A foreign investor in Bahrain works under the Commercial Companies Law (Legislative Decree No. 21 of 2001, as amended) and a Prime Minister's decision that lists the activities foreign-capital companies may carry on and on what terms. This guide explains the points that decide your structure. We assist clients with Bahrain from our office in Kuwait, in cooperation with our partners in Bahrain. This guide focuses on company forms and foreign ownership rules. Related guides are linked at the end of this article.
Which law applies (Articles 1 to 4)
Article 1 defines a company as a contract in which two or more persons undertake to take part in an economic venture aimed at profit, each contributing money or work and sharing profit and loss. It also allows a company to consist of a single person under the Law. Under Article 4, every commercial company established in or based in Bahrain is subject to the Law. A company established in Bahrain is domiciled there and has Bahraini nationality, but that does not give it the rights that belong only to Bahrainis. Companies can be set up by decree or law between governments, as an exception to some or all of the Law's provisions.
The five company forms (Article 2)
A commercial company set up in Bahrain must take one of these forms:
- general partnership;
- limited partnership;
- shareholding company;
- limited partnership by shares;
- limited liability company.
Decree-Law No. 28 of 2020 cut the list to six forms, and Decree-Law No. 38 of 2025 repealed the association in participation (joint venture), leaving five. Existing joint ventures had three months from the date the decree-law took effect to adjust. A limited liability company may be owned by one natural or legal person (Article 261), and Article 1 lets a company consist of a single person. A closed shareholding company may also be set up by one person under conditions the Minister sets (Article 226, as replaced by Decree-Law No. 38 of 2025).
A company that takes none of these forms is null and void, and the persons who contracted in its name are personally and jointly liable to third parties (Article 2(b)).
Foreign ownership: the Prime Minister's decision
The Commercial Companies Law (Article 345(b), added by Decree-Law No. 28 of 2015) provides for a Cabinet decision to set which activities foreign-capital companies may carry on. Prime Minister's Decision No. 40 of 2021, published in Official Gazette No. 3544 on 5 August 2021, does this through schedules (Nos. 2 to 5) attached to the decision. Its main rules, as amended, are:
- Companies wholly or partly owned by non-Bahraini partners may carry on the activities in Schedules 2, 3, 4 and 5 on the stated conditions (Article 1).
- For the activities in Schedule 3, the company must be a Bahraini joint stock company or a limited liability company (Article 2).
- Wholly foreign-owned crude oil and natural gas extraction requires that the foreign parent has signed, or is at the final stage of signing, an exploration and production agreement with the Government of Bahrain (Article 3).
- Online selling (item 106 of Schedule 3) is allowed on condition that the company's invested capital in Bahrain is at least BHD 50,000 in the first year (Article 4).
- Companies 100% owned by non-Bahraini partners may be licensed for the activities in Schedule 4 if the capital of the company established in Bahrain is at least BHD 100,000 or the foreign-currency equivalent, the parent company's total revenue is at least EUR 750 million or the equivalent in BHD, and the company is present in ten markets (Article 5, as replaced by Decision No. 53 of 2024).
The decision's preamble also refers to a law on treatment of Gulf Cooperation Council nationals in economic activity in Bahrain (Law No. 24 of 2004) and to free trade agreements with the United States, Singapore and the EFTA states. We have not read the schedules, so check your exact activity against them and against any later amendment before you commit to a structure.
Name, articles and legal personality
- A person can reserve a name for use when setting up a company. The reservation lasts thirty days and can be renewed twice for equal periods, subject to the Minister's conditions and a fee (Article 5 bis, added by Law No. 50 of 2014).
- The memorandum of association and any amendment must be written in Arabic and legalized by the Notary Public. Otherwise they are null and void (Article 6, as changed by Decree-Law No. 38 of 2025, which removed the joint-venture exception).
- Managers or directors must publish the memorandum and its amendments as the Law requires. Without publication, they have no effect against third parties (Article 7).
- A company acquires legal personality by registration in the Commercial Registry (Article 8).
Protecting the corporate shield
Article 18 bis, as replaced by Decree-Law No. 38 of 2025 (issued September 8, 2025), makes the manager of a company, a member of the board of directors or board of managers of a shareholding company, closed shareholding company or limited liability company, and anyone who in fact runs the company, openly or behind the scenes, liable with all his personal assets for damage to the company, partners, shareholders or third parties. The proof must show that he caused obligations on the company through negligence, gross fault, or breach of the law or the company's constitutive documents. A decision taken at a meeting of the board of directors, the board of managers, the founding assembly or the general assembly does not remove this liability unless he objected and had the objection recorded in the minutes. Being absent does not excuse him unless he proves he did not know of the decision, or knew but could not object. The liability is personal, or joint and several where several people committed the breach. Keep your accounts, minutes and capital records clean from day one.
What partners can contribute as capital (Articles 9 to 14)
A partner's share may be cash or an in-kind contribution. Where the Law does not provide otherwise, it may also be work (services), but it may not be the partner's influence or financial standing. Only cash and in-kind shares form the company's capital (Article 9). Unless agreed or customary otherwise, shares are of equal value (Article 10).
- A partner who fails to pay the value of his share on the due date must compensate the company for the damage this causes (Article 11).
- If the share is ownership or another in-kind right over property, the sale rules on registration and on protection against loss, defect or shortage apply. If the partner contributes only the use of the property, the lease rules apply instead (Article 12).
- If the share is a debt owed to the partner by third parties, his obligation is not discharged until the debts are collected, and he also owes compensation if they are not paid at maturity (Article 13).
- A partner who contributes services must perform them and account for what he earned from them since the company was formed. Those gains belong to the company, but he need not hand over patent rights unless agreed (Article 14).
Profit, loss and protection from partners' creditors (Articles 15 to 19)
If the memorandum does not state each partner's share of profits and losses, the share follows the partner's share of the capital. If it states only the profit share, the same share applies to losses, and the reverse also holds (Article 15). A contract that gives one partner no share of profits, or exempts him from losses, is void (the whole contract, not only the clause). A partner who contributes only services may be exempted from losses by agreement, if no remuneration was set for his services (Article 16).
A partner's personal creditor cannot take the debtor's share in the capital. He can collect his claim from the debtor's share of profits under the balance sheet, and on winding up, the share that goes to the debtor from the assets (Article 17). Claims by company creditors against partners are no longer heard five years after the company is dissolved, or after a partner withdraws (for claims against that partner). The five years run from the completion of the Commercial Registry publicity, wherever publicity is required, and for claims arising from the liquidation itself, from the day the end of liquidation is published (Article 18). If fictitious profits are distributed, the company's creditors may ask each partner to return what he received, even if he acted in good faith. A partner need not repay real profits, even if later years show losses (Article 19).
Capital, publication and electronic meetings (Articles 21 bis to 23 bis)
- The Minister responsible for commerce may set by order a minimum capital for any type of company, or for companies in particular sectors after consulting the sector's supervisor (Article 21 bis, added by Law No. 50 of 2014). Check the order in force for your form and activity before you fix your capital.
- Details the Law requires to be published go in the Official Gazette and in a local newspaper, on the terms in the Minister's order (Article 22).
- Any meeting the Law provides for may be held by electronic or telephone means, as long as the company takes measures to verify the identity of participants and the validity of any proxy, let each partner or shareholder take full part as if present, record every statement and vote correctly, and meet any other measures the Minister sets by decision (Article 23 bis, as replaced by Decree-Law No. 38 of 2025). The earlier exclusions for public shareholding company assemblies and secret votes are no longer in the text.
- Time periods in the Law are counted under Article 333 of the Civil and Commercial Procedures Act (Article 24).
The general partnership in detail (Articles 25 to 37)
A general partnership has two or more partners who are jointly liable with all their funds for its obligations. Bahraini and non-Bahraini partners may form one, on the conditions set by the Minister's order, without prejudice to the laws regulating self-employed professions (Article 25).
- Memorandum: it must give the company name and trade name (if any), head office and branches, objects, partners' names, nationalities and domiciles, managers and signatories, capital and shares, how profit and loss are shared, the term, the financial year, and the way the company will be liquidated (Article 26).
- Name: it may consist of the names of all partners or of one or more with "& Co.", or wording to that effect, or be formed in another way accepted by the Ministry responsible for commerce. It must be followed wherever used by "a Bahraini Partnership Company" and remain consistent with the company's current composition (Article 27, as replaced by Law No. 1 of 2018). A non-partner whose name is used in the company name with his knowledge is jointly liable to third parties who relied on it in good faith (Article 28).
- Articles of incorporation: partners may draw them up in a notarized instrument, attached to the memorandum (Article 29).
- Registration and publication: the memorandum and amendments are entered in the Commercial Registry, and a summary of the memorandum and each amendment is published on the website of the Ministry responsible for commerce (Article 30, as replaced by Decree-Law No. 28 of 2020).
- Status of partners: each partner is treated as a trader, and the company's bankruptcy entails the bankruptcy of every partner (Article 32).
- Transfers: shares cannot be represented by negotiable instruments. A partner may not assign his shares without the consent of all partners or as the memorandum allows, and an unrestricted transfer clause is void (Article 33).
- Creditors: they may pursue the company's assets and the personal assets of any partner who was a partner when the company contracted, and the partners are jointly liable. A contrary agreement has no effect on third parties (Article 35). To enforce against a partner's assets, the creditor needs a judgment against the company and must first demand payment from the company (Article 37).
Because of this unlimited, joint liability, most foreign investors compare the general partnership with the limited liability company, including a one-owner limited liability company, before choosing.
Questions to settle before you file
- Is your activity open to foreign ownership under Prime Minister's Decision No. 40 of 2021, and on what conditions?
- Which of the five forms fits your liability and control needs?
- Is there a minimum capital order for your form or sector?
- Will any part of the capital be in kind or services, and who values it?
- Is the memorandum drafted in Arabic and ready for the Notary Public?
- Who are the managers and signatories, and what are their powers?
Practical steps
- Define the activity and check it against Decision No. 40 of 2021 and its schedules.
- Choose the legal form among the five in Article 2.
- Reserve the name (Article 5 bis).
- Draft the memorandum in Arabic and have it legalized (Article 6).
- Register in the Commercial Registry and publish (Articles 7 and 8).
- Obtain sector licenses, open bank accounts, and complete tax, work permit and residence steps.
Read also: Bahrain Mergers and Acquisitions: Approval and Takeovers | Entering Qatar: Foreign Ownership and Free Zones Guide | Company Formation in Bahrain for Foreign Investors
Frequently asked questions
Can a foreigner own 100% of a Bahraini company?
For the activities in Schedule 4 of Decision No. 40 of 2021, yes, on the conditions in Article 5 of the decision. Other activities depend on the other schedules, which you should check for your activity.
Which company forms exist in Bahrain?
Five forms under Article 2 of the Commercial Companies Law, including the limited liability company, which one person may own.
Does the memorandum have to be in Arabic?
Yes, and it must be legalized by the Notary Public (Article 6).
How long can I reserve a company name?
Thirty days, renewable two equal times (Article 5 bis).
How do you help with Bahrain?
From our office in Kuwait, in cooperation with our partners in Bahrain, we map your structure and review the documents.