The main types of companies that can be formed in the Kingdom of Bahrain are set out in Article 2 of the Commercial Companies Law (Legislative Decree No (21) of 2001, as amended) (CCL). Pursuant to Article 2 of the CCL, a commercial company set up in Bahrain must take one of the following forms:

• General Partnership;
• Limited Partnership Company;
• Shareholding Company (public and closed);
• Limited Partnership by Shares; or
• Limited Liability Company.

Foreign investors in Bahrain commonly establish a Limited Liability Company, principally because it provides limited liability and a comparatively flexible management structure. A Bahraini shareholding company (closed) may also be used, particularly for larger investments, joint ventures or structures involving institutional shareholders.

Under Article 345 of the CCL, companies may be licensed with full or partial foreign ownership, and the Minister of Commerce may exempt foreign-capital companies from the minimum capital requirements otherwise applicable.

The ability of a foreign investor to establish or participate in a Bahraini company is, however, subject to the foreign ownership restrictions applicable to the relevant commercial activity. Decision 40 of 2021 on Determining the Commercial Activates Which Foreign Capital Companies May Be Licensed on Practice (the “Commercial Activity Decision”) sets out the limited commercial activities that companies wholly or partially owned by non-Bahraini partners may undertake, as applicable, together with the restrictions applicable to each such activity.

The schedules to the Commercial Activity Decision classify commercial activities according to the level of permitted foreign ownership, including activities reserved exclusively for Bahraini ownership, activities requiring at least 51% Bahraini ownership, activities requiring the participation of a Bahraini partner without prescribing a minimum ownership percentage, and activities permitting up to 100% foreign ownership subject to specified conditions. Accordingly, the permissibility of foreign ownership in respect of a particular commercial activity and the applicable licensing requirements must be determined by reference to the Commercial Activity Decision.

The most common class is ordinary shares, which have the following statutory rights as set out in Article 168 of the CCL:

• to receive profits paid out to shareholders;
• to participate in the distribution of the company’s property on liquidation, participate in the management of the company (including through attendance in general assembly’s/board of directors);
• to receive the balance sheet, profit and loss accounts, the board of directors’ report and the auditor’s report;
• to dispose of their shares and have the priority to subscribe for new shares;
• to access certain company registers; and
• to challenge resolutions adopted in contravention of applicable law, public order, or the company’s constitutional documents.

Preference shares are permitted under the CCL but may only be issued within the framework set by ministerial order. Preference shares may be divided into different classes, provided that shares within the same class carry equal rights and benefits. The rights and preferences attaching to preference shares may relate to voting, dividends or other rights and benefits. However, preference shares may only be issued by companies whose constitutional documents provide for the depreciation of shares before the expiry of the company’s term, as the company’s business activity relates to the exploitation of a natural resource, a public utility granted for a limited period, or any other form of exploitation of assets that depreciate with use or expire after a certain period of time.

More broadly, the CCL allows the constitutional documents or the extraordinary general assembly (EGA) (by a numerical majority representing at least two-thirds of the capital) to confer different benefits on different classes of shares in respect of voting, profit, liquidation proceeds or any other rights, provided that shares of the same class are treated equally.

The rights attaching to shares are principally governed by the Commercial Companies Law and its Implementing Regulations, together with the company’ constitutional documents. Additional governance, disclosure and regulatory requirements may also apply depending on the type of company, including under Decision of the Minister of Industry, Commerce and Tourism No (19) of 2018 issuing the Corporate Governance Code, as amended, the Bahrain Bourse Listing Rules and, where applicable, the Central Bank of Bahrain Rulebook (the “CBB Rulebook”).

The CCL generally prescribes the minimum rights and protections afforded to shareholders. Subject to those mandatory requirements, shareholders’ rights may vary in accordance with the CCL and the company’s constitutional documents.

In particular, Article 111 of the CCL provides that the rights, benefits or restrictions attaching to a particular type of shares may be amended by a resolution of the EGA passed by the numerical majority of shareholders representing at least two-thirds of the company’s capital. Shares of the same type must carry equal rights, benefits and restrictions.

Shareholders’ rights may be varied through amendment of the company’s constitutional documents by a resolution of the EGA which, is the body competent to approve such amendments. The quorum and majority requirements are set out in Article 212, the EGA requires attendance representing at least two-thirds of the capital at the first meeting, with the decision passed by a two-thirds majority of the shares represented. Where the decision relates to capital changes, extension of the company’s term, dissolution, conversion, or merger, a three-fourths majority of the shares present is required.

Where the variation concerns preference shares, Article 111 imposes an additional safeguard: the rights or benefits attached to preference shares (or any category thereof) may not be amended except with the approval of two-thirds of the holders of the type of shares affected by the amendment.

Under Article 109 of the CCL, the capital of a shareholding company is determined by the founders and must be sufficient to achieve the company’s objects. However, the Minister of Commerce is empowered to issue decisions setting minimum capital thresholds for any company type or for companies operating in specific sectors or economic activities. Regulated entities, such as banks, insurance companies, and other financial institutions licensed by the Central Bank of Bahrain, are subject to separate minimum capital requirements under the CBB Rulebook. Foreign-capital companies may also be exempted from minimum capital requirements by the Minister.

More specifically, the minimum capital requirements are BHD1 million for public shareholding companies, BHD50,000 for closed shareholding companies.

The minimum number of shareholders or partners varies by company type. A limited liability company may be established by a single owner or a group of partners. A closed joint stock company requires no fewer than two persons, although a single person may establish the company subject to conditions to be set by a ministerial decision. A limited partnership by shares requires at least four founders. A general partnership requires at least two partners.

Shareholders’ agreements are commonly used in Bahrain as private contractual arrangements between shareholders to supplement the company’s constitutional documents and regulate matters which may not necessarily be addressed, or addressed in the same level of detail, in the company’s constitutional documents.

Unlike the company’s constitutional documents, which govern the corporate relationship between the company and its shareholders and may have effect vis-à-vis third parties, a shareholders’ agreement operates principally as a private contract between its parties. This also provides shareholders with greater flexibility, as the agreement can generally be amended by agreement between the parties in accordance with its terms, without having to follow the formal corporate, notarisation and registration procedures that may apply to amendments to the company’s constitutional documents.

While the CCL does not specifically regulate shareholders’ agreements, they are generally permissible under the principle of freedom of contract under the Bahraini Civil Code (Decree-Law No 19 of 2001), provided that their terms do not contravene any mandatory provisions of Bahraini law or public policy. Accordingly, a shareholders’ agreement may supplement the company’s constitutional documents and provide for additional contractual rights and obligations between the shareholders, but cannot override mandatory provisions of the CCL or other applicable laws.

Typical provisions include deadlock-resolution mechanisms, put and call options, tag-along and drag-along rights, non-compete and non-solicitation undertakings, dividend-distribution policies, reserved matters requiring unanimous or supermajority consent, and provisions on the appointment and removal of directors and managers. Pre-emptive rights and transfer restrictions on shares or membership interests are also commonly addressed, often supplementing the statutory pre-emptive rights.

Shareholders’ agreements are generally enforceable between the parties as a matter of contract under Bahraini law and are not required to be publicly registered.        

A shareholding company is required to hold an annual ordinary general assembly (OGA) at least once per year within three months following the end of the fiscal year. For limited liability companies, the general assembly must convene at least once a year within six months following the end of the fiscal year. Companies publicly listed on Bahrain Bourse must convene within three months following the end of the fiscal year.

The notice period for an OGA of a public shareholding company is at least 21 days, published in at least two daily local newspapers, one in Arabic and one in English. For closed joint stock companies, invitations are sent by registered mail at least 21 days before the meeting. The same 21-day period applies to limited liability companies. The notices must include the time, venue and detailed agenda.

The OGA is convened at the invitation of the chairperson of the board. The board must also convene the OGA if requested by the auditor or by shareholders representing 10% of the company’s capital. For limited liability companies, the general assembly may be convened at any time at the invitation of the managers, the supervisory board, the auditor, the Ministry of Commerce, or partners holding at least 10% of the capital.

All shareholders are entitled to receive notice of a general assembly. The CCL requires the board of a shareholding company to publish the balance sheet, profit and loss account, a summary of the annual report, and the full auditor’s report in a local Arabic-language newspaper at least 15 days before the general assembly.

Shareholders are entitled to obtain a booklet comprising the company’s balance sheet, profit and loss account, and the reports of the board and auditor. Further, shareholders have the right to access the company’s registers and to obtain copies or extracts thereof, subject to conditions in the constitutional documents that must not prejudice the company’s interests.

Shareholders have the right to access the shareholders’ register free of charge at the company’s head office.

Following the amendment introduced by Decree-Law No 38/2025, Article 23 bis now expressly permits any meeting prescribed under the CCL to be held via electronic or telephone communication, provided that measures are taken to verify the identity of participants and the validity of any proxy, to ensure the shareholder can fully participate as if present in person, and to record all statements and votes. The Minister of Commerce may specify additional conditions for such meetings.

For a shareholding company’s general assembly, the meeting is valid if attended by shareholders representing more than half of the share capital. If this quorum is not achieved, a second meeting is convened after no fewer than seven and no more than 15 days and is valid with shareholders representing more than 30% of the capital. A third meeting is valid regardless of the number of attendees.

For an EGA, attendance representing at least two-thirds of the capital at the first meeting is required, more than one-third at the second, and one-quarter at the third meeting.

There are two principal types of shareholder resolutions. OGA resolutions are generally passed by a simple majority of the shares represented at the OGA. EGA resolutions generally require a two-thirds majority of the shares represented at the EGA. However, resolutions relating to the amendment of the company’s constitutional documents, its merger or liquidation require a higher threshold and must be approved by shareholders representing at least 75% of the company’s capital.

The OGA has the authority to consider all matters concerning the company and to adopt appropriate resolutions, including the election and dismissal of board members, determination of board remuneration, approval of the annual report and financial statements, discharge of the board from liability, appointment of auditors, and approval of dividends.

Matters reserved to the EGA include amendments to the company’s constitutional documents, increases or reductions of capital, disposal of more than half of the company’s assets, dissolution or winding-up of the company, termination or disposal of the entire project undertaken by the company, and mergers.

Notwithstanding the applicable voting thresholds for EGA resolutions, any resolution that would increase the financial liability of the shareholders requires the unanimous approval of all shareholders.

Each shareholder is entitled to a number of votes corresponding to the number of shares held, and any provision to the contrary is void. Shareholders may vote by proxy and may appoint another shareholder or a third party to attend and vote on their behalf, provided that the proxy is not the chairperson, a board member or an employee of the company. A first-degree relative may also act as proxy pursuant to a written special power of attorney.

Voting at the general assembly must be conducted by secret ballot where the matter concerns the election or dismissal of board members or the initiation of liability proceedings against them.

Electronic voting is also expressly permitted. Pursuant to a 2025 amendment to the CCL, the company may adopt an electronic voting system, subject to the conditions and requirements prescribed by the Minister of Industry and Commerce.

Shareholders holding at least 5% of the capital may request that a specific item be added to the general assembly agenda, provided the written request is submitted to the board at least five working days before the meeting date. If during the discussion it appears that there is insufficient information, shareholders holding one-quarter of the shares present may request the meeting be postponed for up to ten working days.       

A shareholder may bring an action to challenge and seek the nullification of any resolution of the general assembly or the board of directors that violates applicable law, public order or the Company’s constitutional documents, and may also claim compensation for any resulting loss.

In addition, general assembly resolutions may be challenged where they unfairly favour a particular class of shareholders or the directors, or prejudice the interests of minority shareholders without due regard to the interests of the company.

Any such challenge must be brought within 15 working days from the date on which the shareholder becomes aware of the relevant resolution, and in any event no later than one year from the date of the resolution.

The CCL does not confer any special or additional rights on institutional investors or other shareholder groups merely by virtue of their status. They exercise their rights in the same manner as other shareholders, principally through their voting rights at general assemblies and, where applicable, representation on the board.

In practice, institutional shareholders, including sovereign wealth funds, pension funds and investment companies, may have greater influence due to the size of their shareholdings and corresponding voting power. However, this does not give them rights beyond those attaching to their shares. As noted in 2.10 Challenging a Resolution, the CCL also protects against the preferential treatment of particular shareholder groups by permitting shareholders to challenge general assembly resolutions that unfairly favour a particular class of shareholders or prejudice minority shareholders without regard to the interests of the company.

Listed companies are additionally subject to applicable CBB corporate governance and disclosure requirements, which promote transparency, communication with shareholders and the protection of shareholder rights, and thereby provide shareholders with further means of monitoring the company’s affairs.

The CCL does not expressly regulate nominee shareholding. In practice, the company’s shareholders’ register records the legal owner of the shares, and it is the registered shareholder who is entitled to exercise the rights attaching to those shares, including the right to receive notices, attend general assemblies and vote.

However, Bahraini law promotes transparency as to the ultimate ownership and control of companies, and nominee arrangements cannot be used to circumvent applicable beneficial ownership disclosure requirements. Under Bahrain’s ultimate beneficial ownership (UBO) regime, the ultimate beneficial owner must be identified and disclosed. This includes, among others, a natural person who directly or indirectly owns or controls 10% or more of the company’s capital or voting rights, as well as a person who otherwise exercises ultimate effective control over the company.

Accordingly, where shares are held through a nominee arrangement, the existence of the registered or nominee shareholder does not, in itself, dispense with the requirement to identify and disclose the ultimate beneficial owner in accordance with the applicable UBO requirements.

The CCL does not generally provide for shareholders to pass resolutions in writing in lieu of holding a general assembly meeting.

The CCL does, however, permit companies to provide in their constitutional documents for general assembly meetings to be conducted through electronic or telephonic means, subject to prescribed requirements designed to verify the identity of participants, enable their full participation and ensure that their votes are properly recorded.

The availability of written resolutions should therefore be considered by reference to the particular form of company and its constitutional documents.

Existing shareholders enjoy a statutory pre-emptive right to subscribe for new shares issued by the company, and any provision to the contrary is void. A statement shall be published in one of the local newspapers indicating that shareholders have priority in subscribing for new shares, as well as the opening and closing dates for the subscription and the value of the new shares. In addition, shareholders may be notified of this priority by way of registered letters. Each shareholder shall express their intention to exercise their right of priority to subscribe for the new shares within 15 days from the date of publication of the statement referred to above.

New shares are first distributed among the shareholders who applied to subscribe in proportion to their existing holdings, provided this does not exceed the number they applied for. Any remaining shares are then distributed among shareholders who applied for more than their pro-rata entitlement, and any shares still unsubscribed are offered for public subscription, subject to the same provisions that apply upon the company’s incorporation.

Trading in shares, registering and depositing them, transfer of the title thereto, making a set-off involving them, settling them, registering mortgages thereon and the attachment thereof, as well as the company’s purchase of its own shares, shall be in accordance with the Central Bank of Bahrain and Financial Institutions Law, promulgated by Law No (64) of 2006, and its Implementing Regulations.

Shares of closed shareholding companies may only be transferred after payment of their full value, except for transfer operations conducted among the founders.

Except for companies listed on the Bahrain Bourse, the constitutional documents of the shareholding company may restrict transfers by imposing a pre-emptive right in favour of existing shareholders and/or requiring board approval for the purchaser. These restrictions do not apply to transfers between shareholders, spouses, ascendants, and descendants.

For limited liability companies, membership interests are not negotiable, but they may be sold by a written instrument with certified signatures. A partner intending to sell must notify the other partners of the offer received, including the price and the buyer’s identity; after two weeks without a purchase request, the partner may sell to third parties. Free-of-charge transfers require approval of partners holding at least 75% of the capital.

Shareholders are entitled to grant security interests over their shares. Article 119 of the CCL provides that the trade, registration, deposit, ownership transfer, set-off, settlement, mortgage, and seizure of shares in a public shareholding company are all governed by the Central Bank of Bahrain and Financial Institutions Law (Law No 64/2006, the “CBB Law”) and the regulations issued in implementation thereof.

The company is required to maintain a shareholders’ register recording the names, nationalities, domiciles, and share details of all shareholders, and to forward a copy of this data to the Ministry of Commerce and the Bahrain Bourse.

Changes in shareholding for listed companies are subject to disclosure requirements under the CBB’s regulations, including mandatory notifications of acquisitions that cross prescribed thresholds. The CCL further requires the company to make certain information about board candidates available to shareholders on the company’s website.

Shares may be cancelled after issue as part of a capital reduction. Under the CCL, the company’s capital may be decreased by a decision of the EGA if it exceeds the company’s requirements or if the company has sustained losses and decides to reduce the capital to its actual value. The decrease may be effected by reducing the nominal value of the shares or by cancelling a number of shares equivalent to the amount of the decrease.

In the case of cancellation, the shares are cancelled from each shareholder in proportion to the percentage of the capital decrease, provided this does not result in depriving the shareholder of their shareholding in the company.

Creditors who object to the decrease within 60 days of its publication may block enforcement until their matured debts are paid or adequate guarantees are provided.

The CCL permits a company to purchase its own shares, subject to the applicable statutory requirements and provided that the shares held by the company as treasury shares do not exceed 10% of its issued capital. Treasury shares do not carry voting rights while held by the Company and are therefore excluded for voting purposes.

The CCL also addresses a specific buyback scenario where the company’s constitutional documents require board approval for a transfer of shares and the board rejects a proposed purchaser. In such circumstances, the board must arrange for the shares to be purchased for the company’s account within 15 days at the applicable price.

For listed companies, share buybacks are additionally subject to the CBB Rulebook and Bahrain Bourse requirements, including applicable restrictions, regulatory approvals and disclosure requirements. A subsidiary is also prohibited from owning shares in its parent public shareholding company.

Dividends are declared by the general assembly based on the board’s or managers’ recommendations regarding the distribution of profits. The annual general assembly must consider the company’s financial statements and the proposed distribution of profits.

Dividends may only be distributed out of profits available for distribution and after making the allocations required by law and the company’s constitutional documents. In particular, the CCL generally requires 10% of the company’s annual net profits to be allocated to the statutory reserve. This allocation may cease once the reserve reaches 50% of the company’s paid-up capital, unless the company’s constitutional documents prescribe a higher percentage or threshold.

Subject to these requirements, the general assembly determines the amount of profits to be distributed to shareholders. Where board remuneration is calculated by reference to profits, the statutory limits on such remuneration must also be observed, including the requirement for a dividend of at least 5% of the paid-up capital before the maximum profit-based board remuneration may be paid.

Once a distribution has been approved, the dividend is payable to the shareholders entitled to receive it in accordance with the rights attaching to their shares. In the case of a limited liability company, approved profits must be distributed to the partners within 30 days of their approval by the general assembly.

Appointment

Shareholders may appoint or elect directors to the board. As a general rule, directors are elected by the general assembly by secret cumulative voting. Each shareholder has a number of votes equal to the number of shares held and may cast all of those votes for one candidate or distribute them among several candidates.

In addition, a shareholder holding 10% or more of the company’s capital has the right to appoint members to the board in proportion to its shareholding, with any fraction rounded to the nearest whole number. The shareholder may not vote, in the election of the remaining directors, the proportion of its shareholding used to exercise this appointment right. Any portion of its shareholding that is not used for an appointment, including where it is insufficient to appoint an additional director, may be used in voting for the remaining directors.

The appointment right is optional and, if not exercised in a particular election or appointment of board members, lapses in respect of that election or appointment. These rules apply unless otherwise provided in the company’s constitutional documents, and the composition of the board remains subject to the requirements of those documents and the applicable provisions of the CCL.

For public joint stock companies, the board must consist of at least five members, while a closed joint stock company must have at least three. The Corporate Governance Code generally limits the board to a maximum of 15 members.

Directors must also satisfy the applicable statutory eligibility requirements. Among other things, a director must have full legal capacity, must not be subject to specified convictions or legal prohibitions from serving as a director, and must satisfy any additional requirements contained in the company’s constitutional documents. A nominee must provide written acceptance of the nomination and make the disclosures required by law, including in relation to competing activities and other directorships.

Removal

The general assembly may remove any or all members of the Board, subject to the applicable requirements of the CCL and the company’s constitutional documents. A meeting to consider removal may be convened through the OGA procedures. The board is required to convene a general assembly upon a request from shareholders representing at least 10% of the company’s capital and, if the Board fails to do so within the prescribed period, the competent authority may convene the meeting.

Shareholders representing at least 5% of the capital may also request that a matter, including a proposal to remove a director, be added to the general assembly agenda, subject to the applicable notice and procedural requirements.

Shareholders do not generally direct the board in the exercise of its management powers or to substitute their own commercial judgement for that of the directors. This applies even where a director has been appointed by a particular shareholder. Under the applicable corporate governance principles, once appointed, a director is expected to act in the interests of the company and all of its shareholders, rather than solely in the interests of the shareholder who nominated or appointed that director. An appointing shareholder therefore does not, merely by virtue of the appointment, have the right to direct how that director acts or votes on the board.

Bahrain law does, however, provide shareholders with remedies in respect of certain decisions, acts or omissions of directors.

• Unfair prejudice: a shareholder may apply to the court for appropriate relief where the company’s affairs are being, or have been, conducted in a manner that is unfairly prejudicial to the interests of shareholders generally or to one or more shareholders, including the claimant. This extends to acts or omissions of the company, including those carried out by another person on its behalf, and may therefore provide a remedy in respect of both action and inaction by the board. Depending on the circumstances, a shareholder may seek court intervention in relation to such conduct, rather than directly requiring the directors to act.
• Liability of directors: the company may bring a liability action against the chairperson, directors or managers for damage caused to the company by their wrongful acts or omissions, pursuant to a resolution of the general assembly.
• Individual shareholder claims: where a director’s fault causes particular damage to an individual shareholder, that shareholder may bring a liability claim directly, subject to first giving the company at least 30 days’ notice.
• De facto management: liability may also extend to a person who exercises actual management of the company, whether overtly or covertly, where that person causes damage to the company, its shareholders or third parties through negligence, gross fault or breach of the law or the company’s constitutional documents. Liability is not avoided merely because the relevant conduct resulted from a board or other corporate decision, unless the person objected to the decision and the objection was recorded in the minutes.

Accordingly, shareholders cannot generally instruct directors as to how they should exercise their management powers, including directors whom they have nominated or appointed. They may, however, seek judicial relief where board action or inaction is unlawful, unfairly prejudicial or otherwise gives rise to liability.

The appointment of the company’s external auditor is a matter for the general assembly. Shareholders appoint one or more auditors from among those authorised to practise in Bahrain and determine their remuneration. They may also resolve not to renew an auditor’s appointment or to appoint a replacement, subject to the applicable requirements of the CCL and the company’s constitutional documents. Accordingly, shareholders exercise control over the appointment and replacement of the company’s external auditors through the general assembly, rather than through the board.

The Corporate Governance Code imposes specific obligations designed to ensure that shareholders are informed of the company’s corporate governance arrangements and practices.

• Comply or explain: the Code operates on a “comply or explain” basis. Where the company does not comply with a provision of the Code, the reasons for non-compliance must be disclosed in the annual corporate governance report and discussed with shareholders at the general assembly.
• Annual corporate governance report: the company must prepare an annual corporate governance report setting out its corporate governance arrangements and compliance with the Code. The report forms part of the company’s annual reporting and provides shareholders with information on its governance practices.
• General assembly consideration: the annual general assembly agenda must include a separate item for the discussion and approval of the corporate governance report, giving shareholders the opportunity to consider the company’s governance arrangements and raise questions in relation to them.

More generally, the board is responsible for ensuring appropriate transparency and disclosure to shareholders regarding the company’s governance and affairs. These requirements enable shareholders to monitor the company’s governance practices and hold the board accountable through the general assembly.

Bahrain law does not generally impose a separate statutory duty of care on a controlling or parent company solely by reason of its control of another company. The controlling company and the controlled company remain separate legal entities. However, the manner in which control is exercised may give rise to liability or other remedies in certain circumstances.

• Board duties: a controlling shareholder that appoints directors to the board does not thereby acquire the right to direct those directors solely in its own interests. Under the applicable corporate governance principles, once appointed, directors are expected to act in the interests of the company and all of its shareholders, rather than solely in the interests of the shareholder that appointed them.
• Conflicts and related-party transactions: the CCL contains safeguards governing transactions in which directors or managers have a direct or indirect interest. These include disclosure and approval requirements and, in certain circumstances, reporting to shareholders and disclosure in the company’s financial statements and annual report. Breach of these requirements may give rise to liability and, depending on the circumstances, may permit the relevant transaction to be challenged. Shareholders holding at least 10% of the capital also have rights to inspect documents relating to certain interested-party transactions.
• Actual or de facto management: a controlling company or other person may potentially incur liability where, rather than merely exercising its rights as a shareholder, it exercises actual management of the controlled company. A person exercising actual management, whether overtly or covertly, may be liable for damage caused to the company, its shareholders or third parties through negligence, gross fault or breach of the law or the company’s constitutional documents. Whether a controlling company falls within this provision will depend on the extent and nature of its actual involvement in the management of the company.
• Minority shareholder protection: minority shareholders may seek court relief where the company’s affairs are conducted in a manner that is unfairly prejudicial to their interests. This may provide protection where the exercise of control results in conduct that unfairly prejudices minority shareholders. See 2.10 Challenging a Resolution and 10.1 Legal and Regulatory Provisions.

Accordingly, a controlling company does not incur duties or liabilities to the shareholders of the controlled company merely because it holds a controlling interest. Liability may, however, arise depending on how that control is exercised, particularly where the controlling company assumes an actual management role or its exercise of control results in unlawful or unfairly prejudicial conduct.

Where a company becomes insolvent, shareholder rights are principally governed by the Reorganization and Bankruptcy Law, together with the applicable provisions of the CCL. For CBB-licensed financial institutions, the CBB Law contains a separate insolvency regime.

• Participation in insolvency proceedings: shareholders may participate in bankruptcy or reorganisation proceedings to the extent that they qualify as persons having an interest in the proceedings. Interested persons may also obtain information from the court or bankruptcy trustee concerning the debtor’s business and financial affairs and the conduct of the proceedings, subject to the applicable requirements and restrictions.
• Corporate decisions in circumstances of serious losses: the CCL also gives shareholders a role before or alongside formal insolvency proceedings where the Company has suffered substantial losses. Where the company’s losses consume its legal reserve and a significant portion of its capital, the board must convene an EGA to consider whether the company should be dissolved, its capital reduced, or other appropriate measures taken. If the board fails to convene the meeting, the required quorum cannot be achieved, or the general assembly declines to dissolve the company, a shareholder may, in the circumstances prescribed by the CCL, apply to the court for dissolution.
• Economic rights on liquidation: shareholders rank behind the company’s creditors. Accordingly, they are entitled to receive a distribution on liquidation only after the company’s debts and other liabilities have been satisfied. Any remaining surplus is distributed among the shareholders in accordance with the rights attaching to their shares and the company’s constitutional documents.

Although shareholders retain applicable corporate and procedural rights, once formal insolvency proceedings commence their ability to control the company’s affairs may be significantly restricted by the powers conferred on the court, bankruptcy trustee or other officeholder under the applicable insolvency regime.

Shareholders have several remedies under the CCL in respect of unlawful or prejudicial conduct by the company. A shareholder may seek to nullify a decision of the general assembly or board of directors that violates the law, public order or the company’s constitutional documents, and may claim compensation for resulting loss.

Shareholders may also challenge general assembly resolutions that unfairly favour a particular class of shareholders or the directors, are intended to harm a particular class of shareholders, or prejudice minority shareholders without regard to the interests of the Company; see 2.10 Challenging a Resolution and 2.11 Institutional Shareholder Groups.

Any such challenge must be brought within the applicable statutory limitation periods.

Directors and managers are personally liable in all their assets for damage caused to the company, shareholders, or third parties where they have acted with gross negligence or error, or in violation of the law or the company’s constitutional documents, under Article 18 bis. This liability is confirmed against the chairperson, board members, and managers under Article 185, and a decision of the general assembly discharging the board from liability does not prevent a liability action being brought regardless. The primary route for enforcing this is a company action, decided by the general assembly and instituted by the chairperson (or another appointed director if the chairperson is implicated), under Article 187(a). Where the company fails to bring that action itself, an individual shareholder may sue the board personally for damage suffered as a shareholder, after giving the company 30 days’ notice of the intended claim, under Article 187(b).

Bahrain’s CCL does provide a mechanism functionally similar to a derivative action. The primary right to sue directors for damage caused to the company belongs to the company itself, decided by the General Assembly, under Article 187(a). Where the company declines to exercise this right, Article 187(b) allows an individual shareholder to step in and bring the liability action personally against the board, provided the shareholder has first notified the company at least 30 days before filing, and any provision in the company’s constitutional documents attempting to exclude this right is void. Article 170(d) reinforces this by prohibiting the general assembly from restricting shareholders’ right to bring such compensation claims against board members. Where the company is in liquidation, the same right passes to the liquidator instead, following a general assembly decision, and to the bankruptcy trustee if the company is bankrupt, under Article 187(c).

Bahrain’s CCL does not use the word “activism,” but it gives minority shareholders several tools they can use to push for change.

• A shareholder group holding 10% of the capital can require the board to convene an OGA. The same 10% threshold also applies to the convening of an EGA. An EGA can decide on major matters such as capital changes, the disposal of more than half of the company's assets, and mergers.
• Shareholders holding just 5% of the capital can require a specific item to be added to the meeting agenda. Shareholders holding a quarter of the shares present at the meeting can also request that the vote be postponed by up to ten working days if they consider that they do not have sufficient information.
• A shareholder with 10% or more of the capital can appoint directors in proportion to their shareholding. Because voting is cumulative under Article 176, that shareholder can allocate all their votes to one candidate, making it possible to secure a board seat without a majority.
• Either the chairperson or shareholders holding one-tenth of the votes represented at the meeting can demand a secret ballot on board appointments, dismissals, or director liability.
• Shareholders holding 10% of the capital can also request that the general assembly dismiss some or all of the directors.
• Shareholders holding 25% of the capital can require the replacement of the company’s auditor during the financial year.
• Shareholders holding 25% of the capital can request that the Ministry of Commerce and Industry inspect the company. If the inspection finds the complaint justified, the general assembly can be convened to dismiss the directors, managers, or auditors responsible.

• A shareholder can sue the directors personally if the company itself refuses to sue them, after giving 30 days’ notice.

• A shareholder can request that the court cancel a general assembly decision that violates the law or the company’s constitution. The same remedy applies to decisions that unfairly favour certain shareholders or directors, or harm the minority. More broadly, a shareholder can file a lawsuit to nullify any decision issued by the general assembly or by the board of directors in violation of the law, the public order or the constitutional documents.

The aims of activist shareholders are a matter of market practice rather than law and will depend on the circumstances of the particular company.

Common objectives include:

• seeking changes to board composition or management;
• influencing the company’s strategy or operations;
• encouraging the distribution of excess capital through dividends or share buybacks;
• advocating for a sale or restructuring of the company or certain business lines; and
• seeking improvements in corporate governance, transparency or ESG practices.

Bahrain does not yet have a developed track record of publicised shareholder activism, and therefore specific data cannot be provided. Generally, activists tend to build their stake in stages, since each threshold under the CCL unlocks a further tool. As explained at 11.1 Legal and Regulatory Provisions, at 5%, an activist can require an item to be placed on the agenda of a general assembly. At 10%, they can compel the convening of an OGA or EGA and appoint directors in proportion to their shareholding through cumulative voting. At 25%, they can require the replacement of the auditor or request that the Ministry of Industry and Commerce inspect the company, which may lead to the dismissal of the board. 

There is no significant trend in Bahrain of shareholder activism targeting particular industries or sectors. Shareholder activism remains relatively uncommon, particularly among publicly listed companies, and there is therefore insufficient activity to identify any meaningful trend based on the market capitalisation of targeted companies.

Bahrain does not yet have a developed track record of publicised shareholder activism, so it is not possible to point to specific data or a well-established pattern of which shareholder groups are most active in this market. That said, based on general trends observed in the wider GCC and internationally, hedge funds and other specialist investment funds tend to be the most active shareholder groups where activism does occur, given their concentrated positions and willingness to take public stances. By contrast, sovereign wealth funds and family-owned investment vehicles, which are significant shareholders in many Gulf-listed companies, tend to exert influence more quietly through board representation rather than public campaigns.

There is no reliable source of data available on the proportion of activist demands met in Bahrain specifically, as the market does not yet have a developed track record of publicised activist campaigns from which meaningful statistics could be drawn.

A company responding to an activist shareholder should first understand the activist’s concerns, assess whether they have merit, and engage constructively where possible. Typical responses may include:

• improving communication with shareholders;
• strengthening investor relations;
• refreshing board composition;
• reviewing strategy or capital allocation; and
• considering settlement where it avoids a prolonged public dispute.

To minimise the risk of activism, companies should maintain strong governance, transparent disclosure, regular shareholder engagement, effective board oversight, and clear performance and capital management strategies. Good governance and early engagement are often the best protection against activist pressure.