Doing business of commercial agencies in Kuwait

The importance of commercial agencies in creating new investment opportunities has emerged, through traders obtaining commercial agencies from major companies located outside the country. Such agencies benefit both parties. Where major companies contract with agents from local companies and traders in order to enter the local markets and increase sales opportunities in the region through these agents, and in return the agents benefit from the representation of these companies.

The concept of commercial agency

Commercial Agency: A contract between the principal and the agent under which the agent is obligated to import, distribute, sell or display the products of his principal, or to provide commercial services within the country in his capacity as an agent, distributor, concessionaire or license holder in return for commission or profit.

Principal: It is the manufacturer, manufacturer or distributor approved by either of them, or the exporter or commercial service provider, and the center of any of them is outside the country.

Agent: A merchant who is a citizen of the state or a company in which the Kuwaiti partner or partners’ share is not less than 51% of its capital.

Conditions that must be met by those who carry out the business of commercial agencies in Kuwait

The principal may have more than one distributor and agent. Several conditions must be met by those who carry out the business of commercial agencies, which are:

  • To be a natural person or a group of natural persons of Kuwaiti nationality, or to be a legal person, provided that the share of the Kuwaiti partner in his capital is not less than 51%
  • To be registered in the commercial register
  • To be licensed to practice the activity covered by the agency
  • To be linked to the principal by a direct agency contract, or linked to a person who has the legal right to represent him

commercial agency contract

The commercial agency must be written and regulated by a special contract concluded between the principal and the agent, and the contract must include the following data:

  • The name of the agent or distributor
  • The principal’s name and nationality
  • A statement of the goods, products or services covered by the contract
  • Rights and obligations of both the principal and the agent
  • Agency area
  • The term of the agency and how to renew it
  • How to terminate the agency and expiration

Standard specifications for goods and services

The goods and products that are imported must meet the conditions, specifications, and international and Gulf quality standards approved in Kuwait, as well as the factory warranty conditions that the agent is bound by, and that the same shall be dealt with with agents and distributors for the same goods and products in the countries of the Gulf Cooperation Council.

Also, the import of goods and products is not limited to its agents or distributors, even if it is exclusive, even if the goods and products include the right to use the trademark, provided that those who import or provide them meet the terms and conditions of the Commercial Agencies Law.

The agent or distributor, in case of importing goods and products by a third party, must provide maintenance and repair services, provided that the good or product imported by the third party is of the same type that the agent or distributor is marketing in Kuwait. These services include providing spare parts for goods and products with the same warranty conditions without increasing the prices offered to customers.

Registration of the agency in the commercial agencies registry

The agent or distributor must request the registration of the commercial agency in a special register called the Commercial Agencies Register. Likewise, any commercial agency not registered in this register shall not be considered, and lawsuits shall not be heard in this regard, and any interested party may obtain extracts from the record of this entry.

In the event of modification or change of agency data, the Ministry of Commerce and Industry must be notified of the request for annotation in this register within three months from the date of the modification or change.

Re-registration of the commercial agency

The principal may re-register the agency in the commercial agencies registry in the name of a new agent in the following cases:

  • Termination of the previous agency by mutual consent between its parties
  • Cancellation of the previous agency by an enforceable court ruling
  • Expiry of the agency term specified in the contract

The principal may not terminate the contract without the agent breaching his obligations, otherwise he shall be obligated to compensate him for the damage he sustained as a result of this termination.

Commercial Agency Management

The agent or distributor may appoint a manager to manage his agency, and notify the Ministry of Commerce and Industry of the name of this manager within three months from the date of his appointment.

Obligations of the commercial agent

The agent or distributor, as the case may be, shall undertake the following:

  • Providing the goods, products or services that his agency needs permanently and adequately, as well as the spare parts you need, provided that they are still available in the country of production
  • Providing the necessary workshops for maintenance and repair needed by the goods in place of the agency, as well as providing all guarantees provided by the producers, taking into account the standard specifications of the state.
  • Maintaining documents showing the prices of goods from their sources, in addition to documents for their insurance, shipment, transportation and customs duties.

The obligations of the agent or distributor in the event of expiry of the agency shall continue for a period of six months from the date of this expiry, or until the appointment of a new agent or distributor, whichever comes first.

Write-off of commercial agencies

In the event the agency is terminated or the agent or distributor loses any of the conditions for carrying out the agency’s work, the agent, distributor, his representative, heirs, or the director of the agent or distributor company shall submit a request to the Ministry of Commerce and Industry to cancel the agency’s entry from the commercial agencies register within three months from its expiration date.

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