Kuwait’s new law tightens grip on hidden businesses

Kuwait has introduced Decree-Law No. 78 of 2026, a significant piece of legislation aimed at combating commercial concealment and regulating economic activities. This new law establishes a comprehensive legal framework designed to enhance market transparency, curb illegal business practices, and strengthen the state's oversight and revenue collection capabilities.

The explanatory memorandum highlights that the legislation addresses the growing issue of individuals conducting economic activities without proper authorization, which has destabilized the market and undermined fair competition. The decree-law explicitly prohibits any person or entity from operating without the necessary licenses or exceeding their granted scope. It also criminalizes commercial concealment by preventing individuals from enabling others to operate under false pretenses, such as using fraudulent licenses or commercial names.

Penalties under the new law are stringent, ranging from one to three years of imprisonment and fines between KD 10,000 and KD 100,000, or an amount equivalent to the total profits generated from the violation, whichever is greater. Courts can impose either imprisonment or fines, with penalties escalating based on the number of offenders or violations. Additionally, those who obstruct enforcement officials or violate inspection provisions face up to six months in prison and fines up to KD 10,000.

Managers are held responsible for violations under their supervision if they were aware of or failed to prevent them, and legal entities are jointly liable for offenses committed in their name or for their benefit. Courts are mandated to confiscate proceeds and assets from commercial concealment offenses. Violating establishments face closure, license revocation, and foreign offenders may be deported, while the rights of bona fide third parties are protected.

The legislation also includes provisions for increased penalties for repeat offenders within five years of a final conviction. A reconciliation mechanism is available, allowing offenders to settle violations before or during court proceedings by paying at least half the maximum fine, provided the violation is remedied. This option is not available to repeat offenders. Furthermore, a financial reward system is established for individuals who report commercial concealment offenses, offering informants up to 10 percent of collected fines.