Commercial Companies Law 2001: Contents
Closed Joint-stock Company
A closed joint-stock company consists of a number of persons — not less than two — who subscribe for negotiable shares that are not offered to the public for subscription.
All provisions contained in this law in respect of public joint-stock companies, which do not conflict with the provisions of this part, shall apply to the closed joint-stock company.
The capital of the company shall be adequate to realize its objectives. The Executive Regulation shall determine the minimum limit of capital.
Article (229)a— The founders shall subscribe for all the capital shares.b— The founders shall deposit with one of the accredited banks the full value of the shares or at least 50% thereof, provided that they shall pay the remaining amount within a period not exceeding three years.
A closed joint-stock company shall not acquire a corporate entity and shall not commence its operations before being registered in the Commercial Registry and the publication of its incorporation decision in the Official Gazette at the company's expense.
Article (231)a— The founders shall call for a constituent assembly to be convened within seven days from the date of the incorporation approval by the Ministry of Commerce and Industry, and the provisions provided for in article (199) of this law apply to the procedures of invitation.b— The meeting shall be presided over by whoever is elected by the numerical majority of the present members.
The constituent assembly shall, in particular, consider the report prepared on the company's incorporation process, the incurred expenses and the evaluation of the in-kind shares. It shall also elect a board of directors and appoint the auditors and announce the company's final incorporation.
The provisions of article (116) of this law shall apply to the due installments of shares, and in case shares are sold, priority of purchase shall be given to the shareholders of the company in accordance with the provisions of this Part.
The shares of closed joint-stock companies shall not become tradable before the lapse of three years from the date of registering the company in the Commercial Registry and the payment of the full value of the shares. Excluded from this shall be trading in shares among the founders during this period.
Except for the companies listed on the Bahrain Stock Exchange, the articles of association of a closed joint-stock company shall not restrict the shareholder's right to dispose of his shares by containing one or all of the following restrictions:a— The stipulation that preference shall be given to the company's shareholders to purchase the shares the owner of which wishes to sell.b— The stipulation that the board of directors shall approve the buyer of the shares.
Excluded from these two restrictions shall be the disposal of shares among shareholders, spouses, ascendants and descendants.
If the company's articles of association include any of these two restrictions, the company shall not be listed on the Bahrain Stock Exchange.
If the articles of association of a closed joint-stock company provide for preference to shareholders to buy the shares, the shareholder shall, before the disposal thereof, notify the company of the sale conditions. The disposal of the shares shall not become effective before the lapse of fifteen days from the date of notification without any shareholder requesting to buy the shares.
If any shareholder so requests this shall be for the declared price, and in case of disagreement, the price shall be determined in accordance with the rules of the Bahrain Stock Exchange.
If the articles of association of a closed joint-stock company provide that the board of directors must approve the shares' purchaser, the board shall, in case of rejecting the purchaser, purchase the shares for the company's account within fifteen days from the date of notifying the board of the request for approval. In this case, the purchase shall be concluded for the declared price without prejudice to the provisions regulating the purchase of a company of its shares.
Article (238)a— In case the company's capital is to be increased, the shareholders shall have priority right to subscribe for the new shares, and any provision to the contrary shall be null and void.b— The shareholders shall be notified by registered mail of their priority to subscribe for the new shares of the date of opening subscription and the date of closing thereof and of the price of the new shares.c— Each shareholder shall express his wish to exercise his right of priority to subscribe for the new shares within fifteen days from the date of sending the registered letter referred to in the foregoing paragraph.d— The priority right may be assigned to third parties against money to be agreed upon between the shareholder and the assignee if the company's articles of association so provide or if the general assembly so decides.
Article (239)a— The new shares shall be distributed to the shareholders who requested to subscribe for them in proportion to the shares they own, provided that this proportion shall not exceed the new shares they have requested to subscribe for.b— The remaining new shares shall be distributed to the shareholders who requested more than they were allocated in proportion to the shares they own. If all the new shares are not distributed to the shareholders the board of directors may allocate them to new shareholders, provided that their value shall be paid in cash. The unallocated shares shall be considered as cancelled if three months lapse from the date of opening subscription without them being subscribed for.
Article (240)a— The company shall be managed by a board of directors, the composition and the membership term of which shall be specified in the company's articles of association. The number of board members shall not be less than three and membership term shall not exceed three years renewable.b— The members of the board of directors shall not be subject to the quorum conditions and the restrictions of multiple memberships provided for in this law.
The board of directors shall meet at an invitation by its chairman or by any of its members, and the quorum shall be available with the presence of half the members, provided that the number of those present shall not be less than two.
The invitation for the general assembly meeting shall be sent by registered mail at least fifteen days before the meeting. However, the invitation may be conveyed by taking the signature of the shareholders indicating their knowledge of the time, venue and the agenda of the meeting.
The meeting of the ordinary general assembly shall not be valid unless attended by a number of shareholders representing more than half the shares. If such quorum is not available, the meeting shall be valid with those present after half an hour from the time fixed for the first meeting.
The meeting of the extraordinary general assembly shall not be valid unless attended by shareholders representing two-thirds of the company's shares. If such quorum is not available, an invitation shall be sent for a second meeting to be held within ten days from the date of the first meeting, and this meeting shall be valid if attended by the representatives of more than one-third of the capital.
If this quorum is not available an invitation shall be sent for a third meeting to be held within ten days from the date of the second meeting. The third meeting shall be valid if attended by the representatives of a quarter of the capital.
A new invitation need not be sent for the last two meetings if their dates were determined in the invitation for the first meeting, provided that the shareholders are notified that the first meeting has not been held. Resolutions shall be passed by a majority of two-thirds of the shares represented in the meeting.
A closed joint-stock company may turn into a public joint-stock company if it has fulfilled the following provisions:a— The nominal value of issued shares have been fully paid.b— At least two financial years must have already elapsed.c— The company must have realized, through exercising the activities for which it was established, distributable net profits of not less than 10% of the capital on average during the two financial years preceding the application for conversion.d— The conversion resolution shall be issued by the extraordinary general assembly of the company by a majority of three-quarters of the shares of those present.e— The issue of a decision by the Ministry of Commerce and Industry declaring the conversion of the company into a public joint-stock company, and this decision shall be published together with the company's Memorandum and Articles of Association at the expense of the company.
The Minister of Commerce and Industry may, in some cases, stipulate on the incorporation of the closed joint-stock company the conversion thereof into a public joint-stock company if the public good so requires.