Bahrain – Decree-Law No. 38 of 2025 Amending the Commercial Companies Law

On 8 September 2025, His Majesty King Hamad bin Isa Al-Khalifa has issued Decree-Law No. 38 of 2025, introducing a comprehensive package of reforms to Bahrain’s Commercial Companies Law (Decree-Law No. 21 of 2001). The amendments took effect the day following their publication in the Official Gazette and require immediate attention from all Bahrain-incorporated entities.

Objectives of the Amendments

These reforms are intended to:

• Strengthen corporate accountability and align Bahrain’s framework with international standards.
• Accelerate digital transformation by facilitating virtual participation and e-voting by default.
• Increase structural flexibility, including sole-shareholder Closed Joint Stock Companies.
• Simplify the corporate landscape by removing outdated entities.
• Enhance regulatory oversight and transparency.

Below is a high-level overview of the headline changes and their practical implications.

1. Personal Liability of “Shadow Managers”

• Wider net of potential liability – Shadow Managers. Liability for wrongful acts is now expressly extended to any person “actually managing the company, whether overtly or covertly,” in addition to promoters, partners, shareholders, board members and named managers.
• Illustrative breaches replaced with more general trigger for liability. The former list of specific breaches which could render managers, (now including persons actually managing the company), promoters, partners, shareholders, board members and named managers liable, has been replaced with a broader test – specifically, where such persons have created obligations upon the company as a result of their negligence or breach of law or breach of the provisions of the constitutional documents of the company.

2. Inspection and Regulatory Obligations now also extend to “Shadow Managers”

• The powers of the Ministry of Industry and Commerce to inspect, and to require copies of all books, documents and records relating to the company’s affairs, may now be directed to persons who are in charge of the actual management of the company (i.e. shadow managers) in addition to the existing categories of persons being directors, managers, employees, and the company auditors.

3. Electronic and Remote Corporate Governance

• Virtual meetings. Previously, the law allowed for electronic meetings (board / shareholders) only if expressly permitted by a company’s constitutional documents. Under the new amendment, electronic meetings are now permitted by default, provided that certain conditions are met, such as: participant verification, proper recording of meetings, accessible participation and compliance with any additional requirements set by the Minister of Industry and Commerce.
• Electronic voting. Previously, the law allowed for electronic voting (board / shareholders) only if expressly permitted by a company’s constitutional documents. Companies may now adopt electronic voting systems, subject compliance with any additional requirements set by the Minister of Industry and Commerce.

4. Single-Shareholder Closed Joint-Stock Companies (CJSCs)

• While closed joint stock companies still generally require a minimum of two shareholders, a new paragraph added to Article 226 allows for the establishment of such companies by a single shareholder, exercising the powers of both the founding assembly and the general assembly, in accordance with terms and conditions in a decision to be issued by the Minister of Industry and Commerce. This relevant ministerial decision has yet to be published.

5. Continuation of Partnerships on Exit or Insolvency of a Partner

• In cases where a company’s constitutional documents are silent on a company’s continuation upon the withdrawal, death, or legal disqualification (e.g., interdiction, bankruptcy, or insolvency) of a partner, the time period granted for the remaining partners to unanimously decide on continuing the company has been extended from 15 working days to 90 working days.

6. Abolition of ‘Mushārakah’ Joint Venture Companies

• A Mushārakah (associations/partnership by participation) was an unincorporated, unregistered partnership that existed only between the partners, with dealings conducted in the name of one or more of them.
• The legal form has been abolished.
• All statutory references to Mushārakah (associations/partnership by participation) are repealed and the entire chapter governing them is deleted.
• Transitional period. Existing Mushārakah (associations/partnership by participation) must regularise their status within three months of the Law’s effective date.

Practical Action Points for Clients

In light of the sweeping raft of changes, clients are advised to consider the following:

• Map “actual managers”. Identify anyone who influences management decisions (de facto or shadow directors) and ensure they understand their new exposure.
• Update governance documents. Review and amend constitutional documents of a company to address continuation of partnerships; and to remove references to joint venture structures.
• Review Directors and Officer Insurance (and equivalent). Confirm coverage extends to “actual managers” and unlimited personal liability scenarios.
• Prepare for inspection requests. Centralise and digitise corporate records to facilitate immediate production to inspectors and the Ministry of Industry & Commerce.
• Restructure existing Mushārakah (associations/partnership by participation). Evaluate conversion to limited partnerships, WLLs, Closed Joint Stock Companies or other vehicles well before the three-month deadline.
• Monitor secondary legislation. The Minister of Industry & Commerce will issue further regulations on electronic voting, single-shareholder Closed Joint Stock Companies and remote meeting / electronic voting protocols.

How We Can Assist

Al-Tamimi & Company’s Bahrain Corporate Team is actively engaging with the Ministry of Industry & Commerce and can help you:

• Conduct director/manager training on the new liability regime.
• Redraft constitutional documents of a company and shareholder agreements.
• Establish compliant electronic meeting and voting platforms.
• Restructure joint ventures and advise on optimal replacement vehicles.
• Liaise with insurers on enhanced coverage terms.

Please contact your usual relationship partner or any of the individuals below to discuss how these sweeping changes affect your Bahrain operations.