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  • Part VII — Part VII — Limited Liability Company

    • General Provisions

      • Article (261)

        A Limited Liability Company is a company in which the number of partners does not exceed fifty partners, and each of them shall only be liable to the extent of his share in the capital. If the number of the partners falls below two, the company shall turn, by force of law, into a single person company unless the company completes the number within thirty days from the date of pooling the company's shares into the hands of one partner.

        The company shall not be incorporated nor its capital be increased nor any borrowing be made through public subscription. It shall not issue negotiable shares or bonds, and the transfer of partners' shares in it shall be subject to their right of retrieval and to the special terms and conditions included in the company's memorandum of association as well as to the provisions of this law.

      • Article (262)

        A Limited Liability Company shall not undertake insurance or banking activities or fund investment for the account of third parties in general.

      • Article (263)

        A Limited Liability Company may have a special name, and such name may be derived from its purposes, and it may include the name of a partner or more. The name of the company shall be followed by the phrase (with Limited liability).

        Such particulars shall be mentioned in all the company's contracts, invoices, advertisements, papers and publications, or else the company's managers shall be jointly liable to the extent of their private property towards third parties.

      • Article (264)

        The company's capital must be adequate for realizing its objectives. It shall not be less than what is determined in the Executive Regulation of this law. In all cases the minimum capital must not be less than twenty thousands Bahraini Dinars.

    • Chapter One — Chapter One — Incorporation of the Limited Liability Company

      • Article (265)

        a— The memorandum of association of a Limited liability company shall include the following details:
        1— The names, titles and nationalities of partners.
        2— The company's headquarters.
        3— The company's name and address, with the addition of the phrase (a limited liability Company).
        4— The company's objectives.
        5— The company's capital, and the cash and in-kind shares provided by each partner with a detailed description of the in-kind shares and their value.
        6— The conditions of share assignment.
        7— The term of the company, if any.
        8— The names of those entrusted with the company's management from among the partners or from others, and the names of the members of the control board in the cases in which law stipulates the existence of such board.
        9— Distribution methods of profits and losses.
        b— The partners may include in the company's memorandum of Association special provisions regulating the right of retrieval of partners' shares and the evaluation methods thereof when this right is exercised, and the formation of reserves other than the statuary reserve and the organization of the company's finance and accounts and the reasons of the dissolution thereof.
        c— The Minister of Commerce and Industry may decree the inclusion of other details than those included in paragraph (A) of this Article.

      • Article (266)

        A limited liability company shall not be incorporated unless all the cash shares are distributed among partners and the value thereof is fully paid and the in-kind shares are delivered to the company.

        The cash shares shall be deposited with one of the licensed banks in Bahrain and shall only be withdrawn by the company's managers upon the submission of a certificate proving its registration in the Commercial Registry.

      • Article (267)

        If the share presented by a partner is an in-kind share, the company's memorandum of association shall specify its type, value, agreed upon price by the other partners, and the name of the partner and the amount of his share in the capital against what he has paid.

        The provider of the in-kind share shall be liable towards third parties for the estimated value thereof in the company's memorandum of association. If it is overestimated, he shall pay the difference to the company, and the other partners shall be jointly liable for such difference unless they prove that they were not aware of it.

        The liability action provided for in the foregoing paragraph shall be barred after the lapse of five years from the date of entering the company in the Commercial Registry.

      • Article (268)

        The company's manager, or whomever the partners delegate, shall register the company in the Commercial Registry and shall publish it in the Official Gazette and in one of the local daily newspapers at the company's expense. The company shall not acquire a corporate entity before registering it, and it shall not undertake its activities before registration. Any act undertaken for the company before registration shall only bind the person who undertakes it, and he shall be liable for it to the extent of all his property. If more than one person undertakes the act, they shall be jointly liable for it.

      • Article (269)

        The capital of a limited liability company shall be divided into equal shares the value of which shall not be less than fifty Bahraini dinars. The share shall be indivisible. However, two persons or more may jointly own one share, provided that one person shall represent them towards the company. The partners in the same share shall be jointly liable for the obligations resulting therefrom.

      • Article (270)

        The capital shares of a limited liability company shall be non-tradable. However, shares may be sold by a written instrument the signatures on which are certified unless otherwise provided for in the company's memorandum of association. Whoever intends to sell his share, or a part of it, shall notify the other partners of the offer he has received and its conditions — in particular the price and the name of the buyer — otherwise the act shall be ineffective. After the lapse of two weeks from the date of notification the partner may sell his share to third parties for the offered price at least if none of the partners requests to buy it. If more than one partner requests to buy the share, it shall be divided among them in proportion to their respective shares in the company's capital. If the assignment of the shares is free of charge, the assigned shares shall not be transferred without the approval of the majority of the partners owning shares of no less than seventy five percent (75%) of the capital after excluding the shares under assignment.

      • Article (271)

        The assignment of a share shall be effective towards the partners and third parties as of the date of the registration thereof in the Commercial Registry and the publication thereof in the Official Gazette.

      • Article (272)

        The share of a partner shall devolve to his heirs or beneficiaries in a will. If the share devolves by way of inheritance or will to more than one person, which increases the number of the partners to more than fifty, the shares of the heirs or beneficiaries shall be considered one share towards the company unless the heirs or the beneficiaries agree to transfer the share to a number of them falling within the maximum number of the partners. If all the company's shares are concentrated in the hands of one person, the company shall turn into a single person company unless it is dissolved.

      • Article (273)

        If a personal creditor of a partner institutes execution proceedings against the share of his debtor, the share shall be offered for sale in a public auction unless the creditor agrees with the debtor and the company on the way and terms of the sale. In the case of sale by public auction, the creditor shall notify the company of the terms and conditions of the sale and the date of the session to be held for considering the objections thereto.

        The company may, within ten days from the date of the decision approving the highest bid offered, find a buyer other than the successful bidder to buy the share on the same terms and conditions.

        These provisions shall apply in the case of the partner's bankruptcy.

      • Article (274)

        The company shall prepare a special register for the partners at its head office including their names, domiciles, professions, nationalities and the number of shares each one of them owns. It shall also show the assignment of the shares and the date thereof.

        Each partner and any interested person shall have the right of access to this register. The details contained in the register and any changes therein shall be forwarded to the Ministry of Commerce and Industry.

    • Chapter Two — Chapter Two — Management of the Company

      • Article (275)

        One manager or more, to be appointed from among the partners or non-partners by the founders for the first time and by the general assembly thereafter, shall manage the company.

        In all cases the manager(s) may be dismissed with the approval of the partners who own the majority of the capital.

        The duties, obligations and responsibilities of the manager(s) shall be the same as those of the members of the board of directors in a joint-stock company.

      • Article (276)

        The company's managers shall have full powers to represent it unless otherwise stipulated in the company's memorandum of association. Any decision issued by the company restricting the powers of the managers or changing them after it has been registered in the Commercial Registry shall not take effect towards third parties before the lapse of five days from the date of it being registered in this registry.

      • Article (277)

        The company's memorandum of association may provide for the constitution of a board for the managers and specify the manner in which the board shall operate and the majority by which its resolutions shall be passed.

      • Article (278)

        The managers shall be jointly liable towards the company, the partners and third parties for their breach of the provisions of the law or of the company's memorandum or articles of association and for any mismanagement in accordance with the rules regulating the joint-stock company. Any condition to the contrary shall be deemed non-existent.

      • Article (279)

        The manager shall not, without the consent of the partners' general assembly, assume the management of a company competing with or having similar objectives to those of the company, nor may he conduct, for his own account or for the account of third parties, any transactions that are competitive or similar to the company's activities.

        Violation of this may lead to the removal of the manager and to obliging him to pay compensation.

      • Article (280)

        If the number of partners is more than ten, and the company does not have a board of managers, a control board, consisting of at least three partners, shall be appointed for a specific period in the company's memorandum of association. The partners' general assembly may reappoint them or appoint others from among the partners after the expiration of this period. The managers shall not have the right to vote on the election or dismissal of the members of the control board.

        The control board shall have the right to examine the company's books and documents, to make an inventory of the cash money, the stock, securities and documents establishing the company's rights and to request the managers at any time to submit reports on their management.

        The board shall also oversee the balance sheet, the profit distribution and the annual report, and shall submit its report in this regard to the partners' general assembly at least fifteen days before its meeting.

        The board shall authorize the acts which the company's memorandum of association requires its authorization to undertake them.

      • Article (281)

        The members of the control board shall not be liable for the actions of the managers or the results thereof, unless they knew about the wrongdoings and did not mention them in their report to the partners' general assembly.

      • Article (282)

        If the number of partners does not exceed ten and the memorandum of association does not provide for the establishment of a control board, the non-manager partners shall have the right to control the managers' acts. They may also examine the company's books and documents in accordance with the rules laid down in article (46) of this law. Any condition to the contrary shall be void.

      • Article (283)

        a— A limited liability company shall have a general assembly consisting of all partners.
        b— The general assembly shall convene at a call by the managers at least once a year within the four months following the end of the company's financial year.
        c— The general assembly may convene at any time at an invitation by the managers, the control board, the auditor, the Ministry of Commerce and Industry or a number of partners representing one-fourth of the capital.
        d— The call for the general assembly to convene shall be made by registered mail with a delivery note or by any way proving the knowledge of partners of it at least one week before the date of the meeting.
        e— The call for the general assembly to convene shall specify the date, the venue and the agenda of the meeting. The agenda shall particularly include the reports of the managers, of the auditor and of the control board, if any, the approval of the balance sheet and the profit and loss account, and consideration of the managers' recommendations with respect to profit distribution.

        Each partner may request the managers to include any issue on the agenda, and if such request is rejected, the partner may take the matter to the general assembly.

        The general assembly meeting shall not debate any matters other than those listed on the agenda; unless serious matters arise during the meeting that require debate.

      • Article (284)

        i— Each partner shall have the right to attend the meetings of the general assembly either in person or by his proxy, provided that the proxy shall not be the company's manager or from among the members of the control board. The proxy shall represent no more than one partner, and each partner shall have a number of votes equal to the shares he owns in the company.
        ii— The general assembly meeting shall not be valid unless attended by a number of partners owning more than half the capital, and the resolutions thereof shall be valid if passed by the majority of the shares represented in the meeting unless the company's memorandum of association provides for a bigger majority. If the quorum is not available, the general assembly shall be invited to hold a second meeting within the ten days following the first meeting for the same agenda. This meeting shall be valid regardless of the number of the shares represented thereat. In this case, resolutions shall be passed by the majority of the shares represented in the meeting unless otherwise provided for in the memorandum of association. The company's manager, the auditor and at least one member of the control board, if any, may attend the meeting, however, none of them shall have the right to vote on the resolutions discharging them of responsibility. The competent government authority may send its representative to attend the general assembly meeting.
        iii— Minutes shall be drafted for each meeting including an adequate summary of the deliberations and resolutions of the general assembly, and shall be signed by the meeting chairman. Such minutes shall be entered in a special register to be kept at the company's headquarters. The provisions regulating the commercial books shall apply to this register, and the company's manager shall be liable for the accuracy of the data contained therein.

      • Article (285)

        The company's memorandum of association shall not be amended, nor its capital be increased or reduced without a resolution by the company's general assembly to be passed by the numerical majority of the partners who own three fourths of the capital unless the company's memorandum of association provides for a higher percentage. However, the partners' obligations shall not be increased without their unanimous approval.

    • Chapter Three — Chapter Three — Company's Accounts

      • Article (286)

        i— The managers shall prepare, for each financial year and within at least three months from the end thereof, the company's balance sheet, profit and loss account and a report on the company's activities and financial position together with their recommendations as regards profit distribution. The managers' report, the balance sheet, the profit and loss account and the other reports shall reflect the company's true financial position.
        ii— The managers shall sign the report, the balance sheet and the profit and loss account.
        iii— The managers shall forward to the Ministry of Commerce and Industry a copy each of the balance sheet, the profit and loss account, the annual report and the auditor's report within ten days from the date of preparing such documents.
        iv— The managers shall not vote on the resolutions discharging them of responsibility for their management.

      • Article (287)

        The company's memorandum of association must provide for the appointment of an auditor or more by the ordinary general assembly every year.

        In respect of their powers, responsibilities and terms of reference, the auditors shall be subject to the provisions of articles (217) to (222) of this law.

      • Article (288)

        The company shall maintain a statuary reserve in accordance with the provisions of article (224) of this law applicable to joint-stock companies.