Recent Updates of Bahrain Commercial Company Law

The Kingdom of Bahrain is one of the countries in the Arabian Gulf, and year after year, it has been growing in its commercial sector and continues to be a significant center of business. With the legislative decree Number 21 of 2001 was promulgated the Commercial Companies Law and in 2020, the Decree-Law number 28 (the New Law) amended the Commercial Company’s Law in Bahrain. In this article, we are going to explore what are the principal amendments of this Law.

Non-Profit Companies (NPC)

Article 1 defines the Company, but the second paragraph of this article was added the non-profit companies in the meaning of companies. Additionally, there is a new chapter with the dispositions for non-profit companies. Article 304 bis dispose of that the profits of this Company are used to accomplish its purposes for which it was created, and it will take the form of a limited liability company (LLC)-article 304 bis 5 states that provisions governing LLC must apply to the NPC- and according to article 304 bis 2 stated that the Company must not be liquidated voluntary, only the liquidation voluntary is possible with the approval of the Ministry concerned with commercial affairs. Any company can convert to an NPC, but an NPC cannot change to another form of Company (article 304 bis 3).

Corporate Structures

Article 2 of decree number 21 of 2001 stated the forms that can take the companies in Bahrain, such as General partnership company, limited partnership company, association in participation, joint-stock Company, limited partnership by shares, limited liability company, single-person Company, and holding Company, nevertheless, the decree-law number 28 of 2020 abolished the single person company and holding company. The single Person Company (SPC) will be combined with the LLC, and the SPC will have six (6) months from the New Law’s announcement date to convert it.

Memorandum of Association

Article 30 of the new Law changed the place where the Company’s Memorandum of Association must be published. Before it shall be published in the Official Gazette at the Company’s expense and with the new Law, it must be published on the Ministry’s website concerned with commercial affairs.

Manager of the Company

With the New Law, if the manager is a partner selected in the Memorandum of Association, he can be dismissed by a decision of the partners holding at least 75 % of the share capital of the Company (Article 44), before he can be discharged only by a court decision upon application by the preponderance of partners and based on acceptable justification. Before, the manager’s resignation must dissolve the Company; nevertheless, the new Law in Article 45 was deleted the Company’s dissolution with the manager’s resignation.

Share Capital

The amendments of article 126 of the Decree-Law Number 28 of 2020 add more ways to increase the capital of the Company, such as:

The resolution of increasing the capital must be published on the website of the Ministry concerned with commercial affairs (Article 133) indeed of published in the Official Gazette and local daily newspapers.

The New Law adds a new article about the increase of capital. Article 127 bis laydowns that under provisions and regulations issued of the Central Bank of Bahrain, the Company can resolve with a resolution approved by shareholders in the extraordinary general assembly to increase its capital. Still, the increase is assigned to admit a strategic partner who can provide technical, operational, or marketing provision to the Company. Furthermore, it is possible to increase the capital of the Company, converting specific cash debts into shares in its share capital which must be dispensed to the creditors upon their approval (Article 127 bis 1).

Candidates for the board direction

The Company must send and make available on its website the following information about each candidate that is applying for the board elections (Article 174):

Programs to motivate the employees

According to the new article 216 bis of the New Law, the Company may have one or more programs to encourage its employees by allowing them to owns shares in it, and the Company shall divulge to the employees the details of the program, including the terms of their entitlement to owing those shares. Additionally, the Central Bank of Bahrein may issue any decisions to control the incentives schemes for employees. The minister of commercial affairs will issue a regulatory decision concerning other companies.

Joint Stock Companies

With the New Law, article 239 bis lay down that a Closed Joint Stock Company could increase its share capital after approval of the general assembly issuing debt bonds convertible into shares in the Company. These convertible debt bonds must be under the provisions of the Central Bank of Bahrain and Financial Institutions Law (Law Number 64 of 2006). Additionally, in case of liquidation of the Company, before converting its debt bonds to share, the bond holder’s right to recuperate the sum of the debt and any interest resulting thereof shall take priority over the rights of the shareholder in the Company. To acquire shares or securities convertible into shares In a Joint Stock Company, the decision must be following the provisions and decisions regulating the rules, in such cases, a well-experienced legal expert can help you with these legal issues. The Central Bank of Bahrain must specify the acquisitions’ conditions and procedures (Article 319 bis).