11-Feb-2022 Types of Entities in Bahrain

Overview:

Investors who are interested in company formation in Bahrain can choose between several legal structures, with the corporation being the primary business vehicle used in this country. The Commercial Companies Law provides for the formation of types of companies, which are differentiated according to the liability of the investors, the permitted number of investors and other characteristics.

The future activity of the business is important when deciding upon a specific business form, however, it is not the single criterion to be taken into consideration. The minimum share capital, for example, is another factor that can influence the investor’s decision.

Companies in Bahrain can be 100% foreign owned and restrictions apply only in selected business sectors like gas bottling and distribution, construction or fishing. In other business fields, like catering services, a minimum Bahraini investment of 51% is required.

Main types of legal structures in Bahrain

Company registration in Bahrain highlights the main types of companies, and their primary characteristics, in the list below:

1. 1. PUBLIC SHAREHOLDING COMPANY (BSC): This type of company is formed by at least two shareholders who are only liable to the extent of the invested capital; the share value may not be less than 100 Fils and not more than 100 BD.

• a. The share capital is required to be adequate to achieve the purposes of a company with share capital not less than 1 million BD.
• b. The share value may not be less than 100 Fils and not more than 100 BD.
• c. The company is required to appoint one auditor or more.

1. 2. CLOSED SHAREHOLDING COMPANY (Closed BSC): This type of company is formed by at least two shareholders and the company does not offer the shares to the public, unlike in PUBLIC SHAREHOLDING COMPANY (BSC).

• a. The minimum share capital of the company shall be 250,000 BD.
• b. The share value may not be less than 100 Fils and not more than 100 BD.
• c. The share capital of a company (100%) may be owned by non-Bahrainis.
• d. The company is required to appoint one auditor or more.

1. 3. LIMITED LIABILITY COMPANY (WLL): This type of company can have a maximum of 50 partners and they are liable only to the extent of the share capital they have invested in the company.

• a. There is no minimum share capital.
• b. The share capital of a company is divided into equal shares with a value no less than 50 BD each. The share shall not be indivisible or a non-negotiable share.
• c. The company is required to appoint one auditor or more who shall be selected by the general meeting of partners.

1. 4. JOINT LIABILITY COMPANY: formed by two or more individuals who are jointly liable for all of the company’s obligations; in the event of company bankruptcy, all of the founders will also face bankruptcy. 

• a. The law permitted to establish joint liability companies, whatever their kind, between Bahraini and non-Bahraini partners in terms of the practice of freelance jobs or others in accordance with rules and controls issued by a resolution from the MOITC.

1. 5. LIMITED PARTNERSHIP COMPANY: formed by one or more founders who are liable for the partnership’s obligations and one or more partners who have invested in the partnership but they are not part of the administration and they have limited liability, only up to the invested amount.

• a. The limited partner may not interfere in managing the company even under power of attorney, otherwise he shall be jointly liable with the joint partners for the obligations resulted from such works.

• b. The name of a limited partnership company shall only include the names of joint partners, so in case of being a single joint partner, the term “& Co.” is required to be added to his name.

1. 6. COMPANY LIMITED BY SHARES: formed by two types of founders, similar to the limited partnership; the joint partners are fully liable for the debts and actions of the company while the limited partners have, as the name suggests, a liability limited to the amount of their invested capital; it needs to be formed by no less than 4 members.

• a. The number of founders shall not be less than 4.
• b. The company is required to appoint one auditor or more.
• c. The minimum share capital of a company shall be 20,000 BD.
• d. The share capital of a company shall be divided into par value, negotiable, and indivisible shares.

1. 7. SINGLE PERSON COMPANY (SPC): this is a company owned by a single natural person who bears liability for the obligations of the company only up to the extent of the value of the share capital he invested. The single person company shall not undertake any business related to insurance, banks, or investment of others’ funds in general.

• a. The share capital of a company shall be fully paid. The owner of the company shall be liable within the limits of the specified share capital of the company.
• b. The company shall have an auditor.
• c. The company shall submit an audited budget per annum to the Company Affairs Directorate or a letter of assurance by the auditor as an alternative to the financial report unless the loss reaches 50% of the share capital.

The SINGLE PERSON COMPANY (SPC) shall be dissolved in the following cases:

1. i. Death of its owner unless the right of heirs in the share capital of the company and its assets is confined to one person or the heirs decide to continue the company by turning it and taking another legal form.

1. ii. The company shall cease to practise its business due to the insolvency of its owner, failure to pay its liabilities, or its bankruptcy.

1. 8. FOREIGN BRANCH: Each foreign branch incorporated and registered outside the Kingdom of Bahrain that is licensed to practise certain business in Bahrain. This kind of business forms suited to foreign corporations; the branch is an extension of the parent company. 

• a. Head office for the branch is required to be in Bahrain 
• b. All the documents submitted to establish the company must be in Arabic or English. In case of being written in another language other than these two languages, then an Arabic or English translation certified by a competent authorities shall be attached therewith.
• c. The branch is required to have a brand name identical to the original name of the company and followed by the statement “Foreign Branch”.
• d. The branch is required to submit audited annual financial statements showing the financial position of the company.
• e. The branch shall be subject to the applicable laws in Bahrain.

1. 9. REPRESENTATIVE OFFICE: Each foreign branch, incorporated and registered outside the Kingdom of Bahrain that is licensed to practise its business as a representative office for the parent company so as to follow up and supervise its interests in Bahrain. Further representative office cannot be used for commercial activities; it only performs marketing and promotional activities. 

• a. Head office for the branch is required to be in Bahrain 
• b. The representative office shall be subject to the applicable laws in Bahrain.
• c. All the documents submitted to establish the representative office are required to be written in Arabic or English. In case of being written in another language other than these two languages, then an Arabic or English translation certified by the competent authorities shall be attached therewith.
• d. Each representative office incorporated in Bahrain is required to have a brand name identical to the name of the parent company and followed by the statement “Representative Office”.