Bahrain makes Substantial Changes to the Commercial Companies Law

Bahrain makes Substantial Changes to the Commercial Companies Law

On 8^th September, 2025, Decree Law No. (38) of 2025 amending certain provisions of the Commercial Companies Law issued by Decree Law No. (21) of 2001 (“Decree Law”) was issued. These amendments aimed to overhaul and reinforce the Commercial Companies Law (“CCL”) in the Kingdom of Bahrain in a manner that aligned its framework with better corporate governance, among other changes.

Key Amendments

The key amendments promulgated by the Decree Law are as follows:

• Personal liability of Directors and Managers

Article (18 bis) of CCL expands the liability (personal or joint) of directors, board members and individuals acting as managers (whether covertly or overtly) in respect of any damage affecting the company and related parties if there exists proof of him causing the company to arrange obligations due to negligence, gross error, or violation of provisions of law or the company’s Memorandum of Association or Articles of Association.

Article (18 bis) of CCL further lists exemption from said liability in the event that the violation occurs as a result of a decision taken at a board or assembly meeting provided that the director objects to the decision and records the objection in the meeting minutes. Absence from the meeting would not preclude liability unless the decision was taken without the director’s knowledge and that there was no way to object to the same.

• Electronic Meetings

Article (23 bis) of CCL, in a move to expand digital autonomy in corporate governance was amended to make it permissible for meetings scheduled in accordance with the CCL by means of electronic communication or by telephone provided:

1. Identity of participant and proxy validity of an agent is verified
2. The partner or shareholder is fully able to participate in the meeting
3. Statements or votes made by a participant are properly recorded
4. Other measures specified by the relevant Ministerial decision are followed

 

• Electronic Voting

Article (204) of CCL complements (b) by recognizing the adoption of electronic voting system, with its conditions and controls to be specified through a Ministerial decision.

• Creation of Single Shareholding Company

Article (226) of CCL bolsters a substantial structural reform within companies by allowing the creation of a Bahraini Shareholding Company (closed) by a single shareholder, subject to conditions and controls prescribed by a Ministerial decision and vests said shareholder with the powers of the General and Founding Assemblies. This is a significant improvement from the earlier regime which required the presence of at least two (2) individuals.

• Continuation of Company following Partner’s departure

While the company’s contract may provide for continuation by the remaining partners in the event of a partner’s death, withdrawal or a ruling of interdiction, bankruptcy or insolvency, if the same is not prevalent, by virtue of the amended Article (322)(c) of CCL, partners in a company may now within ninety (90) working days of occurrence of either of the aforementioned events agree unanimously to continue the company amongst themselves. However, such agreement cannot be invoked against third parties except from the date of publication in the Commercial Registry.

• Changes to Corporate Structure

Article 3 of the Decree Law abolished partnerships by participation. Moreover, Article 4 of the Decree Law requires these structures to reconcile their corporate status in accordance with the provisions of the CCL within a period not exceeding three (3) months from the date of implementation of the Decree Law.

• Submission of documents to Ministry of Industry & Commerce

Article (357) of CCL expands the regulatory purview of the Ministry of Industry & Commerce (“MOIC”) by mandating board members, managers, auditors and now individuals in actual management of the company to furnish matters related to the company’s affairs at any time as may be requested by the MOIC.

Conclusion

The aforementioned changes add to the revolving door of corporate governance in the Kingdom of Bahrain while being mindful of international developments. Accordingly, companies should structure their businesses in a manner that aligns with these requirements.