Startups and scale-ups in Bahrain are set to benefit from a funding boost following the launch of two new schemes that make it easier to raise capital.
A new amendment to the Bahrain Commercial Companies Law (BCCL) will enable firms to introduce employee share schemes and to raise funding via convertible notes – a type of loan which means lenders can be repaid in equity rather than cash.
The change is intended to further improve Bahrain’s business environment and bring the BCCL in line with global best practice.
The amendment allows closed shareholding companies to introduce employee share schemes, enabling them to retain talent and incentivize their employees.
The amendment will also allow these companies to raise capital through convertible notes, making Bahrain the first main land jurisdiction in the Gulf to provide for the use of these debt instruments.
Commenting on the amendment, Head of Startups at the Bahrain Economic Development Board (EDB) Pakiza Abdulrahman said that by granting employees the option to own or buy equity in the company, loyalty is increased and employees are incentivized 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,” she added.
“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.”
Director and Fund Manager at Al-Waha Fund of Funds, Areije al-Shakar said the startup and SME sectors have emerged as increasingly prominent pillars in Bahrain’s economic diversification and growth strategies.
“In fact, across the entire Gulf region, 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-19 economic recovery,” she noted.
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 further strengthening corporate governance and transparency.
The amendment comes in line with the World Bank’s naming Bahrain the world’s fourth most improved economy for doing business.
