Investors interested in forming a company in Bahrain can pick from a variety of legal forms, with the corporation being the most common business vehicle in the country. The Commercial Corporations Law allows for the formation of numerous types of companies based on the investors’ liability, the maximum number of investors allowed, and other factors.
When deciding on a business form, the future activity of the company is vital, but it is not the only factor to consider. Another aspect that can impact an investor’s selection is the minimum share capital.
Only certain business areas, such as gas bottling and distribution, building, and fishing, are subject to limitations. A minimum Bahraini investment of 51 percent is required in other business categories, such as catering services.
Limited Liability Company (WLL)
A Limited Liability Firm (LLC) is a corporate entity in which the owners are only legally responsible and liable for the debts of the company up to the amount of capital they invested. They combine the characteristics of a corporation with those of a partnership or a sole proprietorship. The following items must be collected to form a Limited Liability Company in Bahrain:
- A BDH 20,000 minimum paid capital
- Two directors
- Two stockholders from any country
- A minimum of two and a maximum of fifty participants
In Bahrain, a Limited Liability Company can be held entirely by foreigners. Foreign investors and businesses that want to do business in Bahrain should choose WLL. A WLL allows business owners to maximize earnings while paying the least amount of international tax.
Free Zone Company (FZC)
A free zone company is a company that is based in a free economic zone. Companies are taxed lightly and leniently or completely exempted to stimulate economic activity in this region. Foreign investors who want to start a business in a free trade zone must first get a trade permit from the Trade Zone Authority before starting any business activities. Despite the necessity of only having an office in Bahrain, the Free Zone Company also structures import and export companies. Free Zone companies enjoy many advantages, including no government customs tariffs and lower taxes.
Bahrain Branch Office
A corporation or organization establishes a branch office. It is not a separate legal entity while being geographically separated from the central office. The Commercial Companies Law in Bahrain allows international companies to register a Bahraini branch. If the subsidiary’s industry of operations allows for the formation of an LLC by foreign shareholders, it can be 100 percent foreign-owned.
The following procedures must be followed to register a branch:
- Financial statements that have been audited.
- A Board Resolution approving the branch’s opening.
- Granting of a power of attorney to the general manager.
- A Memorandum of Association and a Certificate of Incorporation.
All of the certificates, statements, and letters stated above must be validated and translated into Arabic.
Engineering and financial services are two industries where a branch office excels.
Shareholding Company
A public joint-stock corporation is sometimes known as a shareholding firm. A BSC is best suited to companies looking to embark on large-scale projects that require significant financial and capital expenditure.
The following are the conditions for establishing a BSC:
- The minimum share capital requirement is BHD 250,000.
- A minimum of 50 participants.
- A minimum of three members on the Board of Directors.
A BSC is best for companies who want to sell their stock to the public by listing their company on the Bahrain Bourse (BHB), Bahrain’s securities exchange agency.
Representative Office
A Representative Office, in general, is a legal office created by an organization or a firm to conduct business in countries where a branch office or subsidiary is not permitted. Bahrain’s Commercial Companies Law allows for the formation of Representative Offices. To open a Representative Office in Bahrain, a local agent or distributor must be appointed to represent the foreign company in Bahrain.
If you want to start a business in Bahrain, or anywhere else in the globe for that matter, you must choose the correct legal structure for the type of business you want to run. Your firm will run more easily and efficiently if you choose the right business entity. When it comes to starting a business in Bahrain, you can choose from a variety of options.
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