BAHRAIN Trends and Developments Contributed by: Noor Hassan Radhi, Fatima Al Ali and Saifuddin Mahmood, Hassan Radhi & Associates
ment pursuant to the Free Trade Agreement between Bahrain and the USA. With respect to the activities that are subject to a minimum Bahraini ownership, the law empowers the Minister in charge of commercial affairs, subject to the approval of the Council of Ministers, to further relax such restriction in specific cases, particularly where the incorporation of a company will have a strategic economic significance or is expected to yield a prof - itable return for the economy, especially where there is a void in the Bahraini market. To ensure a secure investment environment, entry to the market in Bah - rain will remain subject to measures and standards necessary for the protection of national security and the maintenance of public order. These regulatory aspects play a crucial role in foster - ing a business-friendly ecosystem that supports M&A activities, particularly those transactions with a cross- border element. The authorities in Bahrain, especially the Economic Development Board (EDB), continuously monitor the market and engage with stakeholders to identify opportunities for policy enhancements aimed at pro - moting Bahrain as an investment and business expan - sion hub in the region. The EDB also proposes new laws, regulations or amendments to existing laws to support this objective. Strengthening financial services The regulatory frameworks established by the CBB ensure a robust, stable financial market that is char - acterised by transparency and adherence to interna - tional financial standards. Through such regulatory frameworks, the CBB plays a vital role in overseeing the financial sector, regulating M&A within the industry and governing transactions involving public compa - nies in Bahrain. The key CBB regulations governing M&A are out - lined in the CBB Rulebook Volume 6, the Takeovers, Mergers and Acquisitions (TMA) Module. This mod - ule establishes a structured framework for conduct - ing takeovers, mergers and acquisitions within defined thresholds involving publicly listed companies in Bah - rain. It provides detailed guidelines on the approval
and execution processes, covering aspects such as disclosure requirements, corporate governance, and the fair and equal treatment of shareholders. Addi - tionally, the Rulebook details the approval procedures for mergers across specific sectors, including con - ventional banking, Islamic banking and insurance, as detailed in Volumes 1, 2 and 3, respectively. Effective from January 2024, additional measures have been introduced under the TMA Module to ensure transparency and fairness. These measures aim to enhance the protection of shareholder inter - ests, particularly in the context of evaluating the merits of offers or recommendations made to shareholders regarding potential acquisitions. Key amendments include the introduction of provi - sions for the establishment of an independent com - mittee within the offeree company’s board of direc - tors to handle offers, when conflicts of interest arise among board members. The committee must con - sist of non-executive directors without any direct or indirect interest in the offer to handle responsibilities related to the offer. If forming such a committee is not feasible, the primary responsibility for represent - ing independent shareholders’ interests falls on the independent professional adviser appointed by the offeree company’s board to advise the board on the merits of the offer. Additionally, the amendments set out a non-exhaus - tive list of scenarios that the CBB considers as consti - tuting conflicts of interest for the purpose of handling an offer by the offeree’s board, further reinforcing gov - ernance standards in M&A transactions. As part of its efforts to strengthen financial services in the Kingdom, the CBB maintains open channels of communication. In the context of M&A transactions, the CBB actively engages with licensees and institu - tions involved in acquisitions to facilitate regulatory approvals and minimise bureaucratic delays. This open dialogue also promotes advance consulta - tions, enabling proactive identification and resolution of potential regulatory concerns. Moreover, it plays a key role in addressing the concerns of prospective foreign investors in cross-border M&A transactions
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