UC Berkeley

The ongoing trend in the field of mandatory acquisitions is to consider issues from the perspective of minority shareholders rights. How can minority shareholder obtain a fair opportunity whenever a mandatory acquisition occurs in the corporation. In this noble pursuit for minority rights in the corporation arises the common mandatory bid rule (MBR), which offers minority shareholders the option to sell shares at a price equal to the controlling seller.Kuwait, as it began to develop its market, implemented the MBR to protect shareholders. Yet, it now appears that this adoption may not have the intended results on market growth in Kuwait. Adoption of the MBR in Kuwait raises many questions as to why, how, and for what purpose it was considered the mechanism to protect minority shareholders in Kuwait. In order for Kuwait to develop a more robust exchange, certain modifications need to be made to its market practices, specifically its MBR. This paper explores the history of the MBR in Kuwait and then examines how it has been used in Kuwait to protect shareholders but discourage acquisitions, resulting in stagnation that contrasts with the goals of the Kuwait Development Plan of 2035. A potential framework is provided that would retain minority protections while encouraging market growth, including increasing public listings on the exchange. Moreover, while a robust exchange is ideal, Kuwait also needs to implement long-term protections as it foresees its market capacity expanding, offering a national security mechanism to entice foreign shareholders while ensuring market transactions occur in Kuwait’s best interest.