Overview
Law No. 1 of 2016 promulgating the Companies Law, as amended, and its executive regulations establishes a governance framework for shareholding companies in Kuwait, defining board members' duties toward the company and its shareholders, and imposing personal liability on a member who breaches those duties.
Duties of Board Members
- Duty of care: making decisions based on adequate information and reasonable deliberation, not arbitrarily or hastily.
- Duty of loyalty: prioritising the company's interest over any conflicting personal interest, and disclosing any conflict of interest as soon as it arises.
- Acting within the authority granted under the articles of association and general assembly resolutions.
When Personal Liability Arises
A board member is personally liable for damages if a breach of duty causes harm to the company, its shareholders, or third parties. Mere general assembly approval of the member's conduct does not exempt them from this liability where the conduct involved fraud or a serious excess of authority.
Practical Recommendations for Boards
Regularly documenting board deliberations and the reasons for significant decisions forms a board member's first line of defence in any subsequent liability claim. Periodically reviewing the articles of association and internal board bylaws also ensures they keep pace with the latest governance requirements.