#companyformation
Can a person be partner only for profit in a company in Bahrain
Khalid Khan
February 15
The client recently approached us with a query that he wants to join one company as a partner and he will be the main investor also but I want to mention in the memorandum that I will only be the partner for profits and if there is any loss then that will solely be the responsibility of the other partners. The inquiry was whether a person could join a company to be a partner in profits only without paying for the losses.

Let's take a quick look at what Commercial Companies Law 21 of 2001 of the Kingdom of Bahrain has to say about this.
Article (15)

If the company's Memorandum of Association does not define each partner's dividend in profit and loss, such dividends shall be determined in proportion to the partners' respective shares in the capital.

If the Memorandum of Association specifies only each partner's dividend in the profit, the same dividend shall apply to the loss and vice versa.

If a partner's share is in the form of work and the company's Memorandum of Association does not specify his dividend, he may request an evaluation of his work, and his dividend shall be determined on the basis of this evaluation unless otherwise provided in an established custom.

If a partner provides cash or an in-kind share, in addition to work, he shall receive a dividend for his work and another for the other share.
Article (16)

If it is agreed that a partner shall not have a dividend in the company's profits or shall be exempted from the loss, such an agreement shall be null and void.

However, it can be agreed that a partner whose share is in the form of work be exempted from sharing the loss provided that he receives no remuneration for this work.
Therefore, Article 15 clearly stipulates the condition for the attribution of profits and losses for the following cases:

  1. If the company's Memorandum of Association does not define each partner's dividend in profit and loss;
  2. If the Memorandum of Association specifies only each partner's dividend in the profit;
  3. If a partner's share is in the form of work and the company's memorandum of association does not specify his dividend; and
  4. If a partner provides cash or an in-kind share, in addition to work.
Also, Article 16 of the Commercial Companies Law 21 of 2001 clearly laid down that any agreement in which it is mentioned that any partner will not be entitled to profit or liable for losses is null and void except as laid down in the second part of the Article 16 of the Commercial Companies Law 21 of 2001.

Please note the word 'null' means having no legally binding capacity or invalid and the word 'void' means the same as null.
Contact us
Office 32, Building 718, Road 2018, Block 320
Manama, Bahrain
Do you want we call you?
Leave your name and mobile number. We will contact you within 24 hours
We don't spam, share or sell your information