Corporate governance in Bahrain is principally governed by the Commercial Companies Law, the Corporate Governance Code issued in 2018, sector-specific regulations issued by the Central Bank of Bahrain (CBB), company constitutional documents, and applicable Bahrain Bourse requirements for listed companies.
The corporate governance framework addresses board effectiveness, director responsibilities, shareholder rights, disclosure requirements, internal controls, audit oversight, conflict of interest management, transparency, accountability, and corporate reporting obligations.
Companies incorporated in Bahrain are required to comply with governance requirements applicable to their legal structure and regulated activities, while listed companies and financial institutions are subject to additional governance and disclosure obligations.
Bahrain's corporate governance framework is primarily based on the Commercial Companies Law and the Corporate Governance Code.
The Corporate Governance Code establishes 11 core governance principles.
Joint stock companies are subject to enhanced governance and reporting requirements.
Listed companies must comply with Bahrain Bourse and Central Bank of Bahrain regulations.
Boards of directors have responsibilities relating to strategy, financial reporting, internal controls, compliance, and shareholder protection.
Corporate governance reporting and disclosure obligations apply to certain categories of companies.
Audit committees, corporate governance committees, and governance officers play important roles in compliance oversight.
Corporate governance requirements in Bahrain are derived from several sources, including:
The Commercial Companies Law promulgated by Decree Law No. (21) of 2001, as amended.
The Corporate Governance Code issued by Decision No. (19) of 2018.
The Corporate Governance Code contained within the CBB Rulebook applicable to regulated financial institutions.
The memorandum and articles of association of each company.
Bahrain Bourse listing rules, disclosure standards, and other applicable regulatory requirements.
The Corporate Governance Code establishes minimum governance standards for companies incorporated in Bahrain and includes principles relating to board effectiveness, loyalty to the company, internal controls, director appointment and evaluation, remuneration, management structure, shareholder engagement, disclosure, financial integrity, and social responsibility.
The Corporate Governance Code requires boards of joint stock companies to establish governance structures designed to support compliance and oversight.
These include:
Corporate governance committees.
Corporate governance officers.
Annual corporate governance reporting obligations.
Public joint stock companies are subject to additional requirements, including:
Minimum board composition requirements.
Independent and non-executive directors.
Audit committee requirements.
Enhanced disclosure obligations.
Compliance with Bahrain Bourse Listing Rules.
Compliance with applicable CBB regulations.
Boards of directors are responsible for:
Managing the affairs of the company.
Establishing overall business strategy.
Monitoring management performance.
Preparing financial statements.
Managing conflicts of interest.
Protecting shareholder interests.
Ensuring compliance with applicable laws and regulations.
Shareholders participate in governance primarily through ordinary and extraordinary general meetings.
The Commercial Companies Law establishes rules governing:
Notice requirements.
Voting rights.
Meeting procedures.
Quorum requirements.
Shareholder approvals for specified corporate actions.
Joint stock companies are required to disclose corporate governance arrangements and provide annual governance reporting.
Companies are also subject to financial reporting obligations, including audited financial statements and annual reporting requirements.
Businesses operating in Bahrain should ensure that their governance frameworks align with applicable legal and regulatory requirements.
Particular attention should be given to:
Board composition and governance structures.
Internal controls and compliance procedures.
Conflict of interest management.
Shareholder communication and participation.
Corporate governance reporting requirements.
Financial reporting and audit obligations.
Listed companies and entities regulated by the Central Bank of Bahrain should also ensure compliance with the additional requirements applicable to their sector.
Companies should consider:
Reviewing their constitutional documents and governance arrangements.
Assessing compliance with the Commercial Companies Law and Corporate Governance Code.
Evaluating board and committee structures.
Reviewing governance reporting procedures.
Ensuring appropriate internal controls and audit mechanisms are in place.
Assessing disclosure and shareholder communication processes.
Monitoring regulatory developments issued by the Ministry, Bahrain Bourse, and the Central Bank of Bahrain.
Corporate governance requirements are derived from the Commercial Companies Law, the Corporate Governance Code, applicable CBB regulations, company constitutional documents, and Bahrain Bourse requirements.
The Corporate Governance Code provides minimum governance standards for companies incorporated in Bahrain, while regulated financial institutions are subject to a designated corporate governance framework issued by the Central Bank of Bahrain.
The Corporate Governance Code requires boards of joint stock companies to establish governance-related committees, including a corporate governance committee, while audit committees are also required under applicable legislation and regulations.
Shareholders participate through ordinary and extraordinary general meetings and exercise powers granted under the Commercial Companies Law and the company's constitutional documents.
Joint stock companies are required to disclose their corporate governance arrangements and provide annual governance reporting in accordance with applicable requirements.
Author: Legal Team, Hassan Radhi & Associates
Hassan Radhi & Associates is one of Bahrain's leading full-service law firms and the exclusive Lex Mundi member firm in Bahrain. Established in 1974, the Firm advises local, regional and international clients across corporate and commercial law, banking and finance, dispute resolution, arbitration, construction, employment, real estate, regulatory matters and other areas of Bahraini law.
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