Markets
Kuwait: why a market-referenced conversion price is not available
A company listed on Boursa Kuwait cannot issue a convertible whose conversion price refixes against future market prices, and cannot run a standby equity facility. Article 157 of the Companies Law puts the amount and manner of a capital increase to an extraordinary general assembly, and Article 150 floors the issue price at nominal value unless the regulator consents.
Key takeaways
- The floor is nominal value. Article 150 divides the capital of a شركة مساهمة (shareholding company) into equal shares carrying a nominal value, and bars issuing them below it without regulatory approval. This page does not state the statutory minimum denomination: the sources conflict on whether one still applies.
- Below par is a consent, not a right. The same article allows a lower price only where the Supervisory Authorities approve under the executive regulations — a decision taken issue by issue, which no drawdown formula can presume.
- Convertibles exist; refixing does not. Article 159 contemplates converting the company's debts, bonds or صكوك (sukuk) into shares, but not a conversion ratio still unresolved when the assembly votes.
- Headroom is capped at ten times issued capital. Article 148 sets that ceiling on authorised capital, and Article 149 lets the board act inside it only once issued capital is fully paid.
The article that decides it
Most closed markets are closed because a regulator computes a minimum price. Kuwait is closed for a blunter reason: nominal value still does real work here. Article 150 divides the capital of a shareholding company into equal shares carrying a nominal value, then states that shares are issued at that nominal value and not lower unless the Supervisory Authorities approve under the executive regulations.
Read that against a conversion formula. A discount to a trailing volume weighted average price gives a different number at every conversion, and for a Boursa Kuwait small cap it can give a number beneath nominal value. The formula therefore carries a condition neither party controls: a discretionary approval, sought after the fact, for a price nobody could name at signing. Kuwait sits with Germany's par-value floor here, and the consequence is the same.
Six ways to increase capital, and none of them floats
Article 159 lists how a Kuwaiti shareholding company may increase capital, exhaustively but for methods the executive regulations add: public subscription; capitalising reserves or retained profits; converting the company's debts, bonds or sukuk into shares; in-kind contributions; and issuing new shares to new shareholders presented by the board and approved by the assembly.
The third method is the one an issuer reaches for, and it means a Kuwaiti convertible is not exotic. But conversion is a method of increasing capital, so it runs through Article 157: the assembly resolves on a reasoned board proposal supported by an auditor's report, and the resolution must state the amount and the manner of the increase. Article 163 then lets the assembly add an علاوة إصدار (issue premium). Nothing in that chain accommodates a number still unknown when the vote is taken.
One route needs no fresh assembly, and it is the closest Kuwait comes to a facility. Article 149 lets the board resolve to increase the issued capital within an authorised capital already in the Company Contract, provided the issued capital is fully paid. But the board only chooses when to fill headroom the assembly created: Article 150 still fixes the floor and Article 159 the method.
| The structure needs | Kuwaiti position |
|---|---|
| Price set at conversion | Article 157: the assembly resolves the amount and manner |
| Discount to a trailing average | Article 150: nominal value, below only on regulatory approval |
| Drawdown on demand | Article 149: board acts only inside the authorised capital |
| A convertible instrument | Available — Article 159, conversion of debts, bonds or sukuk |
| A selected investor | Available — Article 159, new shareholders approved by the assembly |
| Statutory summary. Not an offer, a quote, or a rate card. | |
Pre-emption is narrower than the headline suggests
It is often said that Kuwaiti shareholders hold حق الأولوية (a priority right) over any new issue. Article 160 is narrower: the right arises where the increase is made by offering shares for public subscription, runs for fifteen days from notification and can be waived by the company contract. An issue to a named investor runs under the fifth method in Article 159, gated by the assembly rather than the register.
That is why Kuwait belongs to the Gulf approval-per-issue family rather than the European pre-emption family: the obstacle is not whether subscription rights can be lifted, but that price is set by a meeting and, below nominal, by a regulator. The shape recurs in Qatar, the United Arab Emirates and Saudi Arabia.
General information, not legal advice. These articles are quoted from an official English translation of the Kuwait Companies Law; the Arabic text governs, and the executive regulations carry much of the operative detail. Capital Markets Authority rules under Law No. 7 of 2010 apply in addition. Take advice from qualified Kuwaiti counsel.
What is actually available to a Kuwaiti issuer
Three routes are real, and each fixes the price in the room: a capital increase to a named investor under Article 159, priced by the assembly with an Article 163 premium; a conversion of existing debt, bonds or sukuk on terms settled in the same resolution; and a public subscription under Articles 159 and 161, which needs a prospectus meeting Law No. 7 of 2010. If the book is not filled, Article 162 lets the body that resolved on the increase withdraw it or cut it to the amount subscribed.
Boursa Kuwait announced a dedicated bonds and sukuk board in 2026 following a Capital Markets Authority decision. On the announcement, admission turns on a recognised credit rating and unrestricted tradability; convertibles are not addressed. It is a venue for rated debt, not a route around Article 150.
If the listing is Kuwaiti, a discount-to-VWAP facility does not fit. If a group company is listed elsewhere, the venue decides: see convertible notes for listed issuers and private placements by public companies, then free-trading shares and which listings we can work with.
Primary sources
- KDIPA — Kuwait Companies Law No. 1 of 2016, English translation
- CMA Kuwait — Executive Bylaws of Law No. 7 of 2010
Orientation
Commentary, press and unofficial texts: useful for orientation, never the citation of record.
Financing a Boursa Kuwait issuer: frequently asked questions
Does Kuwaiti law recognise convertible instruments at all?
Yes. Article 159 lists conversion of the company's debts, bonds or sukuk into shares as a way of increasing capital, so the instrument is recognised. What is not recognised is a conversion price still moving after the extraordinary general assembly has voted, because Article 157 requires that resolution to state the amount and the manner of the increase.
Can shares be issued below their nominal value in Kuwait?
Only with consent. Article 150 says shares are issued at nominal value and not lower unless the Supervisory Authorities approve on the terms set out in the executive regulations. That is a decision taken issue by issue, so a formula that might produce a sub-nominal price at some future drawdown cannot be relied on when the resolution is passed.
Do existing shareholders always have a pre-emption right?
No. Article 160 confers it where the increase is made by offering shares for public subscription, exercisable within fifteen days of notification and capable of being waived by the company contract. A targeted issue to an incoming investor runs under Article 159 instead, which needs the board to present the new shareholders and the assembly to approve them.
What can a Boursa Kuwait issuer realistically use instead?
A fixed-price capital increase authorised by the assembly, with the issue premium set under Article 163, or a debt instrument whose conversion terms are settled in the same resolution. Both put price in the room where the vote happens, so the negotiation is about the fixed number rather than the discount mechanic.
What is available instead
A Boursa Kuwait issuer can have a convertible, provided the conversion ratio is settled when the extraordinary general assembly votes and the price sits at or above nominal value. Saudi Arabia is the nearest market in the Gulf that supports a single convertible on published terms.