Mr. Nayef Ma’ashi Al-Mutairi
Member of the Kuwait Bar Association

Abstract:

This research deals with large companies’ acquisition of other companies as a legal phenomenon that is resorted to by these companies to achieve economic gains and enhance their competitive capabilities in the local and international markets, in addition to the actual control of the management of the target companies by the acquiring company, and thus controlling the decisions issued by it, with the consequences that this acquisition has on the rights of shareholders, especially small ones. For this reason, the legislators in the State of Kuwait paid special attention to protecting the rights of shareholders through the provisions of the Companies Law No. 1 of 2016, and Law 7 of 2010 and its amendments in 2015, as well as the regulatory rules issued by the Capital Markets Authority in this regard. The importance of the research lies in clarifying the legal provisions regulating the phenomenon of acquisition, which is becoming increasingly prevalent in light of the growth of multinational economic and commercial blocs that are looking for opportunities in all parts of the world, and the resulting problems faced by developing economies in light of the lack of competitiveness, a matter that the State of Kuwait has not been free from.
Both descriptive /analytical and comparative approaches were adopted in order to shed light on this phenomenon in its various dimensions. This was done by comparing a set of legislations that dealt with acquisition from various aspects, through two topics: the first focused on defining the nature of acquisition, and the second dealt with the impact of acquisition on targeted companies. The research concluded with a set of results, the most important of which are: that acquisitions are a natural and positive development resulting from globalization, openness of markets and freedom of trade; and that the success of any investment depends on achieving competition opportunities, and on the existence of a valid legal environment governing the acquisition process.
The research also concluded that acquisitions are often made without the consent or approval of the management of the acquired company. As for the mergers, they are usually done by agreement between the departments of each of the merging and merged companies and with the approval of the general assembly in each of them, given that the merger represents a common interest for both parties. The research recommended that the legislators and regulators in the State of Kuwait stress the necessity of restricting acquisitions by foreign investors, activate the principle of transparency and disclosure, and then control acquisitions, with the need to maintain a balance between the interests of the acquisition parties by interfering in the decision of the target company’s board of directors, either by approval or rejection. The research also recommends the regulatory authority, which is the Capital Markets Authority, should stress the necessity of applying deterrent penalties in the event of exploiting information affecting the enforcement of the acquisition process.

Keywords: shareholders’ rights, transparency, disclosure, freedom of trade, competition, governance.

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