BAHRAIN Law and Practice Contributed by: David Walker, Simone Del Nevo, Sherif Saadeldin and Rahul Sud, ASAR - Al Ruwayeh & Partners
transfer everything they own and owe (assets and liabilities) to an existing company (merging com - pany); and • a merger by consolidation, whereby two or more companies (merged companies) dissolve com - pletely, and a brand new legal entity (merging company) is created. 2.2 Primary Regulators The Central Bank of Bahrain (CBB) is the primary regulator for public M&A in Bahrain. The Capital Mar - kets Supervision Directorate at the CBB administers Rulebook 6, including the Takeovers, Mergers and Acquisitions (TMA) regulations, while the Ministry of Industry and Commerce (MOIC) regulates the foreign ownership restrictions and antitrust issues. Other sector-specific regulators may also regulate sector-specific M&A (the Telecommunications Regu - latory Authority, the Ministry of Education, the Ministry of Health, etc). 2.3 Restrictions on Foreign Investments Bahrain significantly relaxed foreign ownership regu - lations in 2021. Previously, many commercial activi - ties mandated a minimum 51% ownership by a Gulf Cooperation Council national, but foreign companies can now own a majority stake in a wider range of busi - nesses, provided a Bahraini shareholder is included. The minimum ownership percentage for the Bahraini partner could be as low as one share. The MOIC has discretion to determine this percentage on a case- by-case basis. Foreign-owned companies can now participate in a significantly broader range of business activities. While many activities are now open to majority foreign ownership, there are still limitations for certain sec - tors. Roughly a third of activities that were previously capped at 49% foreign ownership have been liberal - ised. A small fraction remain capped at 49% foreign ownership, and a very limited number of activities are entirely off limits to foreign ownership. 2.4 Antitrust Regulations Competition and antitrust in Bahrain are regulated under Law 31 of 2018 (the “Competition Law”), which provides that various practices will be deemed to be
anti-competitive and unlawful, and outlines issues regarding particular transactions that require report - ing to and/or approval by the Competition Authority (CPA). Under the Competition Law, persons participating in “economic concentrations” are required to apply to the CPA for approval in certain circumstances. The Competition Law considers that an “economic con - centration” has been created if a change of control resulted from: • a merger between two establishments or more, fully or partially, that were previously independent; or • an acquisition of direct or indirect “control” over an establishment by: (a) one or more natural persons, controlling one establishment or more; or (b) one or more other establishments. The Competition Law granted the CPA the authority to issue a resolution specifying the terms and conditions that create control, as referred to above. As per the Economic Concentration Resolution, a merger control filing will be required in Bahrain if a shift in market control occurs as a result of the acquisition of direct or indirect control over another entity, fully or partially. For a change of market control to occur, at least 40% of the relevant market would need to be affected in the case of one entity, or 60% of the market in the case of two entities. 2.5 Labour Law Regulations Under Bahrain Labour Law No 36 of 2012, if a transac - tion involves the acquisition of assets or a business, as opposed to acquiring the shares of a target com - pany that is the sponsor/employer of the employees, there is a requirement to transfer the employees to the acquirer. This transfer is not automatic, and requires the consent of the affected employees. However, if the acquisition only relates to the shares of a target company that sponsors employees, no obligation or legal requirement arises, as there is no change to the sponsor/employer of the employees. It is worth noting that Bahrain imposes a nationalisa - tion scheme, known as “Bahrainisation”, by which a
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