Bahrain’s 2025 Amendments to the Commercial Companies Law: Key Changes and Implications

Bahrain’s Decree-Law No. 38 of 2025 modernizes its Commercial Companies Law by expanding liability to directors and shadow managers, enabling digital governance, and allowing single-shareholder joint stock companies. The reforms abolish outdated structures like Musharakah, strengthen regulatory oversight, and align Bahrain’s corporate framework with international standards.

On September 8, 2025, the Kingdom of Bahrain enacted Decree-Law No. 38 of 2025 for introducing major amendments to the Commercial Companies Law of 2001. The reforms are meant to expand personal liability and modernize corporate governance in Bahrain. They also abolish outdated legal forms and give continuity for partnerships. Together, these changes aim to recalibrate corporate responsibility and align Bahrain’s corporate framework with international practice.

The role of shadow managers

One of the most consequential reforms is the extension of liability to shadow managers, individuals who, without holding formal office, actually direct or influence company management. It closes gaps where informal actors escaped accountability despite exercising control.

The old law had specific breaches that could invite liability. The new framework replaces this with a broader test. Now the liability arises where managers, promoters, shareholders, or directors create obligations for the company through negligence, legal violations, or breaches of constitutional documents.

Regulatory oversight and disclosure obligations

The Ministry of Industry and Commerce now has expanded investigatory powers. Inspectors from the Ministry can demand books, documents, and records from directors, employees, and auditors as well as from shadow managers. It could close loopholes in oversight and bring Ministry’s reach over individuals materially involved in governance.

Companies that rely on informal decision-making structures may need to formalize processes to avoid adverse inferences. As regulators will look beyond nominal roles, companies should properly document the chain of authority and decision-making.

Digitalization of corporate governance

The amendments recognize the need for modern governance practices. It permits virtual board and shareholder meetings by default, provided conditions on participant verification, accessibility, and recording are met. It similarly authorizes electronic voting by removing the earlier requirement for explicit provisions in company charters.

These changes can reduce logistical costs and enable faster decision-making. For multinationals, the ability to participate in meetings without physical presence could mean greater efficiency and ensures cross-border investors can exercise governance rights more effectively.

Single-shareholder closed joint stock companies

Another structural reform allows the creation of closed joint stock companies (CJSCs) with a single shareholder. This individual exercises the powers of both the founding assembly and the general assembly, subject to terms to be set by the Ministry of Industry and Commerce.

Previously, a minimum of two shareholders was required. It led to artificial arrangements where a second party held shares solely to meet statutory requirements. The new flexibility reduces costs, and brings Bahrain in line with international practice.

Continuation of partnerships after partner exit

The amendments extend the timeframe for partners to decide on company continuation after the death, withdrawal, or insolvency of a partner. The period has been lengthened from 15 working days to 90 working days.

It can accrue biggest benefit to family-owned and professional partnerships, by reducing the risk of premature dissolution. It ensures businesses can continue operations even when partners are considering restructuring options.

Abolition of Musharakah joint ventures

The decree abolishes the legal form known as Musharakah (partnerships by participation). These were unincorporated and unregistered arrangements that relied on dealings in the name of one or more partners.

All statutory references to Musharakah have been removed, and the entire chapter governing them has been repealed. Existing Musharakah structures must regularize their status within three months of the law’s effective date. It phases out informal arrangements in favor of registered and regulated entities which can potentially improve transparency.

Expanded personal liability for directors and managers

In addition to shadow managers, directors and formally appointed managers are now expressly liable for damages caused to the company, shareholders, or third parties due to negligence, gross error, or violations of law. Liability may be individual or joint and cannot be waived unless a formal objection has been recorded.

It elevates expectations for diligence and risk management across all levels of management. Boards now should maintain strong oversight practices and document all decision-making process.

Implementation and transitional requirements

Companies must take immediate steps to comply with the new regime. Existing Musharakah entities are supposed to transition to recognized forms within three months. Firms that are using informal managerial structures must clarify roles and responsibilities to avoid inadvertent exposure of shadow managers. Boards should also review their corporate governance documents to ensure compatibility with default virtual meeting and electronic voting provisions.

What it means for investors and businesses

For foreign investors, the reforms offer both opportunities and obligations:

• Virtual governance lowers barriers to participation in cross-border operatio;
• Single-shareholder CJSCs simplify investment structuring;
• Extended liability requires stricter compliance and internal documents; and
• Abolition of Musharakah eliminates opaque structures.

But success depends on effective implementation. The Ministry must issue some up-to-date regulations on single-shareholder companies and electronic governance. Businesses, in turn, can use professionals to adapt to new compliance systems and meet the liability and disclosures within time.

The reforms also promote stability by lengthening the continuation period for partnerships and expanding oversight by regulators. It also creates opportunities to engage more effectively in governance in one’s companies governance, but also imposes stricter responsibilities.

Success will depend on how companies adapt to these obligations and how consistently authorities apply the new rules. If implemented effectively, the amendments could mean a transparent and investor-friendly reputation for Bahrain.

Read more: Bahrain’s 15% Domestic Minimum Top-Up-Tax on MNEs

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