BAHRAIN Trends and Developments Contributed by: Noor Hassan Radhi, Fatima Al Ali and Saifuddin Mahmood, Hassan Radhi & Associates
As part of its efforts to strengthen financial ser - vices in the Kingdom, the CBB maintains open channels of communication. In the context of M&A transactions, the CBB actively engages with licensees and institutions involved in acqui - sitions to facilitate regulatory approvals and min - imise bureaucratic delays. This open dialogue also promotes advance consultations, 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 within the finan - cial sector, fostering an efficient and investor- friendly business environment. Enhancing technology and digital transformation Bahrain’s progressive fintech policies fostering a supportive environment for fintech innova - tion have influenced M&A particularly within the financial sector. In alignment with fintech poli - cies, the CBB has established a robust regula - tory environment, including the introduction of a regulatory sandbox in 2017, the fintech hub Bahrain FinTech Bay in 2018 and the open bank - ing regulations in 2020. The regulatory sandbox attracts fintech start-ups and encourages col - laborations with traditional financial institutions, as it provides fintech start-ups and established financial institutions with a controlled environ - ment to test innovative products, services and business models under relaxed regulatory requirements before full-scale market deploy - ment. The fintech policies allow companies to lever - age regulatory flexibility to experiment with digi - tal banking, blockchain, payment solutions and open banking initiatives, which may positively impact their market presence. This proactive
approach to fintech regulation strengthens the jurisdiction’s appeal as a hub for M&A activities, particularly to companies that seek to integrate innovative technologies. Data protection laws Bahrain has adopted personal data protection principles through the enactment of the Personal Data Protection Law (PDPL) in 2018, aligning its regulatory framework with the General Data Protection Regulation. The law establishes a structured framework for managing data and sensitive personal information which must be observed in M&A transactions. As a result, M&A transactions now require more rigorous data protection assessments to ensure compliance with legal requirements aimed at safeguarding personal data. This has directly impacted the due diligence process, which now involves restricted access to personal data, along with redaction and anonymisation before sharing documents with potential buyers – unless the data processing required for due diligence aligns with its original purpose and has been expressly consented to by the data subject. Additionally, regulatory approvals may be required for data transfers, particularly in cross- border mergers. If personal data is stored or processed outside Bahrain, it must comply with the requirements for cross-border data transfer under the PDPL. From another angle, it is essential to assess personal data policies and cybersecurity meas - ures during the due diligence process. Addition - ally, any past data breaches or non-compliance issues of the acquired business should be care - fully examined to assess legal and reputational risks and avoid inheriting potential liabilities.
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