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An archipelago composed of 33 islands, Bahrain is an Arab monarchy in the Persian Gulf, located between the Qatar peninsula and the north-eastern coast of Saudi Arabia. Bahrain has been one of the Gulf's most significant commercial centres for more than 4,000 years.
Export and manufacturing establishments are strongly supported by the government of Bahrain, especially in terms of land acquisition for setting up a factory. Corporate law in Bahrain is not unlike that in western countries, in that businesses can be run as limited liability operations, private companies or other types of incorporations. There are sundry free trade zones in the region, setting up a business where brings along with it a supplementary exemption from commercial taxes, import and export duties, land tax, building and property license fees, and limits on the transfer of capital invested there.
A business setup in Bahrain may be commenced in one of several ways, the most common one is through a limited liability company. One may also set up a free zone company, a branch, or a representative office of one’s overseas company.
Below is an account of the available commercial legal structures for company formation in Bahrain.
1. Bahrain Shareholding Company (B.S.C.) – Public
A public shareholding company comprises a number of promoters (not less than 7) who subscribe therein through negotiable shares. Accordingly, a partner shall be liable for the company’s debts and liabilities only to the extent of the value of one’s shares.
Main Features
- Limited liability
- Commercial, banking, insurance and investment activities allowed
- Local office presence required
- Minimum share capital required is BD 1,000,000
- Minimum number of founding shareholders required is 7
- Minimum number of directors required is 5
- Annual submission of audited financial statements required
- GCC nationals and foreign investors are permitted to own company shares
- In accordance with the Bahrain-US Free Trade Agreement (FTA), US investors are accorded Most Favoured Nation (MFN) treatment similar to GCC citizens, effective as of 1 January 2005
Ideal For
People planning to offer shares to the public by listing their company in the Bahrain Bourse (BHB).
2. Bahrain Shareholding Company (B.S.C.) – Closed
A closed shareholding company comprises a number of persons (not less than 2) who subscribe therein through negotiable shares. Such shares may not be offered to the public for subscription.
Main Features
- Limited liability
- Banking and insurance activities allowed
- Local operation allowed
- Local office presence required
- Minimum share capital required is BD 250,000 (a minimum of 50% of the capital to be paid initially at the time of incorporation, the balance to be paid within 3 years)
- The nominal value of each share shall not be below BD 0.1 and shall not exceed BD 100
- Minimum number of partners and promoters required is 2
- Minimum number of directors required is 3
- Local sponsor not required
- Annual submission of audited financial statements required
- Nationals of the Gulf Co-operation Council (GCC) are permitted 100% ownership
- Foreign (non-GCC) investors may acquire up to 100% of the company
- Under the terms of the Bahrain-U.S. Bilateral Investment Treaty (BIT), U.S. investors were accorded MFN treatment, effective as of 1 January 2005
3. With Limited Liability Company (W.L.L.)
A limited liability company is one of which partners are responsible for the debts and liabilities of the company only to the extent of their shareholding in the capital. If the number of partners falls below 2, the company must introduce new shareholders within a period of 30 days, or by force of the law, be converted to a single person company, or proceed to dissolution. A limited liability company cannot issue public shares, negotiable warrants, or debentures.
Main Features
- Limited liability [there being two categories of partners: limited partners or shareholders, and partners with unlimited liability (joint partners)]
- Banking, insurance and investment activities not allowed
- Local operations allowed
- Local office presence required
- Minimum number of partners and promoters required is 2, and the maximum is 50
- Minimum number of directors required is 2
- Local sponsor not required
- 100% foreign ownership allowed
- Annual submission of the audited financial statement required
Ideal For
Foreign entrepreneurs looking to do business in Bahrain. A W.L.L. allows one to maximize one’s profits while legally minimizing international tax liabilities.
4. Partnership Company
A partnership company is a company without limited liability, formed between two or more persons under a specific name, in which partners assume joint responsibility, to the extent of all their personal assets, for the debts and liabilities of the partnership.
Main Features
- Unlimited liability
- Banking, insurance and investment activities not allowed
- Local operations allowed
- Local office presence required
- Minimum share capital not applicable
- Minimum number of partners and promoters required is 2
- Minimum number of directors required is 2
- Local sponsor not required
- 100% foreign ownership allowed
5. Simple Commandite
A simple commandite is a limited partnership company established by one or more partners, who are jointly liable to the extent of their entire personal wealth for the company’s obligations, and other partner or partners who have invested capital in the company but are not involved in management referred to as “the limited partners”. No limited partner is held responsible for the company’s obligations except to the extent of one’s share in the capital.
Main Features
- Limited liability [there being two categories of partners: limited partners or shareholders, and partners with unlimited liability (joint partners)]
- Banking, insurance and investment activities not allowed
- Local operations allowed
- Local office presence required
- Minimum share capital not applicable
- Minimum number of partners required is 2
- The share of Bahraini partners’ capital shall not be less than 51%
- Minimum number of directors required is 2
6. Commandite by Shares
A commandite partnership by shares is a company established between two categories of partners – one of which is that of joint partners who are jointly responsible, to the extent of their entire personal wealth for the company’s obligations, and the other is that of limited partners (shareholders) who are not liable for the company’s obligations except to the extent of their equity (shares) in the capital.
Main Features
- Limited liability [there being two categories of partners: limited partners or shareholders, and partners with unlimited liability (joint partners)]
- Banking, insurance and investment activities not allowed
- Local operations allowed
- Local office presence required
- Minimum share capital required is BD 20,000
- Minimum number of partners and promoters required is 4
- Minimum number of directors required is 2
- An external auditor is required
- Local sponsor not required
- 100% foreign ownership allowed
7. Single Person Company (S.P.C.)
A single person company is a company the capital of which is fully owned by a single natural or corporate person. The proprietor of the capital of the company shall be liable only to the extent of the capital allocated for the company.
Main Features
- Limited liability
- Banking, insurance and investment activities not allowed
- Local operations allowed
- Local office presence required
- Minimum share capital required is BD 50,000
- Minimum number of partners required is 1
- Minimum number of directors required is 1
- An external auditor is required
- 100% foreign ownership allowed (depending on activities)
- Annual submission of the audited financial statement required
8. Individual Establishment
An individual establishment in the Kingdom of Bahrain may be registered only by Bahraini citizens and citizens of the Gulf Cooperation Council (GCC) countries (must be resident in Bahrain). An individual establishment is a non-incorporated entity and is owned by 1 individual only. The owner is liable for all debts and liabilities of the business to the extent of his/her personal assets.
Main Features
- Unlimited liability
- The owner must be a Bahraini or GCC national no less than 18 years of age
9. Foreign Company Branch
A branch of a foreign company that is incorporated and registered outside the Kingdom of Bahrain may be established as an operational office, a representative office, or a regional office.
Main Features
- Limits of liability the same as that of the parent company
- Local operations allowed only for operational offices
- Representative and regional offices only permitted to undertake marketing and promotion
- Banking, insurance and investment activities allowed (operational offices only)
- Local office presence required
- Minimum share capital not applicable
- Branch manager required
- A local sponsor is required only for an operational office, with the exception of branches licensed by the Central Bank of Bahrain (CBB) or the Committee for Organizing
- Engineering Professional Practice (COEPP)
Steps for Setting up a Company in Bahrain
Doing business in Bahrain is simple and straight-forward. The steps are –
1.Decide on a Legal Structure
The legal structure can be one of the corporate entities listed above. One must carefully choose the legal structure of your business as it has a direct impact on how the business will be managed, how ownership is held, the personal liability of the owners, etc.
2.Choose a Business Name
The next step is to select the company name based on the guidelines issued by the Ministry of Industry and Commerce (MOIC). One can propose up to 4 names at a time.
3.Commercial Registration of the Company
On verification of the application form and payment of the necessary fees, one can go for commercial registration of the company. For companies, commercial registration papers are issued at the Bahrain Investment Centre and for individual establishments at the Ministry of Industry and Commerce Commercial Registration Directorate.
4.Licensing and Approval
In case, if one does not get the commercial registration papers right away, one will have to apply for a license or get approval from more than one Governmental authority.
5.Other Requirements
Once the company is registered, you will have to comply with other requirements such as opening a local bank account, leasing an office space, hiring local employees, etc.
Cost of Setting up a Business in Bahrain
With regards to the Bahrain company formation cost, it depends on the type of business activity and business license that is chosen.
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