BAHRAIN Law and Practice Contributed by: David Walker, Simone Del Nevo, Sherif Saadeldin and Rahul Sud, ASAR - Al Ruwayeh & Partners
the target. A bidder must squeeze out minority share - holdings if it holds or controls 90% or more of the target’s voting share capital within three months from the date of acquisition of the 90% stake. There would be no squeeze-out right or obligation for acquisitions of a stake below 90%. For joint stock companies, a merger must be approved by at least 75% of the shares present at the relevant extraordinary general meeting for both merging enti - ties. With respect to limited liability companies, a merger must be approved by the majority of the part - ners owning at least 75% of the company’s capital, unless the company’s deed of association requires a higher percentage. With respect to listed joint stock companies or com - panies licensed by the CBB, the provisions of Central Bank Law No 64 of 2006 and its implementing regula - tions and rulebooks must be taken into consideration. 6.5 Minimum Acceptance Conditions In Bahrain, mandatory takeover offers (MTOs) must be unconditional. However, there is one exception that is subject to CBB approval, whereby the offer can be contingent on the offeror (and those acting together) acquiring over 50% of the voting rights. The squeeze-out provisions are triggered on reaching the 90% threshold. 6.6 Requirement to Obtain Financing As a general rule with limited exceptions, financing for an offer must be fully committed when the announce - ment of the firm intention to make an offer is made. A voluntary offer must not be made subject to condi - tions the fulfilment of which depends on the subjective interpretation or judgement of the bidder, or lies in the bidder’s hands. Once a firm intention to make an offer is formally announced, the bidder is committed to pro - ceed. Scope to withdraw by invoking the conditions to the offer is limited. To the extent that the bidder intends to attach conditions other than normal condi - tions, the CBB must have previously been consulted. 6.7 Types of Deal Security Measures The validity of deal security measures is highly ques - tionable, as the board of the target would not nor -
mally have the power to agree on such measures that would affect the company’s shareholders exercising
their lawful rights in respect thereto. 6.8 Additional Governance Rights
It is the prevailing view that a shareholders’ agreement purporting to give special governance rights outside of the generally applicable governance rules is not permissible for listed companies. For this reason, any arrangement between the bidder and the target aimed at giving the bidder special governance rights might be held to be unenforceable. 6.9 Voting by Proxy Shareholders may vote by proxy and/or a special power of attorney. 6.10 Squeeze-Out Mechanisms In Bahrain, after a successful takeover offer exceed - ing 90% acceptance (excluding the acquirer’s existing stake), a squeeze-out mechanism allows the acquirer to buy the remaining shares from dissenting share - holders. The acquirer must issue a formal notice within 15 days and complete the purchase at the original offer price within three months. Dissenting sharehold - ers have 60 days to challenge the process in court, but are still entitled to receive payment during the dispute. 6.11 Irrevocable Commitments Irrevocable commitments are permitted by the TMA regulations. However, these have not yet been exten - sively used in Bahrain so the practice in relation to them continues to evolve. Any person proposing to contact a private individual or a corporate shareholder with the aim of obtaining an irrevocable commitment should consult the CBB in advance. As irrevocable commitments could be viewed as offering an advan - tage to certain shareholders over others, negotiations are typically undertaken after consulting the CBB. The irrevocable commitments are drawn up as unilateral undertakings and, generally, do not provide a way out for the principal shareholder.
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