Essay: Types of Firms’ Management in Kuwait’s Commercial Law

Introduction:

A good management is the key behind the success of any firm. There are many factors by which firms’ management can be evaluated. Making vital strategic decisions can make a firm go to its right objectives or not. Some could think of management as a single job but it is really the combination of many efforts to lead a single firm. Managers have the responsibility to please shareholders and to personally make sure that the main goal of the firm is in the right direction. Some reflections of good managements can be the Stock Price value and the length of tenure along with a clear long-term strategy and objectives and the satisfaction of partners and employees.

It is fairly important to shed light on the concept of “insider buying and buybacks” where buyback means the signifier of the firm’s resources and inside buyers are those insiders who buy shares in their own firms. The only thing to keep in mind is that managements in different fields take in different amounts. Management means running a certain project or corporation. This action includes certain activities and strategies to accomplish the firm’s main goals employing as much resources as possible. In Kuwait, there are lots of successful corporations which managed to prove their success over many years. Using modern social science, Kuwaiti firms have managed to achieve their objectives while examining social organization and organizational leadership.

There are many levels of managers in Kuwait. The first is senior manager such as the Chief Executive Officer who is responsible for setting the goals and making decisions in a certain firm. Second, there are middle managers who work under the seniors and who report to them. Third stage is concerned with lower managers who act as supervisors. In developed countries such as Kuwait, management involves identifying certain objectives of the enterprise through plans, measurements, commercial tools and goals and measures. Viewed from a wider range, management can be considered a philosophy through which enterprises work. Different types of management contain explanations that cover planning, organizing, hiring, leading and controlling till the goals are met.

Examining management and how it operates, one could quickly realize that it operates through five basic steps: planning, organizing, coordinating, commanding, and controlling. First there is planning which basically means deciding what needs to occur in the future and creating plans for action (deciding in advance). Second, there has to be organizing which means ensuring that the human and nonhuman resources are put into place. Third, there is coordinating (or staffing) meaning creating a structure through which an organization’s goals can be accomplished. Then comes commanding (or leading) determining what must be done in a situation and getting people to do it. Last, controlling is checking progress against plans.

Like many other business pillars, management bears some skills which include: political; used to build a solid base and to create relations, conceptual; used to analyze difficult situations, interpersonal; used to relate, interact, discuss and diagnostic; the ability to visualize appropriate solutions to a certain problem, leadership; the ability to lead and to provide guidance to a specific group, and lastly technical; experience. However, there are several types of management in Kuwait:

1. Strategic Management which covers an organization’s total strategy formation and putting them into actin with the goal of growing. It is mainly an executive function that may report to the owners of a certain firm.
2. Sales Management Management of sales territories, teams or
3. Marketing Management Management of marketing strategies, products, brands and promotions.
4. Public Relations Managing communications between an organization and the public.
5. Operations Management The management of production of goods and services. Operations management is a broad field that describes everything from manufacturing management to retail management.
6. Supply Chain Management Managing the process of moving a product or service from supplier to customer.
7. Procurement Management Managing the acquisition of goods and services from external sources.
8. Financial & Accounting Management Managing financial and accounting processes and teams.
9. Human Resources Management Responsible for attracting, hiring, training, compensating, rewarding and managing the performance of employees.
10. Information Technology Management Managing information technology teams and processes.
11. R&D Management The management of research & development processes and teams.
12. Engineering Management Managing the application of engineering to business solutions. For example, new product development, manufacturing and construction.
13. Program Management Program management is the management of an ongoing portfolio of projects.
14. Project Management – Project management is the planning, organization and control of projects.
15. Risk Management Risk management is the discipline of identifying, assessing and controlling the chance that objectives and processes will have negative consequences.
16. Change Management Change management applies a structured approach to business change. The goal of change management is to help organizations and teams make smooth transitions to target states
17. Quality Management The management of quality planning, control, assurance and improvement.
18. Innovation Management The management of innovation processes such as strategy, research & development or organizational change.
19. Design Management The management of design processes such as new product design.
20. Facility Management The management of facilities such as offices and data centers.
21. Knowledge Management Knowledge management enables the identification, creation, representation, distribution and use of knowledge. In a knowledge driven economy, this has become a critical field.

Management leadership is about finding ways to meet the needs of your employees and of your organization. There is no single correct management leadership style — the best leadership style is the one that meets the challenges you are facing and the needs of the people you are leading. Effective leaders are often flexible and are able to change their style of leadership to suit changing circumstances. Classic Styles: Classic styles of leadership describe how much control the leader gives to those below her. For example, in a laissez-faire style of leadership, the manager gives little direction to subordinates and allows them to get on with things. This styles works best when employees are highly trained and motivated. Transformational Styles: The theory of a transformational style of leadership was first developed by academics James McGregor Burns and Bernard Bass, who described in their books how leaders can bring about change in organizations and in workers. Transformational leaders possess a vision of where they want the firm to go and charisma and skills to implement that vision. Participative Styles: Some leadership styles focus on participation. One of these is the democratic style of leadership. In this style, the leader uses individual employees’ knowledge and skills to help build a consensus for what direction the organization should move in. This style is appropriate when there are several directions an organization could take. The affiliative style of leadership emphasizes teamwork.

Commercial law focuses on the sale and distribution of goods, as well as financing of certain transactions. Business law focuses on the other aspects of business, including forming a firm, mergers and acquisitions, shareholder rights, and property issues such as leasing office or warehouse space. A business that sells products will almost certainly need a lawyer with experience in both of these fields. It is issued and monitored by both state and federal law. The federal government primarily governs stocks and investments, workplace safety and employment laws, and environmental protections. States, however, can add to these federal laws and pass their own laws in other areas, such as imposing licensing requirements for certain professions and establishing rules for forming and running a legal business. It is mainly issued by the Uniform Commercial Code (UCC), which is a vital set of laws regarding the sales of goods, negotiable instruments, and secured transactions. The law itself indicates all business concerning the broad areas of business, commerce, and consumer practices and it covers fields of banking, Bankruptcy, consumer credit, contracts, debtor and creditor, landlord-tenant, mortgages, negotiable instruments, real estate transactions, sales and secured transactions. Commercial law sets the foundations for the rules that traders and others involved in firms must follow as they conduct business amongst themselves and with consumers. It governs the sales of goods and services, negotiable instruments, security interests, leases, principal and agent relationships, contracts of carriage, and much more.

Because various legal issues may be included or excluded from the subject of commercial law depending upon how expansively it is defined, it may be more helpful to consider the matter in terms of timing. Commercial law covers legal issues that arise prior to the initiation of a lawsuit. By contrast, once a lawsuit is filed, the same issues are more properly characterized as litigation. Thus, commercial law attorneys help their clients negotiate and enter into business deals. Because commercial law is primarily found in state statutes, there is a potential for states to enact conflicting rules, thereby disrupting the flow of interstate commerce. The UCC was created to remedy this situation. Foreign firms in Kuwait, wishing to practice in Kuwait may only do so through a Kuwaiti agent. Establishing new firms or industrial works best with a carefully chosen Kuwaiti partner or advisor, who is able to keep in contact with partner, seek business and provide the proper data on the most recent market trends. The success of the relationship with the agent depends upon face-to-face contact and regular communication. Firms providing enthusiastic and marketing assistance to their agent will have a step ahead or an advantage. In Kuwait, and as stated in the Kuwaiti Law, foreign individuals or entities may establish presence in the state through the formation and investment in the following type of firms: Limited Liability firm (WLL), Closed Joint Stock firm (KSC Closed) and Joint Stock firm

Article (56) of the Kuwait Firms and organizations law refers to joint ventures as joint venture firms. As stated in Article (59), joint venture firms do not hold legal personalities in any legal problems. These firms may not conduct corporation stuff in their own name. Although joint ventures are merely mediators that require no formal establishment procedures, they can be complicated and confusing forms for carrying out business. Often foreign bodies do not comprehend the nature of joint ventures within Kuwaiti Law.

Under commercial law in Kuwait, industrial firms in Kuwait are governed by Law No. (36) of 1964 on the Regulation of Commercial Agencies, and Articles (260-296) of the Kuwaiti Commercial Code. Article 1 of the industrial Kuwaiti Law No. (36) of 1964 states that a non-Kuwaiti cannot act as commercial agents in Kuwait. There must be a direct connection between the Kuwaiti agent and the foreign principal. Whereas Article 2 of Law No. (36) declares that commercial agencies are not enforceable unless recorded in the Commercial Register. Commercial law representative in Kuwait can be either individual or a whole entity.

In Kuwait, foreign Investment Law (No. 8/2001) declares many statement useful to regulate foreign investments in Kuwait. Under the law it is intended to allow foreign investors to own up to 100% equity in Kuwaiti firms or ventures for special projects as determined by the Council of Ministers. Prior to the enactment of this law, foreign investors were subject to a ceiling of 49% (maximum) stipulated under the Law of Commerce No. 68 of 1980 and the Commercial firms Law No. 15 of 1960. The law proposes to do away with such restrictions imposed upon foreign investors. Kuwait is currently trying to balance the need for foreign labour with interests of its local population, and firms are strongly encouraged to hire local nationals wherever possible.

Managing the process of labeling and Packaging Regulations in Kuwaiti’s firms: All imported goods must hold the slogan of the country of origin. Food goods should have Arabic or Arabic/English labels and carry the following information: Name of manufacturer, Brand name of food product, Name of food product, Composition, Net and gross weight and Production and expiry dates. Examining firms’ managements in Kuwait, one could never miss that all exported goods have to go through inspection before shipping. Most of these inspections are performed by SGS United Kingdom Ltd. Inspection rules vary frequently so exporters should check the requirements properly with their customer or with the relevant pre-shipment firm. But, it is better noted that some goods and stuff are prohibited by the Kuwaiti Government such as Israeli goods and Alcohol, materials for making alcoholic beverages (hops, malt extracts, wine kits), arms and ammunition, unlicensed drugs and medicines, explosives, pornographic materials, politically subversive materials and pork products are all prohibited. Beef and other products from cattle from the UK and the Republic of Ireland are also prohibited. The prohibition of alcoholic beverages is strictly enforced. Kuwait became an actual vital partner in the World Trade Organisation in 1995, and in 1997 the Kuwait National Assembly also ratified Kuwait’s membership in the World Intellectual Property Organisation (WIPO).

The Commercial Business Law of Kuwait which was issued in 1981 is a distinctive Code covering both commercial and business activities like business contracts, commercial transactions, trademarks, trade names, , banking operations, currency of exchange, bankruptcy etc. The most important articles in this law is article 23 and 24 which explain that non- Kuwaiti has to have one or more Kuwaiti partners in order to get into huge business in Kuwait with the Kuwaiti partners’ percentage of 51 of total capital and also state that any non-Kuwaiti firm can practice business activities under the name and supervision of Kuwaiti agent.

Business management in Kuwait can be by either one of the following: entering into the industrial agency which does not normally require any formal procedures or appoint a local commercial firm or lastly appoint a Kuwaiti representative

This opens the door for the New Investments Law in Kuwait (Law No.8/2001) which has been examined for regulating Direct Investment of Foreign monetary system in the State of Kuwait. Since the law was examined under a view to encourage foreign investment in Kuwait, there are many statements which actually encourage a non-Kuwaiti partner to take part within their capital in the state of Kuwait like the total foreign ownership of corporate shares of a firm (Article 4). A Foreign Capital Investment Committee is set up which is entrusted for recommending to the Minister of Commerce & Industry with regard to the granting of licenses to the foreign investors for practicing the economic activities and enterprises. There are benefits and exemptions granted to the foreign investor like tax exemption, avoidance of double taxation, exemption from customs duties, allotment of land and real estate, recruitment of foreign activity upon the approval by the Investment Committee (Article 13). Articles 23 and 24 of the Kuwaiti Commercial Code state the basic premise for doing business in Kuwait. Article 23 provides that non-Kuwaitis cannot engage in commerce in Kuwait without having a Kuwaiti partner whose equity holding is at least 51 percent. Article 24 provides that a foreign firm cannot establish a branch in Kuwait and it may not engage in commercial activities in Kuwait except through a Kuwaiti agent.

In an effort to attract foreign investment, Kuwait’s Parliament recently passed Law No. 8 Regulating Foreign Capital Direct Investment in Kuwait (April 22, 2001). This law creates an exception to the general rules under which foreign investors conduct business in Kuwait by permitting up to 100% foreign ownership of business entities in certain approved sectors. Implementing regulations, which establish the guidelines for investment under the law, will be forthcoming.

A foreign person or entity may enter the Kuwaiti market and conduct business in the following ways:

• Establishment of a firm;

• Entering into a joint venture agreement;

• Appointment of a local commercial agent; or

• Appointment of a commercial representative.

Law No. 36 of 1964 on the Regulation of Commercial Agencies, and the Kuwaiti Commercial Code, Articles 260-296 regulates commercial agencies. Non-Kuwaitis may not act as commercial agents in Kuwait (Article 1 of Law No. 36 of 1964), and those who violate the rule are subject to three months imprisonment and/or a fine (Article 10 of Law No. 36 of 1964).

The relationship between the Kuwaiti agent and the foreign principal must be direct. Article 2 of Law 36 provides that commercial agencies are not enforceable unless registered in the Commercial Register.

The Code’s provisions set out the general rules governing commercial agencies and the types of commercial agencies. The second type of agency is a distributorship under which the local agent is the distributor of the principal’s product in a defined territory in return for a percentage of the profit (Article 286 of the Kuwait Commercial Code). Distributorships are governed by the same general rules as contracts agencies if the distributor is the sole distributor for the whole country. These rules provide protection to both types of agents. The third type of commercial agency is the commission agency, which is provided for in Articles 287 through 296 of the Commercial Code. In this type of agency, the agent enters into contracts in his/its own name.[6] The principal’s name may not be disclosed without his permission.[7]

In Kuwaiti firm system, commercial representative is a Kuwaiti individual or entity engaged by a foreign firm pursuant to a contract called a “commercial representation agreement” to represent its business interests in Kuwait. The scope of authority of a commercial representative is usually more limited than the authority granted an agent. Concerning taxation in the Kuwaiti firms system, firms are not subject to any taxes on their annual or even monthly income. Thus, another corporation that could be foreign and that can be engaged in commercial activities is definitely subject to taxation. This taxation is stable at 15% of the income. To be comprehensive, individuals (Kuwaiti and foreign nationals) and Kuwaiti firms are not subject to taxes on the annual income.

In August 1996, the Kuwaiti Government passed Law 25 of 1996 regarding the disclosure of commissions in connection with government contracts. This law effectively requires full transparency and accountability in all government contracts in excess of one hundred thousand dinars (approximately $300,000) in value. The law, which applies to all monetary deals entered into by the Kuwaiti Government or its agencies or instrumentalities, requires a stipulation by the contracting party as to whether it has paid or will pay a commission of any kind to a disclosed or concealed intermediary. Additionally, the law imposes an obligation on both the payor and the payee to disclose in a separate declaration, the amount of the commission, the type of currency, and the place and manner of the commission. The sanctions for non-disclosure or misinformation range from civil and criminal penalties equal to the value of the payment to imprisonment. However, it is important to remember that full compliance does not necessarily exonerate the parties in the event that the payment in question constitutes a violation of any other Kuwaiti law.

XI. INTELLECTUAL PROPERTY

Law No. 4 of 1962 governs patents in Kuwait. In order to obtain patent protection in Kuwait, the inventor must first register the patent with the Patents Office at the Trademark Control Department of the Ministry of Commerce & Industry (Article 4). The law permits foreigners who are nationals of or live in countries that give Kuwait reciprocity, as well as firms and other juristic personalities, to register patents in Kuwait (Article 5). Once registered, the owner of the patent is vested with the right to use that patent by any means for 15 years from the date of the application (Articles 10 and 12). The patent may be renewed for an additional five-year term (Article 12).

One of the main successful organizations in Kuwait is The Central Bank of Kuwait which was established to lay the foundations for and maintain a flexible and ongoing monetary financial corporation in Kuwait. It also serves as a banker and financial adviser to the government. Also, there is the Ministry of Commerce and Industry which supports commercial and industrial activities, and provides for the needs of the state and citizens in relation to goods and services. Then, there is the Chamber of Commerce and Industry which is a non-profit, self-financed private institution, established by Amiri decree issued in 1959. The Chamber acts on behalf of, represents and lobbies for the interests of business people and industrialists in Kuwait.

Conclusion:

Like any other business trend, management bears some skills which include: political: used to build a power base and to establish connections, conceptual: used to analyze complex situations, interpersonal: used to communicate, motivate, mentor and delegate, diagnostic: ability to visualize appropriate responses to a situation, leadership: ability to lead and to provide guidance to a specific group, technical: expertise in one’s particular functional area. There are several types of management in Kuwait:

1. Strategic Management

Strategic management looks at an organization’s overall strategy formation and execution with the goal of growing and sustaining competitive advantage.

Strategic management is an executive function that may report to the owners of a certain firm. 2. Sales Management Management of sales territories, teams or 3. Marketing Management Management of marketing strategies, products, brands and promotions. 4. Public Relations Managing communications between an organization and the public. 5. Operations Management The management of production of goods and services. Operations management is a broad field that describes everything from manufacturing management to retail management.6. Supply Chain Management Managing the process of moving a product or service from supplier to customer. 7. Procurement Management Managing the acquisition of goods and services from external sources.8. Financial & Accounting Management Managing financial and accounting processes and teams. 9. Human Resources Management Responsible for attracting, hiring, training, compensating, rewarding and managing the performance of employees.

Classic Styles: Classic styles of leadership describe how much control the leader gives to those below her. For example, in a laissez-faire style of leadership, the manager gives little direction to subordinates and allows them to get on with things. Transformational Styles: Transformational leaders possess a vision of where they want the firm to go and charisma and skills to implement that vision. Participative Styles: In this style, the leader uses individual employees’ knowledge and skills to help build a consensus for what direction the organization should move in.

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