Law No. 37 of 2010 on Regulating Privatization Programs and Operations

Contents (7)

1. Definitions
2. Chapter One – General Provisions
3. Chapter Two – Supreme Council for Privatization
4. Chapter Three – Privatization Operations
5. Chapter Four – Protection of Employees' Rights
6. Chapter Five – Penalties
7. Chapter Six – Final Provisions

Law No. 37 of 2010
on Regulating Privatization Programs and Operations

Definitions

Article 1

The following terms shall have the meaning assigned to each of them:
1- Public Project: a project wholly owned by the State.
2- Privatization: the transfer of the ownership of a Public Project, in whole or in part, in accordance with the provisions of this Law.
3- The Council: the Supreme Council for Privatization.

Chapter One – General Provisions

Article 2

Privatization shall not be carried out except in the manner and within the limits set out in this Law, and in accordance with the following conditions:
a- Protecting the interests of the consumer in terms of the level of prices, service systems and the quality of goods and services in the field of producing goods or services of a monopolistic or strategic nature, by obliging the companies incorporated under this Law to comply with the prices and service systems determined and approved by the regulatory bodies after reviewing them periodically; prices may not be increased except with the approval of such bodies. Such companies shall periodically provide the competent regulatory bodies with all information enabling them to perform their supervisory role.
b- Maintaining the confidentiality of data and information within the limits of the laws in force.
c- Ensuring the provision and development of modern technological means.
d- Undertaking to preserve the safety of the natural environment and to bear liability for damage resulting from any harm to it or any harm to citizens.
e- Ensuring the absence of any direct or indirect conflict of interest in respect of all participants in privatization operations. The Executive Regulations of this Law shall set out the controls and conditions necessary therefor, which shall ensure the prevention of the exploitation of information obtained by a participant by virtue of his participation in this operation.

Article 3

The following provisions shall be observed in applying the Law:
1) The national economy is based on social justice; it is founded on fair cooperation between public and private activity, and its aim is to achieve economic development, increase production, raise the standard of living and achieve prosperity for citizens, all within the limits of the law.
2) All natural resources and all revenues therefrom are the property of the State, which shall preserve them and exploit them properly, with due regard to the requirements of the security of the State and its national economy.
3) No concession for the exploitation of a natural resource or a public utility shall be granted except by law and for a limited period, and the preliminary procedures shall facilitate exploration and discovery operations and ensure publicity and competition.
4) No monopoly shall be granted except by law and for a limited period.
5) Public property is inviolable, and its protection is the duty of every citizen.
6) The payment of taxes and public charges is a duty in accordance with the law.
The law shall regulate the exemption of small incomes from taxes so as to ensure that the minimum required for living is not affected.

Article 4

Subject to the provisions set out in the preceding Article, the production of oil and natural gas, oil refineries, and the education and health utilities may not be privatized.

Chapter Two – Supreme Council for Privatization

Article 5

A council named the “Supreme Council for Privatization” shall be established, chaired by the Prime Minister and composed of five Ministers and three full-time members having competence, experience and specialisation in financial, economic, legal and technical matters relevant to this Law.
The Prime Minister may delegate one of the Ministers who are members of the Council to act on his behalf in chairing the Council and conducting its business.
A Decree shall be issued, upon the proposal of the Prime Minister, appointing and relieving the non-Minister members and determining their remuneration, for a term of three years renewable twice consecutively, and a member shall retain his right to return to his original employment at the end of the term if he works in the government sector.

Article 6

The Council shall lay down the regulations governing its business, the procedures of its meetings and the issuance of its resolutions, the committees it forms from among its members or others, and its financial and administrative system, within three months from the date of issuance of the Executive Regulations of this Law.

Article 7

The Council shall be responsible for setting the general policy for privatization operations and preparing a timetable of the Public Projects which the Council intends to privatize, and submitting it to the Council of Ministers for approval and implementation in accordance with the provisions of this Law.
The Council shall also designate or establish the regulatory body that shall exercise the powers provided for in Article (2) of this Law.

Article 8

The Council shall provide both the Council of Ministers and the State Audit Bureau with a semi-annual report, during the months of January and July of each year, on the work and activities it has carried out in the preceding half-year.
Such report shall include a detailed statement of the extent to which the companies incorporated under this Law comply with its provisions, particularly with regard to compliance with quality standards and the level of prices and with the provisions of both Article (2) and the Articles of Chapter Four hereof, and of the measures taken against the violating companies.
The President of the State Audit Bureau shall provide the National Assembly with a copy of the report and his observations thereon within two months from the date of its receipt, and the report and the observations of the State Audit Bureau shall be distributed to all members of the National Assembly.

Article 9

A body assisting the Council, named the “Technical Bureau of the Privatization Program”, shall be established by Decree and shall be supervised by the Chairman of the Council. The Bureau shall have a President whose grade, salary and other financial entitlements shall be determined by a resolution of the Council of Ministers, and it shall have special financial appropriations included in the budget of the Council of Ministers. The Council shall issue a resolution on the financial and administrative system of the Bureau upon the proposal of its President. The Bureau shall undertake the following:
1- Preparing a guide to the Public Projects eligible for privatization.
2- Conducting preliminary studies on the Public Projects proposed for privatization in accordance with this Law and referring them to the Council.
3- Following up the implementation of the valuation procedures and working to overcome obstacles to implementation in cooperation with the government entity to which the project is affiliated, in accordance with what is determined by the Executive Regulations of this Law.
4- Assisting in preparing the semi-annual report referred to in the preceding Article.
5- Preparing model contracts containing the essential terms and conditions required to be met, and submitting them to the Council for approval.
6- Any other competences that the Council deems necessary for implementing the provisions of this Law.

Article 10

No member of the Council of Ministers or the National Assembly, member of the Council, or their spouses or first-degree relatives, or its advisers, or employees of the Technical Bureau assisting it, or employees of the valuation entities, may have a direct or indirect interest in any of the privatization procedures, particularly in the stake offered at public auction in accordance with Clause (a) of Article (13) of this Law. Holding membership of the board of directors, or owning a percentage of 5% or more of the capital of the company bidding at the auction, shall be deemed an interest within the meaning of this Law.
In the event of a violation of the provisions of the preceding paragraph, the violator shall be deprived of the percentage from which he benefited in violation of the provisions of this Article.

Chapter Three – Privatization Operations

Article 11

Independent specialised consultancy firms, not fewer than two, selected by the Council through procedures observing publicity and competition, provided that at least one of them has international experience, shall be entrusted with valuing the tangible and intangible assets and the liabilities of each Public Project proposed for privatization, provided that they complete their task by a date specified in the contracts concluded with them.
The Executive Regulations of this Law shall set out uniform rules for valuation, the procedures which such firms shall follow therein, and the means of announcing them.
The valuation shall be approved by the Council after its submission to the State Audit Bureau.
The Council shall announce the final incorporation of the shareholding company in accordance with the provisions of this Law for each Public Project within a period not exceeding two years from the date of approval of the valuation.
The Council of Ministers shall assign the government entity that shall incorporate the company.
During the valuation period of the Public Project, no resolution may be issued and no measure may be taken that would affect the privileges and the tangible and intangible assets of the Public Project, except for such privileges previously granted by the State to the Public Project as the Council decides to discontinue, provided that this is stated in the valuation.

Article 12

The Government shall incorporate a Kuwaiti shareholding company to which the tangible and intangible assets and the liabilities of each Public Project decided to be privatized shall devolve, after its valuation and the approval of the valuation by the Council in accordance with the provisions of Article (11) of this Law, and the new company shall replace the project in carrying out its objects, with respect to its rights and obligations.
The capital of the company shall be determined in light of the results of the valuation and shall be divided into shares in order to determine the fair price per share, and the shares of the company shall be allocated in accordance with the provisions of Article (13) of this Law.

Article 13

The shares of the company shall be allocated as follows:
a- A percentage of not less than thirty-five per cent (35%) of the shares shall be offered for sale in a public bidding in which the shareholding companies listed on the local stock markets and other companies approved by the Council participate, and the auction shall be awarded to whoever offers the highest price per share above its nominal value plus the incorporation expenses and the issuance premium, if any. The person to whom the auction is awarded shall, at the same price at which the auction was awarded, subscribe for all the shares devolving to the State in accordance with the provisions of Article (15) of this Law.
b- A percentage not exceeding twenty per cent (20%) for the government entities designated by the Council. A government entity may relinquish this percentage or part thereof by offering it for sale at public auction in accordance with the provisions of Clause (a) of this Article.
c- A percentage not exceeding five per cent (5%), to be subscribed for in equal portions by the Kuwaiti employees transferred from the Public Project to the company and those transferred from the incorporated company in accordance with Article (17) of this Law who wish to subscribe, on the preferential terms set by the Council. A subscribing employee may not sell the shares he has subscribed for within the percentage specified under this Clause before the lapse of five years from the date of subscription, and before the value of the shares has been paid in full. The shares not subscribed for by any of the employees shall be offered for public subscription in accordance with the provisions of Clause (d) of this Article.
d- A percentage of not less than forty per cent (40%) shall be allocated for public subscription and distributed to citizens in accordance with the provisions of Article (14) of this Law, with those benefiting from the provisions of Clause (c) of this Article excluded from participating in this percentage.
A subscriber shall be prohibited from disposing of the shares before the lapse of five years from the date of subscription.
e- The total proceeds of privatization operations shall devolve to the public revenues in the budget of the ministries and government departments, provided that a resolution of the Council of Ministers is issued deducting a percentage of not less than fifty per cent (50%) of the total privatization revenues, to be added to the Reserve for Future Generations.

Article 14

The government entity assigned to incorporate the company shall determine its capital and distribute all the shares allocated for public subscription under Clause (d) of Article (13) of this Law equally among all living Kuwaitis whose names are registered with the Public Authority for Civil Information on the day of subscription, without allocating fractional shares, provided that the value of such subscriptions is paid to the State by the citizens in accordance with the procedures and in the manner determined by the said government entity, without any interest, fees or any increase over the share price fixed on the date of subscription, by no later than the day at the end of which four months expire, calculated from the first day of the month following that in which the same government entity invited the citizens, through the Kuwaiti print, visual and audio media, to pay the value of the subscriptions due from them.
The Council may decide that the said percentage be free of charge and offered to all citizens equally.

Article 15

Fractional shares not allocated to citizens shall devolve to the State; likewise, as of the day following the expiry of the time limit set for citizens to pay the value of these subscriptions in accordance with the provisions of the preceding Article, all shares whose value the citizens have not paid to the State within that time limit, for any reason whatsoever, shall devolve to the State. The State shall transfer the ownership of these shares, within a period determined by the Council, to the company to which the auction was awarded, after collecting their value from it in accordance with the provisions of Clause (a) of Article (13) of this Law.

Article 16

The State shall have a golden share in the ownership of the companies incorporated as a result of the privatization of a Public Project. The establishment of this privilege shall entail granting the State a voting power enabling it to object to the resolutions of the Board of Directors and of the General Meeting of the company, in protection of the public interest.
A resolution of the Council shall be issued granting the rights of the golden share. This resolution shall specify the voting privilege of the golden share and who shall exercise it. This privilege shall be stipulated in the memorandum of association or the articles of association of the company. The provisions relating to it may not be amended except with the approval of the Council.

Article 17

The Council may transfer the ownership of a Public Project to a shareholding company all of whose shares are owned by the State, in preparation for its privatization.
The Council shall, with respect to this company, have the powers of the constituent general meeting, the general meeting of shareholders and the extraordinary general meeting.
The Council shall appoint the members of the Board of Directors from among persons of specialisation and experience in the affairs and field of work of the company.
The Board of Directors of the company shall submit to the Council a semi-annual report on its activities and the resolutions it has adopted for the purpose of preparing the company for privatization.
The Council shall take the necessary procedures to privatize the company incorporated in accordance with the provisions referred to in this Article within three years from the date of its incorporation.

Chapter Four – Protection of Employees’ Rights

Article 18

Kuwaiti employees in the Public Project who wish to work in the company provided for in Articles (12) and (17) of this Law shall be transferred to it, and the company shall guarantee the following benefits to the employee:
1- The term of his contract with the entity to which the Project has devolved shall not be less than five years as of the date of privatization, unless he wishes a shorter term.
2- Receiving, during this term, the salary and the financial and in-kind benefits which he used to receive in the Public Project.
3- No prejudice to the salary and the financial and in-kind benefits which he receives, should the company wish to employ him after the expiry of the said five years.
Any agreement made between the employee and the entity to which the Project has devolved in violation of Clauses (1), (2) and (3) of this Article shall be null and void, unless such agreement would provide the employee with greater benefits.
The Council shall lay down the rules and procedures ensuring that these benefits are obtained.

Article 19

The following provisions shall apply to the employees referred to in the preceding Article:
(1) A period of three years shall be added to the period of service calculated in accordance with the Social Insurance Law referred to above, and this period shall not be included in the calculation of the retirement gratuity provided for in the second paragraph of Article (25) of the said Law.
(2) Subject to the provisions of Article (1), paragraph (m), and Article (2) of the Social Insurance Law referred to above, the employee’s insurance entitlements shall be calculated on the basis of the last salary he received in the Public Project before its privatization, or on the basis of the average salary in the last five years of service, or on the basis provided for in the said Law, whichever is greater.
The Public Treasury shall bear the financial burdens resulting from the application of the provisions of this Article.

Article 20

1- For Kuwaiti employees in the Public Project who do not wish to transfer to the company upon its incorporation and who do not meet the conditions for retirement, the State shall provide suitable jobs in the government sector, together with training programs qualifying them for the new work, provided that their salaries and benefits are not less than what they used to receive in the Public Project.
2- Kuwaiti employees in the Public Project who do not wish to transfer to the company upon its incorporation or to transfer to the government sector, and who are entitled to a retirement pension, shall be granted an end-of-service gratuity equal to the basic salary for a period of three years, provided that the period of service in the same Public Project is not less than thirty consecutive years.
3- There shall be added to the employee’s period of service calculated in accordance with the Social Insurance Law referred to above, if he does not wish to transfer to the company to which the Project has devolved or to the Government, a period of five years or such period as completes the period required for entitlement to the maximum retirement pension, whichever is less.
The Public Treasury shall bear the financial burdens resulting from the application of the provisions of this Clause.

Article 21

Without prejudice to the provisions of Article (9) of Law No. (19) of 2000 referred to above, the Council shall determine the minimum percentage of Kuwaiti manpower relative to the total number of employees of the company, and the minimum aggregate percentage of the wages of such manpower out of the total wages, in any company incorporated as a result of privatization, provided that such percentages are not less than those in the Public Project that was privatized nor less than the percentage prescribed in accordance with the provisions of that Law and the decisions issued in implementation thereof. The Council shall lay down the detailed conditions, procedures and time limits necessary for implementing this obligation.
The Council shall issue the appropriate decisions ensuring that the other competing company complies with the manpower percentage provided for in this Article within a period determined by the Council.

Article 22

The Executive Regulations of this Law shall be issued by Decree within six months from the date of its entry into force, upon the proposal of the Council, and shall include the rules under which the companies shall be bound to lay down and implement training programs ensuring the utilisation of the Kuwaiti employees transferred to them and the upgrading of their job skills, while maintaining the percentage of such employees in the rare specialisations and specialised technical work determined by the Council, in addition to any other conditions, including the conditions of the right of usufruct of the State real estate properties which the Public Project enjoyed before its privatization, if any, in a manner consistent with the law.

Chapter Five – Penalties

Article 23

The shareholding companies incorporated in accordance with the provisions of this Law shall be subject to the supervision of the Council in all matters relating to the implementation of its provisions, its Executive Regulations and the provisions of the contract concluded with them, and the Executive Regulations shall specify the procedures ensuring the companies’ compliance with these provisions.
The Public Prosecution alone shall have jurisdiction to investigate, dispose of and prosecute the crimes provided for in the Law and the crimes connected therewith.

Article 24

If any of the companies subject to this Law violates its provisions, its Executive Regulations, the decisions or instructions issued in implementation thereof or the provisions of the articles of association of the company, or refrains from submitting the documents, data and information it is required to submit, or submits data that does not conform to the truth, the Council may, after the investigation procedures and hearing the statements of the violating company, impose the following penalties:
a- Warning.
b- Imposing financial penalties on the company, graduated according to the gravity of the violation, up to a maximum of fifty thousand Kuwaiti dinars.
c- Deeming the member of the Board of Directors responsible for the violation to have lost eligibility for membership of the Board of Directors of the company.
d- Dissolving the Board of Directors of the company and appointing a commissioner to manage it until a new Board of Directors is elected.
Any funds that the violating company may have obtained as a result of the violations committed shall devolve to the Public Treasury, unless a right of third parties has attached to them; likewise, any financial benefits that a member of the Board of Directors or an employee of the company may have obtained by reason of the violations committed shall devolve to the Treasury.
The Council may decide other penalties included in the Executive Regulations of this Law.

Article 25

Each member of the Board of Directors of the violating company, the Chief Executive Officer, each of the Directors General, their deputies and assistants, the sector managers in the company and the managers of its branches shall, each within the limits of his competence, be liable for every intentional act committed by him that caused the company to violate the provisions of this Law, its Executive Regulations, the decisions and instructions issued in implementation thereof or the provisions of the articles of association of the company, or for failure to submit to the Council the documents, data and information he is required to submit, or for having submitted data that does not conform to the truth.

Article 26

Any member of the Board of Directors of a company subject to the provisions of this Law, or any manager, employee or worker of the company, shall be prohibited from disclosing any information relating to the affairs of the company that has come to his knowledge by reason of the duties of his office, whether during his service or for a period of five years following his leaving the service, except in the cases where the law permits so.

Article 27

Without prejudice to any more severe penalty provided for by another law, whoever violates the prohibition set out in the preceding Articles (25) and (26) shall be punished by imprisonment for a term not exceeding three months and a fine not exceeding five hundred Kuwaiti dinars, or by either of these two penalties, and the offender may in all cases be sentenced to dismissal from office.
The violator shall bear liability for all damages incurred by the company, the shareholders or third parties as a result of the violation.

Chapter Six – Final Provisions

Article 28

The companies incorporated in accordance with the provisions of this Law shall operate in accordance with the provisions of Islamic Sharia.

Article 29

The financial appropriations necessary to meet the expenses of the Council and of the Technical Bureau assisting it shall be included in the budget of the Council of Ministers.

Article 30

The first Board of Directors of the company incorporated pursuant to Article (12) of this Law shall be exempted from the condition of the percentage specified for the number of shares that a member of the Board of Directors is required to own in accordance with the provisions of Law No. 15 of 1960 referred to above.

Article 31

The provisions of Law No. 15 of 1960 and Law No. 7 of 2008 referred to above shall apply to all matters for which no provision is made in this Law, insofar as they do not conflict with its provisions.

Article 32

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

Issued on 30 May 2010 and published in the Official Gazette Kuwait Al-Youm on 13 June 2010.