The Shura Council is set to debate a proposal that would require Bahrain companies with a foreign partner to submit a BD30,000 bank guarantee.
The financial and economic affairs committee recommended rejecting the amendment, warning it could damage Bahrain’s investment appeal and place unnecessary burdens on businesses.
The draft law, approved by Parliament, seeks to amend Article 264 of the Commercial Companies Law. It would oblige any company with one or more foreign shareholders to provide an irrevocable bank guarantee in favour of the Industry and Commerce Ministry for the lifetime of the company.
After reviewing the bill alongside government memoranda, legal and financial opinions, and submissions from stakeholders including the Bahrain Businessmen’s Association and the Bahrain Investors Association, the Shura committee concluded the proposal could undermine confidence in Bahrain’s legislative and economic environment.
Committee chairman Khalid Al Maskati said the amendment contradicts Bahrain’s long-standing approach of building a stable, attractive regulatory framework for investors.
“Imposing a blanket financial guarantee on any company with a foreign partner – regardless of the size of the stake or nature of the activity – risks undermining confidence in the legislative framework governing business in Bahrain,” he said.
Mr Al Maskati stressed that countries competing to attract foreign capital are moving towards simplifying procedures and reducing financial barriers.
“This requirement would increase the initial cost of establishing companies and reduce Bahrain’s competitiveness regionally, especially when many jurisdictions are simplifying entry requirements for investors,” he added.
The committee report noted that the proposal would create disparities between businesses based solely on the presence of a foreign partner – even if that partner holds a minimal shareholding – potentially weakening investor trust.
Committee vice-chairman Redha Faraj highlighted the potential impact on small and medium enterprises (SMEs), which form a critical part of Bahrain’s economic fabric.
“SMEs are a major engine of economic activity and innovation. Requiring a BD30,000 bank guarantee could represent a serious financial burden on new entrepreneurs and small investors seeking to enter the market or expand their activities,” he said.
He added that applying a uniform financial obligation without considering company size, sector, or risk level violates the principle of proportionality in economic legislation.
“Legislation must balance regulatory goals with economic realities. A one-size-fits-all financial requirement does not achieve this balance and could unintentionally restrict market entry,” Mr Faraj noted.
The committee further observed that Bahrain’s Economic Vision 2030 emphasises competitiveness and the attraction of quality investments through flexible regulatory frameworks. It found that the draft law lacked any study on its economic impact to justify the need for such a financial obligation.
While the Shura Council’s legislative and legal affairs committee, chaired by Dalal Al Zayed, confirmed the proposal was constitutionally and legally sound, the financial and economic affairs committee concluded that, from an economic perspective, the risks outweigh the intended benefits.
The matter is set for debate during Sunday’s session, where members will decide whether the proposed amendment aligns with Bahrain’s long-term investment strategy or risks creating unintended barriers for both foreign and local investors.
mohammed@gdnmedia.bh
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