Ministerial Resolution No. 51 of 2018 Issuing the Executive Regulations of Law No. 14 of 2018 on the National Fund for the Care and Development of Small and Medium Enterprises

Ministerial Resolution No. 51 of 2018
Issuing the Executive Regulations of Law No. 14 of 2018 on the National Fund for the Care and Development of Small and Medium Enterprises

Article One

The provisions of the Executive Regulations of Law No. 14 of 2018 amending Law No. 98 of 2013 on the establishment of the National Fund for the Care and Development of Small and Medium Enterprises, the text of which is attached to this Resolution, shall be applied.

Article Two

Ministerial Resolution No. 522 of 2014 and the resolutions amending it relating to the Executive Regulations of Law No. 98 of 2013 referred to above, and any other resolutions that contravene or conflict with the provisions of the Regulations provided for in the preceding Article, shall cease to be applied.

Article Three

This Resolution shall be published in the Official Gazette and shall come into force from the date of its publication.

Executive Regulations of Law No. 14 of 2018 Amending Certain Provisions of Law No. 98 of 2013 on the National Fund for the Care and Development of Small and Medium Enterprises

Article 1

In applying the provisions of these Regulations, the following words, terms and expressions shall have the meanings assigned to each of them:
– The Fund: the National Fund for the Care and Development of Small and Medium Enterprises.
– The Board of Directors: the Board of Directors of the Fund.
– The Chairman of the Fund: the Chairman of the Board of Directors.
– The Regulations: the Executive Regulations of the Law.
– The Director General: the Director General of the Fund.
– The Project: any project benefiting from one of the programmes or services provided by the Fund.
– Small Enterprises: enterprises with no more than fifty employees, whose assets do not exceed KD 250,000 and whose revenues do not exceed KD 750,000 annually, provided that the enterprise is independent and not affiliated to another legal entity; if it is associated with another commercial legal entity, the total assets, revenues and aggregate number of employees of those entities shall be taken into account in the definition.
– Medium Enterprises: enterprises with no more than one hundred and fifty employees, whose assets do not exceed KD 500,000 and whose revenues do not exceed KD 1,500,000 annually, provided that the enterprise is independent and not affiliated to another legal entity; if it is associated with another commercial legal entity, the total assets, revenues and aggregate number of employees of those entities shall be taken into account in the definition.*
– Agricultural Activity: an activity that includes the reclamation of agricultural land, flower production, the development of livestock and fisheries, apiaries and related activities, together with the continuation of the activities financed by the Agricultural Portfolio established by Decree-Law No. 48 of 1988.
– Craft Activity: any activity that relies on manual or professional skills and in which machinery is used in a simple manner.
– Service Activity: any activity in maintenance work or technical, professional or intellectual services.
– Supporting Institutions: institutions that provide training, scientific, technical or financial support, such as universities, research centres, the Kuwait Foundation for the Advancement of Sciences or financial institutions.
– Electronic Activity: any information technology activity in which electronic means are used, including audio information, voice and visual data, and the production, storage, conversion, processing, retrieval, extraction or making available to others of information, and all projects relating to the World Wide Web and the Internet.
– Project Incubator: an entity accredited by the Fund that provides services to the owners of small and medium enterprises and to initiators by providing them with a suitable work environment during the first years of the project, with the aim of increasing its chances of success and growth.
– Internal Incubation: the logistical and financial support provided by the Fund to owners of projects operating inside the premises hosted by incubators, which falls within the programmes registered with the Fund.
– External Incubation: the logistical and financial support provided by the Fund to owners of projects operating outside the premises hosted by incubators, which falls within the programmes registered with the Fund.
– The Initiative: an integrated study submitted by the initiator or the Fund, based on an idea that involves implementing one of the projects benefiting from the services of the Fund, accompanied by a related natural, economic, environmental and technical feasibility study.
– The Initiator: the natural person who applies to the Fund to benefit from the logistical or financial support, services or programmes it provides.
* The definition of “Medium Enterprises” replaced by Board of Directors Resolution No. 52 of 2020 (Kuwait Al-Youm, Issue No. 1508, 8 November 2020).

Article 2

The head office of the Fund shall be in the State of Kuwait, and other branches may be established by a resolution of the Board of Directors.

Article 3

The Competent Minister shall undertake the following:
1- Chairing the Board of Directors.
2- Chairing the Advisory Committee.
3- Submitting to the Council of Ministers any amendment to the percentage for forming the general reserve, based on a proposal of the Board of Directors.
4- Submitting to the Council of Ministers and the National Assembly the annual report prepared by the Director General and approved by the Board on the progress of work at the Fund and the development projects for the previous year.

Article 4

The report referred to in Clause (4) of the preceding Article shall include the progress of work at the Fund and the development projects for the previous year and the financial statements certified by the auditors, together with a detailed explanation of all activities during the past financial year and the report of the Advisory Committee.

Article 5

The Vice-Chairman of the Board shall exercise the powers of the Chairman in his absence or if he is prevented from acting.

Article 6

The Board of Directors may, in order to achieve the objectives and purposes of the Fund, issue the systems and resolutions necessary to manage its affairs in accordance with the Law and these Regulations, and it may, to that end, seek the assistance of whomever it deems fit from within or outside the Fund.

Article 7

The Director General shall prepare the annual plan of the targeted projects, classified according to the types of their activities.
The Board of Directors shall approve the plan within one month from the date it is submitted to it.

Article 8

The Director General may, in order to achieve the objectives and purposes of the Fund, issue the systems and resolutions necessary to manage its affairs in accordance with the Law and these Regulations, and he may, to that end, seek the assistance of whomever he deems fit from within or outside the Fund.

Article 9

The Director General shall prepare model contracts for financing projects, which shall include in particular the following:
1- The rules and method of financing the project.
2- The bases for the financing procedures according to a timetable.
3- The collateral for financing the project.
4- The bases for collecting and following up the Fund’s dues according to a timetable not exceeding fifteen years.
5- Establishing an official mortgage right over the assets of the project in favour of the Fund.
6- The provisions that ensure the Fund’s follow-up of the performance of the projects it has financed.
The model contracts shall be approved by the Board of Directors.

Article 10

The Director General shall prepare the rules governing the follow-up of the collection of the Fund’s rights.

Article 11

The Director General shall issue a guidance manual for the activities covered by the Fund’s care.

Article 12

The Fund’s services shall be announced through the Fund’s electronic portal, in the daily newspapers or by any other means decided by the Director General.

Article 13

The financed initiator shall devote himself fully to managing the project. If the project owner is a public employee, he shall be granted, at his request, a leave of absence for this purpose not exceeding three years, as shall the partners proposed by the Fund after the approval of the Director General. In this case, he shall be exempted from the prohibition on participating in the establishment of commercial companies provided for in the Civil Service Law and its System, provided that he hands the project over to the Fund if he abandons the project and returns to public service, subject to the approval of the Director General of the Fund.

Article 14

The project owner shall be prohibited – without obtaining the approval of the Fund – from the following:
1- Taking any material decision that may affect the fate of the project during the period of the Fund’s care for it.
2- Reducing the capital of the project, merging it into another project, liquidating it, selling it, or assigning the contract in whole or in part to third parties.
3- Changing the legal form of the investor or amending the objectives or the approved plan of the project.
4- Publishing any information concerning the project by any means of media except after obtaining the written approval of the Director General.
5- Amending, adding or cancelling any provision contained in the Company Contract of the company under the Fund’s care.
If the Fund approves a request to assign the contract, the new project owner shall replace the original project owner in all the rights and obligations contained in the contract and shall become responsible before the Fund.

Article 15

The project owner shall deposit his share, which shall not be less than 20% of the financing amount, in the project account, or submit proof of payment of his share through invoices for establishment, fitting-out or purchase of equipment.

Article 16

The Board of Directors of the Fund shall set the rules for the repayment by initiators of their financial obligations, as well as the incentives and benefits that would encourage initiators to make early repayment.

Article 17

A project shall be considered distressed in the following cases:
1- If it stops paying the loan instalments due from it on the dates set for repayment for a period that would harm the project.
2- If the financial statements submitted by the project owner show that its financial position is unstable.
3- The issuance of a final court judgment declaring its bankruptcy.
4- If it stops carrying on the activity.
5- If it defaults in paying the financial dues to those dealing with it, from companies and traders, for two consecutive months.
Other cases of project distress may be added by a resolution of the Board of Directors based on a submission by the Director General.
In the two cases provided for in Clauses 1 and 2, or at the request of the project owner, the Board of Directors may place the project under its management or entrust its management to a specialised company for a consideration, under its supervision and in the name and for the account of the initiator.
The Fund’s management shall end and the project shall be returned to its owner if the causes of distress cease, after the approval of the competent Distress Committee. If the causes of distress cannot cease, the Board of Directors may issue a resolution to liquidate the project, based on a submission by the Director General.

Article 18

The Director General may submit to the Board of Directors a proposal to liquidate the project or to take other appropriate measures in the following cases:
1- If its losses reach three quarters of the financing amount plus the amount of the project owner’s contribution.
2- If the causes of distress referred to in Article (17) of these Regulations cannot cease.
3- If the project owner breaches his obligations set out in Article (14) of these Regulations.

Article 19

The Fund shall finance projects at a percentage not exceeding 80% of the project cost, and the Board of Directors shall issue the rules governing this.
The fixed and movable assets of the project may be mortgaged as security for loans it obtains from the banking system or from other financial institutions, in accordance with the instructions issued by the Central Bank in this regard.
In all cases, the total of such loans may not exceed 50% of the financing provided by the Fund to the project account.

Article 20

The Board of Directors shall, based on a submission by the Director General, issue the legal and accounting rules, controls and procedures to be followed in cases of project distress that ensure the preservation of the rights of the Fund and the investor. It shall also set the bases for calculating provisions in the light of credit and financing risks.

Article 21

The project owner may authorise specialised companies or consulting offices to act on his behalf in submitting applications to benefit from the services provided by the Fund and in carrying out all procedures.
Such companies and offices shall be required to be accredited by the Fund and to hold a special licence to carry on this activity and a commercial registration.

Article 22

Financing applications shall not be accepted from any company any of whose partners has previously obtained financing from the Fund.

Article 23

A project owner, or any of his partners, who obtained financing from the Fund and whose project was liquidated may not obtain new support from the Fund except after a report is prepared by the competent Technical Department on the reasons for the liquidation and the suitability of granting him new financing.

Article 24

Financed projects shall be granted a grace period ranging from one to three years according to the nature of the activity and the feasibility study, pursuant to Clause Second of Article (26) of the Law, and according to the assessments of the competent committee.

Article 25

A percentage not exceeding 10% of the value of contracts, including negotiated procurements, auctions or tenders concluded by ministries, authorities and public institutions, shall be allocated for purchasing the Fund’s products of goods and services after their approval by the Council of Ministers.

Article 26

A percentage not exceeding 10% of the newly developed industrial areas of the Public Authority for Industry and a percentage of 5% of the newly developed agricultural areas of the Public Authority for Agriculture Affairs and Fish Resources shall be allocated to the Fund to meet the applications submitted in accordance with the provisions of the Law.

Article 27

Incubators shall support projects in the stages before, during and after the incubation of the project, both internal and external, and provide logistical support including training, research, administrative, marketing and economic support, in line with international standards.

Article 28

Based on a proposal of the Director General and after the approval of the Board of Directors, an achievement incentive shall be paid to projects, subject to compliance with the following conditions:
1- The project shall be productive.
2- The project shall make profits.
3- The percentage of the incentive paid to the project owner shall not exceed 50% of the Fund’s profits in the project.
4- The percentage of the incentive shall be commensurate with the rates of the project’s achievement of its objectives and its compliance with the procedures and systems determined by the Fund.
5- The project owner shall be committed to the business plan approved by the Fund.
6- The project owner shall comply with the schedule for employing Kuwaitis contained in the approved business plan.
7- The stability of the financial position of the project, as shown by the financial statements submitted by the project owner and as determined by the competent technical committees.
8- The payment shall be made during the financial year following the year in which the project was examined.
9- The payment shall be made at most once for each financial year and for no more than three financial years.

Article 29

The Fund’s monies allocated for financing projects shall be deposited in local banks accredited with the Central Bank of Kuwait, in accordance with the controls approved by the Board of Directors, in order to achieve the best terms, the highest financial returns and the most efficient mechanisms for its performance according to the needs of the Fund.

Article 30

A percentage not exceeding 10% of the commercial shops in the areas allocated by the State to cooperative societies and their branches, and in other investment sites, shall be allocated to the Fund for the benefit of the projects supervised by the Fund.

Article 31

The Board of Directors shall issue a resolution setting the bases necessary for equipping land with utilities and infrastructure and planning it so as to achieve the purpose required by the Law.

Article 32

The Board of Directors may transfer any amounts from the general reserve account to another reserve account that the Board decides to establish.

Article 33

The Board of Directors shall form a permanent Grievances Committee to consider the grievances submitted to the Fund by initiators and project owners. Its members shall be an odd number of not less than three and not more than five, and it shall include legal, technical and financial members.
The Committee may seek the assistance of whomever it deems fit from among persons of experience and expertise to give an opinion on any of the matters submitted to it, without their having the right to vote.
The meeting of the Committee shall not be valid unless attended by a majority of its members, provided that they include the Chairman or the Vice-Chairman, and its decisions shall be issued by a majority of those present; in the event of a tie, the side of the Chairman of the Committee shall prevail.

Issued on 23 October 2018 and published in the Official Gazette Kuwait Al-Youm on 28 October 2018.