministry shall be competent to grant the Licence for the establishment of a professional law company in accordance with the procedures and controls provided for in the Law, the aforementioned Regulations and these Regulations.
The professional company shall be entered in the Professional Law Register at the Ministry and the Lawyers Association, and the professional company shall not acquire legal personality or commence its business until it has been entered in that register.

Article 7

The company shall provide the Ministry with a copy of its memorandum of association and the minutes of its general meetings or of the partners’ meeting — as the case may be — as well as copies of its approved annual financial statements.

Chapter Three – Conditions of Establishment

Article 8

The application to establish a professional law company shall be submitted to the Kuwait Business Center (One-Stop Shop), accompanied by a certificate from the Kuwait Lawyers Association, and the establishment of a professional law company shall be subject to the same procedures prescribed for the form it takes.

Article 9

The Company Contract shall include the following particulars:
The name and address of the company.
The head office of the company.
The purpose of establishing the company.
The term of the company, if any.
The names and titles of the partners, their academic qualifications and the place of residence of each of them.
The method of managing the company, those responsible for management and their powers.
The amount of the capital and the share of each partner, with a statement of each non-cash contribution, its nature, the value at which it was assessed, the name of its contributor, the conditions of its contribution, and any mortgage rights and liens over it, if any.
The provisions on the distribution of returns among the partners.
The financial year of the company.
The provisions on the liquidation of the company and the division of its assets.
The conditions for appointing the manager, his powers, remuneration, term of management of the company and the method of his removal.
The method of distributing profits and contract proceeds.
The method of transferring contracts to a professional law company or another law office.

Article 10

The memorandum of association of the professional company or its articles of association, made public in accordance with the provisions of the Law, the aforementioned Regulations and these Regulations, may not be invoked against third parties until the company has been entered in the Professional Law Register at the Ministry and the Lawyers Association.
Where the failure of publicity is limited to one or more particulars of either of them, those particulars alone shall be unenforceable against third parties.
Nevertheless, third parties acting in good faith may rely on the existence of the company or on any amendments to its contract, even if the publicity procedures have not been completed.

Article 11

Without prejudice to the provisions of Article (28) of these Regulations, the term of the licence of a professional law company shall be (4) four years from the date of its issuance. This term shall be linked to the renewal of the partners’ registration in the Roll of Practising Lawyers at the Lawyers Association, provided that the licensee submits the financial statements within the legally prescribed time limits. In the event of a breach of this obligation, the provisions of Article (11) of Law No. 111 of 2013 on Commercial Shop Licences shall apply.

Article 12

The capital of the commercial law company, whatever form it takes, may not be less than 10,000 (ten thousand Kuwaiti dinars).

Chapter Four – Management of the Professional Law Company

Article 13

A professional law shareholding company shall be managed by a Board of Directors composed of a number of shareholders entered in the Register of Practising Lawyers in Roll (C – Court of Appeal, D – Constitutional Court and Court of Cassation), and the articles of association of the company shall specify the powers of the Board and the provisions relating to its formation.
The powers of the Board of Directors of the professional shareholding company may not include anything that undermines the independence of the shareholders in their practice of the legal profession.

Article 14

A general partnership, limited partnership or limited liability company shall be managed by one or more of the partners entered in the Register of Practising Lawyers in Roll (C – Court of Appeal, D – Constitutional Court and Court of Cassation). Where there are several managers and the Company Contract does not provide for a specific rule, decisions shall be taken by their absolute majority, and in the event of a tie the managers shall refer the matter to the partners for decision, and approval shall be by a majority of the partners.
The powers of the manager — in professional general partnerships, limited partnerships and limited liability companies — may not include anything that undermines the independence of the partners in their practice of the legal profession.

Chapter Five – Rights and Duties of the Partners

Article 15

A partner or shareholder in a professional law company may not be a partner or shareholder in another professional company practising the same profession.

Article 16

Each partner or shareholder in a professional law company shall be personally liable for his professional errors towards the company and the other partners or shareholders, as the case may be, and the company shall be liable for the errors of the partners towards third parties, subject to the aforementioned Law Regulating the Profession.

Chapter Six – The Company’s Practice of Its Activity

Article 17

A professional company shall not practise the legal profession, which is its activity, except through its licensed partners or shareholders. Nevertheless, the professional company may engage in its work persons licensed to practise the profession who are entered in the Roll of Practising Lawyers, provided that in doing so they are subject to the supervision and responsibility of the company.

Article 18

A professional law company shall be confined to practising the profession that is the object of its activity, and it may not engage in commercial business or participate by establishing commercial companies or other professional law companies. Nevertheless, it may own financial and real estate assets to serve its purposes.

Article 19

A professional law company may not provide its services to its clients except through its partners, shareholders or lawyers entered in the Roll of Practising Lawyers, and it may not carry on its activity through the employees of any other company practising the same activity, subject to the aforementioned Law Regulating the Legal Profession.

Article 20

A professional company may engage legal practitioners or administrative staff, whether Kuwaiti or non-Kuwaiti, under the supervision and responsibility of the company, under employment contracts in accordance with the requirements of Law No. (6) of 2010 on Labour in the Private Sector.

Article 21

A professional law company shall not be granted a licence to practise its activity until it submits an insurance policy concluded with local or international insurance companies having branches in the State of Kuwait to compensate for professional errors committed by the partners, shareholders or its employees, provided that the validity of this policy extends for six months after the expiry of the Company Contract, and that it is renewed throughout the term of the company.
The professional risk insurance policy shall be in accordance with the following tiers:
– KWD 50,000 (fifty thousand Kuwaiti dinars).
– KWD 100,000 (one hundred thousand Kuwaiti dinars).
– KWD 250,000 (two hundred and fifty thousand Kuwaiti dinars).
– KWD 500,000 (five hundred thousand Kuwaiti dinars).
Insurance against the professional risks of legal practice shall be taken out with licensed insurance companies, and the professional law company may choose between the insurance tiers set out in this Article, and it shall be obliged to announce the insurance policy to clients and to display it in a visible place.
The insurance company shall notify the insured professional law company and the Lawyers Association of the expiry of the insurance policy no later than two months before its expiry.

Chapter Seven – Loss of a Partner’s Licence to Practise the Profession, or His Withdrawal or Death

Article 22

If a partner or shareholder in a professional law company temporarily loses the licence to practise his profession, or a disciplinary or criminal judgment is issued against him barring him from work for a temporary period, he shall refrain from working in the company — immediately and completely — until he regains the licence or the period of the bar ends.
The professional law company shall be dissolved if the company is reduced — for any reason whatsoever — to a single partner, unless that partner, within (6) six months from the date of the loss or the bar, admits one or more other partners.

Article 23

If a partner or shareholder in a professional law company permanently loses the licence to practise his profession, he shall thereby be deemed to have withdrawn from the company, while retaining his percentage of the proceeds of the contracts concluded with the company’s clients until the issuance of the financial statements for the financial year following the loss of his licence.

Article 24

In the event of the withdrawal or death of a partner after whom the professional company is named or whose name appears in its name, the name of the company shall be amended within (6) six months from the date of the withdrawal or death. The company may continue to bear his name or include it in its name with his written consent or the written consent of his heirs, as the case may be.

Article 25

If one of the partners or shareholders in a professional law company dies, the company shall continue among the remaining partners, and his share shall pass to his heirs after it has been valued in accordance with Article (11) of the aforementioned Companies Law as at the date of the partner’s death. The heirs shall also be entitled to a share of any rights subsequently accruing to the company if they arise from transactions prior to the death of their legator, at most until the issuance of the financial statements for the financial year following the death; pending lawsuits are excepted from this limit until they are decided by a final court judgment.

Article 26

The memorandum of association of the professional law company, or a special agreement between one or all of the heirs of the deceased partner or shareholder and the remaining partners in the company, may provide that one of the heirs of the deceased partner shall take the place of his legator’s share in the company if he is licensed to practise the profession.

Chapter Eight – Withdrawal or Assignment of Interests and the Right of Redemption

Article 27

Withdrawal, assignment, sale or pledge shall be effective against third parties after it has been annotated in the Professional Law Register.

Article 28

Subject to the aforementioned Companies Law, a partner may assign, sell or pledge his interests or shares, provided that in all cases they pass to a lawyer registered in the Roll of Practising Lawyers at the Lawyers Association, even if they are sold by compulsion.

Article 29

A partner who has lost the eligibility to practise the profession shall be granted a period of (6) six months to assign his interests or shares in the company, failing which the company shall redeem them.
In the event of redemption, the interests shall be valued in accordance with Article (11) of the aforementioned Companies Law, and the same rule shall apply to a deceased partner, unless there is among the heirs a person licensed to practise the profession and the heirs agree that he shall take the place of their legator.

Chapter Nine – Conversion, Dissolution and Liquidation of the Professional Law Company

Article 30

Subject to the provisions of the aforementioned Companies Law, any company may convert into any of the forms of company referred to in Article (3) of these Regulations, in accordance with the provisions and procedures prescribed for amending the Company Contract, provided that at least two financial years have elapsed since its entry in the Commercial Law Register.
The conversion of the company shall not take place except after the approval of the Lawyers Association, the completion of the publication and announcement procedures, and the preparation of a report valuing the assets and liabilities of the company in accordance with the provisions on the valuation of in-kind contributions set out in Article 11 of the aforementioned Companies Law.

Article 31

A professional law company shall be dissolved by a decision of the Minister of Commerce and Industry where all the partners lose the conditions for practising the profession, upon a request submitted by the Lawyers Association accompanied by the supporting documents, and it shall be liquidated in accordance with the aforementioned Companies Law.

Article 32

The partners may not agree to dissolve or liquidate the professional law company before the end of its term except after notifying its clients at least six months before commencing the dissolution and liquidation procedures, and the decision of dissolution or liquidation shall not be annotated for that purpose in the Professional Law Register at the Ministry of Commerce and the Lawyers Association except after attaching evidence that each client has been notified individually, together with a detailed list of the names of the clients and their lawsuits pending before the courts or in which enforcement files have been opened, and the actions taken therein.

Chapter Ten – Final Provisions

Article 33

The provisions of Companies Law No. (1) of 2016 and its Executive Regulations, and the provisions of Law No. 42 of 1964 on the Regulation of the Legal Profession before the Courts and its amendments, and the Charter of Honour for the Traditions and Ethics of the Legal Profession, shall apply to the professional law company — in respect of matters for which there is no special provision, and to the extent not inconsistent with its nature.
A partner or shareholder in a professional company, whatever its form, shall not acquire the status of a trader by virtue of his partnership or his ownership of shares.

Article 34

A company that has ceased to practise its activity shall be granted a period of (6) six months to regularise its position in accordance with the provisions of the Law, the aforementioned Regulations and these Regulations, and the Minister may extend this period for one or more similar periods if he sees an interest in doing so.
The company shall be dissolved upon the expiry of the period without its position having been regularised.

Article 35

Without prejudice to the provisions of Article (23) of the aforementioned Law Regulating the Legal Profession, professional law companies may not obtain more than one licence to practise the profession or open branches within the State of Kuwait, and they may not carry on any activity other than legal practice and legal consultancy.

Article 36

Professional law companies shall notify the Ministry and the Lawyers Association within thirty days from the date of any change of their address.

Article 37

Every decision contrary to the provisions of these Regulations is hereby repealed, and the regulations and decisions in force shall continue to apply to the extent not inconsistent with the provisions hereof.

Article 38

These Regulations shall be published in the Official Gazette and shall come into force as of 1 January 2021, and the officials, each within his competence, shall implement them.

Issued on 22 October 2020 and published in the Official Gazette Kuwait Al-Youm on 8 November 2020.