A proposal requiring Bahraini companies with a foreign partner to submit a BD30,000 irrevocable bank guarantee has been unanimously rejected by the Shura Council.
The amendment sought to revise Article 264 of the Commercial Companies Law by obliging any company with one or more foreign shareholders to provide a lifetime bank guarantee in favour of the Industry and Commerce Ministry.
Industry and Commerce Minister Abdulla Fakhro warned that, in its current form, the legislation would harm rather than help the market.
“There are 35,000 expat-oriented companies in Bahrain and if we asked for BD30,000, this will rob the market of more than BD1 billion,” he said during the session yesterday. “This is frozen money that neither businesses nor the government will be able to use.”
He added that many firms would struggle to meet the requirement, with some potentially shutting down or choosing to operate elsewhere.
“This will affect Bahrain’s competitiveness, harm national employment, push businesses to other countries in the region, affect our economic growth, and reduce government revenues from fees,” the minister said. “We support any legislation that strengthens the economy and prioritises Bahrainis, but this proposal in its current format does not achieve that.”
Shura Council financial and economic affairs committee chairman Khalid Al Maskati said the committee recommended rejecting the bill due to its long-term economic consequences and contradiction with Bahrain’s investment strategy.
“Bahrain has adopted a clear policy of attracting investments and strengthening confidence in its economic environment, which has successfully drawn many companies and investors,” he said. “Preserving this competitive environment is a priority, and imposing additional burdens could weaken Bahrain’s ability to compete with other Gulf countries.”
He noted that Bahrain has more than 91,000 commercial registrations, most of them small and medium enterprises, alongside thousands of activities supporting the national economy. He highlighted that foreign direct industrial investment in Bahrain now exceeds $2 billion, reflecting the success of legislative and economic policies.
“Any amendment that affects this system could negatively impact Bahrain’s competitiveness in the long term,” he added.
Committee rapporteur Jawad Al Khayat said the proposal would create unjustified disparities between companies based solely on the presence of a foreign partner, regardless of share size. He stressed that SMEs would be disproportionately affected, violating the principle of proportionality in economic legislation.
Committee vice-chairman Redha Faraj echoed these concerns, saying a uniform BD30,000 requirement fails to consider company size, sector, or risk level.
“SMEs are a key engine of innovation and economic activity. This would represent a serious financial burden on entrepreneurs and small investors,” he said.
Shura member Ali Al Aradi questioned the basis for setting the BD30,000 figure.
“What is the criterion for this number? Is it backed by clear economic studies?” he asked. “The proposal does not clarify how the guarantee would be handled, whether it comes from the personal account of the foreign partner, what happens in cases of death, withdrawal, transfer of shares, or multiple foreign partners.”
He added that the purpose of the guarantee itself remained unclear – whether it was intended to safeguard workers’ rights, cover financial liabilities, or address potential bankruptcy situations.
Shura Council legislative and legal affairs committee chairwoman Dalal Al Zayed confirmed the amendment was constitutionally sound, but warned of its economic implications. She cautioned that imposing such a condition could encourage commercial concealment practices and harm the economy.
“Neighbouring countries are expanding and facilitating procedures, while we would be tightening them. This is not acceptable,” she added.
Shura Council first vice-chairman Jamal Fakhro recalled that Bahrain had previously abolished the BD20,000 minimum capital requirement for limited liability companies to encourage investment – a move later followed by other Gulf states.
“If we approve this, we would be reversing years of progress,” he said. “With around 35,000 companies involving foreign participation, this could freeze nearly BD1bn that should instead be circulating in the local market.”
Following the debate, the Shura Council voted unanimously to reject the bill and return it to Parliament for further review.
mohammed@gdnmedia.bh
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