BAHRAIN Law and Practice Contributed by: Rad El Treki, Noor Al Rayes, Aayush Kainya and Mohamed Al Sari, Al Tamimi & Co.
The most common triggers for these disputes include post-closing price adjustments (often centred on working capital calculations or “locked-box” leakag - es) and breaches of representations and warranties, particularly regarding financial statements, tax liabili - ties or undisclosed “off-balance sheet” encumbranc - es. A rise in shareholder challenges involving minority squeeze-out rights in public takeovers and disputes over earn-out targets is also being seen, where sell - ers allege that buyers have intentionally hindered the target’s performance to avoid deferred payments. 8.2 Challenges to Deal Process, Governance and Disclosure In Bahrain, transactions are occasionally challenged based on process defects or disclosure failures, but such claims rarely result in the unwinding of a deal due to the Kingdom’s strong “certainty of contract” princi - ples. Fiduciary duty claims and minority shareholder suits are the primary vehicles for these challenges, often brought under the Commercial Companies Law, which allows shareholders to sue directors person - ally for gross negligence or self-dealing in a merger context. While process defects – such as improper notice of a general assembly or failure to follow the CBB Rulebook – can lead to a court-ordered stay or suspension of a deal, the most common outcome is a claim for monetary damages rather than rescission. Conflicts of interest, particularly in related party trans - actions, are a high-risk area; if a director fails to dis - close a personal interest in an acquisition, the trans - action can be declared voidable at the request of any interested party. 8.3 “Broken Deal”, MAC/MAE and Conditions Litigation In Bahrain, courts and tribunals generally uphold the principle of contractual freedom under the Civil Code, but they approach material adverse change (MAC) and termination rights with a high degree of strictness, requiring clear, objective evidence of a “material” shift rather than a buyer’s change of heart. For disputes over closing conditions, Bahraini law treats CPs as binding triggers: if a regulatory approval or a specific commercial condition is not satisfied, the contract is typically deemed not to have come into
effect, provided the party invoking the failure acted in good faith. However, because Bahraini courts often favour the stability of contracts, they may scrutinise termination attempts to ensure they are not an “unlaw - ful exercise of right” intended solely to harm the other party, especially where conditions are vague or the alleged adverse effect is considered a foreseeable business risk. 8.4 Disputes Over Regulatory Efforts and Remedies Disputes concerning obligations to seek regulatory approvals (such as CBB or MOIC clearances) or to offer remedies are primarily resolved through court if it has jurisdiction, including the BCDR where the value is over BHD500,000. Parties typically include “best efforts” or “reasonable endeavours” clauses in their contracts, and failure to meet these standards is treated as a breach of con - tract, allowing the aggrieved party to seek specific performance or damages. While parties may agree to litigate adverse regula - tory decisions by appealing to the relevant author - ity’s internal appeals committee or the High Court, most commercial agreements favour arbitration under UNCITRAL rules to maintain confidentiality and tech - nical expertise in resolving “broken-deal” disputes. 8.5 Forum, Procedure and Remedies Forums normally include courts, unless there is an arbitration agreement. Available interim remedies include prejudgment attachments, freezing orders and travel bans issued by the Court of Urgent Matters or an arbitral tribunal. Final remedies typically focus on damages (compensating for lost profit and wasted expenditure), but Bahraini law also recognises spe - cific performance – compelling a party to complete a share transfer or fulfil contractual obligations – and injunctions (both prohibitory and mandatory), though these are discretionary and usually granted only when monetary compensation is deemed inadequate.
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