Lawyer Hussien Al-Ghareeb has criticzed the Ministry of Commerce’s use of article 178 of the companies law, and considered it as “provoking a team of shareholders of a certain company against another team.”
Al-Ghareeb said during his lecture “legal organization of the general assembly and the board of directors in joint stock companies as per the Kuwaiti commercial companies law”, held at the Legal Training Center, “I did not stop at the request of the ministry from the auditor of any company to submit a report around which suspensions were raised in the media or in the general assembly debates.” He confirmed that we need “activation of the legal provisions more than amending them.”
Al-Ghareeb added, the Ministry conducts require amendments in light of the conditions of the current financial crisis and the resulting loss of the shareholders’ funds in many companies.
He pointed out to highlighting the practical problems facing the company shareholders in their relations with the board of directors and the Ministry of Commerce and Industry as a control authority, with the call for activating a number of legal provisions for the protection of the shareholders’ funds, particularly the minority against the majority and the board of directors.
Lawyer Al-Ghareeb said among the most prominent problems facing the shareholder in the general assembly is “non response to his request to hold a general assembly to debate the company matters, or changing the board of directors, despite the availability of the conditions of his request.” It is possible to overcome this matter through the implementation of the “provision of article 154 of the companies law by the articles of association, by scheduling an annual date in which the assembly should be held, at the scheduled time and place, without invitation by the board of directors.”
Lawyer Alghareeb added : the law obliges the board of directors to take all the necessary measures to ensure management of the company funds prudently. It stated the liability of the board of directors for any error in disposing with the company funds or their management, as well as for any violation against the law, articles of association or general assembly resolutions, as well as the acts involving cheating and misuse of authority.
He pointed out that there is no way for activating these potentials and legal provisions unless through the collaboration of the efforts of minority shareholders with the control and supervisory authorities, whereby the shareholder adheres to requesting the debating of any act manifesting mismanagement and turns to the concerned control authorities in order to discuss the matter and take the required action. We can not request the small shareholders to turn to the courts through lawyers whose charges are high, while the authorities mandated by law to combat mismanagement in joint stock companies suffice with watching. Lawyer Al-Ghareeb pointed to the provision of articles 121 and 131 of the constitution which prohibit the member of the National Assembly and the minister to participate in the membership of the company board of directors.
He said the prevailing opinion is “the admissibility of combining between both memberships if the membership of the board of directors was held prior to the membership of the National Assembly.” However, the member who has become a member in the National Assembly may not be elected or re-appointed. However, an opinion emerged recently stating that the prohibition “is only for appointment of member of the National Assembly in the company board of directors” according to article 142 of the companies law, while nomination to the membership of the board of directors and winning the election is not prohibited.
Al-ghareeb added : the provision of article 151 of the companies law stipulates that every transaction intended to be concluded with the company and a party related to the members of the board of directors or one of them shall be presented to the general assembly, in order for the assembly to license such transaction. However, the practical reality uncovers the unsound implementation of this provision, as the approval clause to deal with related parties generally is included without determining the nature of these transactions, their value and the persons intended to deal with. This implementation is in violation of the law.