May 8th, 2022 Legal Updates

New CMA Rules on De-Merger of Companies

The Kuwait Capital Markets Authority (“CMA”) is an independent regulatory body established with the passing of Law No. 7 of 2010, and is tasked with overseeing and regulating companies that are either listed on the Boursa (Kuwait Stock Exchange) or that practice certain regulated activities, such as the marketing, sale, offering or listing of securities and/or ancillary services. The CMA has always been one of the most appreciated bodies in Kuwait given their efficiency in providing updates to their bylaws and being accessible to all those interested.

In furtherance of the authority’s mission to be a leader among sister capital market regulators in jurisdictions across the GCC and to modernize corporate activities, and considering the changes brought by the COVID-19 pandemic, the CMA released a new set of rules governing the division of companies (“De-Mergers”) late last year. The Kuwait Ministry of Commerce & Industry has historically had a space for regulating De-Mergers, but the vagueness of the rules has generally pushed companies away from attempting a legal de-merger; in fact, Kuwait has yet to experience the formal division of a Kuwaiti company. As a result, we have traditionally structured these transactions as asset purchase arrangements where the group will transfer the business it wants to split to a newly created group entity to achieve the same result. However, this is not efficient as the group then needs to secure third-party approvals for the transfer of leases, contracts and employees. Plus, the time needed to effectuate these third-party approvals could take months, if ever, as the other parties will leverage demands to accept the transfer of the relevant contract.

To remedy this legal inefficiency in the market, the CMA seeks to provide Kuwaiti companies governed by the same with proper tools by the inclusion of a chapter on the division of companies with the expansion of Chapter 5 of Module 9 of the CMA Bylaws. The new rules permit companies who wish to divide, or demerge, to apply to the CMA requesting the same, and to submit a draft division contract detailing the terms of the transaction for the CMA’s approval. The rules also require certain announcements by the applying company throughout various stages of the division.

The local change to the CMA rules will have a global impact on investors considering Kuwait companies as their next opportunity and expands the options available to a company to fit its circumstances.

GLA & Co’s lawyers and legal consultants are experts in structuring and restructuring entities with interests across the GCC, whether in single or several jurisdictions. Many of our Kuwaiti lawyers in particular enjoy distinguished relationships with the local authorities, which has always helped support a smooth transactions for our clients.

Author:  Ahmad Saleh, Senior Associate, GLA & Company

For further information, please contact Alex Saleh ( or Ahmad Saleh (