"Hidden Business" Under the Microscope: Commercial Concealment Redraws the Competitive Landscape

Tariq Araymi

As the commercial concealment law approaches its enforcement in February next year, the Kuwaiti market is preparing for a new phase in confronting the phenomenon of “Tadmeen,” which has come under intense public and regulatory scrutiny. This practice represents one of the most prominent forms of unfair competition facing business owners, particularly Kuwaiti youth striving to establish their own enterprises and enter new economic sectors.

After years of debate regarding the exploitation of commercial licenses to conduct economic activities under the names of other individuals, Decree-Law No. 78 of 2026 on Combating Commercial Concealment, issued on August 2 last year, aims to put an end to these practices through stringent penalties. These measures are designed to protect the market and recalibrate competition rules, thereby granting entrepreneurs fairer opportunities to establish viable, sustainable businesses.

Publicly, the most prominent aspect of commercial concealment in Kuwait is the process of “Tadmeen.” In its common form, this involves renting out commercial licenses to residents who then manage the activity and reap its actual profits, while the license remains registered under another person’s name. This practice poses a significant challenge to Kuwaiti entrepreneurs who bear the costs of establishing their businesses and meet operational and regulatory obligations, while potentially facing competition from establishments operating under unequal conditions.

The impact of Tadmeen becomes even more apparent as Kuwaiti youth enter the business world. Business owners incur costs for rent, salaries, equipment, and government fees, alongside compliance with legal and regulatory requirements. Meanwhile, other establishments may conduct actual business operations through unauthorized individuals under the guise of commercial licenses issued in the names of others.

Such practices may grant certain establishments illegal operational advantages or allow them to evade statutory obligations, thereby weakening the competitiveness of compliant businesses. This is particularly evident in activities reliant on pricing and limited profit margins, such as retail trade, contracting, services, car maintenance, and craft activities, which are characterized by a high number of establishments and intense competition for customers.

Therefore, combating commercial concealment is not limited to punishing offenders; it aims to address a distortion affecting the business environment. The goal is to ensure competition is based on product and service quality, management efficiency, and development capacity, rather than on exploiting illegal commercial arrangements.

The law prohibits any person from conducting an economic activity they are not legally permitted to practice, whether by using a trade name, license, commercial register, or any other means that circumvent regulations governing business operations. This includes respecting the legal ownership limits for foreigners, which must not exceed 49% under any circumstances.

In its efforts to curb this phenomenon, the Ministry of Commerce and Industry has enacted a specific law on “Commercial Concealment.” Penalties under this law include imprisonment for a term not less than one year and not exceeding three years, and/or a fine not less than 10,000 Kuwaiti dinars and not exceeding 100,000 Kuwaiti dinars, or an amount equivalent to the profits obtained, whichever is greater. Alternatively, one of these two penalties may be applied. Fines are multiplied based on the number of individuals or activities involved.

Additional penalties include the confiscation of funds, profits derived from the crime, and the tools and means used to commit it, as well as the permanent closure of the establishment and cancellation of its license. Furthermore, offending foreigners are subject to deportation after the execution of the penalty. The penalty is doubled in case of recidivism within five years of the final judgment.

The legislation did not limit itself to penalties but extended to enhancing oversight by granting specialized employees the status of judicial police officers.

Holding the person who effectively manages a legal entity accountable, provided the conditions for legal liability are met, alongside granting whistleblowers who are not perpetrators a reward of up to 10% of the collected fines, in accordance with established regulations, including the submission of evidence and the issuance of a final conviction judgment.