Business entities in Bahrain
Healy Consultants will assist our Clients to engineer the optimum corporate structure for their business projects in Bahrain. There are several ways of starting a new business in Bahrain, the most common being through the formation of a limited liability company (locally known as a WLL). Alternatively, our Clients may establish a free zone company (FZC) or a branch or a representative office of their existing overseas company.
The Bahrain limited liability company (WLL)
- This entity requires i) a minimum paid-up capital of at least US$2,660 ii) two directors iii) two shareholders of any nationality to be incorporated;
- A limited liability company can also be formed by a single individual. This type of company is known as a “single person company (SPC). Additionally, a WLL and SCP must appoint at least one resident manager in Bahrain;
- Trading companies in some sectors are subject to mandatory 51% Bahraini local shareholding joint venture requirements. Companies must also submit i) annual tax returns and audited financial statements and ii) contribute 10% of company profits until the paid-up capital reaches 50% of issued capital;
- Best uses: A WLL is the most commonly used business entity by foreign entrepreneurs looking to do business in Bahrain. This entity will allow our Clients to maximize their profits while legally minimizing international tax liabilities.
The Bahrain free zone company (FZC)
- Foreign or local companies seeking to do business within the free trade zone must first obtain an operations permit from the Free Zone Authority before commencement of activity;
- Import and export companies which only require an office in Bahrain are also permitted to register their business within the Free Trade Zones;
- Companies granted permits to operate within the free zones will enjoy several incentives including zero customs duties and government rebates;
- Best uses: This entity is recommended for our Clients intending to use Bahrain as a regional manufacturing or distribution base, with intent to conducting the bulk of their business outside the Kingdom.
The Bahrain branch
- The Commercial Companies Law permits the registration of a Bahraini branch by a foreign company looking to do business in the country without setting up a subsidiary. This entity can be 100% foreign owned, if their industry of operations is also fully open to the formation of a LLC by foreign shareholders;
- The parent company is required to issue a bank guarantee of at least US$133,000 in favor of the Ministry of Finance and National Economy;
- A branch is permitted to secure business premises, invoice Bahrain customers, sign local sales contracts and receive income from Clients. A resident local Bahrain agent or distributor must also be appointed to sponsor visas and certain operations licenses;
- To register a branch, the foreign company must translate into Arabic and legalize i) audited financial statements ii) Board Resolution authorizing opening of the branch iii) power of attorney issued in favor of the general manager and iv) Memorandum of Association and certificate of incorporation;
- Best uses: This entity is only recommended to our Client in such fields and engineering and financial services industries looking to establish regional headquarters in Bahrain.
The Bahrain shareholding company (BSC)
- This entity is also known as a public joint stock company and is suitable for investors seeking to establish large projects or operations, involving a large investment of funds;
- Main requirements to form a BSC in Bahrain include i) a minimum share capital of US$663,000 ii) minimum of 50 members and iii) board of directors consisting of a minimum of three members;
- Best uses: A BSC is recommended for our Clients planning to offer shares to the public by listing their company in the Bahrain Bourse (BHB), the country’s stocks and securities exchange agency.
The Bahrain representative office
- The Commercial Companies Law also permits foreign entities to establish representative offices in Bahrain. This entity if not permitted to conduct any profit-making activities within the Kingdom;
- Following rep office registration, a local Bahrain agent or distributor must be appointed to represent the overseas company locally;
- Best uses: A representative office is best used for promotion of the parent company’s business and conducting market research.
Shareholder agreement with a Bahrain or US national
- Bahrain company law allows foreign companies draft flexible profit sharing arrangements, which can be different from the shareholding percentages. Healy Consultants will draft a legal shareholders agreement outlining terms and conditions, shareholder restrictions, expectations and remuneration;
- Through a legal shareholders agreement, the nominee will be designated a silent partner who will not interfere in daily activities of the Bahrain limited liability company (or another kind of Bahrain corporate entity type chosen by our Client). The foreign investor legally enjoys full power to solely operate the business and bank account;
- The shareholder agreement will be signed by both the investor and the nominee and witnessed by two different parties from each side. The shareholders agreement is legally valid in the Bahrain courts to arbitrate any dispute between the investor and the local partner;
- The parties to an international contract are free to choose the law and jurisdiction which will govern that contract. If they do not choose an applicable law, the contract will be governed by the Bahraini Civil Code. The parties may also agree in writing to refer disputes to arbitration;
- As the 2006 Bahrain-US Free Trade Agreement affords US citizens the same rights as Bahrain nationals, US citizens and USA companies are allowed to own 100% of shares of Bahrain business entities in all industries. Healy Consultants will be happy to provide our Clients with US nominee services.
The role of the Bahraini or USA shareholder
- While foreign companies prefer to establish a Bahrain company with a silent partner, there are advantages to having an active local Bahrain shareholder. Advantages include i) introduction to potential customers and suppliers ii) preference in the allotment of government contracts iii) navigation through Bahrain Government bureaucracy and iv) assistance with immigration and visa matters;
- Bahraini shares may only be transferred after they have first been offered to the other shareholders by way of pre-emption, unless the other shareholders have agreed to waive their right.
Frequently asked questions
Are there any business entity types in Bahrain that will require me to appoint resident shareholders?In Bahrain, corporate structures do not determine whether a company can be wholly foreign owned. In certain industries including trade and retail, travel and tourism, healthcare and pharmaceuticals, our Clients will require a resident shareholder.
How many resident shareholders will I need to incorporate a Bahrain LLC in a restricted industry?All Bahrain business structures incorporated in restricted industries will usuallly require the resident individual to contribute at least 51% capital to the company.
What are the most common company types in Bahrain?The most commonly incorporated entities in Bahrain are the FZ company and the LLC.
Approximately, how much time will be required to open an limited liability company in Bahrain?On an average, it takes 12 weeks to incorporate a Bahrain private LLC.
What are the advantages of Bahrain business setup?Incorporation of a private limited company in Bahrain will allow our Clients to enjoy multiple advantages including i) easy access to MEA (Middle East & Africa) consumer market ii) easy remittance of profits iii) ease of opening corporate bank account in the country and iv) exemption from corporate taxes, personal taxes withholding taxes, VAT and capital gains taxes.
What are the pre-requisites for the setup of Bahrain company?To complete Bahrain LLC setup, our Clients need to i) find local office premises ii) open a corporate bank account iii) notarize the company documents iv) register the company with the Labor Department v) obtain business license approval and vi) apply for work visas. Healy Consultants knows how to form a Bahrain LLC and can assist with all aspects of of the setup of a Bahrain business. For more information, please refer to our section on steps to incorporation in Bahrain.