Kuwait Bankruptcy Law: Latest Developments and Amendments Report.

Kuwait has taken significant strides in modernising its commercial legal framework. With the enactment of Law No. 71 of 2020 and the important 2025 amendments, the country has reshaped its approach to insolvency and business recovery.

This shift replaces the outdated, punitive system with a rehabilitation-focused framework that emphasises restructuring, preventive settlements, and preserving the value of viable businesses. It represents one of the most ambitious legal modernisation efforts in the region.

Key Features of the Law

• Specialised Bankruptcy Court: Exclusive jurisdiction to handle insolvency cases with speed and expertise.

• Preventive Settlements: Mechanisms that allow distressed businesses to restructure early, protecting creditors and employees while ensuring continuity.

• Inclusive Scope: Applies to traders (both individuals engaged in commerce and companies), Kuwaiti companies, and branches of foreign companies, while excluding joint ventures and collective investment schemes.

• Supervisory Coordination: Oversight by the Central Bank of Kuwait and the Capital Markets Authority, ensuring alignment for financial institutions and listed companies.

The 2025 Amendments

A major change came with the reintroduction of debt imprisonment for solvent debtors who deliberately refuse to pay final judgments. Key safeguards include:

• Maximum detention of six months.

• Application only when clear evidence shows ability to pay but deliberate refusal.

At the same time, enforcement was strengthened with asset-tracing tools and broader creditor rights. These measures aim to reduce bad debts and align with Kuwait’s Vision 2035 by improving commercial trust and creditor confidence.

Impact on Stakeholders

• Debtors: Genuine business failures are no longer criminalised, with opportunities for restructuring and recovery. However, solvent debtors now face stricter enforcement obligations.

• Creditors: Enhanced rights and tools to secure repayment, plus participation in restructuring committees.

• Employees: Protection of wages and employment is a core priority during restructuring.

• Investors: A predictable, transparent framework boosts investor confidence and positions Kuwait as a modern, business-friendly jurisdiction.

Outlook

Challenges remain, including building judicial capacity and addressing international scrutiny over debt imprisonment. Yet, the reforms clearly demonstrate Kuwait’s commitment to balancing creditor protection with debtor rehabilitation, a balance that underpins economic stability, entrepreneurship, and long-term growth.

📎 For more details, the full report “Kuwait Bankruptcy Law: Latest Developments and Amendments” is attached.

Kuwait-Bankruptcy-Law-Latest-Developments-and-Amendments-Report.pdf

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