BAHRAIN Law and Practice Contributed by: David Walker, Simone Del Nevo, Sherif Saadeldin and Rahul Sud, ASAR - Al Ruwayeh & Partners
4. Stakebuilding 4.1 Principal Stakebuilding Strategies It is not unusual for a bidder to build a stake prior to launching an offer. The structure of the market does not facilitate stakebuilding, as the lack of market depth coupled with scarce volatility implies that any stake - building may have a significant impact on the price of the securities to the detriment of the person seeking to build a stake in the company when it comes to launch a subsequent offer, whether mandatory or voluntary. Furthermore, all trades must be effected in the mar - ket, whether in the regular market or in the market for special trades where certain negotiated trades may be settled. However, if a person decides to build a stake prior to launching an offer, it would have to trade on the regular market by placing ordinary trades or seek a negotiated sale with a private seller, which would likely be settled in the special market in the form of a “block trade”. 4.2 Material Shareholding Disclosure Threshold The threshold for disclosure to BHB is triggered when a person’s ownership alone or together with that of their minor children, or any other accounts under their disposal, or the ownership of any of their associate or affiliate companies, amounts to 5% or more of any listed security of a joint stock company. In addition, all persons must obtain the CBB’s prior written approval to execute any order that will bring their ownership alone or their ownership together with their minor children, or the accounts standing under their disposal, to 10% or more in any listed security. Any further increase of 1% or more shall also be sub - A company may not introduce different rules; the mini - mum reporting thresholds are statutory and cannot be changed to lower thresholds in a company’s articles of association. Reporting thresholds are mandatory pro - visions introduced in the interest of all market partici - pants and are therefore not disposable by a company. The Bahrain disclosure requirements are triggered upon the acquisition of 5% or more of any listed secu - ject to CBB prior written approval. 4.3 Hurdles to Stakebuilding
ratio of Bahraini nationals to foreign nationals would apply if there are more than six employees (for cer - tain industries, the requirement does not apply until ten workers are employed). If there are more than six employees, the ratio of foreign to Bahraini employee differs from one industry sector to another. Neverthe - less, Bahrain has instituted a system permitting the issuance of work permits outside of the Bahrainisation ratio requirement through the payment of an increased annual work permit fee. 2.6 National Security Review There is no current knowledge of any express national security review of acquisitions in Bahrain. 3. Recent Legal Developments 3.1 Significant Court Decisions or Legal Developments As a civil law jurisdiction, there are no definitive sig - nificant court decisions in Bahrain; it does not have a precedent system and court decisions are made on a case-by-case basis, depending on the circumstances. 3.2 Significant Changes to Takeover Law In October 2023, the CBB revised the rules regarding M&A of publicly traded companies. These revisions focus on ensuring transparency and fairness through independent evaluations. An independent adviser must assess the fairness of an offer for shareholders. Their advice and reason - ing should be included in relevant communications. If there is disagreement within the board or with the adviser on the offer, explanations must be presented to shareholders, including the dissenting directors’ view. Directors with conflicts must be disclosed and should not vote on the offer. If the offering company is publicly traded or has a conflict, it also needs an independent adviser and shareholder approval. Bahrain Bourse (BHB) has also introduced Market Making Guidelines with the aim of boosting liquidity in capital markets in Bahrain. This is expected to help bring liquidity into the market for securities that are not as actively traded.
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