Bahrain Business: Steps To Launch Your Enterprise

Establishing a business in Bahrain is a relatively straightforward process, with the country offering a business-friendly environment, strategic location, and a range of incentives for investors. Bahrain boasts a strong financial services sector, a diverse and talented workforce, and a competitive tax regime, making it an attractive destination for businesses looking to expand in the Middle East. Here is a step-by-step guide to help you navigate the process of setting up a new business in Bahrain.

Choosing a business structure

When forming a company in Bahrain, there are several legal structures or business forms to choose from. This is one of the most important decisions you will make when starting a company as it will directly impact how the company will be handled, the owner's liability, registration requirements, insurance, and terms and conditions. Here is an overview of the different types of business structures available in Bahrain:

Limited Liability Company (LLC)

Also known as a Company with Limited Liability (WLL), this is the most common type of legal structure for companies in Bahrain. An LLC can have between 2 to 50 shareholders, with at least one shareholder being a resident of Bahrain. The owners of an LLC assume limited liability, meaning they are only responsible for the company's debts or responsibilities to the extent of their investment in the company. There is a minimum capital requirement to form an LLC, which is typically BD 20,000 (approximately USD 53,036). It is important to note that an LLC in Bahrain cannot engage in banking, insurance, or brokerage activities.

Foreign Company Branch

Foreign investors can establish a branch of their company in Bahrain, provided it is authorised by the Minister of Commerce and Agriculture and designated by a local (Bahraini) sponsor. A foreign company branch can engage in various business practices, including invoicing, signing contracts, and trading. The liability for this type of structure lies with the parent company.

Partnership Company

A partnership company is formed between two or more individuals and does not offer limited liability. Partners in this type of structure assume shared responsibility for the company's debts and are liable to the extent of all their personal properties. There is no minimum capital requirement for a partnership company.

Sole Proprietorship

A sole proprietorship is owned by a single business owner, who carries unlimited responsibility for the company. The minimum capital necessary to start a sole proprietorship is BD 50,000. Similar to a partnership company, a sole proprietorship cannot engage in banking, financial services, or insurance industries.

Public Shareholding Company

Also known as a Joint Stock Company, a Public Shareholding Company (PSC) consists of several promoters (more than 7) subscribing to it through shares. Both GCC Bahrain and non-GCC individuals can subscribe to these shares. A PSC is a distinct legal body from its owners.

Closed Shareholding Company

A Closed Shareholding Company is composed of 2 shareholders who subscribe through negotiable shares that are not available to the public. These shares may not be sold to the general public and are typically held by Bahraini, GCC, and non-GCC residents.

Registering a business name

• Choose a unique name for your business that follows the guidelines set by the "Law No. (18) of 2012 with respect to trade names". According to this law, your business name can be a person's name, a part of a person's name, an innovative name, or a combination of these options. It may include a description of your business activity but must not be similar to an existing business name or consist of a common word. Additionally, it should not contradict local laws, values, or religious, political, or military affiliations.
• As per the requirements, you should choose three to four unique and relevant names for your business. These names will be submitted to the Ministry of Industry and Commerce (MOIC) for availability checks and approval. The chosen name should comply with Bahrain's naming conventions and not infringe on existing trademarks.
• Conduct a separate trademark search to ensure that your chosen business name does not conflict with any existing trademarks. This step will help you avoid potential legal issues in the future.
• Once you have selected the potential business names, submit them to the MOIC for approval. The MOIC has developed guidelines for selecting a company's name, so ensure that you adhere to these rules.
• If you are a foreigner, it is essential to note that your trade name must be registered in Arabic. If you choose a trade name in a foreign language, it must have an Arabic translation.
• After receiving approval for your business name, you can proceed with the next steps of setting up your business in Bahrain, such as opening a bank account, leasing office space, and hiring employees.

By following these steps and guidelines, you can successfully register a business name in Bahrain, ensuring that your chosen name is unique, compliant with local laws, and approved by the relevant authorities.

Understanding the costs

Cost Components

• Company Formation Costs: The cost of company formation in Bahrain typically ranges from BHD 800 to BHD 2,150. This includes the registration process, which can be completed within 20 to 45 business days, depending on the complexity of the business structure and required licenses.
• Registration Fees: There are registration fees associated with setting up a company in Bahrain. These fees cover the administrative costs of processing your application and vary depending on the chosen package and business structure.
• Office Address: The type of office address you choose can impact the cost. You can opt for a physical office space, a work desk in a shared workspace, or a virtual office address. Setup in Bahrain offers packages that include a virtual office or a private cabin, with corresponding residency fees.
• Legal Expenses: Drafting and notarizing legal documents, such as the Memorandum of Association (MOA), incur costs. The MOA outlines crucial details about your company, and notarization by the Ministry of Justice is mandatory.
• Bank Account Fees: Opening a corporate bank account may involve additional costs, and you will need to deposit the minimum required capital for your chosen business structure.
• Licenses and Permits: Depending on your industry and business activities, you may need to obtain various licenses and permits, which come with associated costs. These licenses are necessary to ensure compliance with regulations and are an essential step in the final approval process.
• Consultancy Fees: Engaging a professional consultant or a business formation specialist can be beneficial but will incur additional costs. Their expertise can guide you through the complexities of setting up a business in Bahrain and ensure compliance with all statutory requirements.
• Other Expenses: There may be other miscellaneous expenses, such as travel costs, marketing expenses, and any other operational costs specific to your business.

Cost-Saving Opportunities

• No Corporate or Personal Income Taxes: Bahrain offers a competitive advantage with no corporate or personal income taxes, making it an attractive option for global investors.
• Streamlined Banking Processes: The account opening process in Bahrain has been streamlined, allowing for the setup of corporate bank accounts within 1-3 business days.
• Government Support: The Kingdom's Labour Fund, Tamkeen, offers financial assistance in the form of subsidies, grants, and wage support to all active enterprises registered and licensed in Bahrain.
• Competitive Rental Rates: Rental rates for commercial property in Bahrain are relatively affordable compared to nearby nations.
• 100% Foreign Ownership: Bahrain allows 100% foreign ownership in most industries, providing freedom of choice and investment security for global investors.

Understanding and managing these costs effectively will enable you to make informed decisions and establish your business in Bahrain successfully. It is always recommended to consult with specialists and professionals to ensure a smooth and compliant journey towards establishing your business presence in the country.

Obtaining security clearance

Background Check

The Ministry of Interior typically requires copies of passports and other identification documents for all company owners and directors. They will conduct a background check to ensure eligibility and address any potential security concerns. Processing times can vary, so it's essential to factor this into your overall timeline.

Compliance and Risk Assessment

The security clearance process aims to ensure compliance with regulations and assess potential security risks. The NPRA carefully reviews each application, considering factors such as the investor's background, the nature of their business, and any potential risks involved. They take the overall security and stability of Bahrain into account when evaluating clearance requests.

Comprehensive Submission

To increase the chances of approval, submit a comprehensive and accurate profile. Provide all the necessary documents and offer clear, detailed information about your background, business activities, and any supporting materials that strengthen your case. Transparency and meeting NPRA requirements are key to a successful application.

Professional Support

While the security clearance process may seem daunting, consider engaging the services of a professional consultant experienced in security clearance procedures for businesses in Bahrain. They can guide you through the complexities, ensuring compliance and improving your chances of a smooth and efficient approval process.

Timing

The duration of the security clearance process can vary depending on the complexity of the application and the workload of the NPRA. It is advisable to allow several weeks or even months for this process to be completed.

In summary, obtaining security clearance is an important step in establishing a new business in Bahrain. By following the guidelines, providing comprehensive information, and working closely with relevant authorities, you can successfully navigate the process and obtain the necessary approvals to begin your business venture in Bahrain.

Opening a corporate bank account

Choose the Right Bank:

The first step is to select a bank that aligns with your business needs. Bahrain has a strong banking network, including 36 representative offices of overseas banks. Consider factors such as the bank's reputation, services offered, and their experience in handling corporate accounts.

Understand the Requirements and Norms:

Once you've chosen your bank, take time to understand their specific requirements, norms, and objectives. This step is crucial as it will help you prepare the necessary documents and streamline the account opening process.

Gather the Required Documents:

The list of documents you'll need to provide may vary slightly depending on the bank, but here are some standard documents required by most banks in Bahrain:

• Identity proof of business shareholders and investors (typically passports or CPR).
• Address proof of business shareholders and investors.
• A well-drafted business plan or feasibility study.
• Company registration certificate or Commercial Registration (CR).
• Visa copy of all partners.
• Driving license of all partners.
• Bank statements of each partner (typically 6 months' worth of statements).
• Initial deposit (this amount may vary, but it is typically around BHD 300, USD 2,500, EUR 2,000, SAR 10,000, AED 10,000, or GBP 2,000).

Submit the Documents and Initial Deposit:

Submit the required documents to the bank, along with the initial deposit. This step may also involve an in-person meeting with a bank representative to verify your information and documentation.

Finalize the Process:

After submitting your documents and deposit, the bank will review your application. Once your application is approved, you will receive confirmation, and your corporate bank account will be activated. You may also receive a checkbook or online banking access, depending on the bank's policies and your specific requirements.

It's worth noting that the account opening process in Bahrain has been streamlined, allowing corporate accounts to be set up within 1-3 business days in many cases. Additionally, you can also take advantage of online company bank accounts offered by some banks.

By following these steps and working closely with your chosen bank, you should be able to efficiently establish a corporate bank account for your business in Bahrain.

Frequently asked questions