Nayel AlBorshaid – Associate ([email protected])
Following the changes made to the Commercial Companies Law (CCL) to Decree Law No. (21) of 2001 in late 2018, which introduced increased regulation on companies operating within the Kingdom with the aim of reducing internal disputes and violations, whilst simultaneously providing a holistic view of the scope of rights available to minority shareholders; the Ministry of Justice, Islamic Affairs and Endowments announced the ‘New Law’ to outlining further changes to the current provisions of the CCL.
Under Article 6 of the CCL, a company’s ‘memorandum of association’ may now be drafted in English or Arabic, except for those companies of Joint Venture. Under the current provisions of Article 6, although dual texts (Arabic & English) are permitted and exist for the purposes of outlining a company’s memorandum, only the Arabic version will be notarised and thus be the prevailing text. With this, comes difficulty for non-Arabic speakers, as a degree of caution must be applied relative to the translation of the memorandum of association, hence the change increases assurance relative to the trust in the English version of a company’s memorandum of association.
In line with Bahrain’s recent Anti Money Laundering initiative, the CCL has increased the evidential threshold for companies operating in the Kingdom relative to confirmation of finances at the close of the fiscal year through amendment to Article 188, whereby remunerations, including but not limited to, salaries, bonuses and, share purchase agreements must be included in such.
The memorandum of association will no longer be referred to as such, instead being replaced to read as the “Company’s Constitution”. The reasoning behind this is due to the latter’s use as a general term to describe the regulations by which a company is governed, whilst the former is merely an additional requirement required only by companies ‘With Limited Liability’ (W.L.L.).
The new amendments to the CCL highlight Bahrain’s initiative to accommodate foreign entities and ease their transition into the business sector. The CCL has previously only permitted company constitutions to be notarised in Arabic, which inherently comes with it a number of intermediaries for English speaking companies; translators, interpreters, and notaries. When considering Bahrain’s reputation as a business-friendly market, the trend toward permitting English as the official language of a company’s constitution is a step in the right direction. The other modifications contained in Decree Law No. (20) of 2021, while less radical on paper, will nonetheless improve the knowledge, application, and procedure of litigation within the Bahraini judicial system.
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