Kuwait Court of Cassation principle number 145

Summary: - Investment companies. The legislature's conferral upon the Central Bank of authority to supervise them, thereby prohibiting them from conducting their activities before their registration in the register of investment companies at the Central Bank, which may strike the company off the register in numerous circumstances, including where its liquidity or solvency is endangered. Issuance of the striking-off decision by the Minister of Finance upon a proposal from the Board of Directors of the Central Bank. This proposal may not be acted upon until the company has been notified of it and afforded an opportunity to submit its observations on it so that it may defend itself. Issuance of the striking-off decision after completion of these procedures. It is deemed to rest upon grounds legally justifying it and to be immune from annulment. - Striking a bank off the register of banks. Its two cases. Rule: The provision in Article (8) of the Minister of Finance's Decision issued on 8/1/1987 concerning the regulation of the Central Bank of Kuwait's supervision of investment companies that: "No investment company may conduct business until it has been registered in the register of investment companies at the Central Bank ..."; in Article (10) of that Decision that: "Pursuant to the provisions of Article 63 of the Central Bank Law, any investment company may be struck off the register of investment companies in the following cases: ... e- If the company ceases to conduct its activity or its financial circumstances are endangered"; and in Article (63) of Law No. (32) of 1968 concerning Currency, the Central Bank of Kuwait and the Regulation of the Banking Profession, as amended by Decree-Law No. (130) of 1977, that: "1- A bank may be struck off the register of banks: ... e- If it ceases to conduct its activity or its liquidity or solvency is endangered. f- ... 2- The striking-off of any bank may not be proposed in the two aforementioned cases (e, f) until it has been notified of this proposal and afforded an opportunity to submit its observations on it. 3- Striking-off shall be effected by a decision of the Minister of Finance upon a proposal from the Board of Directors of the Central Bank, and the decision shall be effective from the date of its publication in the Official Gazette" indicates that, in view of the growing role of investment companies in developing the national economy and the consequent need to provide the greatest measure of protection and security for their shareholders and those dealing with them, and to ensure that they conduct their activities in accordance with the laws in force and the instructions of the Central Bank in a manner ensuring integration between them and the banking system and their substantial contribution to the processes of economic growth in the State, it was necessary to confer upon the Central Bank authority to supervise these companies. To enable it to exercise this supervision, the legislature prohibited any investment company from conducting its activity before its registration in the register of investment companies at the Central Bank. This supervision extends by degrees to requesting that a company be struck off the register in enumerated circumstances, including where its liquidity or solvency is endangered. Striking-off is effected by a decision of the Minister of Finance. However, given the punitive nature of striking-off in this case and its consequence of exposing the company to inevitable liquidation, the legislature required the administrative authority's decision to be preceded by a proposal to that effect from the Board of Directors of the Central Bank. This proposal may not be acted upon until the company has been notified of it and afforded an opportunity to submit its observations on it so that it may defend itself. If the striking-off decision is issued after completion of these essential procedures, it rests upon grounds legally justifying it and is immune from annulment.