Types of commercial business structures for company registration in Bahrain

There are several Commercial Registration (CR) types to choose from in the Bahrain company registry’s Sijilat portal when registering a company in the Kingdom of Bahrain. The most common entity type in Bahrain is a With Limited Liability (W.L.L) company, which is an equivalent to the Limited Liability Company (LLC).

Other commercial registration options include registering foreign branch / representative offices in Bahrain. The option to establish a Bahrain Free Zone Company (FZC) also exists for specific business activities.

The Bahrain limited liability company (W.L.L)

• A With Limited Liability Company (W.L.L) is the most commonly utilized company registration type in Bahrain by foreign businesses and entrepreneurs looking to pursue commercial activities in Bahrain. This company type provides a good business platform by allowing GCC nationals and foreigners to own 100% of the company shares, reducing international taxation obligations and maximizing local and international profits.
• The WLL company registration requires i) no minimum capital ii) one company director iii) one shareholder who can be of any nationality except in industries where majority foreign ownership is restricted. iv) The name of the company must be followed by the phrase (with limited liability). v) A WLL is required to appoint at least a single resident manager in Bahrain. Refer to this FAQs page on the Sijilat portal to view activities and their ownership restrictions.
• To engage in commercial activities in Bahrain, a company must be registered with the Bahrain Ministry of Industry and Commerce (MOIC). All Bahrain business entities must apply for one of the following licenses:
  • A trade license for buying and selling of goods including wholesale or retail trade enterprises, contractors, hotels, transport and storing establishments etc.
  • An industrial license to discover natural resources or transform raw materials into manufactured products.
  • A commercial or professional license to practice any profession such as engineering consultancy, auditing and accounting, business set up, medical and educational services.

The Bahrain free zone company (FZC)

• A free zone entity is recommended for Clients who intend to use Bahrain as a regional manufacturing or distribution base, where they anticipate that the bulk of their sales will be outside of Bahrain.
• The free zone company registration process should not exceed one week for Bahraini, GCC and US citizens. For other foreign investors, it may take up to two weeks after receipt of the appropriate documents by the competent authorities. It is worth to highlight that, registering a company does not include the process of obtaining a license. The time that it takes to obtain a license depends on the activity selected.
• There are several benefits and incentives for companies operating within the Free Zones such as zero customs duties (5%) on imports/exports as well as government rebates on electricity and land.
• A free zone trading company must confine business activities to within that zone and cannot cater to customers in the Bahrain mainland, unless using a local sponsor.
• Company licenses are renewable annually after submitting annual audited financial statements to the FZ Authority.
• Company registration in the Bahraini International Investment Park (BIIP) allows Clients’ to enjoy a 5% customs duty exemption on imports of raw materials, plant machinery and spare parts imported for manufacturing purposes.
• The BIIP concentrates on several key industries, including food and beverage, fast-moving consumer goods, plastics and fiberglass, pharmaceuticals, chemicals, light engineering, and services.
• Incentives in BIIP include i) 100% foreign ownership and ii) five years exemption from Bahrainization quotas and iii) no recruitment restrictions for the first five years and iv) lease land at a competitive rental rate of 1 BHD per square meter per year and v) Government grants.
• Its strategic location is 3 km away from the port, and 25 km from Saudi Arabia.
• The Bahrain International Investment Park is ideal for large manufacturing operations, including food process, medical technology, electronics, and materials. Export led services including insurance claims, administration, and software and information systems.
• Bahrain Investment Wharf (BIW) is a mixed-use industrial, business, logistics, commercial and residential development estate.
• Bahrain Logistics Zone (BLZ) company registration is ideal for logistics companies as well as value-adding services such as component assembly, packing and packaging, labelling, testing and repair, mixing, weighing and filling, and other light manufacturing activities.

Bahrain branch office of foreign company

• Bahrain branch office is only recommended to businesses when they are operating within the engineering and financial services industries and are looking to establish regional headquarters in Bahrain
• To incorporate a Branch entity, the parent company is required to issue a bank guarantee of at least US$133,000 to the Ministry of Finance and National Economy.
• A branch office can perform similarly to an LLC to secure business premises, invoice Bahrain customers, sign local sales contracts and receive income from clients both locally and internationally.
• A resident local Bahrain agent or distributor must also be appointed to sponsor visas and certain operations licenses.
• All branches of foreign companies, must submit annual audited financial statements to the MoIC, along with the company’s articles of association.
• If you intend to open a branch of a foreign company in Bahrain, you will need to provide the following documents and information.
  • A decision from the parent company to open the branch in the Kingdom of Bahrain in the form of a Board Resolution.
  • Parent company documents including i) commercial registration certificate and ii) a copy of the company s memorandum of association and any other amendments and iii) audited financial statements.
  • A power of attorney for the Bahraini branch manager.
  • A letter of guarantee for the branch.
• All documents must be attested. It is important to note that Bahrain is a signatory to the Hague Apostille Convention. If the documents were issued by another signatory country, there would be no need for further legalization after obtaining the Apostille stamp. However, once these documents arrive in Bahrain, if they are not in Arabic, they will need to be translated into Arabic by a recognized translation firm in Bahrain.

The Bahrain shareholding company (BSC)

• Alternatively known as a public joint stock company or as a public limited liability in most western jurisdiction, this entity is suitable for investors seeking to establish large projects or operations which will require a large capital investment. A BSC is recommended when Clients are planning to offer shares of their company to the public by listing on the Bahrain Bourse (BHB).
• The primary requirements to form a BSC include i) a minimum share capital of US$663,000 and ii) a minimum of 2 members and iii) a board of directors with at least three members.
• Certain commercial activities, such as banking, insurance underwriting and investment, are restricted to joint-stock companies. Moreover, joint-stock companies face no limitation on the number of shareholders, but it should be noted that a minimum of two shareholders are required except in relation to companies established by Amiri Decree.
• A joint-stock company provides a number of minority shareholder protections. For example, any holder of a minimum of 10% of the company’s capital is entitled to appoint a director. In addition, such shareholder may unilaterally call for a meeting of the general assembly. Shareholders also have statutory pre-emptive rights to any equity issuance and to any convertible bond issuance.
• Considering the foregoing, closed joint-stock companies may provide a preferable structure with a balance between minority shareholder protections and the use of corporate governance best practices among varied arm’s length shareholders operating in Bahrain. These benefits should be weighed against the high capital requirements for such entities.

The Bahrain representative office

• The establishment of representative offices of foreign entities in Bahrain is also permitted by the Commercial Companies Law. A representative office is not permitted to conduct any profit-making activities within Bahrain.
• It is mandatory for a local Bahraini agent or distributor to be appointed to represent a foreign company locally.
• A representative office is best used for the promotion and marketing of the parent company’s business and to conduct local or regional market research.

Shareholder agreement with a Bahrain or US national

• Bahraini company law provides foreign companies with the power to draft flexible profit-sharing arrangements, which is structured differently to shareholding percentages. Healy Consultants Group can draft a legal shareholders agreement outlining terms and conditions, shareholder restrictions, expectations and remuneration for the same.
• Through a legal shareholders agreement, a nominee shareholder will be designated as a silent partner who will not be involved in any way in the daily activities of the Client’s Bahraini entity. The foreign investor will legally be in full control of both the business and bank account.
• The shareholder agreement is signed by both the investor and the nominee and is witnessed by two different parties from each side. The shareholders agreement is a legally binding document and is valid within Bahraini courts to arbitrate any dispute between the investor and the local partner.
• Contracts signed between international parties are permitted to select the law and jurisdiction which will govern the signed contract. If a jurisdictional law is not selected by the parties, then the contract will by default be governed by the Bahraini Civil Code. The parties may also agree in writing to refer disputes to arbitration.
• The 2006 Bahrain-US Free Trade Agreement affords US citizens full access to all business activities within Bahrain, removing all restrictions on US citizens and USA companies, allowing 100% ownership of shares of Bahrain business entities in all industries.
• US citizens are not permitted to be appointed as nominee shareholders for joint venture businesses. Bahraini nationals will still be required as 51% nominee shareholders in businesses where the activity is restricted for foreigners.
• While foreign companies generally prefer to establish a Bahrain company with a Bahraini national who will be a silent partner, there are advantages to having an active local Bahrain shareholder. These advantages include i) introduction to potential customers and suppliers; ii) preference in the allotment of government contracts; iii) assistance in the navigation of Bahrain Government bureaucracy and iv) assistance with immigration and visa matters.
• It is necessary that if any shareholder wishes to sell their allotted shares, that they first offer these shares to the other shareholders within the organization by way of pre-emption, unless the other shareholders have previously agreed to waive this 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 Bahrain FZ company and the Bahrain LLC.

• Approximately, how much time will be required to open a 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.