A BD30,000 bank guarantee could be made mandatory for companies with foreign partners.
Parliament yesterday approved amendments to Article 264 of the Commercial Companies Law, which requires that in the event of one or more foreign partners, an irrevocable bank guarantee of BD30,000 must be submitted to the ministry concerned with trade affairs through a bank licensed in Bahrain, valid for the duration of the company.
An alternative amendment proposed by Parliament’s financial and economic affairs committee – which would have left the value and conditions of the guarantee to be determined by ministerial decision and limited it to two years – was rejected by MPs, who opted to retain the fixed BD30,000 requirement.
The law has been referred to the Shura Council for review.
Industry and Commerce Minister Abdulla bin Adel Fakhro said the government shared Parliament’s objective of protecting the national economy and Bahraini traders from improper practices. However, he cautioned that the proposed wording could have unintended consequences.
“Only 19 per cent of companies in Bahrain are 100pc foreign-owned,” he revealed. “At the same time, more than 18,000 commercial registrations are owned by Bahraini citizens in partnership with foreign investors. Imposing such requirements may directly affect the Bahraini partner himself, not only the foreign investor.”
Mr Fakhro added that Bahrain’s legislative approach had long focused on facilitating business start-ups while strengthening post-establishment oversight.
“The current Companies Law already provides adequate regulatory tools without imposing upfront financial burdens,” he said. “We must also consider that many foreign companies operating in Bahrain employ large numbers of Bahrainis and contribute to knowledge transfer and economic activity.”
He stressed that Bahrain is party to more than 40 international agreements to promote and protect investment, requiring a balanced and competitive legislative environment.
“Bahrain’s policy is to attract high-value investments that add to the national economy while always prioritising the Bahraini trader,” he said.
Despite the government’s explanations, Second Deputy Speaker Ahmed Qarata strongly backed the BD30,000 bank guarantee for foreigners.
“If a foreign investor cannot provide BD30,000, why come to invest here?” he asked. “There are many foreign registrations, including from countries with which we have no extradition agreements.”
Parliament’s legislative and legal affairs committee chairman Mahmood Fardan argued that imposing regulatory conditions was constitutionally permissible and aimed at protecting market fairness, while MP Dr Mariam Al Dhaen emphasised that Bahraini investors abroad were subject to similar financial guarantees and oversight mechanisms.
“The financial guarantee is not negative,” said Dr Al Dhaen. “In many countries, guarantees are reviewed periodically over six to 10 years, with portions returned based on compliance. The goal is to ensure seriousness and continuity.”
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