Decree 28 of 2020, issued on 28 September 2020, contains various amendments to certain provisions of bahrain`s Commercial Companies Law (Law 21 of 2001) (the «BCCL»). These changes are part of Bahrain`s ongoing goal to further develop its compliance and regulatory frameworks in line with international best practices. All commercial companies in general are subject to the provisions of this Part, but without prejudice to the special provisions that apply to each commercial company, as set out in this Law. According to the previous draft law on commercial companies, with regard to public limited companies, it was required that the annual report of the board of directors to the shareholders include a declaration of the remuneration of the board of directors for the years in which the company does not make a profit or distribution to the shareholders. This remuneration must include all salaries, bonuses and participation fees paid to the directors in that year. According to the amending law, this requirement now also extends to the management of the joint-stock company as well as to the members of the board of directors. The requirement for entities to form audit committees to review all necessary financial and accounting practices allows for the establishment of appropriate systems and functions to identify and monitor risks. Bahraini public investment companies may be established with the participation of foreign capital or know-how. Subject to an order of the Minister responsible for trade matters, the percentages of participation of foreign capital or expertise in certain sectors or activities may be fixed. The amended law introduces provisions that allow a public limited company to implement one or more programs to motivate its employees through shareholding.

The company must disclose to employees all details of the stock compensation program. The CBB has additional requirements for employee participation programs for publicly traded companies/CBB-licensed companies. MOICT is responsible for issuing regulations for employee participation programs for all other companies. 5. Put and call options in case of subscription are made through one or more commercial banks authorized to operate in Bahrain or through one of their branches or agents abroad, or through investment companies or other parties authorized by the Ministry of Trade and Industry. In the event that a takeover bid for a publicly traded company has been submitted by a party and such an offer has been accepted by 90% or more of the shareholders, the acquiring party has the possibility, under the amended law, to require the remaining 10% of the shareholders to sell their shares within 3 months. The amended law also provides that shareholders who have previously rejected the tender offer require the purchaser to acquire their shares within 60 days if the acquisition has been accepted by 90% or more of the shareholders. This right is analogous to the mandatory offer provisions in the TMA module of the CBB Regulation, but by including it in the Commercial Companies Act, it avoids confusion. The amendments to the Business Corporations Act as a result of the amendment to the Act provide more flexible ways to raise capital that we have seen elsewhere in the region, which will be particularly useful for start-ups.

These are positive developments for companies that are experiencing financial problems and want to raise capital due to the Covid-19 pandemic. In the event of a merger of listed companies or companies approved by the Central Bank of Bahrain (CBB), the provisions of the Central Bank of Bahrain and Law No. 64 of 2006 and its implementing regulations (Law CBB) must be complied with. This also applies to acquisitions. The company is managed by a board of directors whose foundation and duration are specified in the company`s articles of association. The number of members of the Board of Directors may not be less than five (5) and the duration of the composition of the Board of Directors shall not exceed three (3) years, which may be renewed. The Board of Directors shall consist of independent directors and non-executive directors in accordance with the rules set out in a regulation of the Central Bank of Bahrain in respect of companies authorized by the Central Bank and a regulation of the competent Minister of Commerce in respect of other enterprises. At the reasoned request of a Board of Directors, the term of office of the Board of Directors may be extended for a maximum of six (6) months on the basis of a decision of the Central Bank of Bahrain concerning the companies authorized by the Central Bank and a regulation of the Competent Minister of Commerce in respect of other enterprises. In the case of commercial companies of all kinds, claims against the partners are time-barred after five years from the liquidation of the company or from the date on which one of the partners leaves the company in respect of claims against the partner. This limitation period begins to run from the day on which the company is fully registered in the commercial register in all cases where registration is required, and from the date of registration of the completion of the liquidation in cases arising from the liquidation itself. A limited partnership by shares has a general meeting, which consists of all shareholders and holds shareholders.