Shareholders’ rights in Bahrain are principally governed by the Commercial Companies Law (Legislative Decree No. 21 of 2001, as amended) (CCL), its Implementing Regulations and each company’s constitutional documents. Additional requirements may apply under the Corporate Governance Code, Bahrain Bourse Listing Rules and, where relevant, the Central Bank of Bahrain (CBB) Rulebook.
The CCL gives shareholders rights relating to profits, liquidation proceeds, company information, participation in management and voting. It also provides procedures for general meetings, share issues and transfers, board appointments, challenges to certain decisions and claims against directors.
Several rights depend on the shareholder’s percentage of the company’s capital. For example, shareholders holding 5% may request an item be added to a general assembly agenda, while a 10% holding may enable shareholders to request a meeting or appoint directors in proportion to their shareholding. A 25% holding may support a request to replace the auditor or ask the Ministry of Industry and Commerce to inspect the company.
Shareholder activism is not a defined term in the CCL, and publicised activism remains relatively uncommon in Bahrain. The statutory rights available to shareholders can nevertheless be used to seek changes to governance, board composition, company strategy or other matters.
Article 2 of the CCL provides that a commercial company established in Bahrain must take one of the following forms:
Foreign investors commonly use a limited liability company because it provides limited liability and a comparatively flexible management structure. A closed shareholding company 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. The Minister of Commerce may exempt foreign-capital companies from otherwise applicable minimum capital requirements. The permitted level of foreign ownership depends on the relevant commercial activity. Decision 40 of 2021 classifies activities by the level of foreign ownership permitted, including activities reserved for Bahraini ownership, activities requiring at least 51% Bahraini ownership, activities requiring a Bahraini partner without a specified minimum percentage, and activities that may permit up to 100% foreign ownership subject to conditions.
The most common share class is ordinary shares. Article 168 of the CCL provides ordinary shareholders with rights that include receiving declared profits, participating in liquidation distributions, participating in company management, receiving specified company reports, disposing of shares, having priority to subscribe for new shares, accessing certain company registers and challenging certain resolutions.
Preference shares are permitted within the framework established by ministerial order. They may be divided into classes, with equal rights and benefits for shares within the same class. Their preferences may concern voting, dividends or other rights. Their issue is subject to the conditions described in the CCL, including requirements relating to the company’s constitutional documents and the nature of its business.
The CCL and a company’s constitutional documents may provide different benefits to different classes of shares, including in relation to voting, profits and liquidation proceeds, provided that shares of the same class are treated equally. The rights attaching to shares may also be affected by the Corporate Governance Code, Bahrain Bourse Listing Rules and CBB Rulebook, depending on the company and its regulatory status.
Under Article 109 of the CCL, the founders determine the capital of a shareholding company, which must be sufficient to achieve the company’s objects. The Minister of Commerce may set minimum capital thresholds for company types, sectors or activities. CBB-regulated financial institutions are subject to separate minimum capital requirements under the CBB Rulebook, and foreign-capital companies may be exempted from minimum requirements by the Minister.
The stated minimum capital requirements are BHD 1 million for public shareholding companies and BHD 50,000 for closed shareholding companies.
The minimum number of shareholders or partners varies by company form. A limited liability company may be established by one owner or by several partners. A closed joint stock company generally requires at least two persons, although a single person may establish one subject to conditions set by ministerial decision. A limited partnership by shares requires at least four founders, and a general partnership requires at least two partners.
Shareholders commonly use shareholders’ agreements to supplement the company’s constitutional documents and address matters not covered, or not covered in the same detail, in those documents. A shareholders’ agreement generally operates as a private contract between its parties, while the constitutional documents govern the corporate relationship between the company and its shareholders and may have effect in relation to third parties.
The CCL does not specifically regulate shareholders’ agreements. They are generally permissible under the principle of freedom of contract in the Bahraini Civil Code, provided their terms do not contravene mandatory law or public policy. They may create additional contractual rights and obligations between shareholders, but cannot override mandatory provisions of the CCL or other applicable laws.
Common provisions include deadlock mechanisms, put and call options, tag-along and drag-along rights, non-compete and non-solicitation undertakings, dividend policies, reserved matters, director and manager appointment or removal provisions, pre-emptive rights and transfer restrictions. Shareholders’ agreements are generally enforceable between their parties and are not required to be publicly registered.
A shareholding company must hold an annual ordinary general assembly (OGA) within three months after the end of its financial year. A limited liability company must convene its general assembly at least once a year within six months after the financial year ends. Companies listed on Bahrain Bourse must hold their annual meeting within three months after the financial year ends.
For a public shareholding company, notice of an OGA must be given at least 21 days in advance and published in at least two local daily newspapers, one Arabic-language and one English-language. Closed joint stock companies and limited liability companies must send invitations at least 21 days before the meeting. Meeting notices must state the time, venue and detailed agenda.
The board chairperson convenes the OGA. The board must also convene it if requested by the auditor or shareholders representing 10% of the company’s capital. For a limited liability company, a meeting may be convened by the managers, supervisory board, auditor, Ministry of Commerce or partners holding at least 10% of the capital.
Shareholders are entitled to notice of a general assembly. For a shareholding company, the board must 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 meeting. Shareholders may obtain a booklet containing the balance sheet, profit and loss account and board and auditor reports. They may also access company registers and obtain copies or extracts, subject to conditions in the constitutional documents that do not prejudice the company’s interests. The shareholders’ register must be available for free access at the company’s head office.
Following the amendment introduced by Decree-Law No. 38 of 2025, Article 23 bis permits meetings prescribed under the CCL to be held by electronic or telephone communication. The company must take measures to verify participant identities and the validity of proxies, enable shareholders to participate fully as if present in person, and record statements and votes. The Minister of Commerce may prescribe additional conditions.
Electronic voting is also permitted under a 2025 amendment, subject to conditions and requirements prescribed by the Minister of Industry and Commerce.
For a shareholding company’s general assembly, a meeting is valid if attended by shareholders representing more than half of the share capital. If that quorum is not met, a second meeting is held between seven and 15 days later 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, the required attendance is at least two-thirds of the capital at the first meeting, more than one-third at the second and one-quarter at the third.
OGA resolutions are generally passed by a simple majority of shares represented at the meeting. EGA resolutions generally require a two-thirds majority of represented shares. Certain resolutions, including those concerning amendments to constitutional documents, merger or liquidation, require approval by shareholders representing at least 75% of the company’s capital. A resolution that increases shareholders’ financial liability requires unanimous approval.
The OGA may consider company matters including the election and dismissal of board members, board remuneration, annual reports and financial statements, discharge of the board from liability, auditor appointments and dividends. Matters reserved to the EGA include amendments to constitutional documents, capital increases or reductions, disposal of more than half of the company’s assets, dissolution or winding-up, termination or disposal of the company’s entire project, and mergers.
Each shareholder’s votes correspond to the number of shares held. Shareholders may vote by proxy, subject to restrictions on who may act as proxy. A first-degree relative may also act as proxy under a written special power of attorney. A secret ballot is required for elections or dismissals of board members and for initiating liability proceedings against them.
Shareholders holding at least 5% of the capital may request that an item be added to the general assembly agenda by submitting a written request to the board at least five working days before the meeting. If shareholders holding one-quarter of the shares present consider that they lack sufficient information during the discussion, they may request postponement of the meeting for up to ten working days.
Existing shareholders have a statutory pre-emptive right to subscribe for new shares, and any provision to the contrary is void. A public notice must state the priority right, subscription period and value of the shares. Shareholders may also be notified by registered letters. A shareholder must express the intention to exercise the right within 15 days of publication of the notice.
New shares are first allocated among subscribing shareholders in proportion to their existing holdings, subject to the number applied for. Any remaining shares are then allocated among shareholders who applied for more than their pro-rata entitlement. Shares still unsubscribed may be offered for public subscription under the rules applicable to incorporation.
The CBB Law and its Implementing Regulations govern the trading, registration, deposit, transfer, set-off, settlement, mortgage and attachment of shares, as well as a company’s purchase of its own shares. Shares in closed shareholding companies may be transferred only after full payment, except for transfers among founders. For shareholding companies that are not listed, constitutional documents may restrict transfers by giving existing shareholders pre-emptive rights or requiring board approval for a purchaser. These restrictions do not apply to transfers between shareholders, spouses, ascendants and descendants.
Limited liability company membership interests are not negotiable. They may be sold by a written instrument with certified signatures. A partner proposing a sale must notify the other partners of the offer, including the price and buyer’s identity. If no purchase request is made within two weeks, the partner may sell to a third party. A transfer without payment requires approval by partners holding at least 75% of the capital.
A company’s shareholders’ register must record shareholders’ names, nationalities, domiciles and share details, with a copy of the information sent to the Ministry of Commerce and Bahrain Bourse. Listed-company shareholding changes are subject to CBB disclosure requirements, including notification of acquisitions that cross prescribed thresholds. The CCL also requires certain information about board candidates to be made available to shareholders on the company’s website.
An EGA may approve a capital decrease if the company’s capital exceeds its requirements or the company has sustained losses and decides to reduce capital to its actual value. The decrease may be made by reducing the nominal value of shares or cancelling shares. Cancellation must be proportionate to the capital decrease and must not deprive a shareholder of their shareholding.
Creditors who object to a capital decrease within 60 days of publication may block its enforcement until matured debts are paid or adequate guarantees are provided.
The CCL permits a company to purchase its own shares, subject to statutory requirements and a 10% limit on treasury shares as a proportion of issued capital. Treasury shares do not carry voting rights while held by the company. Where constitutional documents require board approval for a transfer and the board rejects a proposed purchaser, the board must arrange for the company to purchase the shares within 15 days at the applicable price. Listed-company buybacks are also subject to CBB Rulebook and Bahrain Bourse requirements. A subsidiary may not own shares in its parent public shareholding company.
The general assembly declares dividends based on recommendations from the board or managers. Dividends may be paid only from distributable profits and after allocations required by law and the constitutional documents. The CCL generally requires 10% of annual net profits to be allocated to the statutory reserve. That allocation may cease when the reserve reaches 50% of paid-up capital, unless the constitutional documents set a higher threshold.
The general assembly determines the amount to distribute. Where board remuneration is calculated by reference to profits, statutory limits apply, including a requirement for a dividend of at least 5% of paid-up capital before maximum profit-based board remuneration may be paid. Approved dividends are payable to entitled shareholders according to the rights attaching to their shares. In a limited liability company, approved profits must be distributed to partners within 30 days of approval by the general assembly.
Directors are generally elected by the general assembly using secret cumulative voting. Each shareholder has votes equal to the number of shares held and may cast them for one candidate or distribute them among candidates.
A shareholder holding at least 10% of the company’s capital has a right to appoint board members in proportion to its shareholding, subject to the rules described in the CCL and company constitutional documents. A shareholder exercising that appointment right cannot use the corresponding proportion of its shareholding to vote for the remaining directors. The appointment right is optional and lapses for an election or appointment if not exercised then.
A public joint stock company must have at least five board members, and a closed joint stock company at least three. The Corporate Governance Code generally sets a maximum of 15 board members. Directors must satisfy statutory eligibility requirements and provide the required acceptance and disclosures.
The general assembly may remove some or all directors, subject to the CCL and the constitutional documents. Shareholders representing at least 10% of capital may request a general assembly to consider removal. Shareholders representing at least 5% may request that a proposal, including a director removal proposal, be added to the agenda.
Shareholders do not generally direct directors in exercising their management powers, including directors appointed by a particular shareholder. Once appointed, directors are expected to act in the interests of the company and all shareholders. The general assembly appoints the external auditor from among those authorised to practise in Bahrain, determines the auditor’s remuneration and may decide not to renew or to replace the auditor.
A shareholder may seek to nullify a general assembly or board resolution that violates applicable law, public order or the company’s constitutional documents, and may claim compensation for resulting loss. A general assembly resolution may also be challenged if it unfairly favours a class of shareholders or directors, or prejudices minority shareholders without due regard to the company’s interests. Such a challenge must be brought within 15 working days after the shareholder becomes aware of the resolution and, in any event, within one year of the resolution.
Directors and managers may be personally liable for damage caused to the company, shareholders or third parties through gross negligence or error, or violation of law or the company’s constitutional documents. Under Article 187(a), the company may bring a liability action following a general assembly resolution. If the company does not bring the action, an individual shareholder may bring a claim after giving the company at least 30 days’ notice. The CCL describes a mechanism that functions similarly to a derivative action. The right passes to the liquidator in a liquidation and to the bankruptcy trustee if the company is bankrupt.
A shareholder may also seek court relief where company affairs are conducted in a manner that is unfairly prejudicial to shareholders generally or to one or more shareholders. The remedy can concern acts or omissions by the company, including conduct carried out on its behalf.
The Corporate Governance Code uses a “comply or explain” approach. If a company does not comply with a provision, it must disclose the reasons in its annual corporate governance report and discuss them with shareholders at the general assembly. Companies must prepare an annual governance report, and the annual general assembly agenda must include a separate item for its discussion and approval.
Bahrain law does not generally impose a separate statutory duty of care on a parent or controlling company solely because it controls another company. The companies remain separate legal entities. However, liability or other remedies may arise depending on how control is exercised.
Directors appointed by a controlling shareholder are expected to act in the interests of the company and all shareholders. The CCL also sets safeguards for transactions in which directors or managers have a direct or indirect interest, including disclosure and approval requirements. Shareholders holding at least 10% of the capital may inspect documents relating to certain interested-party transactions. A person who exercises actual management, overtly or covertly, may face liability for damage caused through negligence, gross fault or breach of law or the company’s constitutional documents.
Where a company becomes insolvent, shareholder rights are principally governed by the Reorganization and Bankruptcy Law and relevant CCL provisions. CBB-licensed financial institutions are subject to a separate insolvency regime under the CBB Law. Shareholders may participate in proceedings if they qualify as interested persons and may obtain information from the court or bankruptcy trustee, subject to applicable requirements and restrictions.
Where losses consume the legal reserve and a significant portion of capital, the board must convene an EGA to consider dissolution, capital reduction or other measures. In circumstances prescribed by the CCL, a shareholder may apply to the court for dissolution if the board fails to convene the meeting, quorum cannot be achieved, or the general assembly declines to dissolve the company. On liquidation, shareholders rank behind creditors and may receive a distribution only after debts and liabilities have been satisfied. Formal insolvency proceedings may significantly restrict shareholders’ ability to control the company’s affairs.
The CCL does not use the term “shareholder activism,” but it provides tools shareholders may use to seek change. Relevant thresholds described in the Bahrain chapter include:
A shareholder may also seek a secret ballot on board appointments, dismissals or director liability where the applicable requirements are met; challenge certain resolutions; and, after giving the company 30 days’ notice, bring a claim against directors if the company does not pursue the action.
Activist shareholders may seek changes to board composition or management, influence strategy or operations, encourage distributions of excess capital through dividends or buybacks, advocate a sale or restructuring, or seek improvements in governance, transparency or ESG practices. These objectives are matters of market practice and depend on the circumstances of the company.
Publicised shareholder activism remains relatively uncommon in Bahrain. There is no significant trend targeting particular industries or sectors, and the available activity does not support meaningful conclusions by target company market capitalisation. There is also no reliable Bahrain-specific data on the proportion of activist demands met or a well-established pattern identifying the most active shareholder groups. The chapter notes that, based on wider GCC and international trends, hedge funds and specialist investment funds tend to be more publicly active where activism occurs, while sovereign wealth funds and family-owned investment vehicles tend to exert influence more quietly through board representation.
Companies responding to an activist shareholder should understand the concerns raised, assess their merits and engage constructively where possible. Possible responses include improving shareholder communication and investor relations, refreshing board composition, reviewing strategy or capital allocation, and considering settlement where it may avoid a prolonged public dispute. Strong governance, transparent disclosure, regular shareholder engagement, effective board oversight and clear performance and capital-management strategies are identified as measures that may help reduce activism risk.
Companies and shareholders should identify the rules that apply to the relevant company type, share class and regulatory status. They should also review the company’s constitutional documents when considering meeting procedures, voting, share transfers, board rights or shareholder remedies.
For shareholders considering action, the applicable percentage threshold, notice period, voting procedure and any statutory deadline may determine which rights are available. For companies, timely disclosures, appropriate meeting procedures, shareholder engagement and compliance with governance reporting requirements support the exercise of shareholder rights and the company’s accountability framework.
Depending on the company and share class, shareholders may have rights to receive declared profits, participate in liquidation distributions and company management, obtain specified financial and governance information, vote, subscribe for new shares, access certain registers and challenge certain resolutions.
Shareholders holding at least 5% of the company’s capital may request an item be added, provided the written request is submitted to the board at least five working days before the meeting.
For a shareholding company, shareholders representing 10% of the capital may request the board to convene an OGA. The chapter also identifies a 10% threshold for requesting an EGA. Separate rules apply to limited liability companies.
A shareholder may seek to nullify a general assembly or board resolution that violates applicable law, public order or the company’s constitutional documents. Certain resolutions may also be challenged if they unfairly favour a class of shareholders or directors, or prejudice minority shareholders without due regard to the company’s interests. The stated time limits are 15 working days from awareness and, in any event, no later than one year after the resolution.
The CCL does not use the term “activism,” but it gives shareholders tools to seek change through general assembly procedures, agenda rights, board appointments, auditor replacement, company inspections and legal remedies. Publicised activism remains relatively uncommon in Bahrain.
Yes. Article 23 bis of the CCL permits meetings to be held electronically or by telephone, subject to measures for verifying participants and proxies, enabling full participation, and recording statements and votes. The Minister of Commerce may set additional conditions.
Yes. A shareholder may appoint another shareholder or a third party to attend and vote by proxy, subject to restrictions. The proxy cannot be the company’s chairperson, a board member or an employee. A first-degree relative may also act as proxy under a written special power of attorney.
Each shareholder has votes corresponding to the number of shares held. In cumulative voting, a shareholder may cast all of those votes for one candidate or distribute them among several candidates. A shareholder holding at least 10% of the capital may also have a right to appoint board members in proportion to that shareholding, subject to the CCL and the company’s constitutional documents.
Shareholders may access certain company registers and obtain copies or extracts, subject to conditions in the company’s constitutional documents that do not prejudice the company’s interests. They may also access the shareholders’ register free of charge at the company’s head office.
No special or additional rights arise solely because a shareholder is an institutional investor. Institutional shareholders exercise the rights attached to their shares, although a larger shareholding may give them greater voting influence in practice.
Yes. Existing shareholders generally have a statutory pre-emptive right to subscribe for new shares. A shareholder must indicate an intention to exercise that right within 15 days of publication of the relevant notice. New shares are first allocated among subscribing shareholders in proportion to their existing holdings, subject to the number applied for.
Shareholders’ agreements are generally permissible and enforceable between their parties under Bahraini law, provided their terms do not conflict with mandatory legal provisions or public policy. They may supplement the company’s constitutional documents but cannot override them where mandatory law applies.
The CCL provides a route for a shareholder to bring a liability action against directors if the company does not pursue the claim, after the shareholder gives the company at least 30 days’ notice. The source article describes this as a mechanism functionally similar to a derivative action.
Shareholders may participate in insolvency proceedings to the extent they qualify as interested persons. On liquidation, they rank behind creditors and may receive a distribution only after the company’s debts and other liabilities have been satisfied. Formal proceedings may also limit their ability to control the company’s affairs.
Dividends may be distributed only from profits available for distribution and after the allocations required by law and the company’s constitutional documents. The CCL generally requires 10% of annual net profits to be allocated to the statutory reserve until it reaches 50% of paid-up capital, unless the constitutional documents set a higher threshold.
This article is a website version of the Bahrain chapter on Shareholders’ Rights & Shareholder Activism 2026 prepared by Hassan Radhi & Associates for Chambers Global Practice Guides and contributed by Fatima AlAli, Saifuddin Mahmood, and Yasmeen Jawahery. View the Chambers Bahrain chapter
Hassan Radhi & Associates is one of Bahrain's leading full-service law firms and the exclusive Lex Mundi member firm in Bahrain. Established in 1974, the Firm advises local, regional and international clients across corporate and commercial law, banking and finance, dispute resolution, arbitration, construction, employment, real estate, regulatory matters and other areas of Bahraini law.
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