08-06-2026
Amendment to Article 116 of the Kuwaiti Companies Law: Enhancing Decision-Making Flexibility
On 20th October 2024, Kuwait introduced a significant amendment to Article 116 of Law No. 1 of 2016 governing companies. This change was made to address practical challenges faced by companies, especially those with limited liability structures, in convening and making decisions in extraordinary general assemblies. The previous version of Article 116 required a high threshold of attendance and voting power, which often delayed or completely halted essential decision-making processes. The new amendment aims to enhance operational flexibility, empowering companies to proceed with their affairs in a more streamlined and efficient manner. The Old Text: A Barrier to Timely Decisions Under the old provisions of Article 116, for an extraordinary general assembly to be valid, a quorum of partners holding at least three-quarters of the company's capital had to be present. Furthermore, decisions could only be passed with the approval of partners owning three-quarters of the capital. This high threshold created significant hurdles for many companies. In cases where partners were unable to meet this requirement, companies found themselves unable to convene meetings or pass crucial resolutions. As a result, business operations were disrupted, and critical decisions were left in limbo. The New Text: Introducing Flexibility The new amendment to Article 116 provides a more flexible framework for convening extraordinary general assemblies and making decisions. The updated provision still requires a quorum of partners holding three-quarters of the capital for the first meeting. However, if this quorum is not met, a second meeting can now be convened, with the requirement reduced to attendance by partners representing more than half of the company's capital. Importantly, decisions at either meeting can now be made with the approval of a majority holding more than half of the total company capital, rather than three-quarters as previously required. Moreover, the amendment grants the Ministry of Commerce and Industry the authority to call for an extraordinary general assembly meeting if the company's management refuses to do so. This action can be initiated at the request of partners holding at least half of the company's capital, providing a safeguard against managerial inaction or obstruction. Why Was This Amendment Necessary? The amendment reflects a response to real-world challenges that companies in Kuwait have faced. Under the old version of Article 116, it became clear that achieving the three-quarters quorum was not always feasible, particularly in companies where partners were spread across various regions or when differences among partners led to boycotts of meetings. This high threshold often paralyzed the decision-making process, preventing companies from moving forward with key initiatives or responding to pressing business needs. The new provisions align more closely with the rules for joint-stock companies, where similar flexibility in meeting quorums and decision-making thresholds has already proven effective. By lowering the quorum for the second meeting and reducing the majority required for decisions, the amendment ensures that companies can proceed with vital decisions without being held hostage to unattainable attendance requirements. Implications for Stakeholders For companies and their partners, this amendment represents a much-needed improvement in corporate governance. It ensures that important decisions can be made in a timely manner, even if a full quorum is not initially met. This is particularly beneficial for companies with dispersed or absentee partners, as the reduced quorum for the second meeting allows business to proceed without excessive delay. Furthermore, the Ministry of Commerce and Industry’s ability to intervene when management refuses to call a meeting empowers partners who hold a significant portion of the capital but may otherwise be sidelined by managerial decisions. This creates a more balanced dynamic within companies, ensuring that all voices, especially those representing a substantial share of the company’s capital, are heard.
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