Starting a business in Bahrain

Conditions for starting a business in Bahrain

Setting up a business in Bahrain improved dramatically for expats in 2018 when the law changed to remove the requirement to have a Bahraini partner in any commercial business activity in Bahrain. This opens up a wide range of investment opportunities for establishing wholly-owned companies as a foreign investor. Activities in residency, real estate, administrative services, health and social work, information and communications, manufacturing, mining and quarrying, food, arts, entertainment and leisure, water supplying and professional, scientific and technical activities, are all accessible for 100 per cent foreign ownership.

There are many business categories in which a foreigner may not be the sole owner, and it is best to check that your proposed business activity does not fall into one of those.

There are many industries in Bahrain, and the country's largest include oil and gas, banking, chemicals, plastics, aluminium, insurance, and tourism. However, the Kingdom is continuing to diversify its activities, and new business is not only encouraged but also supported through a range of initiatives, such as the creation of free trade zones.

Opening a business in Bahrain is a relatively simple process, but it is advisable to use the services of a consulting company. Business dealings in Arab countries may operate in a very different way than in your home country, so knowledge of local customs, market trends, and operations are essential for success.

When registering a new business, which is done through the Ministry of Industry, Commerce and Tourism, it had previously been necessary to show a large share capital. This requirement has been abolished, and share capital can be set as low as BHD50. However, to qualify for the self-sponsored, foreign investor visa, a minimum value of BHD100,000 is required. Initial registration can be done online, and the whole process may take up to 10 working days. Please note that registering a company does not include the time it takes to obtain a license, which varies depending on the business activity.

Company types in Bahrain

• Public shareholding: minimum of two founding shareholders, liable to the extent of the invested capital; the value of a share must not be less than 100 Fils. The public can purchase shares.
• Closed shareholding: minimum of two founding shareholders. The public cannot purchase shares.
• Limited liability: maximum of 50 partners. Liable only to the extent of the share capital they have invested.
• Joint liability: formed by two or more individuals, jointly liable for the company obligations.
• Limited partnership: formed by one or more founders liable for the partnership obligations and one or more partners invested in the partnership but not part of the administration. Invested partners have limited liability up to the amount invested.
• Company limited by shares: formed by two types of founders. Joint partners are fully liable for the company obligations; limited partners have liability limited to the amount invested. Requires no less than four members.
• Single person company: owned by an individual (not another company); liability limited to the value of the share capital invested.
• Foreign branch and representative office: suited to foreign corporations; the branch is an extension of the parent company. A representative office must only be used for performing marketing and promotional activities and must not engage in commercial activities.

Further information about each company type can be obtained from the Ministry of Industry, Commerce and Tourism or your local Bahraini Embassy. Consider hiring a local law firm or consultancy to advise on the formalities and obligations when forming a company.

Bahrain Free Trade Zones

Bahrain has three free trade zones, which are areas designed to provide significant advantages to international companies who intend to use Bahrain as a distribution or manufacturing centre.

The free zones are the Bahrain Logistics Zone, Bahrain International Investment Park, and Bahrain International Airport. Among the advantages of setting up in these areas are that land and electricity rebates are available and there is no taxation on imports and exports.

However, free zone businesses must hire local workers and rent office space in the zone. They are virtual offshore locations meaning that they are operating outside the GCC. Businesses that wish to access the $1.5 trillion economy of the GCC should preferably consider setting up in Bahrain outside the free zones, to reduce trading costs and complications with the rest of the GCC.

 Useful links:

Bahrain Government ePortal: Investing in Bahrain
Ministry of Industry, Commerce and Tourism
Commercial Registration Portal
Bahrain International Investment Park
Bahrain Chamber of Commerce
World Bank Report