Commercial Companies Law 2001: Contents

Commercial Companies Law 2001
Commercial Companies Law
Part V — Joint-stock Company
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Location: Commercial Companies Law 2001 > Commercial Companies Law > Part V — Joint-stock Company > Chapter One — Incorporation of the Company > Article (107)
  • Chapter One — Incorporation of the Company

    • Article (71)

      i— The founder is a person who actually participates in the incorporation of a company for the purpose of shouldering the responsibility arising therefrom.
      ii— A person shall be considered a founder if he, in particular, has offered an in-kind share upon the incorporation of the company or has signed the preliminary contract or has applied for licensing the company.

    • Article (72)

      The founders shall submit an application for incorporating a company to the Ministry of Commerce and Industry.

    • Article (73)

      A special registry shall be held at the Department of Commerce and Companies' Affairs at the Ministry of Commerce and Industry to register the applications for incorporating joint stock companies. The applications shall be given serial numbers.

    • Article (74)

      An adequate statement on the company's particulars, drawn from the company's preliminary Memorandum and Articles of Association, shall be attached with the application for incorporating the company. The statement shall include the name of the founders' agent and his profession and address. Other attachments shall include:

      i— A copy of the company's preliminary Memorandum and Articles of Association duly signed by the founders as shown in the model form referred to in article (21) of this law.
      ii— An evaluation of in-kind shares, if any, as provided for in article (99) of this law.
      iii— An evidence, if the company's name is derived from the name of a natural person, of any intellectual property rights or patents registered in the said person's name the company intends to invest, or an evidence, if the company's name is derived from the name of an acquired commercial entity, of acquiring this entity.
      iv— An evidence, if the company takes another company's name, that the other company is under dissolution and that it agrees to assign its name to the company.
      v— A certified copy, if there is a corporate person among the founders, of the founding document of the said person, and an evidence that the competent authorities approve its participation in incorporating the company.

    • Article (75)

      The company's preliminary contract shall include the following details:

      i— The name of the company.
      ii— The company's head office.
      iii— The company's objectives.
      iv— Names of the founders who shall not be less than seven persons, except for the companies exclusively incorporated by the government or in which the government participates in its incorporation.
      v— The company's authorized, issued and paid-up capital on corporation, and the number of shares that form the capital.
      vi— The term of the company, if any.
      vii— A statement on every in-kind share, including the conditions thereof, the name of its owner and the real rights associated therewith.
      viii— An approximate estimate of the incorporation's expenses fees and costs.

    • Article (76)

      The provisions of this law shall not apply to the companies exclusively incorporated by the government, or those in which the government contributes more than 50% of its capital or those whose shares have been transferred to the government or to any other public entity that is incorporated by an Amiri Decree, except to the extent that these companies are not in conflict with the conditions considered at the time of their incorporation and with the provisions of their articles of association.

    • Article (77)

      Upon submitting the application referred to in article (72) of this law, the Ministry of Commerce and Industry shall ascertain that the company has been incorporated on a sound basis and that the preliminary contract and articles of association do not contravene with the provisions of the law. To this effect, the Ministry may request the founders to provide additional details and supporting documents whenever necessary. It may also request that amendments be made to the company's articles of association to make them consistent with the provisions of this law or compliant with the model form referred to in article (21) herein.

    • Article (78)

      i— The Minister of Commerce and Industry shall decide on the application within thirty days from the date of its submission. If the said period lapses without taking a decision, the application shall be deemed rejected.
      ii— The applicant whose application has been justifiably rejected or considered to be rejected shall have the right to appeal before the High Civil Court within thirty days from the date of notifying him of the rejection of his application or from the date his application is deemed rejected. The court decision whether confirming or overruling the application rejection shall be final.
      iii— The founders shall not have the right to apply anew for the company's incorporation before removing the reasons of rejection or the lapse of six months from the date of the court's rejection decision.

    • Article (79)

      If the company's draft Memorandum and Articles of Association have been approved, the founders shall notarize them in accordance with the latest amendment with the competent notarization authority and return them to the Ministry of Commerce and Industry for issuing the incorporation order.

    • Article (80)

      If the order of incorporation is issued, it shall be published in the Official Gazette at the expense of the company and a copy thereof shall be sent to the founders.

    • Article (81)

      The company shall have a corporate entity from the date of publication of the incorporation order in the Official Gazette.

    • Article (82)

      The issue of the company's incorporation order represents at the same time certification of the company's Memorandum and Articles of Association and the other particulars contained in the application.

    • Article (83)

      The founders shall begin subscription for the shares following the publication of the incorporation order in the Official Gazette.

    • Article (84)

      The founders shall subscribe for shares representing at least 10% and not exceeding 40% of the company's capital and shall pay — before the publication of the subscription prospectus — the amount equal to the percentage required to be paid by the public for each share upon subscription.

      However, the founders may be authorized, subject to the approval of the Council of Ministers, to subscribe for more than 40% of the company's capital.

    • Article (85)

      The founders shall submit to the Ministry of Commerce and Industry — before inviting the public to subscribe for the company's shares — a certificate from the bank proving that they have subscribed for the company's shares within the limits specified in the foregoing article, and that they have already deposited, in the company's account with the bank, an amount equal to the percentage required to be paid by the public for each share upon subscription as provided for in the company's articles of association. Such amount shall be referred to in the subscription prospectus. The bank certificate shall be accompanied with the subscription invitation prepared by the founders in accordance with the provisions of the following article. Upon the completion of the above, the Ministry of Commerce and Industry shall authorize the publication of the invitation prospectus in one of the local daily newspapers.

    • Article (86)

      The founders shall — upon offering shares for public subscription — issue a prospectus approved by the Ministry of Commerce and Industry and Bahrain Stock Exchange calling the public for subscription and including the particulars specified in the Executive Regulation.

      The subscription prospectus shall be published in one of the local daily newspapers at the expense of the company at least five days before the subscription commences.

      The founders who signed the application for the company's incorporation shall sign the prospectus and be jointly liable for the accuracy of the particulars contained therein.

    • Article (87)

      Subscription shall be undertaken at one or more of the commercial banks licensed to operate in Bahrain or at one of its branches or representatives abroad or through securities companies or other parties approved by the Ministry of Commerce and Industry.

    • Article (88)

      The installments due upon subscription shall be paid at the bank; and the bank shall record such payments in a special account to be opened in the name of the company. Subscription shall remain open for a period of not less than ten days and not exceeding three months.

      Subscription shall not close — in case of covering subscription at any period — before the lapse of five days from the date of publication of a notice that subscription for shares has been fully completed, provided that the minimum period of subscription has lapsed.

    • Article (89)

      Subscription shall be effected by a note indicating the number of shares subscribed for, the subscriber's acceptance of the company's Memorandum and Articles of Association, his selected domicile, and any other details that may be deemed necessary. The subscriber or his deputy shall sign the subscription document.

      The subscriber shall submit the note to the bank and shall pay the installments due against a receipt signed by the bank indicating the name of the subscriber, his selected domicile, nationality, date of subscription, the number of subscribed shares and paid installments. Subscription shall be deemed final upon receiving such receipt. Thesubscriber shall not cancel his subscription, without prejudice to the provisions of article (102) of this law.

    • Article (90)

      Printed copies of the Memorandum and Articles of Association shall be given to each subscriber against an amount determined in the company's articles of association, and such amount shall be mentioned in the receipt provided for in the foregoing article.

    • Article (91)

      The bank shall keep all funds received from subscribers for the account of the company under incorporation and shall give such funds only to the first board of directors as provided for in this law after refunding excess subscribed capital immediately following the allotment of shares in accordance with article (94) of this law.

    • Article (92)

      The bank through which subscription is undertaken shall perform related operations according to the company's articles of association and shall be liable for compliance with its provisions and for any violation thereof.

    • Article (93)

      i— The Joint Stock Company may have upon incorporation or upon increasing its capital one underwriter or more to subscribe the remaining shares.
      ii— If the shares have not been fully subscribed for during the subscription period, the underwriters shall purchase the unsubscribed shares and may re-offer these shares to the public without complying with the procedures and restrictions of dealing in shares provided for in this law.

      The Minister of Commerce and Industry shall decree the procedures, requirements and conditions of applying the provisions of this article.

    • Article (94)

      If subscription exceeds the offered number of shares after closing, the shares shall be allotted among subscribers in the manner agreed upon between the founders and the subscribers or in the manner defined in the company's articles of association.

      The Minister of Commerce and Industry may decide at the beginning to allot a number of shares not exceeding 15% of the company's capital among the subscribers, and the allocation proceeds thereafter as provided for in the foregoing paragraph.

    • Article (95)

      Every subscription undertaken in contravention of the above provisions may be contested before courts by whom it may concern within thirty days from the closing date.

      Subscription may be judged null and void even if the company is in a state of liquidation.

    • Article (96)

      i— The founders shall invite the subscribers for a constituent assembly to be held within twenty-one days from the closing date of subscription. The provisions of article (199) of this law shall apply to the procedures of the invitation.
      ii— Each subscriber shall have the right to attend the constituent assembly regardless of the number of shares he owns.
      iii— The assembly shall be chaired by the person elected by the absolute majority of the shares represented therein.

    • Article (97)

      The constituent assembly shall consider, in particular, the founders' report on the company's incorporation, the expenses incurred and the evaluation of the in-kind shares. It shall also elect a board of directors, appoint the auditors and declare the company finally incorporated.

    • Article (98)

      i— For the constituent assembly to be valid, a quorum of at least half the capital shall be available.
      ii— If the quorum provided for in the foregoing paragraph has not been fulfilled in the first meeting, an invitation shall be sent for a second meeting to be held within twenty-one days from the date of the first meeting. The second meeting shall be valid regardless of the number of subscribers represented therein.
      iii— The constituent assembly's resolutions shall be taken by the absolute majority of the shares represented therein.

    • Article (99)

      If the capital of the company comprised upon incorporation or upon increasing the capital material or intangible in-kind shares, the founders or the board of directors — as the case may be — shall refer to experts to verify the accuracy of the evaluation of the in-kind shares in accordance with the principles and provisions defined in the Executive Regulation of this law. The share evaluation shall only be final after approving it by the constituent assembly or by the majority of shareholders representing two-thirds of the shares mentioned above. The holders of these shares shall have no vote in approving the evaluation thereof even if they are holders of cash shares.

      If it appears that the value of an in-kind share has been less than the supposed amount by more than one-tenth, the company shall reduce its capital by an amount equal to the difference. However, the holder of this share may pay the difference in cash or he may withdraw from the company.

      If the in-kind share has been presented by all subscribers or partners, their evaluation of it shall be deemed final with no need for any other procedure.

      However, if it appears that the estimated value is higher than the real value of the in-kind share, the said subscribers or partners shall be jointly liable towards third parties for the difference between the two values.

      The shareholder shall be given fully paid shares.

    • Article (100)

      The first board of directors shall provide the Ministry of Commerce and Industry and the Bahrain Stock Exchange with the following:

      i— A declaration that capital has been subscribed for in full, the amount paid by the subscribers, their names and domiciles and the number of shares subscribed for by each one of them.
      ii— The minutes of the meeting of the constituent assembly signed by its chairman.
      iii— The resolutions of the constituent assembly approving the report of the founders and the evaluation of the in-kind and intangible shares — if any — and the election or appointment of the members of the first board of directors and the appointment of the auditors.
      iv— The supporting documents of the validity of the incorporation procedures.

    • Article (101)

      i— The first board of directors shall register the company and its articles of association in the Commercial Registry in accordance with the provisions of the law.
      ii— The members of the first board of directors shall be jointly liable for any damages arising from the failure to effect registration as provided for in the foregoing paragraph.

    • Article (102)

      i— If the company is not incorporated, the subscribers shall get back the amounts they have paid, and the founders shall be jointly liable for refunding these amounts in addition to paying compensation if necessary. The founders shall also bear all the incorporation expenses and shall be jointly liable towards third parties for the acts they made during the period of incorporation.
      ii— If the company is incorporated, the consequences of the acts made by the founders in the course of the company's incorporation shall be born by the company together with all related expenses paid by the founders.

    • Article (103)

      Any act made between the company under incorporation and the founders shall not bind the company after incorporation unless approved by the board of directors, provided that the board members do not have connection with the founder who had made such act or that they shall not profit from this act, or unless such act is approved by the group of partners or by a resolution adopted by the company's general assembly provided that any of the interested founders has no counted votes in the meeting. In all cases the interested founder shall put all related facts before the authority approving such act.

    • Article (104)

      Subject to the provisions of the foregoing article, all contracts and acts made by the founders in the name of the company under incorporation shall bind the company after incorporation if they were necessary for the company's incorporation.

    • Article (105)

      The founder shall exercise, in his dealing with the company under incorporation or for its account, due care and diligence expected from the ordinary man. The founders shall be jointly liable for any damages the company or third parties may sustain as a result of their failure to comply with this provision.

      If a founder has received any funds or information pertaining to the company under incorporation, he must repay these funds to the company together with any profits he may have gained as a result of using these funds or information.

    • Article (106)

      The founders shall be jointly liable for what they have undertaken to do.

    • Article (107)

      The company's articles of association shall be kept in its office, and any person may obtain a copy thereof against reasonable fees.

      The company's name, form, head office, date of incorporation, authorized, subscribed and paid up capital and its number in the Commercial Registry shall appear in all the company's contracts and correspondence.

    • Article (108)

      If a joint-stock company is incorporated in a way incompatible with the law, any concerned party may request the company to undertake the necessary correction within one month from the date of his request. If the company does not effect the required correction within this period, the concerned person can claim at the High Civil Court the nullity of the company within one year from the date of incorporation.

      However, the shareholders shall not use the nullity of the company as an excuse against third parties. The company shall be liquidated as a going concern without prejudice to the right of any concerned party to institute legal proceedings for joint liability against the founders, the members of the first board of directors and the first auditors.

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