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  • Part V — Part V — Joint-stock Company

    • General Provisions

      • Article (63)

        A joint stock company consists of a number of persons who subscribe in it by way of negotiable shares. They shall be liable for the company's debits and obligations only to the extent of the value of their shares.

      • Article (64)

        All shareholders in a general joint stock company shall be of Bahraini nationality, without prejudice to the right of the Golf Cooperation Council's nationals to establish and own joint stock companies in Bahrain.

      • Article (65)

        Subject to the provisions of this law, Bahraini public joint stock companies may be founded — by a decision of the Minister of Commerce and Industry in collaboration with the relevant minister — with foreign capital or expertise in accordance with the percentages determined by the Minister of Commerce and Industry.

        No dealing in the stocks and shares representing the foreign capital shall be permitted in any way for three years from the date of registering the company in the Commercial Registry unless such dealing is done only among the persons representing the foreign partner.

      • Article (66)

        Every Joint Stock Company shall have a special commercial name indicating its objectives.

        Such name shall not be derived from the name of a natural person unless the objective of the company is to invest a patent registered in the name of that person, or unless the company acquires, upon its incorporation or thereafter, another commercial establishment and uses the name of such establishment as its own. The name of the company shall — whenever mentioned — be followed by the phrase (A Bahraini Joint-Stock Company).

      • Article (67)

        The company may change its name by a resolution by the extraordinary general assembly. The new name shall be registered in the Commercial Registry in accordance with the provisions of law and be published in the Official Gazette and in one of the local daily newspapers.

        The change in the name of the company shall not affect its rights or obligations or legal proceedings taken by or against the company.

      • Article (68)

        i— Except for the case of representing the State in a public company, a public servant shall not in his personal capacity occupy a public position and be at the same time a board member of a joint-stock company or participate in the incorporation thereof or do any paid or unpaid job for it whether permanent or occasional.
        ii— The violator shall refund all that he has received from the company to the state without prejudice to the administrative penalties.

      • Article (69)

        i— A board member of a public organization or entity shall not, in his personal capacity or on behalf of a third party, be a board member of a joint-stock company or act as a manager thereof or undertake permanent or occasional work or consultancy for it if one of its objectives is to exploit any public utility that exists in the jurisdiction of the board of which he is a member, or that is linked with it by a contract of public works or monopoly.
        ii— The member shall be deemed resigned from the company as soon as he is elected to the board. The defaulter shall refund what he has received from the company to the State's treasury.

      • Article (70)

        A decree by the Minister of Commerce and Industry shall regulate the Joint stock companies of variable capital.

    • Chapter One — Chapter One — Incorporation of the Company

      • Article (71)

        i— The founder is a person who actually participates in the incorporation of a company for the purpose of shouldering the responsibility arising therefrom.
        ii— A person shall be considered a founder if he, in particular, has offered an in-kind share upon the incorporation of the company or has signed the preliminary contract or has applied for licensing the company.

      • Article (72)

        The founders shall submit an application for incorporating a company to the Ministry of Commerce and Industry.

      • Article (73)

        A special registry shall be held at the Department of Commerce and Companies' Affairs at the Ministry of Commerce and Industry to register the applications for incorporating joint stock companies. The applications shall be given serial numbers.

      • Article (74)

        An adequate statement on the company's particulars, drawn from the company's preliminary Memorandum and Articles of Association, shall be attached with the application for incorporating the company. The statement shall include the name of the founders' agent and his profession and address. Other attachments shall include:

        i— A copy of the company's preliminary Memorandum and Articles of Association duly signed by the founders as shown in the model form referred to in article (21) of this law.
        ii— An evaluation of in-kind shares, if any, as provided for in article (99) of this law.
        iii— An evidence, if the company's name is derived from the name of a natural person, of any intellectual property rights or patents registered in the said person's name the company intends to invest, or an evidence, if the company's name is derived from the name of an acquired commercial entity, of acquiring this entity.
        iv— An evidence, if the company takes another company's name, that the other company is under dissolution and that it agrees to assign its name to the company.
        v— A certified copy, if there is a corporate person among the founders, of the founding document of the said person, and an evidence that the competent authorities approve its participation in incorporating the company.

      • Article (75)

        The company's preliminary contract shall include the following details:

        i— The name of the company.
        ii— The company's head office.
        iii— The company's objectives.
        iv— Names of the founders who shall not be less than seven persons, except for the companies exclusively incorporated by the government or in which the government participates in its incorporation.
        v— The company's authorized, issued and paid-up capital on corporation, and the number of shares that form the capital.
        vi— The term of the company, if any.
        vii— A statement on every in-kind share, including the conditions thereof, the name of its owner and the real rights associated therewith.
        viii— An approximate estimate of the incorporation's expenses fees and costs.

      • Article (76)

        The provisions of this law shall not apply to the companies exclusively incorporated by the government, or those in which the government contributes more than 50% of its capital or those whose shares have been transferred to the government or to any other public entity that is incorporated by an Amiri Decree, except to the extent that these companies are not in conflict with the conditions considered at the time of their incorporation and with the provisions of their articles of association.

      • Article (77)

        Upon submitting the application referred to in article (72) of this law, the Ministry of Commerce and Industry shall ascertain that the company has been incorporated on a sound basis and that the preliminary contract and articles of association do not contravene with the provisions of the law. To this effect, the Ministry may request the founders to provide additional details and supporting documents whenever necessary. It may also request that amendments be made to the company's articles of association to make them consistent with the provisions of this law or compliant with the model form referred to in article (21) herein.

      • Article (78)

        i— The Minister of Commerce and Industry shall decide on the application within thirty days from the date of its submission. If the said period lapses without taking a decision, the application shall be deemed rejected.
        ii— The applicant whose application has been justifiably rejected or considered to be rejected shall have the right to appeal before the High Civil Court within thirty days from the date of notifying him of the rejection of his application or from the date his application is deemed rejected. The court decision whether confirming or overruling the application rejection shall be final.
        iii— The founders shall not have the right to apply anew for the company's incorporation before removing the reasons of rejection or the lapse of six months from the date of the court's rejection decision.

      • Article (79)

        If the company's draft Memorandum and Articles of Association have been approved, the founders shall notarize them in accordance with the latest amendment with the competent notarization authority and return them to the Ministry of Commerce and Industry for issuing the incorporation order.

      • Article (80)

        If the order of incorporation is issued, it shall be published in the Official Gazette at the expense of the company and a copy thereof shall be sent to the founders.

      • Article (81)

        The company shall have a corporate entity from the date of publication of the incorporation order in the Official Gazette.

      • Article (82)

        The issue of the company's incorporation order represents at the same time certification of the company's Memorandum and Articles of Association and the other particulars contained in the application.

      • Article (83)

        The founders shall begin subscription for the shares following the publication of the incorporation order in the Official Gazette.

      • Article (84)

        The founders shall subscribe for shares representing at least 10% and not exceeding 40% of the company's capital and shall pay — before the publication of the subscription prospectus — the amount equal to the percentage required to be paid by the public for each share upon subscription.

        However, the founders may be authorized, subject to the approval of the Council of Ministers, to subscribe for more than 40% of the company's capital.

      • Article (85)

        The founders shall submit to the Ministry of Commerce and Industry — before inviting the public to subscribe for the company's shares — a certificate from the bank proving that they have subscribed for the company's shares within the limits specified in the foregoing article, and that they have already deposited, in the company's account with the bank, an amount equal to the percentage required to be paid by the public for each share upon subscription as provided for in the company's articles of association. Such amount shall be referred to in the subscription prospectus. The bank certificate shall be accompanied with the subscription invitation prepared by the founders in accordance with the provisions of the following article. Upon the completion of the above, the Ministry of Commerce and Industry shall authorize the publication of the invitation prospectus in one of the local daily newspapers.

      • Article (86)

        The founders shall — upon offering shares for public subscription — issue a prospectus approved by the Ministry of Commerce and Industry and Bahrain Stock Exchange calling the public for subscription and including the particulars specified in the Executive Regulation.

        The subscription prospectus shall be published in one of the local daily newspapers at the expense of the company at least five days before the subscription commences.

        The founders who signed the application for the company's incorporation shall sign the prospectus and be jointly liable for the accuracy of the particulars contained therein.

      • Article (87)

        Subscription shall be undertaken at one or more of the commercial banks licensed to operate in Bahrain or at one of its branches or representatives abroad or through securities companies or other parties approved by the Ministry of Commerce and Industry.

      • Article (88)

        The installments due upon subscription shall be paid at the bank; and the bank shall record such payments in a special account to be opened in the name of the company. Subscription shall remain open for a period of not less than ten days and not exceeding three months.

        Subscription shall not close — in case of covering subscription at any period — before the lapse of five days from the date of publication of a notice that subscription for shares has been fully completed, provided that the minimum period of subscription has lapsed.

      • Article (89)

        Subscription shall be effected by a note indicating the number of shares subscribed for, the subscriber's acceptance of the company's Memorandum and Articles of Association, his selected domicile, and any other details that may be deemed necessary. The subscriber or his deputy shall sign the subscription document.

        The subscriber shall submit the note to the bank and shall pay the installments due against a receipt signed by the bank indicating the name of the subscriber, his selected domicile, nationality, date of subscription, the number of subscribed shares and paid installments. Subscription shall be deemed final upon receiving such receipt. The subscriber shall not cancel his subscription, without prejudice to the provisions of article (102) of this law.

      • Article (90)

        Printed copies of the Memorandum and Articles of Association shall be given to each subscriber against an amount determined in the company's articles of association, and such amount shall be mentioned in the receipt provided for in the foregoing article.

      • Article (91)

        The bank shall keep all funds received from subscribers for the account of the company under incorporation and shall give such funds only to the first board of directors as provided for in this law after refunding excess subscribed capital immediately following the allotment of shares in accordance with article (94) of this law.

      • Article (92)

        The bank through which subscription is undertaken shall perform related operations according to the company's articles of association and shall be liable for compliance with its provisions and for any violation thereof.

      • Article (93)

        i— The Joint Stock Company may have upon incorporation or upon increasing its capital one underwriter or more to subscribe the remaining shares.
        ii— If the shares have not been fully subscribed for during the subscription period, the underwriters shall purchase the unsubscribed shares and may re-offer these shares to the public without complying with the procedures and restrictions of dealing in shares provided for in this law.

        The Minister of Commerce and Industry shall decree the procedures, requirements and conditions of applying the provisions of this article.

      • Article (94)

        If subscription exceeds the offered number of shares after closing, the shares shall be allotted among subscribers in the manner agreed upon between the founders and the subscribers or in the manner defined in the company's articles of association.

        The Minister of Commerce and Industry may decide at the beginning to allot a number of shares not exceeding 15% of the company's capital among the subscribers, and the allocation proceeds thereafter as provided for in the foregoing paragraph.

      • Article (95)

        Every subscription undertaken in contravention of the above provisions may be contested before courts by whom it may concern within thirty days from the closing date.

        Subscription may be judged null and void even if the company is in a state of liquidation.

      • Article (96)

        i— The founders shall invite the subscribers for a constituent assembly to be held within twenty-one days from the closing date of subscription. The provisions of article (199) of this law shall apply to the procedures of the invitation.
        ii— Each subscriber shall have the right to attend the constituent assembly regardless of the number of shares he owns.
        iii— The assembly shall be chaired by the person elected by the absolute majority of the shares represented therein.

      • Article (97)

        The constituent assembly shall consider, in particular, the founders' report on the company's incorporation, the expenses incurred and the evaluation of the in-kind shares. It shall also elect a board of directors, appoint the auditors and declare the company finally incorporated.

      • Article (98)

        i— For the constituent assembly to be valid, a quorum of at least half the capital shall be available.
        ii— If the quorum provided for in the foregoing paragraph has not been fulfilled in the first meeting, an invitation shall be sent for a second meeting to be held within twenty-one days from the date of the first meeting. The second meeting shall be valid regardless of the number of subscribers represented therein.
        iii— The constituent assembly's resolutions shall be taken by the absolute majority of the shares represented therein.

      • Article (99)

        If the capital of the company comprised upon incorporation or upon increasing the capital material or intangible in-kind shares, the founders or the board of directors — as the case may be — shall refer to experts to verify the accuracy of the evaluation of the in-kind shares in accordance with the principles and provisions defined in the Executive Regulation of this law. The share evaluation shall only be final after approving it by the constituent assembly or by the majority of shareholders representing two-thirds of the shares mentioned above. The holders of these shares shall have no vote in approving the evaluation thereof even if they are holders of cash shares.

        If it appears that the value of an in-kind share has been less than the supposed amount by more than one-tenth, the company shall reduce its capital by an amount equal to the difference. However, the holder of this share may pay the difference in cash or he may withdraw from the company.

        If the in-kind share has been presented by all subscribers or partners, their evaluation of it shall be deemed final with no need for any other procedure.

        However, if it appears that the estimated value is higher than the real value of the in-kind share, the said subscribers or partners shall be jointly liable towards third parties for the difference between the two values.

        The shareholder shall be given fully paid shares.

      • Article (100)

        The first board of directors shall provide the Ministry of Commerce and Industry and the Bahrain Stock Exchange with the following:

        i— A declaration that capital has been subscribed for in full, the amount paid by the subscribers, their names and domiciles and the number of shares subscribed for by each one of them.
        ii— The minutes of the meeting of the constituent assembly signed by its chairman.
        iii— The resolutions of the constituent assembly approving the report of the founders and the evaluation of the in-kind and intangible shares — if any — and the election or appointment of the members of the first board of directors and the appointment of the auditors.
        iv— The supporting documents of the validity of the incorporation procedures.

      • Article (101)

        i— The first board of directors shall register the company and its articles of association in the Commercial Registry in accordance with the provisions of the law.
        ii— The members of the first board of directors shall be jointly liable for any damages arising from the failure to effect registration as provided for in the foregoing paragraph.

      • Article (102)

        i— If the company is not incorporated, the subscribers shall get back the amounts they have paid, and the founders shall be jointly liable for refunding these amounts in addition to paying compensation if necessary. The founders shall also bear all the incorporation expenses and shall be jointly liable towards third parties for the acts they made during the period of incorporation.
        ii— If the company is incorporated, the consequences of the acts made by the founders in the course of the company's incorporation shall be born by the company together with all related expenses paid by the founders.

      • Article (103)

        Any act made between the company under incorporation and the founders shall not bind the company after incorporation unless approved by the board of directors, provided that the board members do not have connection with the founder who had made such act or that they shall not profit from this act, or unless such act is approved by the group of partners or by a resolution adopted by the company's general assembly provided that any of the interested founders has no counted votes in the meeting. In all cases the interested founder shall put all related facts before the authority approving such act.

      • Article (104)

        Subject to the provisions of the foregoing article, all contracts and acts made by the founders in the name of the company under incorporation shall bind the company after incorporation if they were necessary for the company's incorporation.

      • Article (105)

        The founder shall exercise, in his dealing with the company under incorporation or for its account, due care and diligence expected from the ordinary man. The founders shall be jointly liable for any damages the company or third parties may sustain as a result of their failure to comply with this provision.

        If a founder has received any funds or information pertaining to the company under incorporation, he must repay these funds to the company together with any profits he may have gained as a result of using these funds or information.

      • Article (106)

        The founders shall be jointly liable for what they have undertaken to do.

      • Article (107)

        The company's articles of association shall be kept in its office, and any person may obtain a copy thereof against reasonable fees.

        The company's name, form, head office, date of incorporation, authorized, subscribed and paid up capital and its number in the Commercial Registry shall appear in all the company's contracts and correspondence.

      • Article (108)

        If a joint-stock company is incorporated in a way incompatible with the law, any concerned party may request the company to undertake the necessary correction within one month from the date of his request. If the company does not effect the required correction within this period, the concerned person can claim at the High Civil Court the nullity of the company within one year from the date of incorporation.

        However, the shareholders shall not use the nullity of the company as an excuse against third parties. The company shall be liquidated as a going concern without prejudice to the right of any concerned party to institute legal proceedings for joint liability against the founders, the members of the first board of directors and the first auditors.

    • Chapter Two — Chapter Two — The Company's Capital

      • Article (109)

        The company's capital must be sufficient enough to achieve its objectives, and be denominated in the Bahraini currency. However, subject to the approval of the Minister of Commerce and Industry, the company's capital may be denominated in another currency valued in the Bahraini currency. The capital shall be divided into equal shares and the Executive Regulation shall specify the minimum capital of the company and the nominal value of the share.

      • Article (110)

        The company shall have an issued capital, and the company's articles of association may specify an authorized capital not exceeding ten times the issued capital. The Executive Regulation of this law may specify a minimum issued capital for each activity the company undertakes and the portion paid thereof on the company's incorporation. The issued capital shall be fully subscribed for, and each subscriber shall pay at least one-fourth of the nominal value of cash shares, provided that the remaining amount shall be paid within a period not exceeding five years from the date of the company's incorporation.

      • Article (111)

        Some privileges to certain types of shares with respect to voting, profits, or liquidation proceeds or any other rights may be provided for in the company's articles of association on incorporation, or in a resolution by the numerical majority of the partners representing at least two-thirds of the capital in an extraordinary general assembly meeting upon increasing the company's capital, provided that the shares of the same type shall be equal in respect of the advantages, the rights or the restrictions. The privileges, rights or restrictions pertaining to a specific type of shares shall not be amended unless otherwise decided by the extraordinary general assembly with the approval of the majority of votes referred to above. The Minister of Commerce and Industry shall decree the provisions, requirements and conditions of issuing preferred stocks.

      • Article (112)

        Preferred stocks shall only be issued by the companies whose articles of association provide for the redemption of their shares before the expiry of their term that is linked to a concession to exploit one of natural resources or one of public utilities granted to it for a limited period of time, or to exploit any other non-renewable resource.

      • Article (113)

        The shares shall be issued in its nominal value, but not in a lower value. If they are issued in a higher value, the deference shall be used to pay issue expenses and the remaining amount shall be added to the statutory reserve.

      • Article (114)

        The share shall be indivisible. However, two or more persons may jointly own one share or a number of shares provided that only one person shall represent them before the company. The partners in the same share(s) shall be jointly liable for the obligations resulting from such ownership.

      • Article (115)

        The shares shall be issued in the name of their owners and be negotiable. However, the company may issue bearer shares in accordance with the rules and requirements decreed by the Minister of Commerce and Industry.

      • Article (116)

        i— The shareholder shall pay the value of the shares on the due dates. Interest shall be charged for the delay in payment once the date falls due without the need for serving a notice.
        ii— If a shareholder fails to pay a due installment, the board of directors shall be entitled to sell the share after serving a notice to the defaulting shareholder by registered mail with a delivery note. If the shareholder does not pay the amount within ten days from the date of receiving the notice, the company may sell the share in the Bahrain Stock Exchange or in a public auction. However, the defaulting shareholder may pay the due installment until the date of the auction in addition to the expenses incurred by the company.
        iii— The company shall recover from the proceeds of the sale the delayed installments and expenses and refund to the shareholder any excess amounts. If the proceeds fall short of the company's entitlements the company shall claim the difference by using the ordinary methods.

      • Article (117)

        The first board of directors shall deliver to each shareholder — within three months from the date of the final publication of the company — an interim certificate of the shares he owns. The certificate shall particularly include the name of the shareholder, the number of shares he has subscribed for, the amount paid and the method of payment of its value, the date of payment, the serial number of the interim certificate, the company's capital and its head office.

        The board shall deliver, within three months from the date of payment of the last installment or of full payment of the shares value, a final certificate of the shares with a serial number, signed by two board members and stamped with the company's seal. The certificate shall especially contain the registration number of the company in the Commercial Registry, the authorized, issued and paid up capital and the number of the shares into which the capital is divided, the type and properties of the shares, the company's head office and term, if any. The Minister of Commerce and Industry may exclude all or some of such details. No specific form is required for the certificate so long as it contains the details mentioned above.

      • Article (118)

        The company shall maintain a register to record therein the shareholders' names, their nationalities and domiciles, the number and the serial numbers of the share certificates, and the dealings made thereon. A copy of these details shall be forwarded to the Ministry of Commerce and Industry and the Bahrain Stock Exchange.

    • Chapter Three — Chapter Three — Transfer, Disposal, Mortgage and Distraint of Shares

      • Article (119)

        The shares and the interim certificates may be traded, and the company may purchase its shares in the cases and in accordance with the rules decreed by the Minister of Commerce and Industry.

        The disposal of the shares shall be effective against the company or third parties only upon the registration thereof in the relevant register.

        Trading in the shares shall be effected in pursuance of the provisions of the law of the Bahrain Stock Exchange and the internal regulation of the market. The purchaser must be a Bahraini national. However, non-Bahrainis may own and trade in shares of the Bahraini joint stock companies in accordance with the provisions of this law and with the rules and the conditions and the percentages decreed by the Minister of Commerce and Industry, except for the companies excluded by a Ministerial decree.

        The company may suspend the registration of the shares transfer during the period between the date of the call for a general assembly meeting and the date of this meeting.

        The company may refuse to register the disposal of the shares in the following cases:

        i— If the shares are mortgaged or distrained by a court order.
        ii— If the shares or the interim certificates are lost and no other shares or certificates are given in lieu thereof.
        iii— If dealing in the shares or the title transfer is in contravention of the provisions of law or of the rules, the conditions and the percentages decreed by the Minister of Commerce and Industry or of the company's articles of association.
        iv— If the value of the shares has not been fully paid to the company or if the company claims a debt thereon.

      • Article (120)

        The shares and the interim certificates may be mortgaged, donated or disposed of in any manner. The provisions of the foregoing article shall apply to such disposal.

        The share mortgage shall be made by marking it overleaf, and the rank of the mortgagee shall be determined from the date of entering the mortgage in the share register.

        The mortgagee shall receive dividends and use the rights attached to the share unless otherwise agreed upon in the mortgage contract. However, the mortgagee shall not attend the general assembly meetings or take part in its deliberation or approve its decisions.

        The mortgage shall not be deleted except by a declaration of acceptance of such deletion by the creditor or by a final court order. The deletion shall be marked in the share register.

      • Article (121)

        No heirs or creditors of a shareholder are entitled for any reason whatsoever to request for the seizure of the company's books, documents, or property, or to demand the winding-up or the sale of the whole company, or to interfere in any way whatsoever in the management of the company's business. In exercising their rights, they shall rely only on the company's records, financial accounts and the general assembly's resolutions.

      • Article (122)

        The company's property shall not be distrained to discharge debts owed by one of the shareholders. However, the shares of the debtor and its dividends may be distrained, and such distraint shall be entered in and deleted from the relevant register upon a notice by a competent authority.

        The distrainer and the mortgagee shall be subject to all the resolutions passed by the general assembly in the same way they apply to the distrainee or the mortgagor without having membership rights in the company.

      • Article (123)

        The holders of the in-kind shares shall not dispose of their shares before the elapse of two years from the date of the final incorporation of the company. However, the holders' heirs, in the case of his death, or the bankruptcy trustee, in the case of his bankruptcy, may dispose of his shares during such period.

      • Article (124)

        The founders shall not trade in the shares they have subscribed for before the publication of the balance sheet and the profit and loss account for a financial year of not less than twelve months from the date of publication of the company's incorporation unless the company's articles of association provides for a longer period. A notation shall be made on these shares indicating its type and the date of the company's incorporation.

        However, the titles of the shares may be transferred during the ban period by way of sale from one founder to another or from the heirs of one founder to a third party or from the bankruptcy trustee of the bankrupt founder to a third party. The provisions of this article shall apply to the shares subscribed for by the founders in the case of increasing the capital of the company before the expiry of the ban period.

    • Chapter Four — Chapter Four — Changing the Capital

      • 1 — 1 — Increasing the Capital

        • Article (125)

          The extraordinary general assembly may increase the authorized capital; and the ordinary general assembly may increase the issued capital up to the limit of the authorized capital, if any, provided that the issued capital must be paid in full before the increase. The approved increase in the issued capital must be made within the next three years to the date of the decision authorizing the increase. This period shall be calculated for any increase adopted or authorized before this law has entered into effect as of this date. However, in the cases specified in the Executive Regulation, some companies may issue new shares before the full payment of the value of the previous shares upon the approval of both the ordinary general assembly and the Minister of Commerce and Industry.

          The Ministry of Commerce and Industry and the Bahrain Stock Exchange shall be notified of the reports and the reasons requiring such increase.

        • Article (126)

          The capital may be increased in one of the following ways:

          i— Issuing new shares for the amount of the increase.
          ii— Transferring the reserve into capital through one of the following methods:
          1— Increasing the nominal value of the original shares without asking the shareholders to pay the difference, which shall instead be paid from the reserve, and the shares shall be marked with their new value.
          2— Issuing new shares for the amount of the increase and distributing them free of charge to the original shareholders in proportion to the original shares each shareholder owns.

        • Article (127)

          The nominal value of the new shares must be equal to the nominal value of the original shares. The extraordinary general assembly may decide to add a premium to the nominal value of the shares and determine its amount. The net amount of this premium shall be added to the statuary reserve even if it exceeds half the capital.

        • Article (128)

          i— The shareholders shall have priority right to subscribe for the new shares, and any condition to the contrary shall be deemed non-existent.
          ii— A statement shall be published in one of the local daily newspapers declaring priority of subscription given to the shareholders, the starting and closing dates thereof and the value of the new shares. The shareholders may also be notified of this statement by registered mail.
          iii— Each shareholder shall express his willingness to exercise his priority right in subscribing for the new shares within fifteen days from the date of publication of the statement referred to in the foregoing paragraph.
          iv— The priority right may be assigned to a third party against a quid pro quo, to be agreed upon by the shareholder and the assignee.

        • Article (129)

          i— The new shares shall be distributed among the shareholders who have applied for subscription in proportion to the shares they own in the company, provided that this proportion shall not exceed the new shares they have applied for.
          ii— The remaining new shares shall be distributed among the shareholders who have applied for more than they own in accordance with the provisions of the foregoing paragraph.
          iii— Any remaining new shares shall be offered for public subscription, and the same provisions relating to public subscription on the company's incorporation shall apply.

        • Article (130)

          i— In the case of offering new shares for public subscription, a prospectus shall be issued containing, in particular, the following details:
          1— The reasons for the capital increase.
          2— The resolution of the extraordinary or the ordinary general assembly, as the case may be, authorizing the capital increase.
          3— The capital of the company at the time of issuing the new shares, the amount of the proposed increase, the number of the new shares and the issue premium, if any.
          4— A statement on the in-kind shares, if any.
          5— A statement on the average profits distributed by the company during the three years preceding the capital increase.
          6— A declaration from the auditor certifying the details mentioned in the prospectus.
          ii— The chairman of the board of directors and the auditor shall sign the prospectus and shall be jointly liable for the accuracy of the details contained therein.

        • Article (131)

          The board of directors shall publish the resolution of increasing the capital in the Official Gazette and in one of the local daily newspapers, and the resolution shall be entered in the Commercial Registry within one month from the date of increasing the capital.

      • 2 — 2 — Reducing the Capital

        • Article (132)

          The company may, by a resolution of the extraordinary general assembly, reduce its capital if it is more than the company needs or if the company has sustained a loss and decides to reduce the capital to the actual value that exists.

          The resolution reducing the capital shall be issued only after reading the reports of the board of directors and the auditor on the reasons for the reduction, the obligations of the company and the effect of such reduction on these obligations.

          A copy each of the reports of the board of directors and the auditor shall be forwarded to the Ministry of Commerce and Industry.

        • Article (133)

          Capital shall be reduced by one of the following means:

          i— Reducing the nominal value of the share.
          ii— Canceling a number of shares equal to the amount of the decided reduction.

        • Article (134)

          Capital reduction shall be made, if it is more than the company needs, by reducing the nominal value of the shares, either by giving back a part of it to the shareholders equal to the decided percentage of reduction or by discharging them of the unpaid installments of shares' value in proportion to the decided reduction. If the reduction is due to the company's losses, a number of shares equal to the decided amount of reduction shall be cancelled. In all cases the nominal value of the shares must not be less than the minimum value stipulated by law.

        • Article (135)

          If the capital reduction is made by way of canceling a number of the company's shares, a number of shares owned by each shareholder shall be cancelled in proportion to the percentage of capital reduction, provided that the shareholder shall not be deprived of sharing in the company. The company shall, within one month from the date of cancellation, redeem the cancelled share certificates from the shareholders and destroy them and enter the same in the shareholders' register and notify the Ministry of Commerce and Industry and the Bahrain Stock Exchange accordingly.

        • Article (136)

          Any resolution reducing the company's capital shall be entered in the Commercial Registry in accordance with the provisions of the registry law and be published in the Official Gazette and in one of the local daily newspapers.

        • Article (137)

          Reduction shall not be effective against the creditors who make an objection thereto and submit their documents within sixty days from the publication date in the Official Gazette unless they are paid their due debts or have been provided with adequate guarantees for the payment of their deferred debts.

    • Chapter Five — Chapter Five — Loans

      • Article (138)

        The ordinary general assembly of both the public and closed joint stock companies, in which the government or any other public entity owns at least 30% of capital, may decide, by a resolution, to borrow by issuing loan bonds upon a recommendation by the board of directors showing the extent to which the company needs to borrow and the conditions of issuing these bonds. The company shall obtain the approval of the Bahrain Monetary Agency if the loan bonds are denominated in foreign currency or denominated in local currency but shall be offered for subscription in international markets.

        The general assembly may authorize the board of directors to select the issue date, provided that the issue shall be made within the two years following the date of the resolution. The Ministry of Finance and National Economy must approve the company's borrowing by issuing loan bonds. However, the Bahrain Monetary Agency shall be the competent authority if the company is one of those subject to its supervision.

      • Article (139)

        Bonds shall be nominal or for its bearer, negotiable, with equal values and categories and the maturity date shall not be less than two years. The bonds of the same issue shall entail equal rights to their holders towards the company, and any provision to the contrary shall be void.

      • Article (140)

        The company shall not issue bonds except after the issued capital is fully paid up and after the balance sheet and the profits and losses account for at least two financial years have been published unless the state or one of the public entities guarantees such bonds.

      • Article (141)

        The total value of the existing bonds issued by the company shall not exceed the issued and fully paid up capital and the undistributed reserves according to the latest balance sheet approved by the general assembly.

        Excluded from this are the bonds guaranteed by the state or by one of the public entities and the bonds issued by banks and companies that are subject to the supervision of the Bahrain Monetary Agency and upon its approval.

      • Article (142)

        The company shall cover the value of the bonds by one of the following means:

        i— Offering the bonds for public subscription. In this case the rules and provisions applicable to the subscription for shares shall apply without prejudice to the nature of the bonds.
        ii— Selling the bonds through banks, investment companies and subscription underwriters. In this case, the rules and practices commonly used in this regard shall be followed in a manner that does not conflict with the provisions of the law.

      • Article (143)

        The call for public subscription for the loan bonds shall be made by way of a prospectus approved by the competent governmental authority and published in one of the local daily newspapers. The prospectus shall contain the following details:

        i— The resolution of the general assembly authorizing the issue, its date and the approval of the competent governmental authority.
        ii— The total amount of the loan.
        iii— The essential details to be included in the bond certificates as provided for in this law.
        iv— A summary of the balance sheet and the profits and losses account for the two financial years preceding the issue of bonds.
        v— The value of the previous bonds issued by the company before and the outstanding unpaid value at the time of issuing the new bonds.
        vi— The entity conducting the subscription in bonds.
        vii— The amount to be paid for each bond in the case of payment in installments.
        viii— The period specified for subscription.
        ix— The period in which the owners of the convertible bonds may express their desire to convert them into shares, provided that such period shall not exceed the fixed term of bond amortization.
        x— The extent to which the shareholder may subscribe for the convertible bonds.
        xi— The extent to which the company may amortize the bond and the conditions thereof.
        xii— A list of the names of the board members.

        Such details shall be included in all advertisements and bulletins relating to the loan, and the prospectus shall be signed by the chairman of the board of directors and the auditor, who shall be jointly liable for the accuracy thereof.

      • Article (144)

        Subscription shall be deemed complete if 50% or more of the bonds offered for subscription is covered during the specified period or any other extension thereto, otherwise, the general assembly shall have either to retract from concluding the loan and refund the money to the subscribers or to consider the portion of bonds subscribed enough and accordingly cancel the remaining bonds.

      • Article (145)

        The following details shall be contained in the bond certificates:

        i— The name of the issuing company, its entry number in the Commercial Registry and the address of its head office.
        ii— The capital of the issuing company.
        iii— The total amount of the loan.
        iv— The name of the bond's owner if the bond is issued in the owner's name.
        v— The nominal value and the serial number of the bond.
        vi— The interest rate or the return and its due dates, or the annual share determined for the bond from the company's profits.
        vii— The bond collateral, if any.
        viii— The conditions and dates of bond amortization.
        ix— If the bonds are convertible into shares, the dates specified for the bond owner to use his right to convert and the conditions thereof shall be mentioned.

      • Article (146)

        If the conditions and procedures provided for in this law for the issue of and subscription for bonds are violated, any interested party may initiate legal proceedings to nullify the subscription and to compel the company to refund the value of the bonds and to pay compensation for sustained damages.

      • Article (147)

        The bond owner shall have the right to get fixed interest or return in specific times and the right to redeem the nominal value of the bond at its maturity date. The company may issue bonds against a part of the company's annual profits.

      • Article (148)

        The company may issue bonds for which subscription is effected for less than its nominal value, and undertake to pay the nominal value of the bond and to calculate the interests on the basis of such value.

      • Article (149)

        The company, whose shares are negotiable on the Bahrain Stock Exchange, may issue convertible bonds by a resolution of the extraordinary general assembly upon a justified recommendation by the board of directors in accordance with the following provisions:

        i— Specifying the rules of converting bonds into shares, especially the value of the share on the basis of which the conversion shall be made.
        ii— The bond's issue value shall not be less than the nominal value of the share.
        iii— The value of the convertible bonds in addition to the value of the company's shares must not exceed the authorized capital.
        iv— The period during which conversion of the bonds into shares may be requested.
        v— The right of the bond owner to refund its value if he does not want to convert them into shares.

      • Article (150)

        The company's shareholders shall have the priority right to subscribe for the convertible bonds if they express their desire to do so within a period not exceeding fifteen days from the date of calling them to use such right. The shareholder may use his priority right to subscribe for bonds in excess of his share in the company's capital if the offered bonds allow this.

      • Article (151)

        The bond owners who desire to convert their bonds into shares shall express their desire to do so within the period provided for in the resolution of bond issue and specified in the subscription prospectus. Bonds shall be converted into shares in accordance with the procedures and conditions specified in the resolution of the extraordinary general assembly and published in the subscription prospectus. The company shall honor the value of the bonds whose owners do not want to convert them into shares at the maturity date.

      • Article (152)

        After passing a resolution by the extraordinary general assembly to issue convertible bonds and until the date of conversion or paying their value, the company shall not distribute bonus shares or profits from the reserve or issue new convertible bonds except after taking the necessary measures to safeguard the rights of the holders of the convertible bonds who elect to convert them into shares by granting them bonus shares or profits from the reserve or some of these bonds as if they were shareholders. Subject to the provisions of article (150) of this law, if the resolution of the general assembly to issue new convertible bonds, referred to in the foregoing paragraph, provides for the cancellation of the preference right of the shareholders to subscribe, the approval of the body representing the holders of the convertible bonds shall be obtained.

      • Article (153)

        After passing the resolution of the extraordinary general assembly for issuing convertible bonds and until the date of conversion or paying their value, the company shall not reduce its capital or increase the percentage to be distributed as minimum profits on shareholders. In the case of reducing the capital due to losses by way of canceling a number of shares or by reducing the share's nominal value, the rights of the bondholders wishing to convert them into shares shall be reduced by the same percentage of capital reduction as if they were shareholders without the need to obtain the approval of the body representing the bondholders.

      • Article (154)

        The converted shares shall have a dividend in the company's distributable profits for the financial year in which conversion has been effected as from the date of conversion until the end of the financial year.

      • Article (155)

        The company may issue bonds that entitle their holders to priority in subscribing for any capital increase, just as the shareholders, and this shall be undertaken for whoever wishes to do so within a period not exceeding fifteen days from the date of notifying him. The priority right shall be limited to subscription for shares the nominal value of which does not exceed the value of bonds owned by whoever uses such right.

      • Article (156)

        If the company issues bonds guaranteed by mortgages on its property or any other collaterals, the legal procedures for mortgage shall be undertaken in favor of the bondholders or a trustee representing them before offering the bonds for subscription. The company itself shall undertake such procedures or they may be undertaken by the party presenting the guarantee, if it is presented by a party other than the company. The company shall, within a period not exceeding one month from the closing date of subscription, take the necessary measures to enter the loan value together with all related details in the register in which the mortgage has been entered.

      • Article (157)

        The company shall not put forward or put back the date of honoring the bonds unless otherwise provided for in the issue resolution and the subscription prospectus. However, in case the company is wound up for reasons other than merging, the bondholders may request to recover the value of their bonds before the maturity date, and the company may also offer to do so. In both cases the interests shall not be counted for the remaining period of the loan term.

      • Article (158)

        If the payment of the bond value is made in installments and the bondholder fails to pay any installment at the due date, the company may sell the bond and recover its entitlements in accordance with the procedures provided for in article (116) of this law.

      • Article (159)

        The company shall maintain a special register to register the bonds of each issue and the names of their owners if the bonds are issued in the name of their owners, and all acts carried out in relation to these bonds shall be recorded in the register.

      • Article (160)

        The bonds issued in the names of their owners shall be traded in compliance with the procedures provided for in this law regarding dealing in shares, and bearer bonds shall be traded by way of transferring its title from the seller to the buyer. The company shall honor the value of the bond on maturity. The procedures and provisions included in the by-laws of the Bahrain Stock Exchange of dealing on the bonds quoted on the stock exchange shall be observed.

      • Article (161)

        The company may accept its loan bonds as a way of recovering its debts even before maturity. The company shall have the right to resell such bonds unless there is a ban on such sale in the company's articles of association or by a resolution by the general assembly.

      • Article (162)

        A body representing the holders of the bonds of the same issue shall be formed to defend their joint interests, and shall have a legal representative either from among its members or to be elected from non-members, provided that the representative shall not have any direct or indirect interest with the company. The company shall, within one month from the date of the completion of subscription, invite the bondholder's body to approve its statutes and to elect or appoint its representative, and such invitation shall be made by way of publication in a daily newspaper.

        If the company does not invite the body to convene within the period specified in the foregoing paragraph, any interested person may request the Ministry of Commerce and Industry to invite the body to convene within a period not exceeding fifteen days from the date of the application.

      • Article (163)

        The body shall convene whenever it is necessary at a request by its representative, by the company or by a number of bondholders owning 10% of its value. The invitation shall be made in the same manner referred to in the foregoing paragraph including the agenda. The resolutions passed by the body shall not be valid unless the meeting is attended by a number of bondholders representing two thirds of the issued bonds. If the quorum is not available, the body shall be invited to convene a second meeting for the same agenda, and such meeting shall be valid if it is attended by bondholders representing one third of the bonds. The resolutions shall be issued by the majority of the bondholders attending the meeting. If the resolution has to do with the extension of the maturity of bonds, reduction of the return or the loan amount or if it has to do with the guarantees or if it prejudices in any way whatsoever the rights of the bondholders, it shall be valid only if it is approved by bondholders representing two thirds of the loan bonds. In all cases, the body shall not issue any resolution that might result in increasing the obligations of its members or prejudicing the principle of equality among them.

      • Article (164)

        The representative of the body shall have the right to attend the company's general assembly meetings, and the company shall invite him exactly as it does the shareholders. He shall have the right to take part in the deliberations without voting on the resolutions. The representative shall also have the right to take the necessary measures, whenever required, to protect the rights of the bondholders.

      • Article (165)

        If a bond issued to its owner or bearer is lost or damaged, the owner whose name is registered in the company's register or its bearer may request a new bond instead of the lost or the damaged one. The owner shall publish the serial numbers of the lost or damaged bonds and its quantity and numbers in a local newspaper. If no objection is raised to the company within fifteen days from the date of publication, the company shall provide the owner with a new bond indicating that it is instead of the lost or the damaged bond. The new bond shall confer upon its holder the same rights and shall entail the same obligations related to the lost or damaged bonds.

      • Article (166)

        Whoever objects to the issue of a bond instead of the lost or the damaged one referred to in the foregoing article shall initiate his lawsuit before the competent court within fifteen days from the date of submitting his objection to the company, otherwise, his objection shall be deemed as non-existent. The court shall decide on the objection as quickly as possible.

    • Chapter Six — Chapter Six — Membership of the Company

      • Article (167)

        Subject to the provisions of the law, the founders signing the company's memorandum of association and the shareholders subscribing for its shares shall be members of the company. They shall be entitled to equal rights and liable for the same obligations.

      • Article (168)

        The shares shall confer equal rights and obligations. The member shall in particular have the following rights:

        i— Receiving profit dividends decided for the shareholders.
        ii— Receiving a share of the company's total property on liquidation. The company shall, when distributing dividends to the shareholders, distribute such dividends to the shareholder whose name is registered as the last owner of the share in the company's register when the general assembly approves the financial statements and profit distribution. As regards the company's assets, the last owner of the shares registered in the company's register is the only one entitled to receive the money due for his share in such assets.
        iii— Participating in the company's management, whether through the general assemblies and as a member of the board of directors, according to the company's articles of association.
        iv— Obtaining a printed booklet comprising the company's balance sheet for the past financial year, the profit and loss account and the reports of the board of directors and the auditor.
        v— Filing lawsuits to invalidate any resolution issued by the general assembly or by the board of directors in contravention of the law, the public order or the memorandum or the articles of association.
        vi— Disposing of the shares he owns and having a priority in subscribing for new shares in accordance with the provisions of the law.
        vii— The right to examine the company's records and to obtain copies thereof according to the conditions and procedures defined in the articles of association, provided that the use thereof shall not prejudice the company's interests or financial position or third parties.

      • Article (169)

        The member shall in particular have the following obligations:

        i— Payment of due installments and delay interests following the expiration of the date thereof without the need to serve him a notice.
        ii— Payment of expenses incurred by the company in the process of collecting the unpaid installment and sale of shares.
        iii— To refrain from doing any act that might harm the company.
        iv— Execution of any resolution adopted by the general assembly in a legal manner.

      • Article (170)

        The shareholders' general assembly shall not:

        i— Increase the financial obligations of the shareholder or increase the share value except as provided for by law.
        ii— Reduce the distributable percentages of the net profits specified in the company's articles of association.
        iii— Add new conditions other than those prescribed in the company's articles of association regarding the right of the shareholder to attend and to vote in the general assembly meetings.
        iv— Restrict the right of the shareholders to file legal actions against all or some of the board members to claim compensation for whatever damage he has sustained in accordance with the provisions of the law.

      • Article (171)

        The company shall maintain a register for shareholders to enter therein the members names, addresses, number of shares each one owns, the amount paid for each share, entry date of each member in the register and the date of his separation from the company and the manner of dissociation.

        The register shall be kept at the company's head office, and each member shall have the right of access thereto free of charge. Likewise, any other person shall also have the right of access to it against the payment of reasonable fees except in the cases forbidden by law. Any interested party shall have the right to request for the necessary correction if a person is recorded in or removed from the register without justification.

    • Chapter Seven — Chapter Seven — Joint-stock Company's Management

      • 1 — 1 — Board of Directors

        • Article (172)

          The company shall be managed by a board of directors the formation and term of which shall be specified in the company's articles of association. The number of board members shall be at least five appointed for a period of three years renewable.

          At a request by the board of directors, the Minister of Commerce and Industry may extend the membership term for no more than six months.

        • Article (173)

          The member of the board shall fulfill the following conditions:

          i— He must be fully qualified to act,
          ii— He must not have been convicted of a crime involving negligent or fraudulent bankruptcy or a crime affecting his honor or involving a breach of trust or of a crime on account of his breach of the provisions of this law, unless he was reinstated.
          iii— He must personally own a number of shares the nominal value of which shall be at least ten thousand Bahraini dinars or the person he represents must own a number of shares representing not less than 1% of the company's capital whichever is higher, unless the company's articles of association provide for a higher amount.

          If the member forfeits any of the above conditions, he shall no longer be a member from the date of forfeiture of that condition subject to the provisions of the next article.

        • Article (174)

          The aforesaid quorum shares referred to in the foregoing article shall be set aside to guarantee the good conduct of the member, and shall be deposited within thirty days from the date of his election or appointment with one of the banks. The member shall not dispose of these shares in any manner whatsoever throughout his term until the balance sheet of the last financial year in which he was holding office is approved.

          If the quorum shares are not deposited within the period specified in the foregoing paragraph, his membership shall be null. Membership shall also be null if such shares are reduced for any reason whatsoever during his term and are not completed within thirty days from the date of the reduction occurring.

        • Article (175)

          Anyone who owns 10% or more of the capital shall appoint a person to represent him on the board of directors for the same percentage of the number of the board members. If he exercises this right, he shall lose his right to voting for the percentage for which he appointed a proxy. If the remaining percentage is not enough to appoint another member, he may use this percentage in vote.

          In all cases the number of board members shall be subject to the company's articles of association and the rules and procedures decreed by the Minister of Commerce and Industry.

        • Article (176)

          The general assembly shall elect the board members by secret ballot and they shall be selected by relative majority of the valid votes. As for the members of the first board, the company's articles of association may stipulate the election of not more than half the members from among the company's founders.

        • Article (177)

          The general assembly may appoint a number of experts on the board of directors other than the founders or the shareholders. The Minister of Commerce and Industry shall decree the necessary conditions thereof.

        • Article (178)

          i— The company's articles of association shall specify the cases in which board membership is terminated.
          ii— The general assembly may dismiss all or some of the board members even if the company's articles of association provide otherwise. A request shall be submitted by a number of shareholders representing ten percent (10%) at least of the company's capital. The board of directors shall refer the request to the general assembly within one month at most from the date it is submitted, otherwise the Ministry of Commerce and Industry shall make the invitation. The general assembly shall not consider the request if it is not listed on its agenda, unless there appear in the meeting serious matters that require such dismissal. The dismissed member may claim compensation from the company if the dismissal has not been justified or has been made at an inconvenient time.
          iii— The board member may resign his office provided that he resigns at a convenient time otherwise he shall be liable to pay compensation.

        • Article (179)

          i— If the office of one of the board members becomes vacant, he shall be replaced by the member next to him in the number of votes in the latest elections of the board. The new member shall complete the unexpired term of his predecessor. In cases other than this, the board shall elect by secret ballot, a member to replace him from among the candidates nominated by two of the board members, at least until the next meeting of the general assembly.
          ii— If the vacant offices are equal to one-fourth of the original offices, the board of directors shall invite the ordinary general assembly to convene within two months from the date of the last office becoming vacant to fill them.
          iii— If the vacant offices exceed more than half the number of the board members, the board shall be deemed dissolved, and new elections shall be called for to elect a new board of directors for the company.

        • Article (180)

          The board of directors shall convene at an invitation by the chairman or by two members at least. The meeting shall be valid only if attended by half the members, provided that three members thereof at least are present, unless the company's articles of association provide for a higher number or percentage.

          The board member may not delegate any other person to attend on his behalf unless otherwise stipulated by the company's articles of association. In such case, he shall be one of the board members or the representative of the public entity whom the original member represents. However, proxy may not also be given to more than two members, provided that the present number of members in person shall not be less than half the board members including the chairman. Proxy shall be personal and in writing and shall be sent to the board of directors three days at least before the meeting. The resolutions of the board of directors shall be passed by the majority of the present members. In case of equal vote, the chairman shall have the casting vote, and any objecting member shall put his objection on the minutes of the meeting.

          The board of directors shall meet at least four times in the financial year unless the company's articles of association provide for more times.

        • Article (181)

          The board of directors shall elect by secret ballot a chairman and a deputy for one year unless the company's articles of association provide for another period.

          The board of directors may elect by secret ballot a managing director or more who shall have the right to sign on behalf of the company either severally or jointly as decided by the board of directors.

          The Ministry of Commerce and Industry shall be given a copy of the decisions of electing the chairman, his deputy and the managing directors.

        • Article (182)

          The board of directors shall undertake the powers and the acts necessary for the company's management in accordance with its objectives except for those banned by the law, the company's articles of association or the general assembly resolutions.

          The company's articles of association shall specify the extent to which the board of directors can borrow for more than three years or sell company's property or business or mortgage such property or provide guarantees for third parties or discharge the company's debtors of their liabilities or reach a compromise with them or donate the company's property. If such matters are not provided for in the company's articles of association, the board shall refrain from carrying out such acts without the approval of the general assembly, unless such acts are falling within the ambit of the company's objectives.

        • Article (183)

          The chairman of the board is the company's chairman, and represents it before third parties, and his signature is considered as a signature of the board of directors before third parties, unless the company's articles of association provide for including another member or another person authorized by the board of directors to co-sign with the chairman. He shall implement the board decisions and abide by its recommendations. The vice-chairman shall act for the chairman in his absence.

        • Article (184)

          The board of directors may allocate its duties among its members in accordance with the nature of the company business, and the board shall exclusively have to do the following:

          i— Delegate any of its members or a committee from among its members to carry out a specific assignment or more or to supervise one of the company's activities or to exercise some of the powers or authorities granted to the board.
          ii— Delegate a member or more to perform actual management, and the board shall specify the powers of the member so delegated.

        • Article (185)

          The chairman and the members of the board shall be jointly liable before the company, the shareholders and third parties for all acts of fraud and misuse of powers and any violation of the law or the company's articles of association and for mismanagement. Any condition to the contrary shall be null and void.

          A decision by the general assembly absolving the board of directors of liability shall not preclude instituting action of liability against it.

        • Article (186)

          The liability referred to in the foregoing paragraph shall be either personal relating to a specific member or joint for all board members. In the last case the members shall be jointly liable for paying compensation unless some of them have objected to the decision causing the liability and put their objection on the minutes of the meeting. The absence of a member from the meeting in which the resolution was passed, shall not be a reason for exemption from liability unless he proves that he was unaware of the resolution or that he was aware of it but was unable to object to it. If more than one member committed the wrongdoing, they shall be jointly liable towards the company. The liability actions shall be time-barred after the elapse of five years from the date of the general assembly meeting at which the board of directors reported on its management.

        • Article (187)

          i— The company shall have the right to file an action of liability against the board members whose wrongdoing has caused damages to the shareholders. The general assembly shall pass a resolution to file the action which shall be carried out by the chairman of the board. If the chairman of the board is among those litigated by the company, the general assembly shall appoint another board member to file the action. However, if the action was against all board members, the general assembly shall appoint a non-member to file the action.
          ii— In case of the company's bankruptcy, the bankruptcy trustee shall file the action, and if the company is in the process of liquidation, the liquidator shall file the action following a resolution by the general assembly.

        • Article (188)

          The company's articles of association shall specify the manner of determining the remuneration of the chairman and members of the board, the total of which shall not exceed 10% of the net profits after deducting the legal reserves and distributing a profit of not less than 5% of the company's paid-up capital. The general assembly may decide to pay an annual remuneration to the chairman and members of the board in the years in which the company has not achieved profits or the years in which no dividends are paid to the shareholders, provided that the Minister of Commerce and Industry approves such payment. The board of directors' report to the general assembly shall include a comprehensive account of all payments to the board members during the financial year, including salaries, profit shares, representation allowances, attendance allowances and expenses and the like. The report shall also include an account of the amounts paid to the members of the board in their capacities as employees and administrators, and what they have received for technical, administrative or consulting services or any other business.

        • Article (189)

          i— Any one of the company's board members or managers shall have no direct or indirect personal interest in the business and contracts concluded on behalf of the company unless allowed by the general assembly. Any contract or business concluded in contravention of this provision shall be null and void.
          ii— Any member of the board shall notify the board of his direct or indirect personal interest in the matters presented to the board. Such member shall not participate in deliberations or voting on these issues and his declaration shall be recorded in the minutes of the meeting.
          iii— The chairman of the board shall notify the general assembly of the results of the permitted works and contracts at the first meeting following the termination of the work or the implementation of the contracts. The notification shall be accompanied by a special report from the auditor. The company shall disclose such dealings and contracts in its financial statements.
          iv— Any member who violates this ban shall be liable to pay compensation to the company for any damages it has sustained. However, this provision shall apply neither to the ordinary dealings which the company concludes with its customers nor to those awarded in public tenders if the offer presented by the board member is the best.

        • Article (190)

          The public entity shall receive all the amounts due for its representative in the company's board of directors in any manner, and the chairman of the board shall pay these amounts to the public entity within one week from the date they become due. The public entity may determine the remunerations and salaries of those representatives.

        • Article (191)

          Subject to the provisions of article (215) of this law, any board member or manager of a joint-stock company shall not exercise any business in competition with the company's activities without special and justified authorization by the general assembly, to be renewed annually, otherwise the company may claim compensation from him, or consider the operations he exercises as conducted for the company.

          The chairman and members of the board of directors and the company's managers shall not disclose any of the company's confidential matters they come to know.

          Without prejudice to the provisions of the Penal Code and this law, whoever violates the ban provided for in this article shall forfeit his membership of the board of directors and be liable to pay compensation.

        • Article (192)

          The company shall not give cash loans whatsoever to any member of its board or guarantee any loan contracted by any of them with third parties.

          Excluded from this ban are banks and other credit companies. In exercising activities falling within the ambit of their objectives under the supervision of the Bahrain Monetary Agency and on the same terms and conditions applied to their clients, they are allowed to lend any board member or to open a credit for him or to guarantee loans he contracts with third parties.

          A statement by the auditors shall be placed at the disposal of the shareholders, for their personal information, at the date specified in article (195) of this law declaring that the loans, credits or guarantees mentioned above have been concluded without breach of the provisions of the foregoing paragraph.

          Any contract concluded in contravention of the provisions of this article shall be void without prejudice to the shareholders' right to claim compensation from the violator if necessary.

        • Article (193)

          i— No person shall be appointed or elected member of the board of directors unless he declares in writing his acceptance. The declaration shall also disclose any business he conducts that competes directly or indirectly with that of the company and the names of the companies and the entities in which he is engaged in such business.
          ii— In case the board member has been appointed or elected in breach of the provisions of this law or has misused his membership by conducting works in competition with those of the company thereby causing damages to the company, the general assembly of the company shall convene to consider dropping his membership within forty-five days from the date of discovering the violation.

        • Article (194)

          The minutes of the meetings of the board of directors shall be entered in a special register and signed by the members present at the meeting and the secretary of the board.

          The member who objects to any of the board's resolutions shall put his objection on the minutes of the meeting, and those who sign the minutes of the meetings shall be liable for the accuracy of the information included in the register.

        • Article (195)

          Each company shall prepare, for each year, a detailed list approved by the chairman of the board and the managing director — if any — of the names of the chairman and members of the board and their designation and the names of the company's managers. The company shall maintain a copy of this list and send the original to the Ministry of Commerce and Industry attached with the annual report prepared by the board of directors and the company's balance sheet and the profits and losses account. The company shall notify the said ministry of any changes that may take place in the list during the year.

          The board of directors shall prepare for each financial year, within a period not exceeding three months from the end thereof, a report on the company's activities and financial position during the ended year and the company's balance sheet and the profit and loss account. The chairman and another member of the board shall sign the report, the balance sheet and the profit and loss account. The board members shall be responsible for the implementation thereof.

        • Article (196)

          The board of directors shall publish the balance sheet, the profit and loss account and an adequate summary of the annual report and the full text of the auditors' report in one of the local daily Arabic language newspapers at least fifteen days before the general assembly meeting.

        • Article (197)

          The Minister of Commerce and Industry may dissolve the company's board of directors if the company has encountered severe financial or administrative difficulties, or if it has sustained heavy losses prejudicing the rights of the shareholders or its creditors, or if the provisions of this law have been violated. All such incidents shall be evidenced by whoever the Minister of Commerce and Industry appoints, either from the staff of the ministry or from amongst others, to inspect the works and accounts of the company. The minister may also dissolve the company if the chairman and board members have resigned their offices, or if the board of directors has lost its quorum so that it becomes unable to convene, or if the general assembly has not been able to elect a new board of directors.

          In case of board dissolution, the Minister of Commerce and Industry shall appoint an interim committee composed of specialized experts to manage the company for a six month term renewable only once until the general assembly elects a new board at an invitation by the Minister of Commerce and Industry.

          Any interested person shall have the right to appeal against the decision of dissolving the company within fifteen days from the date it is issued before the High Civil Court, and the court shall decide on the case on an urgent basis.

      • 2 — 2 — General Assembly

        • A — A — Ordinary General Assembly

          • Article (198)

            The ordinary general assembly of the shareholders shall convene at an invitation by the chairman of the board of directors at the time and place designated in the company's articles of association. The general assembly shall convene at least once a year during the six months following the end of the company's financial year.

            The board of directors may invite the ordinary general assembly to convene upon a justified request by the auditor or by a number of shareholders representing at least 10% of the company's capital. The auditor may invite the ordinary general assembly to convene in the cases specified in article (218) of this law.

            The Ministry of Commerce and Industry may invite the general assembly to convene if a period of one month has lapsed from the date appointed for its meeting without it convening, or if the number of the board members becomes less than the minimum number required for the meeting to be valid, or if a number of shareholders representing at least (10%) of the company's capital so requests for serious reasons.

            The Minister of Commerce and Industry may invite the general assembly to convene if he deems the meeting necessary.

          • Article (199)

            i— The invitation to the shareholders shall be published in at least two daily Arabic newspapers; one of them at least must be local. The publication shall be made at least 15 days before the meeting and shall include the agenda of the meeting.
            ii— Copies of the invitation documents shall be sent to the Ministry of Commerce and Industry at least (10) days before the general assembly meeting.

          • Article (200)

            The founders shall prepare the agenda for the constituent general assembly, and the board of directors shall prepare the agenda for the ordinary or extraordinary general assembly.

            If the general assembly convenes at an invitation by the shareholders, the auditors or the Ministry of Commerce and Industry, the agenda shall be prepared by whoever requests the meeting. The general assembly shall not consider any matters not listed on the agenda.

          • Article (201)

            The chairman of the board of directors or his deputy or whoever is delegated by the board of directors or by the general assembly shall preside over the general assembly meeting.

            The meeting shall not be valid unless it is attended by a number of shareholders representing more than half the capital. If this quorum is not available, an invitation shall be sent for a second meeting to be held for the same agenda within 7 to 15 days from the date fixed for the first meeting. The second meeting shall not be valid unless it is attended by a number of shareholders representing more than 30% of the capital at least. The third meeting shall be valid regardless of the number of attendees. Sending a new invitation for the last two meetings may not be necessary if the dates thereof have been fixed in the invitation for the first meeting, provided that publication shall be made in at least two daily Arabic newspapers, at least one of them shall be local, that none of these two meetings has been held.

          • Article (202)

            The Ministry of Commerce and Industry may appoint a representative to attend the general assembly meetings. The representative shall not have the right to vote on the deliberations and shall submit a report thereon to the Ministry.

          • Article (203)

            Each shareholder, regardless of the number of the shares he owns, shall have the right to attend the general assembly, and shall have a number of votes equal to the number of shares he owns in the company. Any provision or decision to the contrary shall be null and void. Any shareholder may delegate a person, from among the shareholders or from among non-shareholders to attend the general assembly on his behalf, provided that this person shall not be the chairman of the board or from among the members of the board of directors or from among the members of the company's staff. However, this shall not prejudice the right to delegate a first-degree relative. The company shall prepare a special written form for this purpose. The delegate shall not represent in this capacity a number of votes exceeding 5% of the issued capital in the general assembly meetings. Legal representatives of the members lacking capacity or under legal incapacity shall represent them in the meetings. The company shall prepare special cards for the shares owned by the shareholder and for the shares he represents on behalf of other shareholders. Delegation shall be made, and delegation capacity shall be shown to the company, twenty-four hours at least before the general assembly meeting. No member shall vote for himself or for whomsoever he represents in matters in which he has a direct interest or on an unsettled dispute between him and the company.

          • Article (204)

            Voting at the general assembly shall be conducted in the manner specified in the company's articles of association. Voting must be conducted by secret ballot if the resolution is related to the election or dismissal of the members of the board of directors or to filing liability action against them or if the chairman of the board or a number of members representing at least one-tenth of the present votes at the meeting so requests.

          • Article (205)

            The members of the board of directors shall not vote on the general assembly's resolutions relating to the determination of their salaries and remuneration or to discharging them or exempting them from liability for their management.

          • Article (206)

            Except for what the law has reserved for the extraordinary general assembly, the ordinary general assembly shall be competent to consider all matters relating to the company and pass the appropriate resolutions thereon. In particular, it shall consider the following:

            i— Election and dismissal of members of the board of directors.
            ii— Determination of the board members' remunerations.
            iii— Consideration and approval of the board's report on the company's activities and financial position during the ended financial year.
            iv— Discharging or refusing to discharge the members of the board from any liability.
            v— Appointment of an auditor or more for the following financial year and determination of his/their fees or authorizing the board to do the same.
            vi— Consideration of the auditor's report on the financial statements of the company for the ended financial year.
            vii— Approval of the profit and loss account and the balance sheet and the statement allocating the net profits and determining dividends.
            viii— Consideration of recommendations relating to bond issue, borrowing, mortgaging and issuing guarantees and deciding thereon.

          • Article (207)

            The general assembly shall not consider matters not listed on the agenda, unless they are urgent and have occurred after the agenda has been prepared or during the meeting. If the competent government body or a shareholding public entity or a number of shareholders representing at least 10% of the company's capital requests the board of directors to include a certain subject in the agenda but the board did not do so, the general assembly shall have the right to consider this subject at the request of the interested party. If, in the course of the discussion, it becomes clear that the information relating to some agenda items is not adequate, the meeting shall be adjourned for no more that ten days if so requested by a number of shareholders representing one-fourth of the shares present in the meeting.

            The resolutions adopted by the general assembly on the urgent matters, shall be submitted for approval by the Ministry of Commerce and Industry, otherwise they shall be null and void.

          • Article (208)

            Adequate minutes of the meeting shall be prepared, reporting deliberations, proceedings, the quorum, the resolutions adopted, the number of "Yes" and "No" votes and all such matters as the shareholders may request to enter into the minutes.

            The names of the attendees, whether for self or by proxy, shall be entered in a special register, to be signed before the meeting by the auditor, the vote counter and the chairman of the meeting. The company shall maintain all documents and instruments evidencing the contents of the minutes and send a copy of the minutes to the competent government authority within fifteen days from the date of the meeting. Each interested shareholder may have a copy of the minutes.

        • B — B — Extraordinary General Assembly

          • Article (209)

            The provisions applicable to the ordinary general assembly shall apply to the extraordinary general assembly, subject to the provisions of the following articles.

          • Article (210)

            The following matters shall be reserved for the extraordinary general assembly:

            i— Amending the company's memorandum or articles of association and extending the company's term.
            i— Increasing or reducing the company's capital.
            i— Selling the entire project carried out by the company or disposing of it in any other manner.
            iv— Winding up the company or merging it with another company.

            The company's nationality shall not be changed, nor its Head Office be transferred outside Bahrain, nor the obligations of the shareholders be increased, and any provision to the contrary shall be null and void.

          • Article (211)

            The extraordinary general assembly shall convene at an invitation by the board of directors or a written request to the board of directors by a number of shareholders representing 10% at least of the company's shares.

            In these cases the board of directors shall invite the general assembly to convene an extraordinary meeting within a month from the date of the request. Otherwise, the Ministry of Commerce and Industry shall send the invitation within fifteen days from the date of expiry of that period, subject to the provisions of article (199) of this law.

          • Article (212)

            The extraordinary meeting of the general assembly shall not be valid unless it is attended by shareholders representing at least two thirds of the company's capital. If this quorum is not available, an invitation shall be sent for another meeting to be held within fifteen days from the date of the first meeting. The second meeting shall be valid if attended by shareholders representing more than one-third of the capital. If the quorum is not available for the second meeting, an invitation shall be sent for a third meeting to be held within fifteen days from the date of the second meeting. The third meeting shall be valid if attended by one-fourth of the shareholders.

            A new invitation for the last two meetings may not be sent if the dates thereof have appeared in the invitation for the first meeting, provided that publication shall be made in at least two daily Arabic newspapers, one of them is local, that none of these meetings has been held.

            The extraordinary general assembly's resolutions shall be passed by a two-thirds-majority vote of the shareholders represented in the meeting. However, if the resolution relates to increasing or reducing the company's capital, extending the company's term, winding it up, converting or merging it with another company, the resolution shall not be valid unless adopted by a three-fourths majority of the shares present at the meeting and with whose attendance the meeting is considered valid. The extraordinary general assembly's resolutions shall not become effective except after they are approved by the Ministry of Commerce and Industry.

          • Article (213)

            The extraordinary general assembly may pass a resolution falling within the powers of the ordinary general assembly provided that the quorum and majority required for the ordinary general assembly meeting are available and that the matters subject of the resolution are included in the agenda.

        • C — C — Common Provisions

          • Article (214)

            i— The resolutions passed by the general assembly in accordance with the provisions of the law and the company's articles of association shall bind all the shareholders whether they attended the meetings at which the resolutions are passed or not and whether they voted for or against them.
            ii— The board of directors shall implement the general assembly's resolutions.

          • Article (215)

            Without prejudice to the rights of bona fide third parties, any resolution passed by the general assembly in contravention of the provisions of the law, the company's memorandum of association or articles of association shall be null and void. The court may overrule any resolution passed to the advantage or disadvantage of a certain class of shareholders or to the benefit of the members of the board of directors or others without taking the company's interests into account. In this case, only those shareholders whose objection to the resolution has been put in the meeting's minutes or failed to attend the meeting for acceptable reasons may file the nullity action. The Ministry of Commerce and Industry may act on behalf of the said shareholders in filing the nullity action if serious reasons are given.

            A resolution adjudged by the court as null and void shall be deemed inexistent for all the shareholders, and the board of directors shall publish the judgment in a daily local newspaper. Filing the nullity action shall not entail suspension of the implementation of the resolution unless otherwise ordered by the court. A nullity action shall be barred after the lapse of one year from the date of the resolution.

          • Article (216)

            The names of the shareholders shall be entered in a special register to be prepared for this purpose at the company's head office at least twenty-four hours before the meeting. This register shall include the names of the shareholders, the number of shares they own, the number of shares they represent and the names of their owners together with letters of attorney. The shareholder shall be given an attendance card in which the number of votes he is entitled to either in person or by proxy is written.

      • 3 — 3 — Auditors

        • Article (217)

          a— The company shall have an auditor or more to be appointed from those licensed to practise auditing by the ordinary general assembly, which shall determine their remuneration and term of appointment. The founders of the company may appoint an auditor to carry out auditing until the constituent general assembly is held. If more than one auditor is appointed, each of them shall exercise auditing separately. If the auditor appointed by the general assembly has not assumed his duties for any reason, the board of directors may, if necessary, appoint another auditor to replace him, provided that the matter shall be presented to the general assembly at its next meeting to resolve it.
          b— If there is more than one auditor, they shall be jointly liable for auditing.
          c— The auditor shall not be the chairman or a member of the board of directors of the company the accounts of which he is auditing, nor a managing director nor a person assuming any administrative work or supervising its accounts; nor a second-degree relative of a person supervising the company's management or accounts. He shall not also buy or sell shares in the companies the accounts of which he is auditing during his term.

          In all cases the company's auditor shall not become a member of the company's board of directors or staff before the lapse of two years from the date of discharging him of his liability.

        • Article (218)

          a— The auditor shall have at any time the right of access to the company's books, registers and documents, and of requesting any details he deems necessary. He shall also have the right to verify the company's assets and liabilities.
          b— The board of directors shall enable the auditor to carry out his duties specified in the foregoing paragraph. If the auditor is unable to exercise such rights, he shall report this in writing to the board of directors, and if the board does not facilitate his task, the board shall invite the ordinary general assembly to consider the matter.
          c— In all cases the auditor shall provide the Ministry of Commerce and Industry with copies of his reports and remarks whatsoever, whether they are financial or administrative and whether they are presented to the company's general assembly or to the board of directors.

        • Article (219)

          The Auditor shall attend the general assembly and express his opinion in all matters pertinent to his work, and in particular, the company's balance sheet. He shall read his report to the general assembly. The report shall be prepared in accordance with the international auditing principles and standards or the standards approved by the competent authority; and shall include in particular the following details:

          a— Whether the auditor obtained the information he deemed necessary for doing his work satisfactorily.
          b— Whether the balance sheet and the profit and loss account are conforming to the facts, and are prepared according to the international accounting standards or to the standards approved by the competent authority; and whether they include all what is provided for in the law and in the company's articles of association and honestly and clearly reflect the actual financial position of the company.
          c— Whether the company maintains regular accounts.
          d— Whether the stock taking undertaken by the company has been carried out in accordance with the accepted practices.
          e— Whether the data included in the report of the board of directors are in conformity with what is stated in the company's books.
          f— Whether there have been violations of the provisions of the law or the company's articles of association during the financial year in a way that affects the activity of the company or its financial position, and whether these violations are still existing to the extent of the information made available to him.

          If the company has more than one auditor and they do not submit a joint report, each of them shall prepare an independent report.

          The auditor's report shall be read at the general assembly, and each shareholder shall have the right to discuss the report and request clarifications on its contents.

        • Article (220)

          The auditor shall be responsible for the accuracy of the details included in his report in his capacity as the representative of all the shareholders, and each shareholder shall have the right to discuss, at the meeting of the general assembly, the report of the auditor and seek clarifications on its contents. The auditor shall be liable towards the company for any damages sustained by the company as a result of his mistakes. If the company has more than one auditor and they were involved in the mistake they shall become jointly liable towards the company.

          The civil liability action referred to in the foregoing paragraph shall be barred after the lapse of one year from the date of the general assembly meeting at which the auditor's report was read. If the act attributed to the auditor constitutes a crime, the civil liability action shall not lapse except with the lapse of the general action.

          The auditor shall also be liable to pay compensation for any damage that may be sustained by any bona fide shareholder or third parties as a result of his professional error or of not complying with the accounting principles and standards.

        • Article (221)

          The board of directors or a number of shareholders representing at least 25% of the capital may request the replacement of the auditor during the financial year. The board of directors shall invite the ordinary general assembly to convene to consider the request after the lapse of fifteen days from the date it is submitted. The request shall be sent during this period to the auditor to prepare his reply thereto in writing, and such reply shall be sent to the company at least five days before the general assembly meeting. The chairman of the board of directors or the board member representing him shall read the request and the reasons thereof and the auditor's reply thereto before the general assembly in order to pass a resolution thereon. Any resolution passed for replacing the auditor in breach of these procedures shall be null and void.

        • Article (222)

          The auditor may resign, at a suitable time, during the term of his appointment by submitting a written application to the board of directors. If there are matters he must bring to the notice of the company's shareholders and creditors, he shall submit a report thereon to the general assembly. The board of directors shall invite the ordinary general assembly to convene to consider the report within a period not exceeding thirty days from the date of its submission. The auditor shall be liable for any damages sustained by the company as a result thereof.

      • 4 — 4 — Financial System

        • Article (223)

          The company shall have a financial year that starts on the first of January and ends on the 31st of December of each year, unless otherwise provided for in the company's articles of association.

          The first financial year shall be an exception. It shall begin at the date of the final incorporation of the company and end with the end of the financial year.

        • Article (224)

          10% of the net profits shall be deducted every year and set aside for the statutory (legal) reserve, unless the articles of association specify a higher percentage.

          Such deduction may be suspended if the reserve amounts to 50% of the paid-up capital, unless the articles of association provide for a higher percentage. Yet, if the statutory reserve falls below the said percentage, deduction shall be resumed until the reserve reaches the said percentage.

          The statutory reserve shall not be distributed to the shareholders, but may be used to ensure the distribution of dividends to the shareholders not exceeding 5% of the paid-up capital in the years in which the company's profits do not allow to ensure such limit.

          Subject to the approval of the general assembly, a percentage of the company's net profits that results from the sale of fixed assets or any compensation in lieu thereof may be distributed, provided that this shall not lead to the company's inability to restore the original condition of its assets or to buy new ones.

        • Article (225)

          The general assembly may, upon a recommendation by the board of directors, decide every year to deduct a part of the net profits for the voluntary reserve.

          The voluntary reserve shall be used for the depreciation of the company's assets or for compensation of the fall in its value or for such purposes as may be decided by the general assembly.

      • Closed Joint-stock Company

        • Article (226)

          A closed joint-stock company consists of a number of persons — not less than two — who subscribe for negotiable shares that are not offered to the public for subscription.

        • Article (227)

          All provisions contained in this law in respect of public joint-stock companies, which do not conflict with the provisions of this part, shall apply to the closed joint-stock company.

        • Article (228)

          The capital of the company shall be adequate to realize its objectives. The Executive Regulation shall determine the minimum limit of capital.

        • Article (229)

          a— The founders shall subscribe for all the capital shares.
          b— The founders shall deposit with one of the accredited banks the full value of the shares or at least 50% thereof, provided that they shall pay the remaining amount within a period not exceeding three years.

        • Article (230)

          A closed joint-stock company shall not acquire a corporate entity and shall not commence its operations before being registered in the Commercial Registry and the publication of its incorporation decision in the Official Gazette at the company's expense.

        • Article (231)

          a— The founders shall call for a constituent assembly to be convened within seven days from the date of the incorporation approval by the Ministry of Commerce and Industry, and the provisions provided for in article (199) of this law apply to the procedures of invitation.
          b— The meeting shall be presided over by whoever is elected by the numerical majority of the present members.

        • Article (232)

          The constituent assembly shall, in particular, consider the report prepared on the company's incorporation process, the incurred expenses and the evaluation of the in-kind shares. It shall also elect a board of directors and appoint the auditors and announce the company's final incorporation.

        • Article (233)

          The provisions of article (116) of this law shall apply to the due installments of shares, and in case shares are sold, priority of purchase shall be given to the shareholders of the company in accordance with the provisions of this Part.

        • Article (234)

          The shares of closed joint-stock companies shall not become tradable before the lapse of three years from the date of registering the company in the Commercial Registry and the payment of the full value of the shares. Excluded from this shall be trading in shares among the founders during this period.

        • Article (235)

          Except for the companies listed on the Bahrain Stock Exchange, the articles of association of a closed joint-stock company shall not restrict the shareholder's right to dispose of his shares by containing one or all of the following restrictions:

          a— The stipulation that preference shall be given to the company's shareholders to purchase the shares the owner of which wishes to sell.
          b— The stipulation that the board of directors shall approve the buyer of the shares.

          Excluded from these two restrictions shall be the disposal of shares among shareholders, spouses, ascendants and descendants.

          If the company's articles of association include any of these two restrictions, the company shall not be listed on the Bahrain Stock Exchange.

        • Article (236)

          If the articles of association of a closed joint-stock company provide for preference to shareholders to buy the shares, the shareholder shall, before the disposal thereof, notify the company of the sale conditions. The disposal of the shares shall not become effective before the lapse of fifteen days from the date of notification without any shareholder requesting to buy the shares.

          If any shareholder so requests this shall be for the declared price, and in case of disagreement, the price shall be determined in accordance with the rules of the Bahrain Stock Exchange.

        • Article (237)

          If the articles of association of a closed joint-stock company provide that the board of directors must approve the shares' purchaser, the board shall, in case of rejecting the purchaser, purchase the shares for the company's account within fifteen days from the date of notifying the board of the request for approval. In this case, the purchase shall be concluded for the declared price without prejudice to the provisions regulating the purchase of a company of its shares.

        • Article (238)

          a— In case the company's capital is to be increased, the shareholders shall have priority right to subscribe for the new shares, and any provision to the contrary shall be null and void.
          b— The shareholders shall be notified by registered mail of their priority to subscribe for the new shares of the date of opening subscription and the date of closing thereof and of the price of the new shares.
          c— Each shareholder shall express his wish to exercise his right of priority to subscribe for the new shares within fifteen days from the date of sending the registered letter referred to in the foregoing paragraph.
          d— The priority right may be assigned to third parties against money to be agreed upon between the shareholder and the assignee if the company's articles of association so provide or if the general assembly so decides.

        • Article (239)

          a— The new shares shall be distributed to the shareholders who requested to subscribe for them in proportion to the shares they own, provided that this proportion shall not exceed the new shares they have requested to subscribe for.
          b— The remaining new shares shall be distributed to the shareholders who requested more than they were allocated in proportion to the shares they own. If all the new shares are not distributed to the shareholders the board of directors may allocate them to new shareholders, provided that their value shall be paid in cash. The unallocated shares shall be considered as cancelled if three months lapse from the date of opening subscription without them being subscribed for.

        • Article (240)

          a— The company shall be managed by a board of directors, the composition and the membership term of which shall be specified in the company's articles of association. The number of board members shall not be less than three and membership term shall not exceed three years renewable.
          b— The members of the board of directors shall not be subject to the quorum conditions and the restrictions of multiple memberships provided for in this law.

        • Article (241)

          The board of directors shall meet at an invitation by its chairman or by any of its members, and the quorum shall be available with the presence of half the members, provided that the number of those present shall not be less than two.

        • Article (242)

          The invitation for the general assembly meeting shall be sent by registered mail at least fifteen days before the meeting. However, the invitation may be conveyed by taking the signature of the shareholders indicating their knowledge of the time, venue and the agenda of the meeting.

        • Article (243)

          The meeting of the ordinary general assembly shall not be valid unless attended by a number of shareholders representing more than half the shares. If such quorum is not available, the meeting shall be valid with those present after half an hour from the time fixed for the first meeting.

        • Article (244)

          The meeting of the extraordinary general assembly shall not be valid unless attended by shareholders representing two-thirds of the company's shares. If such quorum is not available, an invitation shall be sent for a second meeting to be held within ten days from the date of the first meeting, and this meeting shall be valid if attended by the representatives of more than one-third of the capital.

          If this quorum is not available an invitation shall be sent for a third meeting to be held within ten days from the date of the second meeting. The third meeting shall be valid if attended by the representatives of a quarter of the capital.

          A new invitation need not be sent for the last two meetings if their dates were determined in the invitation for the first meeting, provided that the shareholders are notified that the first meeting has not been held. Resolutions shall be passed by a majority of two-thirds of the shares represented in the meeting.

        • Article (245)

          A closed joint-stock company may turn into a public joint-stock company if it has fulfilled the following provisions:

          a— The nominal value of issued shares have been fully paid.
          b— At least two financial years must have already elapsed.
          c— The company must have realized, through exercising the activities for which it was established, distributable net profits of not less than 10% of the capital on average during the two financial years preceding the application for conversion.
          d— The conversion resolution shall be issued by the extraordinary general assembly of the company by a majority of three-quarters of the shares of those present.
          e— The issue of a decision by the Ministry of Commerce and Industry declaring the conversion of the company into a public joint-stock company, and this decision shall be published together with the company's Memorandum and Articles of Association at the expense of the company.

          The Minister of Commerce and Industry may, in some cases, stipulate on the incorporation of the closed joint-stock company the conversion thereof into a public joint-stock company if the public good so requires.