Business entities in Bahrain in 2021
Healy Consultants Group is able to engineer a corporate structure that will optimally suit our Clients intended businesses in Bahrain. There are various options available to entrepreneurs looking to capitalize on business opportunities in Bahrain. The most commonly formed business entity in Bahrain is a With Limited Liability (WLL) company which is the equivalent to the internationally standard Limited Liability Company (LLC). Alternatively, branches and representative offices are also commonplace for foreign companies with existing overseas entities. The option to establish a Free Zone Company (FZC) also exists, although the benefits are very sparse and therefore is only recommended for very specific business activities.
The Bahrain limited liability company (WLL)
- The basic establishment requirements of a WLL entity are i) a minimum paid-up share capital of at least US$2,660, ii) two company directors and iii) two shareholders who can be of any nationality except in industries where majority foreign ownership is restricted. Refer to this website to view activities and their ownership restrictions;
- A Limited Liability Company can also be established by a sole entrepreneur, this type of entity is known simply as a “Single Person Company” (SPC). Both WLL and SCP entities are required to appoint at least a single resident manager in Bahrain;
- Trading companies in certain sectors require a mandatory 51% Bahraini local shareholder in order to legally do business;
- A WLL is the most commonly utilized business entity in Bahrain, in particular by foreign entrepreneurs looking to pursue commercial prospects in Bahrain. This entity provides a good business platform to reduce international taxation obligations, thereby maximizing profits both locally and internationally earned;
- Companies involved with exploration, extraction, production and refining within the oil and gas industry are subject to a 46% corporate tax rate;
- 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)
- In order to establish a company in a free trade zone, both foreign and local companies are required to obtain an operations permit from the Free Zone Authority before they will be able to commence business activities;
- Organizations that operate within the import/export industry are able to register their entities within Free Trade Zones in order to provide their business with an office in Bahrain;
- There are several benefits and incentives for companies operating within the Free Zones such as zero customs duties on imports/exports as well as government rebates on electricity and land;
- Best uses: This entity is recommended for Clients who are intending to use Bahrain as a regional manufacturing or distribution base, where they anticipate that the bulk of their business will be conducted outside of Bahrain.
The Bahrain branch
- The Commercial Companies Law permits the registration of a branch in Bahrain of a foreign company looking to do business in the country. However, this entity can only be 100% foreign owned, if their intended business is not among the list of reserved activities;
- In order 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 is able to perform similarly to an LLC in that it is able 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;
- Documentation required to register a branch include; 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. All of these documents need to be translated into Arabic and legalized;
- Best uses: This entity is only recommended to our Clients when they are operating within the engineering and financial services industries and are looking to establish regional headquarters 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;
- The primary requirements to form a BSC include i) a minimum share capital of US$663,000, ii) a minimum of 50 members and iii) a board of directors with at least three members;
- Best uses: 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 country’s stocks and securities exchange agency.
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;
- Best uses: 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.
|Type of Business entity||LLC||Free zone||branch||Rep office|
|Also known as?||WLL/SPC||Free zone||Branch||Rep. office|
|Allowed to issue sales invoices?||Yes||Yes||Yes||No|
|Allowed to sign contracts?||Yes||Yes||Yes||No|
|Corporate tax payable||0%||0%||0%||0%|
|Allowed to import goods?||Yes||Yes||Yes||No|
|Allowed to export goods?||Yes||Yes||Yes||No|
|Type of business permitted||All except trade, retail, media||All||All except trade, retail, media||Only research and marketing|
|Bahrain bank account allowed?||Yes||Yes||Yes||Yes|
|How long to open company bank account?||2 weeks||2 weeks||2 weeks||2 weeks|
|Can rent an office in Bahrain?||Yes||Yes||Yes||Yes|
|Tenancy agreement required?||Yes||Yes||Yes||Yes|
|Can conduct business within Bahrain?||Yes||No||Yes||No|
|Can apply for immigration visas?||Yes||Yes||Yes||Yes|
|Bahrain employment visa fees||US$3,950||US$3,950||US$3,950||US$3,950|
|Can hire staff in Bahrain?||Yes||Yes||Yes||Yes|
|Incorporation period||6 weeks||4 weeks||8 weeks||8 weeks|
|Shelf companies allowed?||Yes||Yes||No||No|
|Minimum directors allowed||1||1||0||0|
|Public registrar of companies?||Yes||Yes||Yes||Yes|
|Corporate directors allowed?||Yes||Yes||Yes||Yes|
|Bahrain resident company secretary required?||No||No||No||No|
|Can buy Bahrain property?||Yes||Yes||Yes||No|
|Need to travel for company set up?||No||No||No||No|
|Annual tax return?||Yes||Yes||Yes||Yes|
|Annual audited financial statements?||Yes||Yes||Yes||Yes|
|Access to Bahrain double tax treaties?||Yes||No||Yes||Yes|
|Annual license renewal?||Yes||Yes||Yes||Yes|
|Bahrain national director or shareholder required for trading activities?||No||Yes||No||No|
|Allowed own shares in other Bahrain companies?||Yes||Yes||No||No|
|Healy Consultants fees||US$25,131||US$25,131||US$26,131||US$26,131|
|Draft invoice||View invoice PDF||View invoice PDF||View invoice PDF||View invoice PDF|
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.
The role of the Bahraini or USA shareholder
- 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 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.