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  • GR-4 GR-4 Controllers

    • GR-4.1 GR-4.1 Key Provisions

      • GR-4.1.1

        Licensees must obtain prior approval from the CBB for any of the following changes to their controllers (as defined in Section GR-4.2 and subject to the limits as outlined in GR-4.3):

        (a) A new controller;
        (b) An existing controller increasing its holding from below 20% to above 20% of issued and paid up share capital;
        (c) An existing controller increasing its holding from below 50% to above 50% of issued and paid up share capital; or
        (d) An existing controller reducing its holding from above 50% to below 50% of issued and paid up share capital.
        January 2014

      • GR-4.1.1A

        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-4.1.1B

        For the purpose of Paragraph GR-4.1.1A, 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-4.1.2

        Condition 3 of the CBB's licensing conditions specifies, among other things, that licensees must satisfy the CBB that their controllers are suitable and pose no undue risks to the licensee (See Paragraph AU-2.3.1). There are also certain procedures which are set out in Articles 52 to 56 of the CBB Law on controllers. Licensees and their controllers must also observe the CBB's Capital Markets requirements in respect of changes in holdings of shares of listed companies.

        January 2014

      • GR-4.1.3

        Applicants for a license must provide details of their controllers, by submitting a duly completed Form 2 (Application for Authorisation of Controller). (See sub-Paragraph AU-4.1.4(a)).

        January 2014

      • GR-4.1.4

        There are strict limits on changes in the holdings of shares held by controllers in licensees or the extent of voting control exercised by controllers in licensees. These limits are outlined in Section GR-4.3.

        January 2014

      • GR-4.1.5

        Failure to observe the limits outlined in this Section or to comply with an order issued by the CBB in relation to violating the share acquisition rules may lead to imposition of enforcement provisions of the Rulebook on the licensee and other penalties on the controller under the provisions of the CBB Law as outlined in Paragraph GR-4.1.2, including loss of voting power or transfer of shares.

        January 2014

      • GR-4.1.6

        Where a controller is a legal person, any change in its shareholding must be notified to the CBB at the earlier of:

        (a) When the change takes effect; and
        (b) When the controller becomes aware of the proposed change.
        January 2014

      • GR-4.1.7

        For approval under Paragraph GR-4.1.1 to be granted, the CBB must be satisfied that the proposed controller or increase in control poses no undue risks to the licensee. The CBB will therefore consider or reconsider the criteria outlined in Paragraphs GR-4.3.6 to GR-4.3.8 in any request for approval. The CBB may impose any restrictions that it considers necessary to be observed in case of its approval of a new controller, or any of the changes listed to existing controllers in Paragraph GR-4.1.1. These restrictions will include the applicable maximum allowed limit of holding or control (as outlined in Section GR-4.3). A duly completed Form 2 (Controllers) must be submitted as part of the request for a change in controllers. An approval of controller will specify the applicable period for effecting the proposed acquisition of shares.

        January 2014

      • GR-4.1.8

        If, as a result of circumstances outside the licensee's knowledge and/or control, one of the changes specified in Paragraph GR-4.1.1 is 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
        January 2014

      • GR-4.1.9

        The approval provisions outlined above do not apply to existing holdings or existing voting control by controllers already approved by the CBB. The approval provisions apply to new/prospective controllers or to increases in existing holdings/voting control as outlined in Paragraph GR-4.1.1.

        January 2014

      • GR-4.1.10

        Licensees are required to notify the CBB as soon as they become aware of events that are likely to lead to changes in their controllers. The criteria by which the CBB assesses the suitability of controllers are set out in Section GR-4.3. The CBB aims to respond to requests for approval within 30 calendar days and is obliged to reply within 3 months to a request for approval. 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 Form 2, if required to satisfy itself as to the suitability of the applicant.

        January 2014

      • GR-4.1.11

        Licensees must submit, within 3 months of their financial year-end, a report on their controllers (See Subparagraph BR-1.1.2(f)). This report must identify all controllers of the licensee, as defined in Section GR-4.2 and the extent of their shareholding interests.

        January 2014

    • GR-4.2 GR-4.2 Definition of Controller

      • GR-4.2.1

        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 issued and paid up share capital in the licensee ("L"), or is able to exercise (or control the exercise of) 10% or more of the voting power in L;
        (b) Holds 10% or more of the issued and paid up share capital in a parent undertaking ("P") of L, or is able to exercise (or control the exercise of ) 10% or more of the voting power in P; or
        (c) Is able to exercise significant influence over the management of L or P.
        January 2014

      • GR-4.2.2

        For the purposes of Paragraph GR-4.2.1, "associate" includes:

        (a) The spouse, son(s) or daughter(s) of a 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 legal person, a director of the controller, a subsidiary of the controller, or a director of any subsidiary undertaking of the controller.
        January 2014

      • GR-4.2.3

        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.

        January 2014

    • GR-4.3 GR-4.3 Suitability of Controllers

      • GR-4.3.1

        All new controllers or prospective controllers (as defined in Section GR-4.2) of a licensee must obtain the approval of the CBB. Any increases to existing controllers' holdings or voting control (as outlined under Paragraph GR-4.1.1) must also be approved by the CBB and are subject to the conditions outlined in this Section. Such changes in existing controllers or new/prospective controllers of a licensee must satisfy the CBB of their suitability and appropriateness according to the criteria outlined in Paragraphs GR-4.3.6 to GR-4.3.8. The CBB will issue an approval notice or notice of refusal of a controller according to the approval process outlined in Section GR-4.4 and Paragraph GR-4.1.6.

        January 2014

      • GR-4.3.2

        All controllers or prospective controllers (whether natural or legal persons) of all licensees are subject to the approval of the CBB. Persons who intend to take ownership stakes of 10% or above of the voting capital of a licensee are subject to enhanced scrutiny, given the CBB's position as home supervisor of such licensees. The level of scrutiny and the criteria for approval become more onerous as the level of proposed ownership increases. Existing and prospective controllers should therefore take particular note of the requirements of Paragraphs GR-4.3.3 to GR-4.3.8 if they wish to take more substantial holdings or control.

        As a matter of policy, the CBB distinguishes between regulated legal persons (i.e. financial institutions) and unregulated legal persons and natural persons as controllers. Regulated legal persons must satisfy home country prudential requirements. As a regulated legal person can own a greater percentage of issued and pid up share capital, it is subject to additional conditions as outlined in Paragraph GR-4.3.8. The CBB may also contact their home regulators for information on their "fit & proper" status.

        January 2014

      • GR-4.3.3

        A natural person will not be allowed to own or control more than 15% of the issued and paid up capital of a licensee. Such person must satisfy the conditions in Paragraph GR-4.3.6 below.

        January 2014

      • GR-4.3.4

        An unregulated legal person (including companies, trusts, partnerships) will not be allowed to own or control more than 50% of the issued and paid up capital of a licensee. All such persons must satisfy the conditions in Paragraph GR-4.3.7 below.

        January 2014

      • GR-4.3.5

        The CBB will only permit financial institutions which are subject to effective consolidated supervision under a regulatory framework consistent with the Basel Core Principles, the IOSCO Principles or the IAIS Principles to become controllers with a holding of 100% of the issued and paid up capital of a licensee. Furthermore, the concerned regulated financial institution must satisfy the conditions in Paragraph GR-4.3.7 and also the specific conditions in Paragraph GR-4.3.8.

        January 2014

      • GR-4.3.6

        In assessing the suitability and the appropriateness of new/prospective controllers (and existing controllers proposing to increase their shareholdings) who are natural persons, the CBB considers 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 person's track record as a controller of, or investor in financial institutions;
        (m) The financial resources of the person and the likely stability of their shareholding;
        (n) 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;
        (o) The legitimate interests of creditors and minority shareholders of the licensee;
        (p) If the approval of a person as a controller is or could be detrimental to the subject licensee, Bahrain's banking and financial sector or the national interests of the Kingdom of Bahrain; and
        (q) Whether the person is able to deal with existing shareholders and the board in a constructive and co-operative manner.
        January 2014

      • GR-4.3.7

        In assessing the suitability and appropriateness of legal persons as controllers (wishing to increase their shareholding) or new/potential controllers, the 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 person, its parent(s) and other members of its group, its implications for the licensee and the likely stability of the person's shareholding;
        (b) Whether the person or members of its group have ever entered into any arrangement with creditors in relation to the inability to pay due debts;
        (c) The person'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 person's (and other group members') propriety and general standards of business conduct, including the contravention of any laws or regulations including financial services legislation on 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 person or other members of its group, whether or not this resulted in an adverse finding;
        (g) The extent to which the person or other members of its group have been truthful and open with regulators and supervisor;
        (h) Whether the person has ever been refused a licence, authorisation, registration or other authority;
        (i) The person's track record as a controller of, or investor in financial institutions;
        (j) The legitimate interests of creditors and shareholders of the licensee;
        (k) Whether the approval of a controller is or could be detrimental to the subject licensee, Bahrain's financial sector or the national interests of the Kingdom of Bahrain;
        (l) Whether the person is able to deal with existing shareholders and the board in a constructive manner; and
        (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.
        January 2014

      • GR-4.3.8

        Regulated financial institutions wishing to acquire more than 50% of the voting capital of a licensee must observe the following additional conditions:

        (a) The person must be subject to effective consolidated supervision by a supervisory authority which effectively implements the Basel Core Principles, the IOSCO Principles or the IAIS Principles as well as the FATF Recommendations on Combating Money Laundering and the Financing of Terrorism and Proliferation;
        (b) The home supervisor of the person must give its formal written prior approval for (or otherwise raise no objection to) the proposed acquisition of the licensee;
        (c) The home supervisor of the person must confirm to the CBB that it will require the person to consolidate the activities of the concerned licensee for regulatory and accounting purposes if the case so requires;
        (d) The home supervisor of the person must formally agree to the exchange of customer information between the person and its prospective Bahraini subsidiary/acquisition for AML/CFT purposes and for large exposures monitoring purposes;
        (e) The home supervisor of the person and the CBB must (if not already in place) conclude a Memorandum of Understanding in respect of supervisory responsibilities, exchange of information and mutual inspection visits; and
        (f) The person must provide an acceptably worded letter of guarantee to the CBB in respect of its obligation to support the licensee.
        January 2014

    • GR-4.4 GR-4.4 Approval Process

      • GR-4.4.1

        Within 3 months of receipt of an approval request under Paragraph GR-4.1.1, the CBB will issue an approval notice (with or without restrictions) or a written notice of refusal if it is not satisfied that the person concerned is suitable to increase his shareholding in, or become a controller of the licensee. The notice of refusal or notice of approval with conditions will specify the reasons for the objection or restriction and specify the applicant's right of appeal in either case. Where an approval notice is given, it will specify the period for which it is valid and any conditions that attach (see Paragraph GR-4.1.6). These conditions will include the maximum permitted limit of holding or voting control exercisable by the controller.

        January 2014

      • GR-4.4.2

        Notices of refusal have to be approved by an executive director of the CBB. The applicant has 30 calendar days from the date of the notice in which to make written representation as to why his application should not be refused. The CBB then has 30 calendar days from the date of receipt of those representations to reconsider the evidence submitted and make a final determination, pursuant to Article 53 of the CBB Law and Module EN (Enforcement).

        January 2014

      • GR-4.4.3

        Pursuant to Article 56 of the CBB Law, where a person has become a controller by virtue of his shareholding in contravention of Paragraph GR-4.1.1, or a notice of refusal has been served to him under Paragraph GR-4.4.1 and the period of appeal has expired, the CBB may, by notice in writing served on the person concerned, direct that his shareholding shall be transferred or until further notice, no voting right shall be exercisable in respect of those shares.

        January 2014

      • GR-4.4.4

        Article 56 of the CBB Law empowers the CBB to request a court of law to take appropriate precautionary measures, or sell such shares mentioned in Paragraph GR-4.4.3, if the licensee fails to carry out the order referred to in the preceding Paragraph.

        January 2014