Spc Company: Understanding Bahrain's Unique Business Entity

A Single Person Company (SPC) in Bahrain is a legal entity separate from its owner, offering limited liability and 100% foreign ownership. SPCs are governed by the Commercial Companies Law of 2001, which allows foreigners to own 100% of the shares and enjoy complete tax exemption. The company must be owned and controlled by a single person, who can be a foreigner, and have a minimum capital of BHD 50,000. SPCs offer a range of benefits, including no taxes, limited liability, and no restrictions on capital and profit repatriation. However, as of 2020, existing SPCs are required to convert to a limited liability company (WLL) within 6 months of the implementation date of the amended law.

Foreigners can own 100% of the shares

A Single Person Company (SPC) in Bahrain is a company owned and controlled by a single person or corporate body. It is a legal entity separate from its owner, offering limited liability and full liability protection. The Commercial Companies Law of 2001 governs the formation, registration, business activities, and termination of SPCs, and crucially, this law allows foreigners to own 100% of the shares in an SPC. This means that all shares in an SPC can be owned by non-Bahraini citizens, providing a unique opportunity for sole proprietors to establish a company in Bahrain with complete ownership.

The benefits of forming an SPC in Bahrain are numerous. Firstly, SPCs enjoy complete tax exemption, with no income tax, corporation tax, capital gains tax, gift tax, inheritance tax, wealth tax, or withholding taxes imposed by Bahrain. This tax-friendly policy significantly enhances the appeal of SPCs for foreign investors. Additionally, SPCs require only one owner and one director, who can be the same person, providing streamlined control and decision-making. The owner's liability is limited to their share capital contribution, offering protection for the owner's personal assets.

Another advantage of SPCs in Bahrain is the flexibility it offers in terms of the owner's residency and nationality. The shareholder can reside anywhere in the world and be a citizen of any country, making it accessible to international investors. Furthermore, SPCs are not restricted to local business operations and can engage in international activities. The only prohibitions on business activities are for banking, insurance, and financing services. The minimum requirements for establishing an SPC include a minimum share capital of 50,000 BHD (approximately $133,000 USD as of July 2017) and the appointment of a local registered agent with an office in Bahrain.

It is important to note that while SPCs offer 100% foreign ownership, there are other business vehicles in Bahrain where foreign ownership restrictions may apply. Certain sectors, such as construction, press, publishing, and distribution, have restrictions on foreign investment. However, Bahrain has demonstrated a conscious effort to attract foreign investment, and the Minister of Industry and Commerce can grant exemptions to allow foreign investment into restricted sectors if it is deemed beneficial to the country's economic development.

SPCs are exempt from all taxes

A Single Person Company (SPC) in Bahrain is a company with limited liability, owned and controlled by a single person. SPCs are exempt from all taxes, including income tax, corporation tax, capital gains tax, gift tax, inheritance tax, wealth tax, and withholding taxes. This is because all of Bahrain's wealth is obtained from its oil-producing industry.

SPCs offer complete foreign ownership, with 100% of shares available to be owned by foreigners. SPCs also only require one owner and one director, who can be the same person. The owner's liability is limited to their share capital contribution.

To qualify for an SPC in Bahrain, the applicant must be 18 years of age or older (some business activities require the applicant to be at least 21 years old), have no criminal record, and be committed full-time to their business. The company must have a local office in Bahrain and a minimum share capital of 50,000 BHD (equivalent to $133,000 USD as of July 2017).

It is important to note that while SPCs in Bahrain are exempt from local taxes, individuals and entities who are taxpayers in other countries, such as the US, must still declare all income to their respective governments.

Requirements for setting up an SPC in Bahrain

A Bahrain Single Person Company (SPC) is a company owned and controlled by a single person. It is a legal entity separate from its owner, offering limited liability and full liability protection in Bahrain.

Qualifications

To qualify for an SPC, the applicant must be:

• 18 years of age or older (some business activities require a minimum age of 21)
• Of sound mind
• Committed full-time to their business
• With no criminal record

Documents

The following documents must be included with an application to form an SPC:

• A copy of the passport if the founder is a non-Bahraini citizen
• A copy of the director's Bahraini ID (if a citizen) or passport if a non-citizen
• A copy of the authorised signatory's Bahraini ID (if different from the founder or director) or passport if a non-citizen
• Original notarised power of attorney by the applicant's representative
• A copy of the applicant's educational qualifications if the business requires specific qualifications
• A proposed registered local office address (a copy of a signed office lease agreement, if one exists)
• A copy of a draft Memorandum of Association for the new SPC
• A copy of a draft Articles of Association for the new SPC
• Original Declaration of a Single Person Company
• A copy of the resolution by the Board of Directors authorising the formation of the SPC
• A copy of the resolution by the Board of Directors appointing the director and authorised signatory for the SPC

Company Name

The company name must not be similar to another legal entity's name in Bahrain. The name must end with the words "Single Person Company" or its abbreviation, "S.P.C.".

Shareholder and Director

A minimum of one shareholder (founder) is required, and they can reside anywhere in the world and be a citizen of any country. The sole shareholder may also be the only director, and directors can be citizens of other countries and reside anywhere.

Registered Agent and Office

A local registered agent must be appointed, and their office may be the registered office address for the SPC.

Minimum Capital

The required minimum share capital is 50,000 BHD (equivalent to $133,000 USD as of July 2017).

Advantages of setting up an SPC in Bahrain

Bahrain offers a range of benefits for those looking to set up a Single Person Company (SPC). Here are some key advantages:

100% Foreign Ownership

One of the most attractive features of an SPC in Bahrain is that it can be 100% foreign-owned. This means that all shares in the company can be owned by foreigners, providing an opportunity for international investors to establish a company in the country.

No Taxes

SPC companies in Bahrain enjoy complete tax exemption. This includes no income tax, corporation tax, capital gains tax, gift tax, inheritance tax, wealth tax, or withholding taxes. However, it is important to note that US taxpayers and others paying global income tax must declare all income to their governments.

Limited Liability

The SPC structure offers limited liability, which means that the owner's liability is limited to their share capital contribution. This provides protection for the owner's personal assets, as they are separate from the company's obligations.

One Owner and One Director

An SPC in Bahrain only requires one owner and one director, and the owner can also act as the director. This simplifies the management structure and decision-making process, as there is no need to coordinate with multiple stakeholders.

English as a Second Language

English is the official second language in Bahrain, making it easier for international businesses to operate. This is a result of Bahrain's history as a British protectorate for 58 years.

Business-Friendly Environment

Bahrain has a reputation for being business-friendly, with liberal policies and a low basic cost of operation. The country also offers excellent connectivity to Saudi Arabia and other GCC countries, providing access to a wider market.

Strategic Location and Strong Banking Sector

Bahrain's strategic location in the Middle East, along with its strong financial and banking sector, provides a stable and attractive environment for businesses. The country's proximity to Saudi Arabia and other Gulf countries further enhances its appeal for investors.

No Requirement for Annual General Meetings

Unlike other company structures, an SPC in Bahrain is not required to hold annual or extraordinary general meetings. Instead, the company simply needs to file its audited financial reports with the Ministry of Trade and Commerce, reducing the administrative burden.

Low Minimum Capital Requirement

The minimum capital requirement to set up an SPC in Bahrain is relatively low, starting at BD1,000 or BHD 50,000, depending on the nature of the business activity. This makes it accessible to a wider range of entrepreneurs and investors.

Local Business Operations Allowed

SPC companies in Bahrain are permitted to engage in local business operations, in addition to international business. This provides more opportunities for growth and expansion within the country.

Fewer Formalities

Setting up an SPC in Bahrain involves fewer formalities compared to other company structures, such as the WLL Company structure. This can streamline the process of establishing a business in the country.

Documents required to set up an SPC in Bahrain

To set up a Single Person Company (SPC) in Bahrain, there are a number of documents required as part of the application process. The following is a list of documents that will be needed:

• A completed company registration application form, including details of the type of business operation, the nationality of the investor, proof of capital, and educational qualifications of the investor.
• A copy of the applicant's passport if they are a non-Bahraini citizen. If the director is different from the founder, a copy of their passport is also required if they are not a Bahraini citizen.
• A copy of the authorised signatory's Bahraini ID if they are a citizen and different from the founder or director. If they are a non-citizen, a copy of their passport is required.
• The original notarized power of attorney by the applicant's representative.
• Copies of the applicant's educational qualifications if the type of business requires specific qualifications.
• A proposed registered local office address, along with a copy of a signed office lease agreement if one is in place.
• A draft Memorandum of Association for the new SPC.
• A draft Articles of Association for the new SPC.
• The original Declaration of a Single Person Company.
• A copy of the Resolution by the Board of Directors authorising the formation of the SPC. This can be done by the founder as the sole board member.
• A copy of the Resolution by the Board of Directors appointing the director and authorised signatory for the SPC. The founder can be the sole director and signatory.
• A copy of the parent company's Commercial Registration certificate, if applicable.
• The general assembly resolution or Board of the director as the sole proprietor of the SPC.
• Copies of the parent company's Memorandum of Association, Articles of Association, and any amendments for foreign-registered companies.
• The parent company's latest audited financial report, unless the company is less than one year old.
• A capital deposit certificate, obtained after preliminary approval.
• External entities pre-approval, depending on the business activity.
• A financial auditor's report or evolution letter for any kind of investment or incoming capital.

In addition to these documents, there are certain criteria that the applicant must meet to be eligible to set up an SPC in Bahrain. These include being 18 years of age or older (with some business activities requiring a minimum age of 21), being dedicated to their business, and having no criminal record.

Frequently asked questions