Bahrain amends the Commercial Companies Law

His Majesty King Hamad issued Decree 28 of 2020, on 28 September, to amend certain provisions of the Bahrain Commercial Companies Law (BCCL) to bring it into line with international best practice, to promote enterprise in Bahrain and to encourage investors to choose Bahrain as the destination of choice for doing business in the Middle East region.

Some of the amendments may require companies in Bahrain to make changes to their current structure, in a particular the abolition of Single Person Companies (SPCs). Existing SPCs will be required to convert into a ‘With Limited Liability’ (WLL) company within six months of the announcement date and, where relevant, amend their trade names, company logos, advertisements and official papers.

To facilitate the conversion of an SPC into a WLL, a WLL will be permitted to have one or more (no limit) shareholders. Previously WLLs were required to have a minimum of two and a maximum of 50 shareholders. The share capital of WLLs must be divided into equal shares.

Other significant amendments are in the following areas:

  • The minimum share capital requirement for a WLL has been removed, although certain activities may still require a WLL to be formed with a minimum share capital;
  • Companies may issue preference shares (for example, no voting rights but a preferred right to dividends);
  • Nominees for board membership will be required to disclose certain information (such as their their CVs, other board appointments held and any potential conflicts) to shareholders prior to standing for election;
  • Audit committee members must also be members of the board;
  • The powers of a chairperson can only be delegated to a board member or to executive management of an entity;
  • A board report including details of the remuneration, shareholdings and non-cash benefits of an entity’s board members must be presented at the AGM (if a company is loss making, ministerial approval for remuneration paid to board members may be required);
  • Subject to certain conditions and approval from the Bahrain Ministry of Industry, Commerce and Tourism (MOICT) and, in certain cases Central Bank of Bahrain (CBB) approval, a company may be permitted to issue shares to strategic shareholders to increase capital;
  • Subject to relevant rules of the CBB, the statutory reserve of an entity may be used to increase its capital to cover any losses. If the reserves exceed 50% of the issued share capital, the company may decide in prescribed circumstances to distribute the excess to shareholders;
  • Provisions have been introduced to facilitate mergers and acquisitions;
  • Companies are required to disclose to employees full details of the terms and conditions of any employee shares plans;
  • Joint stock companies will be permitted to increase their capital in the following ways:
    • Converting debt to equity;
    • Converting its reserve or distributable profits;
    • Converting bonds into shares;
    • Issuing convertible bonds;
    • Accepting in-kind contributions;
  • Limited partnerships may adopt a trade name;
  • A new chapter has been added to the BCCL in respect of ‘not-for-profit’ companies, which may be set up as WLLs.
Contact the Bahrain office
Get in Touch

Please contact us if you have any questions or queries and your local representative will be in touch with you as soon as possible.