HC-1.2 HC-1.2 Role and Responsibilities
HC-1.2.1
All directors must understand the Board's role and responsibilities under the Bahrain Commercial Companies Law (2001), as amended and any other laws or regulations that may govern their responsibilities from time to time. In particular:
(a) The Board's role as distinct from the role of the shareholders (who elect the Board and whose interests the Board serves) and the role of officers (whom the Board appoints and oversees); and(b) The Board's fiduciary duties of care and loyalty to thelicensee and the shareholders (see HC-2.1).October 2019HC-1.2.2
The Board's role and responsibilities include but are not limited to:
(a) Approving and reviewing at least annually the overall business performance and strategy for thelicensee ;(b) Reviewing regularly the implementation of the strategy and operational performance;(c) Causing financial statements to be prepared which accurately disclose thelicensee's financial position;(d) Monitoring management performance;(e) Reviewing regularly the level of risk;(f) Approving and reviewing at least annually systems and controls framework (including policies);(g) Approving the agenda for shareholders' meetings;(h) Monitoring conflicts of interest and preventing abusive related party transactions;(i) Assuring equitable treatment of shareholders including minority shareholders; and(j) Setting out clearly and reviewing on a regular basis who has authority to enter thelicensee into contractual obligations.Amended: January 2020
Added: October 2019HC-1.2.3
With respect to Subparagraph HC-1.2.2(j), the Board should set a materiality threshold so that contractual obligations above this set threshold are regularly reported to the Board. In setting the materiality threshold, the Board will consider the financial impact the contractual obligation may have in relation to its capital.
October 2019HC-1.2.4
The members of the board of directors are responsible both individually and collectively for performing the responsibilities outlined in Paragraph HC-1.2.2 and must have sufficient expertise as a Board to understand the important issues relating to operation and control of the
licensee . Although the Board may delegate certain functions to committees or management, it may not delegate its ultimate responsibility to ensure that an adequate, effective, comprehensive and transparent corporate governance framework is in place. This statement must be clearly communicated to Board members andsenior management. October 2019HC-1.2.5
When a member of the board of directors is inducted, the chairman of the Board, or the
licensee's legal counsel or compliance officer, or other individual delegated by the chairman of the board, should review the Board's role and duties with that person, particularly covering legal and regulatory requirements and Module HC (see also HC-4.3.1).October 2019HC-1.2.6
The
licensee should have a written appointment agreement with each director which recites the directors' powers and duties and other matters relating to his appointment including his term, the time commitment envisaged, the committee assignment if any, hisremuneration and expense reimbursement entitlement, and his access to independent professional advice when that is needed.October 2019HC-1.2.7
The Board should adopt a formal Board charter or other statement specifying matters which are reserved to it, which should include but need not be limited to the specific requirements and responsibilities of board directors.
October 2019Additional Guidance
HC-1.2.8
In assessing the
licensee's strategic plans (see Paragraph HC-1.2.2), the CBB would expect the Board to address thelicensee's current and future aspirations with respect to its position in the market place, its size, products, value and other key aspirations that would be considered important by investors. Furthermore, the Board should demonstrate that it is able to identify proactively and understand the significant risks that thelicensee faces in achieving its business objectives. A description of thelicensee's strategy should be included in the annual financial statements.October 2019HC-1.2.9
The Board must have effective policies and processes in place for:
(a) Ensuring a formal and transparent Board nomination process;(b) Appointingsenior managers , and ensuring that they have the necessary integrity, technical and managerial competence, and experience;(c) Overseeing succession planning, and minimising undue reliance on key individuals;(d) Reviewing keysenior management and Boardremuneration packages and ensuring such packages are consistent with the corporate values and strategy of thelicensee and encourage prudent risk taking;(e) Monitoring and evaluating management's performance in implementing agreed strategy and business plans, and ensuring appropriate resources are available; and(f) Approving budgets and reviewing performance against those budgets.October 2019HC-1.2.10
The Board must be able to demonstrate that the
licensee's operations, individually and collectively:(a) Are measured, monitored and controlled by appropriate, effective and prudent risk management systems commensurate with the scope of thelicensee's activities. The systems must produce information on a timely basis, and in a form and quality appropriate to the needs of the different recipients;(b) Are supported by an appropriate control environment. The risk management and financial reporting functions must be independent of business lines and must be run by individuals not involved with the day-to-day running of the various business areas; and(c) Make effective use of the work of internal and external auditors.October 2019
