BAHRAIN Law and Practice Contributed by: David Walker, Simone Del Nevo, Sherif Saadeldin and Rahul Sud, ASAR – Al Ruwayeh & Partners
8.3 Business Judgement Rule Bahrain does not have a precedent system, so it is not possible to give a definitive answer as to whether courts in Bahrain defer to the judgement of the board. However, takeover issues do not appear to have been the subject of any signifi - cant litigation in Bahrain. 8.4 Independent Outside Advice Both the bidder and the target entity must pro - cure a report from an independent investment adviser, who must provide their opinion on the offer and present it to the shareholders of the entity that retained the adviser. 8.5 Conflicts of Interest While Bahrain does not have a precedent sys - tem, the courts have handled a number of conflict of interest matters. The CBB has also handled a number of conflict of interest cases, through its disciplinary processes. Although Bahrain’s TMA regulations permit hos - tile takeovers, they are practically non-existent. 9.2 Directors’ Use of Defensive Measures Once a bona fide offer has been communicated to the board of the target or once the board of the target has reason to believe that a bona fide offer may be imminent, no action that could effectively result in an offer being frustrated may be taken by the board of the target in relation to the affairs of the company without the approval by the shareholders of the target, nor may any action be taken that results in the sharehold - ers of the target being denied an opportunity to decide on the merits of an offer. 9. Defensive Measures 9.1 Hostile Tender Offers
In particular, the target’s board must not, without shareholders’ approval, do or agree to do the following: • issue any shares; • create, issue or grant, or permit the creation, issue or grant, of any convertible securities, options or warrants in respect of shares of the target; • sell, dispose of or acquire assets of a material amount, other than during the normal course of business; • enter into contracts, including service con - tracts, other than in the ordinary course of business; or • cause the target or any subsidiary or associ - ated company to purchase or redeem any shares in the target or provide financial assis - tance for any such purchase. 9.3 Common Defensive Measures Without approval by the shareholders of the target, a board of the target may consider the following possible anti-takeover defences or impediments: • denying due diligence access; • soliciting competing offers; and • encouraging shareholders not to accept the offer. In the case of a merger, the non-co-operation of the target’s board could prevent the merger from completing. In such instances, the hostile bidder would necessarily have to launch a contractual takeover offer. 9.4 Directors’ Duties The directors are under the overarching duty to act in the sole interest of the shareholders, and this duty is clearly enshrined in the TMA regula -
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