What is the Kuwait Commercial Agency Agreement and what to pay attention at?
Updated: Mar 15
Establishment of a 100% foreign-owned company in Kuwait is time-consuming, expensive, and requires registration and licensing before a company is able to operate. A more simple, more cost-effective way of doing business is through a Commercial Agency Agreement.
Our law firm can assist you in:
1. Performing due diligence on the potential partner;
2. Drafting and negotiating the terms of the Agency Agreement;
3. Registering the Agency Agreement with the Ministry of Commerce and Industry in Kuwait
What is the Kuwait commercial agency agreement?
The Agency Agreement is a partnership between a Kuwaiti national and a Foreigner.
The Kuwaiti national (agent, sponsor, distributor, whatever the case might be) agrees to represent, promote and sell goods or services in Kuwait on behalf of the foreigner or her/his
Company in return for a fee or commission.
The commercial agency agreement allows foreigners to conduct business in Kuwait through the agent without the need to set-up a legal entity or securing a license. The agent and the agency agreement must be registered with the Ministry of Commerce in Kuwait and all contracts and invoices must contain the agent’s name, address, commercial agency agreement registration number.
Once the agent is registered with the Kuwait Ministry of Commerce, the agent will be responsible for representing the interests of the foreign company in Kuwait.
The major advantage of registering and setting a commercial agency agreement is that the foreign company does not need to setup the actual business/office in Kuwait. If the agent is a reliable, knowledgeable agent after a necessary training, it is a win-win situation for both parties involved. Since Arabic language is a must when dealing with the government authorities, your agent will be quite a valuable asset when handing “situations” locally.
The major disadvantage is that the violation of the local laws and regulations will lead to penalties, which could result in prohibition of business in Kuwait, ban on the commercial agency’s activities, deportation of the foreign staff employed (if there were any). The reputation of the foreign company may suffer as a result of the above-mentioned.
2 major tips to avoid the above-mentioned:
- Choose your partner wisely. Due diligence is a must (obtain potential agent's copies of the documents, reference letters, contact the reference letter providers, conduct interviews, etc).
- Have a quality Commercial agency contract. Include the provisions such as:
a. The agent will not interfere with the business’s management;
b. The agent will be paid a lump sum and/or a percentage of profits or turnover. Be as precise as possible!
c. The agency agreement is for a fixed term and expires on a specific agreed date, unless both parties agree to renew;
d. Select binding arbitration as the method of dispute resolution with the arbitration centers in Europe or North America
Please contact our offices if you need to register a Commercial Agency in Kuwait for assistance.