Most of the principal types of business entities in Bahrain are governed by the Law of Commercial Companies, Decree 28 of 1975, as periodically amended. This decree contains the law relating to companies, partnerships and branches. In addition to the aforementioned entities, Ministerial Order 25 of 1977 created a specific entity known as the exempt company, an offshore company introduced in order to encourage foreign companies to locate their regional headquarters in Bahrain. To further promote Bahrain's goal of being the regional financial centre, many of the offshore entities are banking units and investment banks.
In order to establish a joint-stock company, limited liability company, or partnership in Bahrain, at least 51% of the capital must be owned by Bahraini nationals. The laws and regulations governing the establishment of offshore exempt companies and offshore banking companies significantly relax the usual restrictions against foreign ownership.
The terms used in the legislation are difficult to translate precisely. For example, the term "company" is often used to mean both company and partnership and the term "partner" to mean both partner and shareholder. A company or partnership is defined by the Law of Commercial Companies as a contract under which persons undertake to participate in a financial enterprise with a view to profits, each contributing money or services and dividing the profits or losses resulting from the enterprise.
Bahraini law allows for the establishment of the following types of companies and partnerships:
Joint Stock Company;
Limited Liability Company;
General Partnership (a partnership under a collective name);
Partnership Limited by Shares; and
Any association which does not assume one of the prescribed forms will not be recognised by law and any persons who enter into a contract in the name of such an unrecognised entity are liable jointly and severally to third parties for resultant obligations.
Forms of Business Organisation
Joint Stock Company
A joint stock company is a pure shareholding company in which all of the members are liable for company debts to the extent of the nominal value of their shares. This type of company can take the form of an exempt joint stock company, a closed joint stock company or a public joint stock company. While the latter type requires a minimum of 51% Bahraini ownership, the exempt and closed joint stock companies may be 100% foreign owned. All forms of the joint stock company must maintain permanent offices in Bahrain.
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