Navigating Share Transfers: A Legal Perspective on WLLs and BSC(c)
Understanding the intricacies of share transfers is essential for companies considering adjustments to their share structure. Whether introducing a new shareholder or altering the distribution of shares among existing shareholders, the share transfer process involves relocating existing shares rather than issuing new ones. This is a common method used to bring in new strategic business partners. The regulations governing share capital transfer are primarily outlined in Legislative Decree No. 21 of 2001, known as the Commercial Companies Law, as amended from time to time (“CCL”).
This article will discuss the process of share transfers for Limited Liability Companies (“WLL”) and Bahrain Shareholding Companies (Closed) (“BSC(c)”) from a Bahraini legal perspective. For a detailed explanation of the differences between these two types of companies, please refer to this article explaining the various types of businesses.
In principle, shares can be freely transferred over time unless the company’s constitutional documents explicitly state otherwise. Shareholders of WLLs and BSC(c) companies often seek to manage the admission of new shareholders, particularly if this could significantly influence company management or control. It is customary for such companies to impose certain restrictions on shareholders’ rights to transfer their shares. These transfer restrictions, which can include the right of refusal by directors and pre-emption rights, are stated in the company’s constitutional documents and/or shareholders’ agreement. If there are any restrictions in the constitutional documents, this might impede the intended transfer. Assuming there are restrictions, these restrictions can be waived or disapplied through unanimous agreement or a validly passed resolution.
In summary, understanding the process of share transfers in Bahrain is important for companies seeking to adjust their share structure effectively. Businesses can strategically manage new shareholder admissions while retaining operational control by understanding the legal regulations and navigating specific requirements for WLLs and BSC(c) entities. While this article offers a concise overview of share transfer procedures, consulting a lawyer is advisable for best practice.
Please do not hesitate to reach out if you need assistance navigating the share transfer process. Our dedicated team members are ready to provide support tailored to your needs.
