Foreign investors can set up a company in Bahrain, but how much they may own, and through which vehicle, is decided activity by activity. The Commercial Companies Law (Legislative Decree No. 21 of 2001, as amended, most recently by Decree-Law No. 38 of 2025) fixes the legal forms. The Commercial Register Law (Legislative Decree No. 27 of 2015) fixes the registration mechanics. Prime Minister's Decision No. 40 of 2021, amended repeatedly up to 2026, fixes which activities foreign-capital companies may practice and at what percentage. This article reads the three together from the investor's side, from ownership tables and legal forms to the Sijilat sequence and the duties that begin once the registration is issued.
The legal framework: three instruments, one file
Three texts decide a Bahraini formation. The first is the Commercial Companies Law, Legislative Decree No. 21 of 2001, which defines the permitted forms in Article 2 and the rules of each. The second is the Commercial Register Law, Legislative Decree No. 27 of 2015, which makes registration the entry point for every trader (Article 4) and sets the sequence of application, approvals and licenses (Articles 5 to 9). The third is Prime Minister's Decision No. 40 of 2021, issued with reference to Article 345 of the Companies Law, which lists the commercial activities that companies owned wholly or partly by non-Bahrainis may be licensed to practice, with the percentage and conditions attached to each.
These texts do not move at the same speed. The Companies Law was reformed by Decree-Law No. 28 of 2020 and again by Decree-Law No. 38 of 2025. Decision 40 has been amended several times since 2021, including by Decisions 22, 47 and 53 of 2024, Decision 71 of 2025 and Decision 36 of 2026, which added activities to its annexed tables. A guide written two years ago can therefore be wrong on the form or the percentage. We confirm the current text of the decision on the day the application is prepared.
Who may invest and through which vehicle
The Ministry of Industry and Commerce's procedures guide for establishments and commercial companies distinguishes three groups. Bahrainis may carry on all commercial, professional, industrial and service activities in every company form and as sole proprietors. Citizens of GCC states and of the United States may do so through a sole proprietorship or a company, subject to the banned activities, on the basis of Law No. 24 of 2004 and the free trade agreement ratified by Law No. 23 of 2005. Citizens of other countries, Arab or foreign, may engage in all economic activities through any form of commercial company, again except the banned activities.
One limit catches foreign individuals who plan to trade in their own name. Article 10 of the Commercial Register Law allows a sole commercial proprietorship to be registered only for a Bahraini national aged at least eighteen, without prejudice to the laws and agreements in force. A non-GCC individual therefore forms a company, normally a with-limited-liability company, or opens a branch of a foreign company.
Ownership percentages under Decision 40 of 2021
Article 1 of Decision 40 allows companies owned wholly or partly by non-Bahrainis to practice the activities in Tables 2, 3, 4 and 5 annexed to it, at the percentages and on the conditions stated there. The common statement that Bahrain allows full foreign ownership is a summary, not a rule: the table entry for the activity decides.
Article 2 adds a requirement on form: companies practicing the activities in Table 3 must be a Bahraini shareholding company or a with-limited-liability company. We therefore begin every file by identifying the exact activity codes and reading the table row for each. A mixed business, for example consulting combined with trading, can fall under different rows, and in practice the most restricted activity sets the structure.
The routes to 100 percent: Articles 3, 4, 4 bis and 5
Decision 40 contains several distinct routes to full foreign ownership. Article 5, as replaced by Decision 53 of 2024 from 18 October 2024, allows companies owned 100 percent by non-Bahrainis for the Table 4 activities when three conditions are met: the capital of the company established in Bahrain is at least BD 100,000, the gross revenue of the parent is at least EUR 750 million, and the group is present in ten markets. The earlier text required three markets, parent capital of BD 20 million and BD 2 million invested in the first year, so guides quoting those figures are out of date.
The other routes are narrower. Article 3 allows 100 percent ownership of crude oil and gas extraction if the foreign parent has signed, or is about to sign, an exploration and production agreement with the Government. Article 4 allows online retail by foreign-capital companies if invested capital in Bahrain is at least BD 50,000 in the first year. Article 4 bis, added by Decision 22 of 2024 and replaced by Decision 53 of 2024, lets an authorized distributor (item 21 of Table 2) exceed the Table 2 percentage, up to 100 percent, in three cases: an active entity at least 51 percent Bahraini-owned already distributes the same brand, the global brand owner distributes its own products and meets Article 5, or the brand has economic importance and the Council of Ministers approves.
Available legal forms after the 2020 and 2025 reforms
Article 2(a) of the Companies Law, as replaced by Decree-Law No. 28 of 2020, listed six forms. Decree-Law No. 38 of 2025 deleted the joint venture company by repealing Part Four and item 3 of Article 2(a), so five forms remain: the general partnership, the simple limited partnership, the joint stock company, the partnership limited by shares and the with-limited-liability company. Article 4 of the 2025 decree required existing joint venture companies to regularize their position within three months. A new Bahraini joint venture company can no longer be planned.
For most foreign investors the real choice is between the with-limited-liability company and a branch. Joint stock companies serve larger projects: the Ministry's guide gives minimum capital of BD 250,000 for a closed company and BD 1,000,000 for a public one, and Article 226, as replaced in 2025, lets a closed company be founded by one person on ministerial conditions. Partnerships carry unlimited partner liability and rarely suit a foreign group.
The with-limited-liability company after the 2020 reform
Decree-Law No. 28 of 2020 merged the former single-person company into the with-limited-liability company (WLL). Article 1, paragraph 2 allows a company to consist of one person, and Article 261, as amended, lets the WLL be owned by one or several partners, each liable only up to its share. The minimum capital of BD 20,000 that Article 264 once set is gone: after Law No. 50 of 2014 amended it, Article 264 leaves the capital to the founders, who must fix it at a level adequate for the company's objects, and the Ministry's guide confirms that a WLL has no minimum capital. Some activities still carry capital requirements under their own licensing rules.
Article 263 requires the company name to be followed by the words "with limited liability", failing which the managers answer jointly to third parties. Article 265 lists the content of the memorandum, including the partners, objects, capital and managers. Article 266 requires cash shares to be fully paid and deposited with a licensed bank. Article 269 divides the capital into equal shares, and Article 271, as replaced in 2020, gives a share assignment effect only from its registration and publication.
Branches and representative offices of foreign companies
A foreign company operating under its own name registers a branch under Part XIV of the Companies Law (Articles 346 to 350). The Ministry's guide describes the features: the parent bears all the branch's responsibilities, the branch has no capital of its own, and a branch manager is required. A representative office may only market and promote the parent's activities.
The branch suits a group that wants one chain of liability and no local capital, the WLL a group that wants to ring-fence its Bahraini operations. A branch is not a shortcut around the activity rules, since its activities are licensed against the same Sijilat activity directory. Our standing advice is to compare the two on liability, audit, banking and exit.
The Sijilat pathway, step by step
Registration runs on Sijilat, the Ministry's electronic system launched in May 2015. The procedures guide sets the order: obtain an electronic key from the e-government authority; determine the activities and read the licensing entities' requirements in the unified activity directory; determine the legal form, since some activities require a particular one; choose the commercial name; then file electronically with the draft articles, the approvals for activities that need them, the capital deposit certificate and payment. Law No. 18 of 2012 governs trade names, and a name may not duplicate a registered one, offend public order, contradict the activity or infringe a trademark.
Article 5 of the Commercial Register Law lists the application content: identity and address, trade name, legal form, activity, capital, premises and authorized signatories. Article 6 has the Directorate obtain the competent authorities' approvals where needed. Article 7 lets the Ministry issue the registration certificate before the licenses, stating that they are outstanding, but the company may not carry on the activity until it has them. Article 8 gives the period set in the implementing regulation to obtain the licenses, and Article 9 strikes the registration off if that period lapses. Article 30 of the Companies Law requires publication of the articles.
Beneficial ownership and economic substance
Article 18 bis of the Commercial Register Law, added by Legislative Decree No. 52 of 2018, requires a trader to submit a statement identifying the ultimate beneficiary when applying for registration and at each renewal, and to report changes within the period the Minister sets. Ministerial Order No. 83 of 2020 sets the disclosure criteria, except for registrations licensed by the Central Bank of Bahrain. A trader that refuses to identify the beneficiary or gives incorrect particulars exposes its registration to the measures listed in Article 20.
Article 18 ter authorizes regulations to verify real economic substance. Ministerial Order No. 106 of 2018 applies to distribution and service center, headquarters, holding company, leasing (other than Central Bank licensees), shipping and intellectual property activities. Those traders must be directed and managed in Bahrain, with board or partner meetings held there, a quorum physically present, records available in Bahrain, and core income-generating activities carried out in Bahrain. A holding or headquarters vehicle built as an empty shell does not meet those requirements.
Governance, personal liability and keeping the registration alive
Before registration the company does not exist. Under Article 268, as replaced in 2020, a WLL acquires legal personality only on registration, and an act done earlier binds only the person who did it, with all his property, and jointly if several acted. After registration, Article 18 bis of the Companies Law, as replaced by Decree-Law No. 38 of 2025, makes a manager, a director and anyone who runs the company in fact, openly or covertly, personally liable for damage if shown to have caused obligations through negligence, gross fault or breach of the law or the articles. A recorded objection in the minutes preserves a dissenting manager's position.
Article 285(a) requires a resolution of partners holding three quarters of the capital to amend the articles or change the capital, and unanimity to increase the partners' financial obligations. Article 44(a) allows a manager named in the articles to be removed by partners holding at least 75 percent of the capital, for an acceptable reason. Under Articles 11 to 13 of the Commercial Register Law, changes to registered data must be noted within thirty days, the registration must be renewed, and one that is unrenewed or inactive for over a year may be struck off. Article 27 penalizes carrying on a commercial activity without a license.
Licenses, employment and tax after registration
The municipality license for the premises and the sector licenses for regulated activities follow, since Article 7 of the Commercial Register Law bars operation until they are issued. An employer registers its establishment with the Labour Market Regulatory Authority before applying for expatriate work permits, under Law No. 19 of 2006 regulating the labor market, and employment is governed by the Labour Law for the Private Sector, Law No. 36 of 2012. Article 2 of the Social Insurance Law, Decree-Law No. 24 of 1976, applies compulsorily to all workers regardless of nationality.
Tax is light but not absent. Bahrain has no general corporate income tax; income tax under Decree No. 22 of 1979 applies to companies in the oil and gas sector at 46 percent. Value added tax under Decree-Law No. 48 of 2018, as amended by Law No. 33 of 2021, is 10 percent from 1 January 2022, with mandatory registration once annual taxable supplies exceed BD 37,500. Decree-Law No. 11 of 2024 introduced a domestic minimum top-up tax from 1 January 2025 for multinational groups with consolidated revenue of at least EUR 750 million, which overlaps with the group-size test in Article 5 of Decision 40.
What we review in a Bahrain company formation file
When we review a Bahrain formation, we begin with the exact activity codes and the row of Decision 40 that governs each, then test the investor's group against the Article 5 conditions where full ownership is sought. We compare the WLL with a branch, draft the memorandum against Article 265 and the manager-liability rules of Article 18 bis, and prepare the beneficial ownership statement. We check whether the economic substance order applies, plan the approvals that must precede the certificate under Articles 6 and 7, and set the post-registration calendar: licenses, labor registration, VAT, renewal and the thirty-day change notices.
See also: commercial contracts in Bahrain and our commercial and corporate practice, plus our Gulf company formation comparison.
Frequently asked questions
Can a foreigner own 100 percent of a company in Bahrain?
Yes, where the activity is listed for it. Decision 40 of 2021 sets the percentage per activity, and Article 5, as replaced by Decision 53 of 2024, allows 100 percent for the Table 4 activities if the company has BD 100,000 of capital and the parent has EUR 750 million of revenue and presence in ten markets.
Is there a minimum capital for a WLL in Bahrain?
No general minimum applies. Article 264, as amended by Law No. 50 of 2014, leaves the capital to the founders so long as it is adequate for the objects, although Decision 40 sets BD 100,000 under Article 5 and BD 50,000 for online retail under Article 4.
Can one foreign person own a Bahraini company alone?
Yes. Decree-Law No. 28 of 2020 merged the single-person company into the WLL, and Article 261, as amended, allows a WLL to have one or several partners.
Is the joint venture company still available in Bahrain?
No. Decree-Law No. 38 of 2025 repealed Part Four of the Companies Law and item 3 of Article 2(a), and existing joint venture companies had three months to regularize under Article 4.
Can the company start trading as soon as it is registered?
Not always. Under Article 7 of the Commercial Register Law the certificate may be issued before the licenses, but the company may not carry on the activity until it obtains them, and Article 9 strikes the registration off if the license period lapses.
Does a foreign investor need to be in Bahrain to register?
The Sijilat license service accepts a power of attorney where the applicant is not one of the partners. The partners' identity and approval documents are still required.
Does Bahrain tax company profits?
Not generally. Income tax under Decree No. 22 of 1979 applies at 46 percent to oil and gas companies, VAT is 10 percent, and Decree-Law No. 11 of 2024 adds a top-up tax for groups with revenue of at least EUR 750 million.
Do you handle company formation in Bahrain for foreign investors?
Yes. We review the activity and ownership route, draft the memorandum, prepare the Sijilat file and plan the post-registration licenses. Contact us through our contact page to discuss your project.