Bank guarantee rule for foreign partners faces parliamentary test

TDT | Manama

Email: mail@newsofbahrain.com

Foreign partners seeking to establish a limited liability company (LLC) in Bahrain could be required to provide a bank guarantee under a draft amendment set for debate in Parliament on Tuesday — despite government and business opposition.

The proposal would amend Article 264 of the Commercial Companies Law to require an irrevocable bank guarantee for companies formed with any non-Bahraini shareholding. In its original form, the draft set a fixed BD30,000 guarantee to be held for the lifetime of the company.

How ever, Parliament’s Financial and Economic Affairs Committee revised the clause. Under its version, the guarantee would apply only for two years from incorporation, with the amount and rules to be set by the Minister of Industry and Commerce based on the company’s capital and business activity.

Supporters say the measure targets low-capital firms that contribute little to the economy and would help ensure foreign investors are genuine, while protecting local traders from unfair competition.

The government has urged reconsideration, warning the amendment could restrict investment, conflict with Bahrain’s open-market approach and be easily bypassed — for example, by transferring shares to a foreign partner after incorporation. It also called for economic impact studies before adopting any change.

Business groups echoed those concerns, arguing the proposal could deter investment and distort market competition. Despite the objections, the committee has recommended the bill’s approval in principle.