Rayhana Kapadia from law firm Baker & McKenzie explains how to establish a corporate presence in Bahrain
In assessing whether, and how, to set up a business in Bahrain, the starting point is the type of activity that you are proposing to conduct. That forms the foundation for establishing whether the business activity is possible, who can carry out such an activity and who can be stakeholders, the licensing requirements for the business, which legal structure is required to perform the business activity, and the formalities required to set up the business. The following guide sets out a broad overview of the process of establishing a company in Bahrain, borne out of our experience of setting up businesses in Bahrain for our global clients over a wide range of industry sectors in conjunction with local counsel.
Types of Business Activities
In Bahrain, you may carry out any type of business activity unless it is one of the following prohibited activities:
- Alcoholic drinks manufacturing
- Narcotics manufacturing
- Weapons manufacturing
- Import of any type of waste and treatment, storage and dumping of radioactive materials and toxic waste
- Import, manufacturing and dealing (not removing) of asbestos and its by-products
- Import and industrial use of restricted chemicals
- Pearl farming
- Cigarette manufacturing
- Import of automatic cigarette vending machines
- Letter post (exclusive to Bahrain Post)
If the business activity is permitted, then you need to establish whether it is restricted to being carried out by Bahraini and/or GCC citizens or companies. The following is a list of some of those businesses that may be restricted in whole or part to Bahraini or GCC citizens or companies:
Real estate services and rental and management of land and buildings (not including buying and selling of real estate, or management and development of private property)
- Press, publication and distribution of daily, non-daily and specialised newspapers and magazines
- Printing press
- Cinema, television, radio, and theatre production and distribution
- Cinematic filming studio
- Management and operation of cinemas and film distribution
- Cinema halls
- Goods land transport
- Passenger land transport
- Tourist land transport
- Domestic sea cruises
- Driving instruction
- Motorcycle rental
- Car rental
- Call taxi
- Petroleum products supply (petrol stations)
- Gas bottling and distribution
- Cooker refilling and repairing
- Gas cylinder distribution
- Handing and processing formalities with government departments and authorities
- Hajj and Umra services
- Foreign manpower supply
- Commercial agencies
- Small business activities
- Book-keeping and accounting services (not including auditing)
- Import, export and sale of racing car fuel
- Cargo clearing
- Trade (including sale, purchase, import and export)
- Travel and tourism offices
- Medical clinics and centres
The Commercial Companies Law (Decrees No. 21 of 2001) and various ministerial orders (Companies Laws) together form the primary legal framework governing the formation of commercial legal structures in Bahrain.
The Ministry of Industry & Commerce in Bahrain is principally responsible for issuing commercial registrations and administering the Companies Laws. It is important, however, to be aware that other ministries and/or governmental agencies may also be involved, depending on whether the chosen business activity requires it.
The Ministry of Industry & Commerce is principally responsible for issuing commercial registrations
After determining which, if any, ownership restrictions apply, you are able to establish which legal structure is appropriate to carry out the business activity. Bahrain has many legal structures, but the common ones set up by international clients are: a Bahraini closed joint stock company; a limited liability company; a single person company; a branch or a representative office. The overleaf table summarises the main features of each of the commonly used legal structures.
Carrying out any business activity in Bahrain will require you to hold a commercial licence. A commercial registration licence-holders business activities are limited to those listed in its licence. It is important to note that certain activities may require additional licensing or restrictions from applicable regulatory authorities. Banking activities require additional licensing from the Central Bank of Bahrain.
Making the Application for Commercial Registration
Having determined your optimal legal structure, you are usually ready to make an application to the Ministry of Industry & Commerce. In order to register a company in Bahrain, it is common to appoint a registration agent who will submit a completed Ministry of Industry & Commerce application for registration form with the following documentation:
- A copy of the draft memorandum and/or articles of association for the legal structure if applicable
- A certified, legalised and authenticated copy of each corporate shareholders governing bodys minutes or board resolution approving the formation of the entity in Bahrain
- A notarised, authenticated and legalised power of attorney from each corporate shareholders governing body authorising a registration agent to sign on behalf of a shareholder
- A certified copy of the commercial registration, constitutional documents, trading licence and authorised signatory statements for each corporate shareholder
- A copy of the last audited financial accounts for each corporate shareholder
- A copy of each shareholders passport and, if a non-GCC shareholder, also a CV (resume) for the individual and a bank reference letter
- A copy of a lease for the business premises
- Where a company is being formed, an original capital deposit letter from the bank evidencing required capital has been deposited
- Financial auditors report for in-kind capital contribution towards the issued capital, if any
- In the case of a branch, the original parent guarantee letter
- Passport copies and CVs for each director to be appointed
It is important to note that the Ministry of Industry and Commerce in Bahrain has the discretion to require additional documentation.
All documents may be in English, with the exception of the memorandum of association of a company. This is required to be in English and Arabic as it will be signed in the presence of a notary public.
The length of time it takes to complete the filing of the application, registration and subsequent requirements of establishing your business will depend on the legal structure chosen. Incorporating a Bahraini closed joint stock company and attending to subsequent requirements takes approximately two to three weeks. Incorporating a limited liability company or a single person company or establishing a foreign branch and attending to subsequent requirements takes approximately five to seven business days.
These timeframes may be longer if certain business activities, such as banking, require regulatory approvals or you must apply for no-objection certification from relevant ministries before the application to the Ministry of Industry & Commerce.
Following the application and registration of your legal structure, the main post-registration steps relate to your employees in Bahrain and the authorised persons of your legal structure.
An employer is required to register any expatriate employees with the Labour Market Regulatory Authority. The number of expatriate employees will be subject to restrictions depending on a number of factors, including the type of business activity. An employer is required to register any employees who are Bahraini nationals with the Ministry of Labour. Employers will make contributions on behalf of all their employees, regardless of nationality, to the Social Insurance Organisation at the applicable rates.
The other main step after the application and registration process is to register the signatures of your authorised persons with the Bahraini Chamber of Commerce & Industry.
Foreign companies may operate in Bahrain through a Bahraini agent. An agency/sponsorship/distributor contract is the legal structure that enables the performance of the business activity. A key feature to note about commercial agencies is that the agency and commercial laws in Bahrain are protective of Bahraini agents, whether commercial or otherwise, and may give rise to them, being entitled to receive compensation upon termination or expiration of the agency or distributorship contract in certain circumstances. The timeframe for establishing an agency relationship depends primarily on the negotiation and retention process with a Bahraini agent.
Ministry of Industry & Commerce
Tel: (+973) 1 756 8000 (Industry affairs)
Tel: (+973) 1 757 4777 (Commerce affairs)
Central Bank of Bahrain
Tel: (+973) 1 754 7777
Labour Market Regulatory Authority
Tel: (+973) 1 750 6055
Ministry of Labour
Tel: (+973) 1 787 3777
Social Insurance Organisation
Tel: (+973) 1 700 0707
Rayhana Kapadia is a senior associate at the Bahrain offices of law firm Baker & McKenzie.
Tel: (+973) 1 710 2000
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