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Company Formation Bahrain

So you've decided to start your business in Bahrain and researched your market. Now it's time to decide how you will register and prepare to start a business in Bahrain. What is the best, most viable option for your company, your products, and yourself? Which is the path of least resistance?

Here are your typical options when starting a business in Bahrain:

Limited Liability Company

The most popular form of company for foreign investors, the business must have between two and fifty shareholders and the shares are not available for public purchase. It is worth noting that at least one shareholder must be Bahraini and the shareholdings by Bahrainis must not be less than 51%. As in other countries, the shareholders are only liable for the capital of the business, although limited liability companies are not permitted to engage in banking, insurance or brokerage activities

Branch Office

Branch office companies are businesses that are established outside Bahrain and are permitted to open branches or offices in the country, on the condition of approval from the Minister of Commerce and Agriculture and a local sponsor is appointed. The sponsor must be a Bahraini merchant. However, the branch offices are exempted from the necessity of a Bahraini sponsor if the office uses Bahrain as a regional centre or a representative office for their activities.

Partnerships

Partnerships in Bahrain fall into three broad categories

• Partnerships Limited by Shares: This is a partnership made up of least one general partner and at least ten shareholders. The general partners take responsibility for the business and are liable to the businesses debts and commitments to the extent of their own assets. The limited partner is not permitted to participate in the running of the business or they risk liability in the same way as the general partner.
• Limited Partnership: A limited partnership requires one general partner and one limited partner. As with a limited company, the partners are only liable to the amount of capital invested in the business. The limited partner may not participate in the management of the business, as they risk the same liability as the general partner. The general partner must be Bahraini and Bahraini investors must own a minimum of 51% capital.
• General Partnership: Although foreign investors can participate in the partnerships, Bahrainis must own 51% of the business. The liability of the partnership is unlimited to all shareholders.

Single Person Companies

This is where one person can set up a business and the liability is limited to the capital invested. The minimum capital required to start the business is 50,000 BD and single person companies are forbidden from trading in insurance or banking and investment.

Joint Stock Company (closed)

A joint stock company is where all of the shareholders in the business are liable to company debts to the extent of their investment in the venture. A closed joint stock company can be entirely foreign owned and does not require Bahraini investors. To establish this type of company requires permission from the Ministry of Commerce supported by an Emir decree. There must be seven founding members who own between 7 and 20% of the holdings.

Joint Stock Company (open)

The same as a closed joint stock company, except that 51 percent of the shares need to be owned by Bahraini nationals. Both forms of business require a permanent office in Bahrain. An open joint stock company can have a board of directors of three to twelve members, nominated for a period of three years. The majority of the directors must be Bahraini and must reside in the country. In addition, Bahrainis are only permitted to sell their shares to other Bahraini citizens.

Licensing

Licensing in Bahrain is the permission for someone else to use your intellectual property rights: either a patent, trademark, trade secret, or copyright. Different types of license include:

• Non-Exclusive License - A non-exclusive license implies that your intellectual property rights can be awarded to more than one licensee.
• Exclusive License - A little more complex because, although the license may not be exclusive to one licensee, it may be exclusive to a geographic location, a certain product, or limited area of use. For instance, you may grant a licensee exclusive use of the rights in France, yet grant another licensee its use in Germany.
• Patent License in Bahrain - The allowance of another party to use your patented product, design or process.
• Trademark License in Bahrain - Trademark licensing means permission is awarded to a licensee to sell a product or service. However, the licensor retains more control in order to ensure that quality is maintained. Quality control is in place to uphold the image of the brand / product / service / licensor, and therefore sustain customer confidence and satisfaction.

Franchising In Bahrain

Franchising is the licensing out of a business name, product, technique, philosophy, trademark, etc, for a percentage of the income. Instead of setting up new outlets as part of your expansion, you license your existing business blueprint out to franchisees who then set up and manage it for you.

The benefits of franchising your business in Bahrain include: more freedom, as the franchisee takes on major responsibilities; minimal expense; lower cost and higher profits; potential for fast growth; brand building.

Disadvantages of franchising a business in Bahrain: although few, rely predominantly on your franchisees. They include: poor quality franchisees; franchisees not declaring all income; poor performance.

In Bahrain, firms are eager to establish new market opportunities and are open to foreign franchise ideas. There is a high demand for US restaurant franchises in the country, with McDonalds, Burger King, Dominos Pizza and KFC all offering routes to the market.

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