The Bahraini government has approved new amendments to the Bahrain commercial companies (BCC) law to help boost startups access to funding and enhance the ease of doing business in the country.

The new amendments will enable Bahrain-based firms to introduce employee share schemes and to raise funding via convertible notes, making Bahrain the first mainland jurisdiction in the GCC to enable the use of these debt instruments.  The regulations that will enforce and govern both employee share schemes and convertible notes are expected to be published by the end of the year.

“By granting employees the option to own or buy equity in the company, loyalty is increased, and employees are incentivised to act as owners. Convertible notes are a debt instrument that provide startups with a simpler, cheaper and faster means of raising capital without having to establish a valuation at an early stage. By granting incentives for early investors such as discount rates, this instrument can attract a wider range of capital. These developments are empowering new growth for locally registered businesses – especially startups and SMEs with global ambitions,” said Pakiza Abdulrahman, head of Startups at the Bahrain Economic Development Board.

Other enhancements include allowing for the establishment of non-profit companies, enabling online voting and candidacy submissions for board appointments, further increasing the rights of minority shareholders and strengthening corporate governance and transparency.

“The startup and SME sectors have emerged as increasingly prominent pillars in Bahrain’s economic diversification and growth strategies. In fact, across the entire GCC, they are significant contributors to non-oil GDP and job creation and are widely regarded as being the engine of the Gulf’s post-COVID economic recovery,” said Areije Al Shakar, director and fund manager at Al Waha Fund of Funds.

“These are therefore priority sectors for governments across the region, and particularly so in Bahrain, where this legal amendment will make it even easier for startups and SMEs in the Kingdom to operate, access investment and ultimately scale," she added.