Transaction Between the Company and A Related Party

As part of the Capital Markets Authority’s commitment to establishing policies and mechanisms for mitigating conflicts of interest and methods for addressing and managing them within companies under its supervision, the Executive Bylaws of Law No. 7 of 2010 regarding the establishment of the Capital Markets Authority and Regulation of Securities Activity, require that listed and licensed companies, when intending to enter into a transaction or arrangement with any related party, must prepare an independent report on such transaction or arrangement and submit it to the Board of Directors or the General Assembly.

What are the governing references that require Boursa Kuwait-listed companies and CMA-licensed companies to submit a Report on the Transaction or Arrangement with Related Parties?

In accordance with the CMA’s Executive Bylaws, Module Fifteen “Corporate Governance”, Article 7-7 stipulates that:

The Company shall assign an independent expert, such as an Asset Valuator or Investment Advisor, to report to the general assembly or the Board of Directors, as the case may be, on any transaction between the company and any Related Party or any arrangement whereby each party enters into any project or financing asset where the value of the transaction or arrangement equals 5% or more of the total assets of the company, or if the transaction or the arrangement had a Material Effect on the company’s financial statements, provided that such report is submitted before the transaction is approved or the arrangement stipulated in this article.

The same article also defined the professional responsibility of the entity preparing the report, stating the following:

The assigned expert must be objective and impartial in preparing the report required in this Article, and rely on the latest available information, in addition to complying with the provisions of Appendix (1) “Minimum Requirements for the Valuation or Assessment of the Impairment of Assets” of Module Eleven (Dealing in Securities) of these Bylaws.

What is a related party of a company?

Module One “Glossary” of the Executive Bylaws of the Capital Markets Authority defines a Related Party as follows:

A party is considered related to a company if:

1. person who has direct or indirect control over the company;
2. A party that is a subsidiary of the company;
3. A party that is a member of the same group to which the company belongs;
4. A member of the company’s Board of Directors or a member of its executive management;
5. A relative of a related party referred to in paragraphs (1) or (4); or
6. A company under the control, joint control, or significant influence of the related parties referred to in paragraphs (4) and (5) through their direct or indirect voting power.

When determining related parties, the provisions of the Law, the Bylaws, and International Accounting Standard (IAS) 24, as amended, shall be taken into account.

What is the added value to business entities from preparing a Report on Transaction or Arrangement with Related Parties?

• Compliance with the regulatory requirements of the Capital Markets Authority.
• Achieving transparency and disclosure regarding conflicts of interest.
• Assisting the Board of Directors or the General Assembly in making informed decisions.

What are the services provided by Baker Tilly Kuwait?

Preparing an Independent Report on a Transaction Between the Company and a Related Party

Why Baker Tilly Kuwait?

1. Baker Tilly in Kuwait is a member of the Baker Tilly International network based in the UK, ranked amongst the top 10 global accounting networks, enabling the use of the latest internationally recognized methodologies and access to global subject matter experts.
2. Baker Tilly in Kuwait is licensed by the Kuwait Capital Markets Authority (CMA) to provide Investment Advisor and Asset Valuator services.
3. Extensive experience in providing transaction services between the Company and a related party to entities operating across various business sectors in the State of Kuwait.
4. Highly experienced bilingual team with specialized academic qualifications and professional certifications.
5. Commitment to performing Transaction Between the Company and a Related Party engagements according to predefined timelines with no delays, and responsiveness to client requirements.