Law No. 59 of 1982 on Transactions in Company Shares Concluded on a Deferred Basis and Guaranteeing the Related Creditors’ Rights

Law No. 59 of 1982
on Transactions in Company Shares Concluded on a Deferred Basis and Guaranteeing the Related Creditors’ Rights

Article 1

An Arbitration Panel composed of five members and chaired by a member of the judiciary shall be formed by a resolution of the Council of Ministers. It shall have exclusive jurisdiction to decide disputes relating to the transactions registered in accordance with the provisions of Decree-Law No. 57 of 1982 and the claims arising therefrom.
The Panel may order the necessary precautionary measures, including a prohibition on disposing of the assets held in the name of the debtor or devolving to him, or which he is proven to have smuggled, disposed of fictitiously or assigned to third parties to the detriment of his creditors, in whosesoever hands they may be found, as well as a travel ban. It may also seek the assistance of whomever it deems fit to assist it in performing its task.

* The competences of the Arbitration Panel were transferred to a circuit of the Court of First Instance composed of three judges, and the phrase “the competent circuit” replaced the phrase “the Arbitration Panel” or “the Panel”, and the phrase “the Office for the Liquidation of Deferred Share Transactions” replaced the phrase “the Corporation for the Settlement of Transactions in Company Shares Concluded on a Deferred Basis”, wherever they appear in this Law, pursuant to Articles 1 and 16 of Decree-Law No. 42 of 1988 (Kuwait Al-Youm, Issue No. 1782), effective as of 27 November 1988.

Article 2

The Arbitration Panel shall decide the disputes referred to it without being bound by the procedures prescribed in the Civil and Commercial Procedures Law, and shall rule on the settlement of the rights of the parties in accordance with prevailing commercial custom and the requirements of good faith in transactions, having regard to the preservation of the national economy, and without any reduction in the value of the debt unless such reduction has been agreed by the parties. It may also determine the method of payment, including payment of the amounts due in instalments, and may rule that transactions are void for simulation or for other reasons. It may also rule on the rescission of the contract and the restoration of the parties to their former position.
With respect to post-dated cheques that are proven to have been issued for a higher value in exchange for cheques payable on demand and that do not involve a transaction of any kind, the Panel shall refer them to the competent court to award fair compensation in respect thereof.
Until the Panel decides the disputes referred to it, all civil, commercial and criminal judicial proceedings relating to the transactions subject of such disputes and the means of their payment shall be stayed, including bankruptcy declaration proceedings.
The Panel’s judgment in all of the foregoing shall be final and shall be enforced in accordance with the rules provided for in the Civil and Commercial Procedures Law.
In the event of non-enforcement of the judgment or non-payment of the amount awarded, the investigating authorities and the persons concerned may take criminal, civil and commercial proceedings, including the declaration of bankruptcy and its consequences.

* “Including the declaration of bankruptcy” was corrected from a misprint by the corrigendum published in Kuwait Al-Youm (Issue No. 1448, 12 December 1982).
* Disputes shall be brought before the competent circuit in accordance with the ordinary rules and procedures of litigation, and its judgments shall be final, pursuant to Article 2 of Decree-Law No. 42 of 1988 (Kuwait Al-Youm, Issue No. 1782), effective as of 27 November 1988.

Article 2 bis

Debts arising from transactions in company shares concluded on a deferred basis and registered in accordance with the provisions of Decree-Law No. (57) of 1982 referred to above shall fall due at the end of December 1983 if they have not fallen due by that date. Such debts shall be settled on the basis of the spot price on the day of contracting plus a percentage of profit representing the difference between the agreed forward purchase price and the spot price, in proportion to the period elapsed until the date on which such debts fall due.
Set-off shall take place between the rights and the obligations of the parties to such transactions arising therefrom and registered in accordance with the provisions of Decree-Law No. (57) of 1982 referred to above, even if one or both parties are bankrupt, taking into account the reduction of debts by the percentage of the deficit expected in the assets of the debtors as estimated by the Corporation for the Settlement of Transactions in Company Shares Concluded on a Deferred Basis.
The debtor may defer payment of the debt to a date not exceeding one year from its due date, provided that he pays at least half of the debt within six months.
In the event of non-payment on the due date of such debts, delay compensation shall be calculated on the amounts not paid, and the rate of such compensation shall be determined by a resolution of the Council of Ministers.

* Added by Article 17 of Law No. 75 of 1983 (Kuwait Al-Youm, Issue No. 1473, 24 April 1983).
* “The Office for the Liquidation of Deferred Share Transactions” replaced “the Corporation for the Settlement of Transactions in Company Shares Concluded on a Deferred Basis” in this Article pursuant to Article 16 of Decree-Law No. 42 of 1988 (Kuwait Al-Youm, Issue No. 1782), effective as of 27 November 1988. See the footnote to Article 1.
* These debts fall due as of the date Law No. 100 of 1983 comes into force instead of the end of December 1983, provided that the profit percentage does not exceed 25% per annum of the spot price, without prejudice to the third paragraph of this Article, pursuant to Article 1 of Law No. 100 of 1983 (Kuwait Al-Youm, Issue No. 1492).

Article 3

Repealed.

* Repealed by Article 20 of Law No. 75 of 1983 (Kuwait Al-Youm, Issue No. 1473, 24 April 1983).

Article 4

If it is established to the Public Prosecution – upon the request of the Office for the Liquidation of Deferred Share Transactions – that the debtor referred to the Office has concealed any of his assets or transferred them abroad, it shall instruct him to return such assets within a period it sets for him. If that period lapses without their return, it shall refer him to trial.
Without prejudice to any more severe penalty provided for by another law, a debtor who has concealed any of his assets or transferred them abroad shall be punished by imprisonment for a term not exceeding five years, and he shall also be banned from leaving the country after serving the term of the penalty for a further period of five years.
The debtor shall be exempted from this ban if he proves that he has paid the rights of all creditors. The debtor shall be punished by imprisonment for a term not exceeding five years if he absconds during the period set for him by the Public Prosecution to return the assets or during the period of his travel ban.

* Replaced by Article 11 of Decree-Law No. 42 of 1988 (Kuwait Al-Youm, Issue No. 1782), effective as of 27 November 1988.

Article 5

The provision of Clause (4) of Article (533) of the Commercial Law shall apply to cheques registered in accordance with the provisions of Decree-Law No. 57 of 1982, and their registration shall be deemed equivalent to their presentation for payment.

Article 6

Repealed.

* Repealed by Article 18 of Decree-Law No. 42 of 1988 (Kuwait Al-Youm, Issue No. 1782), effective as of 27 November 1988.

Article 7

The parties to the transactions provided for in this Law may make amicable settlements between themselves, provided that this does not prejudice the rights of third parties, and provided that they notify the Arbitration Panel thereof for the ratification and enforcement of the settlement.

* “The competent circuit” replaced “the Arbitration Panel” or “the Panel” in this Article pursuant to Article 16 of Decree-Law No. 42 of 1988 (Kuwait Al-Youm, Issue No. 1782), effective as of 27 November 1988. See the footnote to Article 1.

Article 8

A fund to guarantee creditors’ rights relating to transactions in company shares concluded on a deferred basis shall be established at the Ministry of Finance, with a capital of five hundred million Kuwaiti dinars to be drawn from the State General Reserve.
The Fund shall collect a percentage of 1% of the value of each transaction registered in accordance with Decree-Law No. 57 of 1982 referred to above, and the proceeds of this percentage shall devolve to the State General Reserve. The Minister of Finance shall lay down the rules and conditions necessary for collecting these amounts.

* The capital of the Fund was increased by an amount of KD 670,000,000, to be covered from the State General Reserve after deducting the return on investment of the Fund’s assets, and the proceeds of the prescribed percentage and the Fund’s revenues from its dues from the Corporation for the Settlement of Transactions in Company Shares Concluded on a Deferred Basis shall devolve to the State General Reserve, pursuant to Article 14 of Decree-Law No. 42 of 1988 (Kuwait Al-Youm, Issue No. 1782), effective as of 27 November 1988.

Article 9

The purpose of the Fund is to guarantee the rights of creditors arising from transactions in company shares concluded on a deferred basis and registered in accordance with the provisions of Decree-Law No. 57 of 1982 referred to above.
No claim relating to transactions not registered within the time limit specified in the said Decree-Law shall be taken into account for the purposes of this guarantee.
Nor shall any action, claim or complaint be admitted before the judicial, arbitral, investigating or other authorities in respect of the transactions provided for in the preceding paragraph before the lapse of two years from the date this Law comes into force, except in the case of minors, who may bring their claims before the Arbitration Panel.

* “The competent circuit” replaced “the Arbitration Panel” or “the Panel” in this Article pursuant to Article 16 of Decree-Law No. 42 of 1988 (Kuwait Al-Youm, Issue No. 1782), effective as of 27 November 1988. See the footnote to Article 1.

Article 10

The Fund shall undertake:
a- Payment of the debts arising from the transactions referred to in the first paragraph of the preceding Article, after the issuance of a judgment obliging the debtor to pay the debt and the issuance of a decision by the Arbitration Panel provided for in Article (1) of this Law referring the debtor to the Public Prosecution to take bankruptcy proceedings against him in accordance with Article (3) of this Law.
b- Investment of the funds in its possession in the manner it deems appropriate to grow them.
c- Taking all legal proceedings against the debtors to recover what it has paid on their behalf to their creditors.
d- Returning the surplus to the State General Reserve.

* The condition of the issuance of a decision by the Arbitration Panel referring the debtor to the Public Prosecution to take bankruptcy proceedings against him was replaced by the condition of referring the debtor to the Debt Settlement Corporation in accordance with Article (4) of Law No. 75 of 1983, pursuant to Article 19 of Law No. 75 of 1983 (Kuwait Al-Youm, Issue No. 1473, 24 April 1983).
* “The competent circuit” replaced “the Arbitration Panel” or “the Panel” in this Article pursuant to Article 16 of Decree-Law No. 42 of 1988 (Kuwait Al-Youm, Issue No. 1782), effective as of 27 November 1988. See the footnote to Article 1.

Article 11

Payment of the aforementioned debts shall be made either in cash or by bonds issued by the Fund and maturing on specified dates, in accordance with the rules and conditions issued by a resolution of the Council of Ministers.
The Fund shall pay the amounts due to the creditors, each according to his category, after the Arbitration Panel issues its judgment obliging the debtor to pay the debt and decides to refer him to the Public Prosecution to take proceedings for the declaration of his bankruptcy.
If the date written on the cheque is later than 20/9/1982, the value of the cheque shall be reduced, vis-à-vis the Fund, to the spot price on the day of contracting plus a percentage of profit representing the difference between the forward purchase price and the spot price in proportion to the period elapsed until 20/9/1982.

* The first paragraph was corrected by the corrigendum published in Kuwait Al-Youm (Issue No. 1448, 12 December 1982).
* The condition of referring the debtor to the Public Prosecution to take proceedings for the declaration of his bankruptcy was replaced by the condition of referring the debtor to the Debt Settlement Corporation in accordance with Article (4) of Law No. 75 of 1983, pursuant to Article 19 of Law No. 75 of 1983 (Kuwait Al-Youm, Issue No. 1473, 24 April 1983).
* “The competent circuit” replaced “the Arbitration Panel” or “the Panel” in this Article pursuant to Article 16 of Decree-Law No. 42 of 1988 (Kuwait Al-Youm, Issue No. 1782), effective as of 27 November 1988. See the footnote to Article 1.

Article 12

Subject to the provisions of the first paragraph of the preceding Article, the rights of the creditor against his debtor shall pass by operation of law to the Fund, which shall be subrogated to him therein to the extent of what it has paid, whether in cash or in bonds, plus what the creditor has finally waived in favour of the Fund, as of the date of payment.

* The Corporation for the Settlement of Transactions in Company Shares Concluded on a Deferred Basis shall act as the statutory representative of the Fund in claiming the rights to which it has been subrogated under this Article, pursuant to Article 18 of Law No. 75 of 1983 (Kuwait Al-Youm, Issue No. 1473, 24 April 1983).
* The Fund shall recover what it has paid to the creditor before any other dues remaining to that creditor against his debtor by reason of these transactions, pursuant to Article 4 of Law No. 100 of 1983 (Kuwait Al-Youm, Issue No. 1492).

Article 13

The Fund shall keep a special account recording all the operations it carries out and showing its assets and liabilities in detail.

Article 14

The Minister of Justice and Legal and Administrative Affairs shall issue a decision regulating the work of the Arbitration Panel provided for in this Law and the procedures it follows.

* “The competent circuit” replaced “the Arbitration Panel” or “the Panel” in this Article pursuant to Article 16 of Decree-Law No. 42 of 1988 (Kuwait Al-Youm, Issue No. 1782), effective as of 27 November 1988. See the footnote to Article 1.

Article 15

The Minister of Finance shall issue a decision regulating the work of the Fund and the manner of its management, and a sufficient number of employees shall be assigned to it.

Article 16

Within thirty days from the date this Law comes into force, the Government shall submit to the National Assembly a comprehensive statement of all the cases registered within the time limit and referred to the Arbitration Panel.
It shall also submit to the Assembly every three months a detailed report on the results of the Panel’s work, and a final report on everything it has done after the Panel completes its task.

* “The competent circuit” replaced “the Arbitration Panel” or “the Panel” in this Article pursuant to Article 16 of Decree-Law No. 42 of 1988 (Kuwait Al-Youm, Issue No. 1782), effective as of 27 November 1988. See the footnote to Article 1.

Article 17

Any provision that conflicts with the provisions of this Law is hereby repealed.

Article 18

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.