Limited Partnership Memorandum of Association

Two partners signed a short agreement believing it was enough to start their business. One of them was supposed to manage the company, while the other would provide the funding.

However, a later review revealed a serious problem. The agreement did not identify which partner was the general partner and which was the limited partner. In fact, the wording sounded more like a consultancy agreement, using phrases such as “providing recommendations and advice.”

The issue was not simply one of wording. Poor drafting could expose a partner to real financial liability and lead to disputes that may be difficult to resolve.

For this reason, before signing any Limited Partnership Memorandum of Association in Bahrain, it is important to clearly identify each partner’s legal capacity from the outset and state the company’s capital and each partner’s contribution in clear terms.

The agreement should also name the appointed manager and define the manage’s signing powers. A commercial company agreement should not be confused with a services agreement. There are several other important points to consider, which we will explain throughout this article.

Are you concerned that poorly drafted partnership terms could leave you personally liable for debts and financial obligations beyond your contribution?

Contact a Company Formation Lawyer NowOr continue reading to learn about the legal provisions that can help reduce the risk of future disputes.

What Is a Limited Partnership Memorandum of Association?

Start with the basic concept. A Limited Partnership Memorandum of Association in Bahrain is the document that establishes a commercial relationship between two different categories of partners: one partner who takes responsibility for management and bears broader liability, and another who contributes capital without taking part in the company’s day-to-day management.

Article (50) of Bahrain’s Commercial Companies Law, issued under Legislative Decree No. (21) of 2001 on 20 June 2001, defines a limited partnership as a company formed between one or more partners who are jointly liable for the company’s obligations with all their personal assets, and one or more partners who contribute capital, remain outside management, and are known as limited partners. Each limited partner is liable only up to the amount of their contribution to the company’s capital.

The Commercial Companies Law governing company formation has been amended several times, including by Legislative Decree No. (38) of 2025. In practical terms, this means the agreement should answer several clear questions, including:

• Who will manage the company?
• Who has authority to sign on its behalf?
• Who bears personal liability for the company’s debts?
• Who contributes capital without taking part in management?
• What is each partner’s contribution?
• How will profits and losses be distributed?
• What happens if a partner withdraws, dies, or transfers their interest?

The agreement is therefore not simply a friendly arrangement between people who know each other. It is a constitutional company document that defines rights and obligations and is intended to support registration and dealings with third parties.

When Is This Type of Company Suitable?

A limited partnership may be suitable when the partners have different roles. One person may have the experience and take charge of management, while another may wish to invest money without becoming involved in the company’s daily operations.

This structure may work particularly well in situations such as:

• One partner understands the market and will personally manage the business.
• An investor wants to limit liability to the amount of their contribution.
• The partners want a clear separation between management and funding.
• A family business needs one clear manager and other partners who mainly provide capital.
• The parties want to define signing authority precisely.

The Difference Between a General Partner and a Limited Partner

Understand this distinction before drafting any provision in the agreement. A general partner does not have the same legal position as a limited partner. Mixing the two roles may undermine the agreement and expose a partner to broader liability.

Article (54) of the Commercial Companies Law prohibits a limited partner from taking part in the management of the company, even under a power of attorney, and sets out the consequences for liability where a limited partner actually becomes involved in management.

However, monitoring the company, expressing an opinion, and approving acts that go beyond the manager’s authority are not, by themselves, treated as prohibited involvement in management, provided they remain within their proper limits.

The Trade Name in a Limited Partnership Memorandum of Association

Do not treat the company name as a minor formality. It will later appear on contracts, invoices, printed materials, correspondence, and everyday business documents, so it should be settled correctly from the beginning.

Following the amendment of Article (53) under Legislative Decree No. (28) of 2020, a limited partnership may use a distinct trade name or a name derived from its business activities. The company name must be followed by the words “Limited Partnership,” and this description must also appear in the Limited Partnership Memorandum of Association in Bahrain, as well as on invoices, advertisements, documents, and printed materials.

When selecting the name, use the following practical guidelines:

• Add the words “Limited Partnership” immediately after the company name.
• Avoid any name that suggests the company is a limited liability company.
• Do not use wording that describes the company as a “Partnership Limited by Shares” when the intended structure is a limited partnership.
• Check that the proposed name is available and appropriate for the intended business activity.
• Review the possible legal effect of including a limited partner’s name in the company name or commercial branding.
• Use the same name consistently in the agreement, Commercial Registration, invoices, and website.

The Difference Between a Limited Partnership and a Partnership Limited by Shares

Distinguish carefully between these two company forms. Similar names do not mean the legal structures are the same.

A limited partnership is based on:

• General partners.
• Limited partners.
• Capital contributions.
• Management that is generally handled by the general partner.
• Different levels of liability among the partners.

A partnership limited by shares is a different legal form and involves shares and a different regulatory structure. Therefore, do not use a heading such as “Partnership Limited by Shares Memorandum of Association Template” in an article dealing with a Limited Partnership Memorandum of Association in Bahrain.

Key Provisions of a Limited Partnership Memorandum of Association in Detail

Draft every provision of a Limited Partnership Memorandum of Association in Bahrain in clear language. Avoid a long sentence when a short one communicates the point better. Each clause should address a foreseeable issue. Given the importance of these matters, it is usually advisable to consult a specialised corporate lawyer.

1. Partners’ Details

Start by identifying the parties. Do not rely only on a first name or an abbreviated business name.

Include the following information:

• Full name.
• Nationality.
• CPR or passport number.
• Address.
• Capacity of the partner: general partner or limited partner.
• Value of the contribution.
• Method of paying the contribution.

2. Legal Form and Company Name

State the company’s legal form expressly. Do not expect the reader to infer it from the heading alone.

For example, state that:

• The partners agree to establish a limited partnership.
• The company shall be named “…… Limited Partnership.”
• The company shall be governed by Bahrain’s Commercial Companies Law and its amendments.

This clause helps avoid confusion with:

• A general partnership.
• A limited liability company.
• A partnership limited by shares.
• An unregistered private partnership agreement.

3. Company Objectives

Define the company’s business activity precisely. Avoid broad wording such as “carrying on all types of commercial activities” when the actual business is specific.

Describe the objective in a way that supports the licensing process, such as:

• Food trading.
• Technology services.
• Import and export.
• Contracting.
• Operating an e-commerce store.
• A professional or service activity that requires special approval.

4. Registered Office

State a clear address in Bahrain. Avoid using a vague or unverifiable location.

The clause should preferably include:

• The governorate or area.
• The property or office number, where available.
• The company’s ability to open branches.
• The manager’s authority to update the address after obtaining partner approval, where required.

5. Capital and Contributions

State the following in the agreement:

• Total capital in Bahraini dinars.
• Each partner’s contribution.
• Whether the contribution is in cash or in kind.
• The payment deadline.
• The method used to prove payment.
• The consequences of failing to pay a contribution on time.

A simple example could read:

• Company capital: BHD 20,000.
• First general partner: BHD 8,000.
• First limited partner: BHD 12,000.
• The contributions shall be paid within 15 days from the date of signing the agreement or before submitting the registration application, depending on what the partners agree and what the competent authority requires.

6. Management and Signing Authority

The agreement should clearly identify:

• The manager’s name.
• Whether the manager is a general partner or another person appointed by the partners.
• The limits of signing authority.
• Financial commitment limits.
• Matters requiring prior partner approval.
• Who may sign banking documents, cheques, and major contracts.
• Actions that cannot be taken without written approval.

Add practical examples to the clause to reduce the risk of disputes:

• The company may not borrow money without the partners’ approval.
• A major company asset may not be sold without a written resolution.
• A new branch may not be opened without partner approval.
• A new partner may not be admitted without amending the agreement.

7. Oversight Rights of the Limited Partner

Allow oversight, not management. A limited partner is not a partner without rights, but neither should the limited partner act as the company’s manager.

The agreement may grant rights such as:

• Reviewing the company’s accounts.
• Requesting periodic financial reports.
• Attending partners’ meetings.
• Expressing an opinion on major decisions.
• Approving specified actions that go beyond ordinary management.
• Requesting copies of important contracts.

However, avoid wording such as:

• The limited partner shall manage the company.
• The limited partner may sign individually on behalf of the company.
• The limited partner shall represent the company before third parties.
• The limited partner may issue daily instructions to employees.

The distinction may seem narrow, but it is important. Oversight protects the partner’s interests, while actual management may affect the scope of that partner’s liability.

8. Profits and Losses

Agree on financial matters before profits arise. Many partnership disputes start after the business becomes successful.

State clearly:

• Each partner’s share of profits.
• Each partner’s share of losses.
• When the accounts will be prepared.
• When profits will be distributed.
• Who approves the financial statements.
• Whether the company will maintain an operating reserve.
• How losses will be dealt with.

Avoid broad phrases such as “profits shall be distributed as agreed.” The agreement should be stated in the contract itself or in a clear annex signed by the partners.

9. Accounts and Financial Year

Organise the company’s accounts from the first day. Do not wait until the first disagreement arises.

Include:

• The beginning and end of the financial year.
• The method of maintaining accounting records.
• The partners’ right to inspect records.
• The deadline for preparing financial statements.
• The right to appoint an accountant or auditor if the partners agree.
• The method of keeping invoices and contracts.

10. Transfer of Partnership Interests

Do not allow a new person to enter the company without clear controls. Transferring an interest can completely change the balance between the partners.

State in the agreement that:

• A partner may not transfer an interest without the approval of the other partners.
• The interest must first be offered to the remaining partners if they have agreed on a right of first refusal.
• The agreement must be amended where necessary.
• The Commercial Registration details must be updated.
• The transfer will not be effective against the company or third parties until the required legal procedures have been completed.

This provision is particularly useful when the limited partner is mainly an investor or when the general partner is the person on whom the company depends for day-to-day management.

11. Death, Withdrawal, or Loss of Legal Capacity

Plan for difficult circumstances. A well-drafted agreement should not be written only for the easy days.

The agreement should explain:

• Whether the company will continue if one of the partners dies.
• Whether the heirs will replace the deceased partner.
• Whether the value of the partner’s interest will instead be paid to the heirs.
• How the interest will be valued.
• What happens when a partner withdraws.
• Whether advance notice is required.
• Whether a withdrawing partner will be restricted from competing with the company for a certain period, within the limits permitted by law.

This clause helps reduce tension between partners and heirs and makes the future of the company clearer.

12. Dispute Resolution

Do not wait for a dispute to arise before asking where the parties should go. Define the process from the beginning.

The clause may include:

• An attempt to settle the dispute amicably within a specified period.
• A meeting between the partners.
• Written notice explaining the dispute.
• Jurisdiction of the courts of the Kingdom of Bahrain.
• Alternatively, a clear arbitration clause if the partners choose arbitration.

13. Registration and Publication

Article (51) of the Commercial Companies Law requires a limited partnership to be registered in the Commercial Register and published. The summary of the company agreement does not need to state the names of the limited partners, provided sufficient information is given about their contributions to the company’s capital and the value of those contributions.

It is also important to note that Article (6) of the Commercial Companies Law requires the company’s memorandum of association, except in the case of a joint venture company, to be drawn up and notarised before a Notary Public. Otherwise, the agreement or any amendment to it is void, according to the officially published text.

Limited Partnership Memorandum of Association Template in Bahrain

Below is a sample Limited Partnership Memorandum of Association:

On …… corresponding to ……, the undersigned agreed to establish a limited partnership in the Kingdom of Bahrain in accordance with Bahrain’s Commercial Companies Law and its amendments, subject to the following terms:

First: General Partners

• Name: ……
• Nationality: ……
• CPR or passport number: ……
• Address: ……
• Value of contribution: ……
• Method of paying the contribution: ……

Second: Limited Partners

• Name: ……
• Nationality: ……
• CPR or passport number: ……
• Address: ……
• Value of contribution: ……
• Method of paying the contribution: ……

Article One: Company Name and Legal Form

A limited partnership shall be established under the name: “…… Limited Partnership.”

The partners shall comply with the following:

• Use the same name on contracts, invoices, and correspondence.
• Avoid using any name that suggests a different legal form.
• Amend the name if required by the competent authority.

Article Two: Company Objectives

The purpose of the company shall be to carry on the activity of: ……, together with any necessary or complementary activities connected with it, after obtaining the required approvals and licences.

The business activity shall:

• Be clearly defined.
• Be lawful.
• Match the Commercial Registration application.
• Remain within the scope of the licence issued to the company.

Article Three: Registered Office

The company’s registered office shall be located in the Kingdom of Bahrain at the following address: ……

The company may open branches in Bahrain provided that:

• The partners approve.
• The applicable licences permit it.
• The required registration and update procedures are completed.

Article Four: Capital

The company’s capital is fixed at BHD ……, distributed among the partners as follows:

• General Partner / ……: BHD ……
• General Partner / ……: BHD ……
• Limited Partner / ……: BHD ……
• Limited Partner / ……: BHD ……

Each partner shall pay their contribution at the time and in the manner agreed.

Article Five: Management and Signing Authority

The company shall be managed by the General Partner / ……, who shall have authority to sign on behalf of the company within the scope of its business objectives.

The manager may not carry out any of the following actions without the partners’ written approval:

• Borrowing in the company’s name.
• Mortgaging or pledging company assets.
• Selling a major asset.
• Opening a new branch.
• Admitting a new partner.
• Entering into transactions outside the company’s business objectives.

Article Six: Status of the Limited Partner

The limited partner shall not take part in managing the company or representing it before third parties.

The limited partner shall, however, have the following rights:

• Review the company’s accounts.
• Request a financial report.
• Express an opinion on major decisions.
• Approve transactions for which the agreement expressly requires such approval.
• Receive their share of profits in accordance with the agreement.

Article Seven: Profits and Losses

Profits and losses shall be distributed among the partners according to the following percentages:

• Partner ……: ……%.
• Partner ……: ……%.
• Partner ……: ……%.

Profits shall not be distributed until:

• The accounts have been prepared.
• The results have been approved.
• Expenses and liabilities have been deducted.
• Any amount required for the continued operation of the business has been retained, if the partners have agreed to maintain such a reserve.

Article Eight: Accounts and Financial Year

The company’s financial year shall begin on …… and end on ……

The manager shall:

• Maintain proper accounts.
• Keep invoices and contracts.
• Provide periodic reports to the partners.
• Allow the partners access to the records under procedures that do not disrupt the company’s operations.

Article Nine: Transfer of Partnership Interests

No partner may transfer their interest to a third party without the approval of the other partners and compliance with the applicable legal procedures.

Where an interest is transferred, the parties must:

• Prepare a written agreement.
• Amend the memorandum where necessary.
• Update the Commercial Registration.
• Preserve the rights of the remaining partners.

Article Ten: Duration of the Company

The duration of the company shall be …… years, starting from the date of its registration in the Commercial Register.

The company may be renewed if:

• The partners agree in writing.
• No legal restriction prevents renewal.
• The required update procedures are completed.

Article Eleven: Withdrawal and Death

If a partner wishes to withdraw, that partner must notify the other partners at least …… days in advance.

In the event of death or loss of legal capacity, the partner’s interest shall be dealt with as follows:

• The company may continue with the remaining partners if they agree.
• The interest shall be valued using a clear accounting method.
• The rights of the heirs or legal successor shall be settled.
• The company’s records shall be amended where necessary.

Article Twelve: Dispute Resolution

The partners shall first attempt to settle any dispute amicably within …… days from the date notice of the dispute is given.

If no settlement is reached:

• The courts of the Kingdom of Bahrain shall have jurisdiction over the dispute.
• Alternatively, an arbitration clause shall apply if the partners expressly agree to arbitration in writing through a clear contractual provision.

Article Thirteen: Registration and Publication

The manager, or any person authorised by the partners, shall complete the procedures required for registration in the Commercial Register, publication, and notarisation in accordance with the law.

This includes:

• Submitting the Memorandum of Association.
• Submitting the partners’ details.
• Following up on any observations or requirements raised by the competent authority.
• Updating the company’s information whenever an amendment occurs.
• Keeping a notarised copy of the agreement at the company.

Signatures of the General Partners: ……

Signatures of the Limited Partners: ……

Frequently Asked Questions About a Limited Partnership Memorandum of Association in Bahrain

Some of the most common questions about a Limited Partnership Memorandum of Association in Bahrain include:

Draft the agreement before disputes begin. A Limited Partnership Memorandum of Association in Bahrain is not merely a formal document. It is the roadmap that defines management, capital, liability, withdrawal, and registration.

When the agreement is written clearly, each partner understands their role and limits from the beginning. When it is copied from an unsuitable template, however, it may become a source of legal risk rather than a tool for protecting the partners.

Contact the best lawyers in Bahrain at our firm if you would like assistance obtaining or preparing a Limited Partnership Memorandum of Association in Bahrain template.

You may also be interested in: Establishing a Financial Brokerage Company in Bahrain.

Lawyer Abdulrahman Khalifa

A Bahraini lawyer and the founder of a legal consultancy firm established in February 2019. He holds a Higher Degree in Sharia and Law from Al-Azhar University. He has extensive experience in court representation and providing legal advice in criminal, personal status, civil, and commercial matters. He is known for delivering clear, practical, and effective legal advice aimed at protecting his clients’ rights and interests, and has achieved tangible results in notable cases, including commercial litigation and inheritance matters