Protection of Minority Shareholders in the Event of a Company Acquisition: Study in Kuwaiti Law
Dr. Ayedh Rashid Al-Marri
Associate Professor of Commercial Law – Law Department – College of Business Studies – PAAET – Kuwait
The importance of protecting the minority – especially at the current time – is highlighted by the stumbling block of many commercial companies as a result of the forced closure of their commercial activities as a result of the Corona virus pandemic. Due to this pandemic, companies resorted to restructuring, integration or acquisition by other companies for various goals as discussed in this research.
In this study we examine an important issue, which is to protect the minority shareholders in joint-stock companies, in the event of the acquisition of the company. Therefore, we divided the study into an introductory section in which we address the concept of acquisition in terms of its definition, scope, and form. The first chapter discusses the legal protection for minority shareholders under the Capital Markets Authority Law No. 7 of 2010 and its amendments and the executive regulations, as well as under the Kuwaiti Companies Law No. 1 of 2016 and its amendments, as well as regarding the theory of abuse of the right found in Civil Law. The second chapter addresses legal and agreement based protection for the minority shareholders from the risks of acquisition, by adopting the analytical approach of the relevant provisions of Kuwaiti law.
The study is concluded with a number of results, including that the Kuwaiti legislator provided protection for the minority shareholders in both the Capital Markets Authority Law No. 7 of 2010 and its amendments and the executive regulations, as well as under the Kuwaiti Companies Law No. 1 of 2016 and its amendments, as well as found in Civil Law regarding the theory of abuse of the right. There is also a type of protection that is no less important than the legal protection mentioned in the aforementioned legislation, which is the agreement protection that shareholders can agree upon to protect the company and shareholders. Additionally, there is a legal protection provided by the aforementioned legislation for the minority shareholders.
The study recommended that the legislator extend the acquisition provisions contained in the Capital Markets Authority Law or the Executive Regulations to include companies that are not listed in the stock exchange market as found in the reverse acquisition. It also recommended that the issue of hostile takeover offers be regulated to prevent frivolous competition offers that are usually done by the Board of Directors, as well as activating the target company’s commitment to the provisions and principles of governance to protect the minority shareholders, and to provide the greatest equality and transparency of information.
Keywords: acquisition, capital markets, companies, Kuwaiti law, corporate restructuring, integration, corporate governance.