"Freelance Work" for Government Employees: Under Review
- The proposal stipulates appointing a Kuwaiti manager for micro-business activities from outside the ownership structure.
- Adding other activities to the license holder if they are listed in the Ministry’s business directory.
- Broad understanding of business environment development needs in line with the requirements of “Kuwait Vision 2035.”
- Expanding the scope of individual business owners’ participation in the list of beneficial owners.
- Linking the issuance of “specialized business” licenses to a university or specialized degree, along with consultants.
Officials at the Ministry of Commerce and Industry are studying a package of structural and regulatory improvements to the licensing controls for free business activities. This initiative is part of the ministry’s plans to develop and activate commercial licensing mechanisms in the local market, serving investors’ aspirations and reducing the risks of business owners registering their activities under the names of non-real beneficial owners for legal reasons.
Free business activities refer to micro-businesses and special-nature activities conducted by their owners without the need for a commercial premises. These include 120 activities, which by inference encompass various consulting services, software design and programming, website design, fashion and apparel design, jewelry design, event photography, beekeeping, and other free business activities. The company applying for the license must take the form of a single-person commercial entity.
The scope of the proposed amendments includes restructuring the ownership and beneficial owner framework by allowing government employees to own “free business” licenses. This represents a fundamental change to the current status, which does not permit government employees to own “free business” licenses. Furthermore, no additional economic activity may be conducted unless the person holds a license for it.
These amendments align with the commercial licensing regulations issued for single-person companies, which are one of the seven legal entities stipulated in the Companies Law. In such entities, a government employee may own 100% if they have a commercial headquarters, whether an office or a shop, provided they appoint a retired Kuwaiti manager or one from the private sector.
If the proposed amendments to the commercial licensing framework are approved, Kuwaiti government employees will be allowed to own “free business” entities that do not have a commercial headquarters, whether an office or a shop. This is in addition to other ownership cases that include retirees and private sector employees, who must appoint a Kuwaiti manager. This contrasts with the current situation, which requires a Kuwaiti to own 100% and manage it, provided the owner does not hold a government position.
Furthermore, the proposed amendments encourage owners to appoint a manager for the entity from outside the ownership structure, providing an additional facilitation compared to current regulations that require the founder to be the manager themselves—a natural person holding Kuwaiti nationality, possessing full legal capacity, and over 21 years of age, or having prior permission to conduct business. This consideration takes into account that the issuance of “single-person” licenses remains restricted to citizens only.
In addition, the proposed facilitations to develop the local business environment include linking the permission to issue “specialized free business” licenses to a university or specialized degree held by the license holder, proving their expertise in the sector through which they intend to provide specialized services to clients. This includes providing various types of consulting services.
The license holder is permitted to add other activities if the added activity is listed in the appendix to the decision, and if the added activity or activities are complementary, similar, necessary, or related to the granted license.
The proposed improvements aim to enhance transparency levels and improve Kuwait’s business environment, thereby boosting the efficiency of the local market through facilitations that meet current needs. This involves ensuring that all business owners, from individual entrepreneurs to institutional entities, are included in the ownership list of the commercial register, eliminating the need to conceal ownership or control of entities through methods that expose them to legal liability, in accordance with the recently enacted provisions of the new “Commercial Concealment” law.
In this regard, allowing government employees to hold “free trade” licenses constitutes a significant support for the efforts of the Ministry of Commerce and relevant authorities to strengthen compliance with the latest methods for identifying beneficial owners, as recommended by the Financial Action Task Force (FATF), to prevent the misuse of legal arrangements by legal persons through the concealment of ownership and control rights.
In practice, the new amendments under consideration for regulating “free trade” licenses are expected to help resolve a large portion of the challenges associated with “commercial concealment.” These amendments will enable a significant segment of “free trade” license holders to abandon the need to conceal their business activities behind licenses held in the names of relatives, such as parents or spouses, or other nominal beneficiaries, a practice previously necessitated by the prohibition on government employees owning “free trade” licenses.
Regarding the commercial facilitations under review by the Ministry of Commerce, their approval reflects a practical understanding of the needs for developing the local business environment, aligning with the objectives of Kuwait Vision to support entrepreneurship. These measures lay the foundation for a new phase of economic growth based on transparency and empowering citizens to engage in free trade activities within a regulated legal framework, without the need for commercial concealment behind nominal fronts.
A recent statistical report from the Ministry of Commerce and Industry on valid commercial licenses, classified by the legal entity type of the establishment, revealed that the total number of active commercial licenses reached 139,776. The statistics showed that limited liability companies (LLCs) hold the largest share of active licenses, with 65,980 licenses, accounting for approximately 47% of the total. Single-owner companies ranked second with 43,105 licenses, representing about 31% of the total, while sole proprietorships ranked third with 21,045 licenses, accounting for approximately 15%.
