• GR-5 GR-5 Controllers

    • GR-5.1 GR-5.1 Key Provisions

      • GR-5.1.1

        Whenever they are aware of such cases, licensees must obtain prior approval from the CBB, as required under Paragraph BR-2.3.8, for any changes in the percentage holding of a controller or a new controller (as defined in Section GR-5.2).

        May 2011

      • GR-5.1.1A

        Licensees must not incur or otherwise have an exposure (either directly or indirectly) to their controllers, including subsidiaries and associated companies of such controllers.

        Added: April 2019

      • GR-5.1.1B

        For the purpose of Paragraph GR-5.1.1A, licensees that already have an exposure to controllers must have an action plan agreed with the CBB's supervisory point of contact to address such exposures within a timeline agreed with the CBB.

        Added: April 2019

      • GR-5.1.2

        Articles 52 to 56 of the CBB Law require notification to the CBB of all controllers of licensees and of listed companies; it further gives the CBB the right to refuse approval of controllers if deemed damaging to the interests of the market, customers, or in contravention of the criteria set by the CBB.

        May 2011

      • GR-5.1.3

        Requests for approval under Paragraph GR-5.1.1 must be made by submitting a duly completed Form 2 (Application for Authorisation of Controller) to the CBB. Notification must be made by the controller or intended controller, and by the licensee where it is aware of the change.

        May 2011

      • GR-5.1.4

        If, as a result of circumstances outside the licensee's knowledge and/or control, changes specified in Paragraph GR-5.1.1 are triggered prior to CBB approval being sought or obtained, the licensee must notify the CBB no later than 15 calendar days on which those changes have occurred.

        Amended: January 2017
        May 2011

      • GR-5.1.5

        For approval under Rule GR-5.1.1 to be granted, the applicant must satisfy the CBB that the proposed change in controller poses no undue risks to the licensee or its customers, and is not damaging to the interests of the market, as defined in the suitability criteria for controllers, contained in Section GR-5.3.

        May 2011

      • GR-5.1.6

        An approval of controller is valid for the period specified in the approval letter issued by the CBB. The CBB may impose any restrictions that it considers necessary to be observed when granting its approval.

        May 2011

      • GR-5.1.7

        The approval process is specified in Section GR-5.4.

        May 2011

      • GR-5.1.8

        Licensees must submit, within 3 months of their financial year-end, a report on their controllers. This report must identify all controllers of the licensee, as defined in Section GR-5.2.

        May 2011

    • GR-5.2 GR-5.2 Definition of Controller

      • GR-5.2.1

        A controller of a licensee is a natural or legal person who, either alone or with his associates:

        (a) Holds 10% or more of the shares in the licensee ('L'), or is able to exercise (or control the exercise of) more than 10% of the voting power in L; or
        (b) Holds 10% or more of the shares in a parent undertaking ('P') of L, or is able to exercise (or control the exercise of) more than 10% of the voting power in P; or
        (c) Is able to exercise significant influence over the management of L or P.
        May 2011

      • GR-5.2.2

        For the purposes of Paragraph GR-5.2.1, 'associate' includes:

        (a) In the case of natural persons, the spouse or child of the controller;
        (b) An undertaking of which a controller is a Director;
        (c) A person who is an employee or partner of the controller; and
        (d) If the controller is a corporate entity, a Director of the controller, a subsidiary of the controller, or a Director of any subsidiary undertaking of the controller.
        May 2011

      • GR-5.2.3

        Associate also includes any other person or undertaking with which the controller has entered into an agreement or arrangement as to the acquisition, holding or disposal of shares or other interests in the licensee, or under which they undertake to act together in exercising their voting power in relation to the licensee.

        May 2011

    • GR-5.3 GR-5.3 Suitability of Controllers

      • GR-5.3.1

        All new controllers or prospective controllers (as defined in Section GR-5.2) of a Bahraini specialised licensee must obtain the approval of the CBB. Any increases to existing controllers' holdings or voting control (as outlined under Paragraph BR-2.3.8) must also be approved by the CBB and are subject to the conditions outlined in this Section. Such changes in existing controllers (as defined in the Section GR-5.2) or new/prospective controllers of a licensee must satisfy the CBB of their suitability and appropriateness according to the criteria outlined in Paragraphs GR-5.3.2 to GR-5.3.5. The CBB will issue an approval notice or notice of refusal of a controller according to the approval process outlined in Section GR-5.4 and Paragraph GR-5.1.6.

        Amended: April 2012
        May 2011

      • GR-5.3.1A

        In line with Resolution No.(43) of 2011, the CBB may require, on a case-by-case basis, and at its sole discretion that at least one of the controllers is a regulated financial institution holding at least 20% of the licensee's shares.

        Added: April 2012

      • GR-5.3.2

        In assessing the suitability of controllers who are natural persons, the CBB has regard to their professional and personal conduct, including, but not limited to, the following:

        (a) The propriety of a person's conduct, whether or not such conduct resulted in conviction for a criminal offence, the contravention of a law or regulation, or the institution of legal or disciplinary proceedings;
        (b) A conviction or finding of guilt in respect of any offence, other than a minor traffic offence, by any court or competent jurisdiction;
        (c) Any adverse finding in a civil action by any court or competent jurisdiction, relating to fraud, misfeasance or other misconduct in connection with the formation or management of a corporation or partnership;
        (d) Whether the person has been the subject of any disciplinary proceeding by any government authority, regulatory agency or professional body or association;
        (e) The contravention of any financial services legislation or regulation;
        (f) Whether the person has ever been refused a license, authorisation, registration or other authority;
        (g) Dismissal or a request to resign from any office or employment;
        (h) Disqualification by a court, regulator or other competent body, as a Director or as a manager of a corporation;
        (i) Whether the person has been a Director, partner or manager of a corporation or partnership which has gone into liquidation or administration or where one or more partners or managers have been declared bankrupt whilst the person was connected with that partnership or corporation;
        (j) The extent to which the person, has been truthful and open with regulators;
        (k) Whether the person has ever been adjudged bankrupt, entered into any arrangement with creditors in relation to the inability to pay due debts, or failed to satisfy a judgement debt under a court order or has defaulted on any debts;
        (l) The financial resources of the person and the likely stability of their shareholding, and their track record as a controller or significant investor in financial institutions;
        (m) Existing Directorships or ownership of more than 20% of the capital or voting rights of any financial institution in the Kingdom of Bahrain or elsewhere, and the potential for conflicts of interest that such Directorships or ownership may imply;
        (n) The legitimate interests of investors, creditors and shareholders (including minority shareholders) of the licensee;
        (o) Whether the approval of a controller is or could be detrimental to Bahrain's financial sector; and
        (p) Whether the person is able to deal with existing shareholders and the Board in a constructive and co-operative manner.
        May 2011

      • GR-5.3.3

        Natural persons who intend to take a stake of 20% or more in a licensee are subject to enhanced scrutiny, given the CBB's position as home supervisor of such licensees. The level of scrutiny and the expected compliance with the above standards become more onerous as the level of proposed ownership increases. Natural persons will not normally be approved to take majority control (i.e. a stake of 50% or more of either the capital or voting rights) of a licensee.

        Amended: April 2012
        May 2011

      • GR-5.3.4

        In assessing the suitability of controllers who are legal persons, CBB has regard to their financial standing, judicial and regulatory record, and standards of business practice and reputation, including, but not limited to, the following:

        (a) The financial strength of the controller, its parent(s) and other members of its group, its implications for the licensee and the likely stability of the controller's shareholding;
        (b) Whether the controller or members of its group has ever entered into any arrangement with creditors in relation to the inability to pay due debts;
        (c) The controller's jurisdiction of incorporation, location of Head Office, group structure and close links, and the implications for the licensee as regards effective supervision of the licensee and potential conflicts of interest;
        (d) The controller's (and other group members') propriety and general standards of business conduct, including the contravention of any laws or regulations, or the institution of disciplinary proceedings by a government authority, regulatory agency or professional body;
        (e) Any adverse finding in a civil action by any court or competent jurisdiction, relating to fraud, misfeasance or other misconduct;
        (f) Any criminal actions instigated against the controller or other members of its group, whether or not this resulted in an adverse finding;
        (g) The extent to which the controller or other members of its group have been truthful and open with regulators and supervisors;
        (h) Whether the person has ever been refused a license, authorisation, registration or other authority;
        (i) The person's track record as a controller or investor in financial institutions;
        (j) The legitimate interests of investors, creditors and shareholders of the licensee;
        (k) Whether their approval as a controller is or could be detrimental to Bahrain's financial sector; and
        (l) Whether the person is able to deal with existing shareholders and the Board in a constructive manner.
        May 2011

      • GR-5.3.5

        Legal persons who intend to take a stake of 20% or more in a licensee are subject to enhanced scrutiny, given the CBB's position as home supervisor of such licensees. The level of scrutiny and of expected compliance with the above standards becomes more onerous as the level of proposed ownership increases. In particular, unregulated legal persons will not normally be approved to take majority control (i.e. a stake of 50% or more of either the capital or voting rights of a licensee, unless the proposed parent is a well-established business (that satisfies the above conditions), and its ownership would not pose undue conflicts of interest. Regulated legal persons will normally only be approved to take majority control where — in addition to the above conditions — the resulting group would be subject to effective consolidated supervision in accordance with relevant international standards; and the home supervisor of the parent entity has agreed to the proposed acquisition, as well as to the sharing of relevant prudential information for supervisory purposes (expressed, if necessary, through the signing of a Memorandum of Understanding between the CBB and the home supervisor, setting out their respective supervisory responsibilities).

        Amended: April 2012
        May 2011

      • GR-5.3.6

        The CBB may contact references and supervisory bodies in connection with any information provided to support an application for controller. The CBB may also ask for further information, in addition to that provided in the Form 2, if required to satisfy itself as to the suitability of the applicant.

        May 2011

    • GR-5.4 GR-5.4 Approval Process

      • GR-5.4.1

        Within 3 months of receipt of an approval request under Paragraph GR-5.1.1, the CBB will issue a written notice of approval (or of refusal, if it is not satisfied that the person concerned is suitable to become a controller of the licensee). The notice of refusal will specify the reasons for the objection and specify the applicant's right of appeal. Where an approval notice is given, it will specify the period for which it is valid and any conditions that may be applied.

        May 2011

      • GR-5.4.2

        Article 53 allows the CBB up to 3 months in which to respond to an application, although the CBB normally aims to respond within 30 calendar days. Notices of refusal have to be approved by an Executive Director of the CBB. The applicant has 30 calendar days from the date of a notice in which to appeal a decision to refuse the application or any conditions imposed as a condition of approval. The CBB then has 30 calendar days from the date of the appeal in which to consider any mitigating evidence submitted and make a final determination. See Module EN (Enforcement).

        May 2011

      • GR-5.4.3

        Where a person has become a controller by virtue of their shareholding in contravention of Paragraph GR-5.1.1, or a notice of refusal has been served on them under Paragraph GR-5.4.1 and the period of appeal has expired, the CBB may, by notice in writing served on the person concerned, instruct the person concerned to transfer such shares, or refrain from exercising voting rights in respect of such shares.

        May 2011

      • GR-5.4.4

        If the person concerned fails to take the action specified under Paragraph GR-5.4.3, then the CBB may seek a court order to take appropriate measures: these may include forcing the person to sell their shares.

        May 2011

      • GR-5.4.5

        The powers available to the CBB that are described in Paragraphs GR-5.4.3 and GR-5.4.4 are specified in Article 56 of the CBB Law.

        May 2011

      • GR-5.4.6

        In addition to the above requirements, licensees are encouraged to notify the CBB as soon as they become aware of events that are likely to lead to major changes in their controllers. Any supervisory implications of such changes can then be discussed prior to the filing of a formal approval request.

        May 2011