Bahrain Corporate Governance Code
July 2018
The new Bahrain Corporate Governance Code has been issued by the Ministry of Industry, Commerce and Tourism (“MOICT”) pursuant to the Ministerial Resolution No. 19 of 2018 (the “Code”).
The Code has been issued on 19 March 2018 and its provisions came into effect on 5 October 2018.
The Code is applicable to joint stock companies only except for those joint stock companies licensed by the Central Bank of Bahrain (the “Company(ies)”). However, consideration of applicability of the Code shall be made with respect to family-owned joint stock companies, that is to make its application compatible with their nature in terms of financial and administrative matters.
The Code consists of 11 principles (the “Principles”) and their applicability is based on the “comply” or “explain” principle. Therefore, Companies must either comply with the recommendations of each Principle or explain its non-compliance in its annual report for corporate governance.
Each Company must prepare an annual report for corporate governance to be enlisted with the annual financial report of the Company (in the form determined by the MOICT). Such annual report must be filed with the MOICT with the financial report within 6 months from the end of the financial year of the Company. The annual report must also be added as an agenda item in the annual ordinary general assembly meeting of the Company to be approved by the general assembly.
Each Company must appoint from its employees a corporate governance officer (“Corporate Governance Officer”). The Corporate Governance Officer shall be responsible to ensure the Company’s compliance with the Code. The Corporate Governance Officer must be approved by the MOICT as well as have access to the board of directors and its sub-committees (if any).
Each Company must have a written guide containing all policies and procedures of the Company’s corporate governance. All employees of the Company must be made aware of such guide by way providing awareness programs to the employees. Each employee must then sign a declaration confirming his/her receipt of the necessary corporate governance awareness program by the Company.
The Principles are:
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The Company shall be headed by an effective collegial and informed board.
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The Company’s board members and its officers shall have full loyalty to the Company.
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The board shall have rigorous controls for financial audit and reporting, internal control, and compliance with law.
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The Company shall have effective procedures for appointment, training, and evaluation of the board members.
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The Company shall remunerate the board members and its senior officers fairly and responsibly.
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The board shall establish a clear and efficient management structure for the Company and define the job titles, powers, roles and responsibilities.
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The Company shall communicate with its shareholders, encourage their participation, and respect their rights.
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The Company shall disclose its corporate governance. The Code sets out the mechanism of such disclosure.
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Companies which offer Islamic services shall adhere to the principles of the Islamic Shari’a.
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The board shall ensure the integrity of the financial statements submitted to shareholders through appointment of external auditors.
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The Company shall seek through social responsibility to exercise its role as a good citizen.