Addition debts:
Debt. Image Credit: For illustrative purposes only

Abu Dhabi: The executive regulations of the Bankruptcy Law approved by Kuwait's National Assembly a year ago were enforced as of Saturday, meaning 80,000 debtors breathed a sigh of relief as no more arrest warrants will be issued against them, local media reported.

The new law abolished Article 292 of the Procedure Code and does not treat failure to pay debt as a criminal offence, unless it is fraudulent. It also allows bankruptcy to be avoided either by a settlement with creditors or a restructuring plan to increase protection for troubled businesses and provides two new options to affected entities before they are forced to declare bankruptcy.

Scope of application

With the exception of joint venture companies and collective investment schemes, the Bankruptcy Law specifies the persons to whom the provisions of the law apply (which includes every natural person, trader, Kuwaiti companies and branches of foreign companies).

The Bankruptcy Law gives the Central Bank of Kuwait and the Capital Markets Authority the right to set out rules governing preventive settlement procedures, restructuring and bankruptcy for stock exchanges, clearing agencies, central depository entities, central brokers, banks and insurance companies, in a manner that may deviate from the Law and in accordance with the requirements of the nature of these entities.

It provides for a committee to be formed to oversee the management of restructuring procedures to facilitate consensual restructuring arrangements between debtor and creditors, with the help of one or more Committee-appointed experts. The Committee will also maintain a register of insolvencies, authorise expert fees and maintain an approved list of insolvency experts whose role is to assist the courts in assessing the grounds for, and implementing of, the chosen insolvency procedure.

Specialised bankruptcy court

For first time in Kuwait, a new specialised bankruptcy court has been established and the law provides that the judgments issued by it shall be enforceable without declaration. It is not permissible to dispute the judgments, or suspend their implementation except in accordance with a ruling issued by the Court of Appeal.

Preventive settlement

The Bankruptcy Law adopted the preventive settlement option to avoid insolvency by a debtor company to allow the discharge of debtor company’s debts through an arrangement with the creditors called preventive settlement. The bankruptcy court may order the termination of the preventive settlement procedures in the event of the conditions mentioned in the Law being realised.

The preventive settlement proposal approved by the bankruptcy judge shall be enforceable against all creditors, including those who rejected the proposal.


The Bankruptcy Law increases the debtor’s penalty from three years to five years and the fine from 30,000 ($98,000) to 100,000 Kuwait Dinars ($327,000) or one of these two penalties in the event of concealing the books or misappropriating part of the company’s money.

The chairman and members of the board of directors, the auditors of its accounts, and those in charge of liquidating shall be punished with imprisonment for a period not exceeding five years - and a fine not exceeding 100,000 Kuwaiti Dinars or either of these two penalties - if after the issuance of a final decision to open bankruptcy procedures, they concealed the company’s books or embezzled any of the bankrupt company’s money.