At last, the draft law on combating commercial concealment has arrived, addressing one of the files that has most exhausted the economy, distorted competition, and damaged the reputation of the market. The law is not aimed at the honest expatriate resident who works within the rules, nor at the foreign investor who enters through legitimate channels. It targets a phenomenon everyone has long known about, that some chose to ignore for decades, and that a great many people have paid for. I have written several times over the years about the practice of renting out commercial licences, warning that it is not the easy income some imagine it to be. It is often the opening move in a long sequence that ends in the courts, and sometimes in prison. During my years in the banking sector, I saw case after case of citizens who handed over their names and their commercial licences to others in exchange for a monthly payment. They believed they had leased a licence. In fact, they had leased their legal liability along with it. The moment a money-laundering offence occurs, or a bounced cheque is issued, or there is tax evasion, fraud, or a financial irregularity, the first person the authorities summon is the registered licence holder. Not the operator behind the scenes, who can vanish in an afternoon.
How many people set out looking for a few hundred dinars of supplementary income and ended up facing criminal proceedings, travel bans, frozen assets, and in some cases custodial sentences because in the eyes of the law they were the real merchant, while the person actually running the business was a ghost the system could not locate. Perhaps the most serious consequence of commercial concealment is that it wrongs everyone at once. It wrongs the compliant business owner who must compete against someone carrying none of the regulatory costs. It wrongs the state, which loses a portion of its lawful revenues and fees. It wrongs the consumer, who may be dealing with an enterprise whose actual management is unknown to them. And it wrongs the citizen who put his name on the licence in the belief that he was somehow shielded from responsibility. A healthy market is not built on borrowed names or hollow façades. It is built on transparency, disclosure, and the acceptance of responsibility. Anyone who wishes to trade should trade under the law, whether they are a citizen or a properly licensed foreign investor. The buying of names and the renting of licences does not merely damage the economy. It erodes confidence in the market as a whole.
As I said, I encountered many such cases while managing distressed debt at the bank. I saw grown men weep. People who suddenly found themselves the subject of claims, having signed credit facility agreements and personal guarantees for companies that were run, and in substance owned, by others. Most of them, if not all, were ordinary retirees of modest means. One case became something of a cautionary tale. A bank manager, a man who understood finance professionally — ended up serving five years in prison. He was the registered owner of a contracting company in partnership with a group of Asian businessmen, holding the licence purely as a front for their operations. He then went further and became a personal guarantor. Greed got the better of his judgement. His partners won a series of tenders, collected the advance payments, and left the country. He was left holding contracts he had no idea how to execute. The guarantees were called in, the cheques went to the public prosecutor, and the outcome was exactly what one would expect. This continues to this day. Foreign operators effectively control large parts of the contracting sector, the retail sector, and services, through licences rented from citizens. The numbers are not small. And it is worth being fair here: these are not all criminals. Many of them work honestly and with integrity. But they work in breach of the law, in sectors reserved by statute for citizens including real estate purchase and sale, and brokerage.
During the property boom before 2008, a significant number of non-Kuwaiti engineers were acquiring investment plots, developing them on their own account, and selling them on, all under the names of citizens. They made millions. The citizen received crumbs. Some arrangements went further still: the citizen would grant a power of attorney allowing them to operate and to take on credit facilities in his name. If anything went wrong, he carried it. And the reverse held too: if a citizen chose to turn on them, he could simply declare that the property and the company were his, and there was little they could do about it. Two decades ago, I contracted a construction company to build a residential block. The contractor submitted his files and supporting documents in proper order. Halfway through the project, I arrived on site to find a Kuwaiti man sitting in the office, telling me he was the contractor. It transpired that the operators had abandoned the project and left, leaving him with it. He was, as it turned out, a decent man. He signed over the project to me, I settled with him for the work actually completed, and I chose not to pursue the sums his partner had taken without delivering against them. I resolved the matter with minimal losses, and I was fortunate that the man in front of me was honest and genuinely wanted to close things properly. I later learned that the other clients with stalled projects were not in a position to be so forgiving, and that their situations ended badly. Variations of this story have repeated themselves many times since. I have written on this subject repeatedly over the past ten years, offering advice and warnings. It is encouraging that the legislature is now moving in the right direction, toward measures that protect business stability and safeguard rights. The passage of this law is an important step. But its real success will depend on something legislation alone cannot deliver changing a prevailing culture in which renting out a licence is treated as an ordinary, unremarkable transaction.
A commercial licence is not an asset to be leased. It is a legal trust, and it carries moral, financial, and criminal responsibility. In the end, money that arrives without effort can take with it everything you have built in reputation and peace of mind and can hand you legal liability within a matter of hours.
Stay safe.