New Regulatory Framework for Authorized Distributors
The Ministry of Industry and Commerce (“MOIC”) has implemented significant regulatory changes under Ministerial Order No. 29 of 2024, which establishes new conditions for authorized distributors of trademarked products and services. This order introduces a more formal framework for distribution agreements, focusing on increasing transparency, legal protections, and market structure in Bahrain’s distribution sector.
The new regulation defines who can act as an authorized distributor. Only Bahraini-owned businesses, with at least 51% of local ownership, are eligible to apply. This rule ensures that distribution activities largely benefit Bahrain-based entities. However, there is room for flexibility, as MOIC may approve exceptions for businesses that do not meet the ownership threshold. These exceptions are likely to be evaluated on an induvial case basis.
A critical aspect of the new order is its provision allowing trademark owners to appoint more than one authorized distributor. This can help multinational brands establish a broader market presence in Bahrain, as multiple distributors can simultaneously promote and sell the same trademarked goods, increasing competition and availability.
The distinction between authorized distributors and commercial agents is another key point under the new regulation. Distributors operate more narrowly, focusing on product sales and distribution, while agents typically have a broader scope, often involving negotiations, brand representation, and customer support services. Agents may also work under profit-sharing or commission models, and they are governed by the Commercial Agencies Law, whereas authorized distributors fall under the Commercial Registry Law. This distinction is essential for businesses when deciding how to structure their relationships with third parties.
To ensure compliance with the order, all distributors are required to formalize their distribution agreements with trademark owners by October 18, 2024. This includes updating their commercial registration to reflect the new designation of “Authorized Distributor” under ISIC No. 4699. Additionally, these agreements must be registered with the MOIC’s Authorized Distributor Registry via the Sijilat platform. Failure to comply could result in legal penalties or loss of distribution rights, as this framework aims to regulate the market more effectively and provide legal certainty for both distributors and trademark owners.
