Contact Us
rs=w_1280 (1)

Lenders’ Protection Against Capital Reduction covers Gurantors

A new creditors’ protection has been introduced by Article 169 of the Kuwaiti Companies Law 1/2016 requiring a corporate borrower to first grant a security or collateral to lenders for “indebtedness” or prepay the debts before it can proceed with its capital reduction to pay excess cash to its shareholders. Due to the novelty of this lenders’ protection, it was unclear whether this protection applies to “corporate guarantor” and not only corporate borrowers. Al-Hossam Legal received a final judgment by the Court of Cassation confirming that Article 169 of the Companies Law applies to any company issued a guarantee in favour of a lender, thus affording more protection to lenders and banks.

Leave a Comment