Business entities in Bahrain

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 choose to set up another type of business entity in Bahrain, such as a free zone company (FZC) as well as a branch or a representative office of their existing overseas company.

The Bahrain limited liability company (WLL)

    foreign investor in Bahrain

  • Locally known in Bahrain as a private limited liability company (WLL), a limited liability company is the type of business entity most commonly used by foreign entrepreneurs willing to do business in Bahrain. Its formation requires i) the appointment of two directors ii) two shareholders and iii) a minimum paid-up capital of US$2,660;
  • It is also possible to form a limited liability company with a sole director and shareholder. This type of company is publicly known as a “single person company (SPC) and requires a minimum investment of US$2,660 before the company is fully registered;
  • SPCs and WLLs are required to appoint a resident manager in Bahrain. Trading companies in some industries are furthermore subject to joint venture requirements with a local partner in Bahrain, who must own at least 51% of the shares;
  • Before incorporation of the company, the Bahrain authorities will require provision of a lease agreement for office premises in Bahrain. After incorporation, details on the shareholding and directorship structure of the company will be publicly available on the Bahrain Registrar of Companies. The company will also be required to i) submit a tax return and audited financial statements to the Bahraini Ministry of Finance and ii) contribute at least 10% of its earnings until its paid-up capital reaches 50% of its issued capital.

The Bahrain free zone company (FZC)

It is possible to obtain a permit to operate in a free zone for companies incorporated both locally and abroad. Such free zone companies are recommended for our Clients intending to use Bahrain as a regional manufacturing or distribution base, with the bulk of their business conducted outside the Bahraini Kingdom. Free zones can also be used by import/export companies who only require an office in Bahrain. In Bahrain free zones, these corporate entities also enjoy zero customs duties and government rebates.

The Bahrain branch

  • The Bahrain Commercial Companies Law regulates the registration of a branch by a foreign company in Bahrain and stipulates they may be 100% foreign owned, if their industry of operations is also fully open to the formation of a LLC by foreign shareholders. Such business entity is allowed to invoice Bahrain customers, sign local sales contracts and receive income from customers. A local Bahrain agent or distributor must be appointed to sponsor visas and licenses. The foreign company must also issue a bank guarantee of US$133,000 in favor of the Ministry of Finance;
  • For the registration of a branch in Bahrain, the incorporation documents of the overseas company must be translated and legalized at i) the Bahrain embassy in the country of incorporation and then ii) by the Ministry of Foreign Affairs of Bahrain. Parent company documents to be translated into Arabic include i) two years audited financial statements ii) a Board of Directors’ Resolution authorizing opening of the branch in Bahrain iii) a power of attorney issued in favor of the general manager of the Bahrain branch and iv) the overseas company’s Memorandum of Association and certificate of incorporation.

The Bahrain shareholding company (BSC)

  • This entity is also known as a public joint stock company and suitable for large projects or operations, involving a large investment of funds or raising private or public capital. If our Client plans to offer shares to the general public to raise capital, we recommend forming a public joint stock company. This entity is similar to a UK Public Limited Company or German Aktiengesellschaft (AG);
  • Main requirements to form a BSC in Bahrain include: i) a minimum share capital of US$663,000 ii) a minimum of 50 members and iii) a Board of directors consisting of a minimum of three members.

The Bahrain representative office

The representative office of a foreign company is not permitted to make sales within Bahrain. Such an office will only be allowed to engage in activities such as i) promoting the business of the parent company and ii) market research. A local Bahrain agent or distributor must be appointed to represent the overseas company locally.

Type of Business entityLLCFree zonebranchRep office
Also known as?

WLL/SPCFree zoneBranchRep. office
Allowed to issue sales invoices?YesYesYesNo
Allowed to sign contracts?YesYesYesNo
Corporate tax payable0%0%0%0%
Allowed to import goods?YesYesYesNo
Allowed to export goods?YesYesYesNo
Type of business permittedAll except trade, retail, mediaAllAll except trade, retail, mediaOnly research and marketing
Bahrain bank account allowed?YesYesYesYes
How long to open company bank account?2 weeks2 weeks2 weeks2 weeks
Can rent an office in Bahrain?YesYesYesYes
Tenancy agreement required?YesYesYesYes
Can conduct business within Bahrain?YesNoYesNo
Can apply for immigration visas?YesYesYesYes
Bahrain employment visa feesUS$3,950US$3,950US$3,950US$3,950
Can hire staff in Bahrain?YesYesYesYes
Incorporation period6 weeks4 weeks8 weeks8 weeks
Shelf companies allowed?YesYesNoNo
Minimum shareholders1100
Minimum directors allowed1100
Minimum capitalUS$2,660US$2,66000
Bearer shares?YesYesNoNo
Public registrar of companies?YesYesYesYes
Annual accounting?YesYesYesNo
Corporate directors allowed?YesYesYesYes
Bahrain resident company secretary required?NoNoNoNo
Can buy Bahrain property?YesYesYesNo
Need to travel for company set up?NoNoNoNo
Annual tax return?YesYesYesYes
Annual audited financial statements?YesYesYesYes
Access to Bahrain double tax treaties?YesNoYesYes
Annual license renewal?YesYesYesYes
Bahrain national director or shareholder required for trading activities?NoYesNoNo
Allowed own shares in other Bahrain companies?YesYesNoNo
Government feesUS$1,031US$1,031US$1,031US$1,031
Healy Consultants feesUS$23,131US$25,131US$26,131US$26,131
Draft invoiceBahrain LLC invoiceBahrain FZ invoiceBahrain branch invoiceBahrain RO invoice

Shareholder agreement with a Bahrain or US national

  1. 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;
  2. 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;
  3. 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;
  4. 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;
  5. 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

  1. 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;
  2. 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

Contact us

For additional information on our LLC setup services in Bahrain, please email us at email@healyconsultants.com. Alternatively please contact our in-house country expert, Ms. Chrissi Zamora, directly:
client relationship officer - Chrissi