A liaison office in Bahrain, also known as a representative office, is used for conducting marketing operations as well as a number of other non-commercial operations. This form is usually the initial one before companies open branches or subsidiaries in Bahrain. It is used solely for establishing a presence on the market and maintaining an open communication channel with local clients, business partners, and other parties.
Although not all companies follow this route to establish their activities in the country, for those who do decide this, our agents who specialize in company formation in Bahrain can offer specialized services.
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The characteristics of the liaison office in Bahrain
The liaison office can be suitable for foreign companies that need to test the market before settling in and opening a permanent establishment. However, this entity has certain limitations, and company incorporation in Bahrain will become a necessity for those entrepreneurs who want to engage in commercial activities.
The characteristics of a Bahraini liaison office are, in general, the following:
- legal status: the liaison office has no legal personality, like a corporation;
- liability: the parent company is liable for its Bahraini liaison office, like in the case of the branch;
- activities: the representative office cannot engage in commercial activities;
- it cannot generate income and it is limited to market research and communications with third parties;
- taxation: not applicable as the liaison office does not generate any type of Bahraini-sourced income;
- others: the representative office will need to have a local representative from the company, most often an individual who has relocated to Bahrain.
The liaison office is generally subject to a simpler registration procedure due to the fact that it cannot engage in commercial activities. It doesn’t need a sponsorship agreement with a Bahraini partner company or other Bahraini trader or distributor, as may be the case for a branch.
Documents required to open a representative office in Bahrain
Foreign business owners who want to create Bahraini representative offices must prepare the following set of documents:
- the standard application form;
- details about the agent to become a representative office manager;
- a track record of the parent company’s last 3 years of activity.
Apart from these, the parent company must also ensure the financial solvency of the representative office, case in which it must submit a written declaration that it will support the liaison office to carry out its activities.
Types of liaison offices in Bahrain
There are two types of representative offices that can be established in Bahrain:
- a liaison office created for non-commercial purposes;
- another one established by foreign banks and other financial institutions.
Out of the two, the second one falls under the regulations of the Central Bank of Bahrain. Such an office must also obtain a special license from the National Bank. The authorization is required if:
- the office has a legal address in Bahrain for correspondence purposes;
- the office is in charge of contacting clients who are residents of the Kingdom.
Our lawyers in Bahrain can offer more information on the Rulebook providing for the licensing requirements applying to representative offices and financial institutions seeking to create them.
Here is also an infographic on this subject:
Conditions for the liaison office in Bahrain
The representative office in Bahrain will need to comply with a set of requirements in order to function properly:
- governing law: the representative office is subject to all of the laws applicable in Bahrain;
- documentation: the papers submitted for registration must be in English or Arabic;
- name: the liaison office will have the exact same name as the parent company, followed by “representative office”;
- license: it needs to be licensed to practice its activities as a representative office for the parent company abroad.
Companies may choose to set up a representative office where they need to supervise their interests in the Kingdom of Bahrain or follow up on market research and maintain a contact base for their local business partners or clients. When foreign companies do need to engage in direct transactions in their own name in Bahrain, they may opt for a branch. The alternative would be to open a company limited by shares which is subject to certain conditions, such as having at least four founders and a minimum share capital of 20,000 BD. One of our Bahraini company formation specialists can give you more details about this business form as well as the other available company types, suited to businesses of certain sizes.
The choice between opening a branch, a representative office, or another type of business can be conditioned by future activities and plans for market expansion.
The representative office manager in Bahrain
Foreign enterprises setting up liaison offices in Bahrain are also required to appoint at least one manager who must obtain approval from the Central Bank prior to the office commencing its operations.
The position held by the manager is known as a controlled function and refers to the person appointed meeting certain fit and proper criteria. Once approved, the person will be known as an ”approved person”.
The fit and proper criteria imply for the person:
- to be honest and have a good reputation;
- to have professional experience and expertise;
- not to be bankrupt.
Our company formation agents in Bahrain can assist with the licensing procedure for both the representative office and the approved agent who must be a natural person.
How many foreign financial companies operate in Bahrain?
According to the Central Bank, in 2024 Bahrain hosted:
- a total of 84 banks;
- out of these, 16 were branches of foreign retail banks;
- 7 representative offices of banks.
If you are interested in another sector, our local specialists can help you set up a company in Bahrain in the field you want. In addition, our local lawyers can assist in immigration matters, if you want to apply for residency in Bahrain.
Contact us for complete assistance with company formation in Bahrain.