New Investment Limited Partnership Law in Middle East
International law firm Trowers & Hamlins has, in conjunction with the Bahrain Economic Development Board and the Central Bank of Bahrain, assisted in the development of Bahrain's new Investment Limited Partnership Law.
The new law makes Bahrain the first country in the GCC region to have introduced national legislation enabling for the formation of limited partnerships in a manner comparable to structures utilised in reputable off-shore fund domiciles.
The firm has also supported Bahrain in respect of the implementation of this new law, and its promotion to enable key stakeholders become familiar with its features and lay the ground for the new structure's utilisation, alongside the Economic Development Board and the Central Bank of Bahrain.
The new investment partnership law will allow for onshore (i.e. not free zones or legally separate centres of finance within countries) limited partnerships to be established in the region, and it contains best in class features comparable to international laws in respect of the establishment of limited partnerships in major fund domiciles.
It is hoped that the new law will help promote Bahrain as a continued jurisdiction of choice for the establishment of private equity funds, infrastructure funds, technology funds and venture capital funds with a regional nexus, in terms of their investors or investments to be made, which means it is very significant for the private equity /asset management sector and fund sponsors in particular.
The development of the new law is part of a broad concerted effort to develop the financial sector in the Kingdom. New laws have also been issued for Protected Cell Companies (umbrella funds or segregated portfolios) and a flexible Trusts Law, following stakeholder engagement to identify areas of opportunity for Bahrain and the broader region. Both of these new laws complement the new investment partnership law and position Bahrain as a fund domicile to be considered for the establishment of funds, particularly where they have a regional GCC focus or nexus.
Certain notable features of investment limited partnerships include:
- they will allow fund managers develop terms that suit their needs in respect of their involvement and generally the flexibility to develop terms that suit many different forms of investment;
- with the possibility of several General Partners, a certain amount of control and oversight can be given to sponsoring investors of a Bahrain investment limited partnership while still offering the structure a separately regulated operator;
- a general partner of a Bahrain investment limited partnership can be established as a subsidiary/SPV of an investment business. This will allow the promoter not be unduly exposed in terms of liability and still utilise the preferred and widely recognised international model for funds;
- and fees payable to establish a Bahrain investment limited partnership are reasonable and less than other jurisdictions in the region.
With the implementing regulations for the new law being published this week, it is now possible to establish investment limited partnerships in Bahrain.
The new laws complement each other and allow for financing structures to be developed that can assist promote existing opportunities available in the country. These laws are expected to provide a strong boost to the financial sector, supporting growth in real estate funds, private equity funds, venture capital and technology funds, start-ups, and Shariah-compliant funds, as well as in the area of captive insurance.
Trowers & Hamlins are excited about the prospects for the new laws and the opportunities they will hopefully promote investment in and from Bahrain and the region more broadly.
The firm is privileged to be working with the Bahrain Economic Development Board (EDB) in relation to ensuring all relevant market participants are aware of the new opportunities these new laws present.
Trowers & Hamlins' Partner Brian Howard, who led on the work in relation to the new law with the support of Trowers' International Funds Team, said:
“We are delighted with the prospects for this new law and the opportunities it will create. We are also excited about the development of the new Trusts Law and Protected Cell Companies Law in Bahrain. We are now working with the Economic Development Board in its outreach programme to publicise the new opportunities these new laws present to regional and international banks, asset managers and professional services providers."
Khalid Al Rumaihi, Chief Executive of the Bahrain EDB said:
“We are excited by the opportunities that the new laws present and look forward to continuing to engage with the sector to help companies to take advantage of those opportunities.
“The Kingdom has a strong and mature financial sector and these new regulations come as part of our efforts to continue to nurture this growth with the industry, ministries and the Central Bank of Bahrain.”