Bahrain

Starting business in Bahrain:

Bahrain has some of the most investor friendly conditions within the GCC states and 100% foreign ownership in some sectors is allowed. The below types of companies are those typically established by foreign investors (either solely or in partnership with Bahraini and/or GCC citizens or entities).

Below is a snapshot of the different legal structures available to investors in Bahrain according to the Bahrain Ministry of Industry & Commerce.

PARTNERSHIP COMPANY

A Partnership Company is a company without limited liability, formed between at least two persons under a specific name, and in which partners assume joint responsibility, to the extent of their entire personal assets, for the partnerships debts and liabilities.

The main features of this type of company are the following:

  • Unlimited liability;
  • Banking and insurance activities are not allowed;
  • Local operations are allowed;
  • Local office presence required;
  • Minimum share capital not applicable;
  • Minimum of two partners and promoters required;
  • Minimum of two directors required;
  • Local sponsor not required; and
  • 100% foreign ownership allowed.

COMMANDITE BY SHARES

A Commandite Partnership by Shares is a company established between two categories of partners:

  • Joint partners who are jointly responsible, to the extent of their entire personal wealth for the company’s obligations; or
  • Limited partners (shareholders) who are not liable for the company’s obligations except to the extent of their equity (shares) in the capital.

The main features of this type of company are the following:

  • Limited liability (two categories of partners as above);
  • Banking and insurance activities not allowed;
  • Local operations allowed;
  • Local office presence required;
  • Minimum share capital of BHD 20,000 required;
  • Minimum of four partners and promoters required;
  • Minimum of two directors required;
  • External auditor required;
  • Local sponsor not required; and
  • 100% foreign ownership allowed.

BAHRAIN SHAREHOLDING COMPANY (Closed)

A Closed Shareholding Company consists of a number of persons (not less than two) who subscribe therein by way of negotiable shares. Such shares may not be offered to the public for subscription.

The main features of this type of company are:

  • Limited liability;
  • Banking / insurance activities allowed;
  • Local operations allowed;
  • Local office presence required;
  • Minimum share capital of BHD 250,000 required (a minimum of 50% of the capital must be paid initially; the remaining to be paid within 3 years);
  • Nominal value of each share between at least BHD 0.100 and no more than BHD 100;
  • Minimum of two partners and promoters required;
  • Minimum of three directors required; and
  • Local sponsor not required
  • Foreign ownership allowed with the following clarification: 100% ownership by GCC nationals is permitted and foreign (i.e. non-GCC) investors may acquire up to 100% of the company (dependent upon the type of business being undertaken); and
  • Annual submission of audited financial statements required.

Under the terms of the Bahrain-US Bilateral Investment Treaty (BIT), US investors were accorded GCC treatment beginning 1 January 2005.

WITH LIMITED LIABILITY COMPANY (WLL)

A WLL is a company in which partners are responsible for the company debts and liabilities only to the extent of their shareholding in the capital. If the number of partners falls below two, the company must introduce new shareholders within a period of 30 days, or by force of law, be converted to a single person company, or proceed to dissolution. A WLL cannot issue public shares, negotiable warrants, or debentures.

The main features of this type of company are:

  • Limited liability;
  • Banking and insurance activities not allowed;
  • Local operations allowed;
  • Local office presence required;
  • Minimum share capital of BHD 20,000required;
  • Minimum of two partners and promoters required and maximum of fifty;
  • Minimum of two directors required;
  • Local sponsor not required;
  • 100% foreign ownership allowed; and
  • Annual submission of audited financial statement required.

Individual Establishment

An Individual Establishment is a non-incorporated entity and is owned by one individual only. The owner is liable for all debts and liabilities of the business to the extent of his / her personal assets.

Only Bahraini citizens and citizens of the GCC countries residing in Bahrain may register an Individual Establishment.

The main characteristics of this type of establishment are that there is unlimited liability and the owner must be Bahraini or a GCC national no less than 18 years of age.

FOREIGN COMPANY BRANCH

A branch of a foreign company which is incorporated and registered outside the Kingdom of Bahrain may be established as an operational office, a representative office, or a regional office.

The main features of this type of company are:

  • Limits of liability same as the parent company;
  • Local operations allowed only for an operational office;
  • Representative and regional office only permitted to undertake marketing and promotion;
  • Banking and insurance activities allowed (operational offices only);
  • Local office presence required;
  • Minimum share capital not applicable;
  • Branch manager required; and
  • Local sponsor required only for an operational office.