HC-10.1.3

All directors should understand the board's role and responsibilities under the Commercial Companies Law and any other laws or regulations that may govern their responsibilities from time-to-time.

HC-10.1.4

The board's role and responsibilities include but are not limited to:

HC-10.1.5

The directors are responsible both individually and collectively for performing these responsibilities. 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.

HC-10.1.6

When a new director is inducted, the chairman of the board, assisted by company legal counsel or compliance officer, should review the board's role and duties with that person, particularly covering legal and regulatory requirements and Module HC.

HC-10.1.7

The CMSP 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, his remuneration and expense reimbursement entitlement, and his access to independent professional advice when that is needed.

HC-10.1.8

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 directors.

HC-10.1.9

The board should have no more than 15 members, and should regularly review its size and composition to assure that it is small enough for efficient decision-making yet large enough to have members who can contribute from different specialties and viewpoints. The board should recommend changes in board size to the shareholders when a needed change requires amendment of the CMSP's Memorandum of Association.

HC-10.1.10

Potential non-executive directors should be made aware of their duties before their nomination, particularly as to the time commitment required. The board should regularly review the time commitment required from each non-executive director and should require each non-executive director to inform the board before he accepts any board appointments to another company. One person should not hold more than three directorships in public companies in Bahrain with the provision that no conflict of interest may exist, and the board should not propose the election or re-election of any director who does.

HC-10.1.11

The board should be collegial and deliberative, to gain the benefit of each individual director's judgment and experience.

HC-10.1.12

The chairman should take an active lead in promoting mutual trust, open discussion, constructive dissent and support for decisions after they have been made.

HC-10.1.13

The board should meet frequently but in no event less than four times a year. All directors must attend the meetings whenever possible and the directors must maintain informal communication between meetings.

HC-10.1.14

The chairman should ensure that all directors receive an agenda, minutes of prior meetings, and adequate background information in writing before each board meeting and when necessary between meetings. All directors should receive the same board information. At the same time, directors have a legal duty to inform themselves and they should ensure that they receive adequate and timely information and should study it carefully.

HC-10.1.15

The board must encourage participation by management regarding matters the board is considering, and also by management members who by reason of responsibilities or succession, the CEO believes should have exposure to the directors.

HC-10.1.16

Non-executive directors should have free access to the CMSP's management beyond that provided in board meetings. Such access should be through the Chairman of the Audit Committee or CEO. The board should make this policy known to management to alleviate any management concerns about a director's authority in this regard.

HC-10.2.1A

Each director and officer must understand that under the Commercial Companies Law he is personally accountable to the company and the shareholders if he violates his legal duty of loyalty to the company, and that he can be personally sued by the company or the shareholders for such violations.

HC-10.2.2

The duty of loyalty includes a duty not to use property of the CMSP for his personal needs as though it was his own property, not to disclose confidential information of the CMSP or use it for his personal profit, not to take business opportunities of the CMSP for himself, not to compete in business with the CMSP, and to serve the CMSP's interest in any transactions with the company in which he has a personal interest.

HC-10.2.3

For purposes of paragraph HC-10.2.3, a director or officer should be considered to have a "personal interest" in a transaction with the company if:

is a party to the transaction or has a material financial interest in the transaction. (Transactions and interests which are de minimis in value should not be included).

HC-10.2.4

Each director or officer should make every practicable effort to arrange his personal and business affairs to avoid a conflict of interest with the CMSP.

HC-10.2.5

Each director or officer should inform the entire board of conflicts of interest as they arise and abstain from voting on the matter in accordance with the relevant provisions of the Commercial Companies Law. This disclosure should include all material facts in the case of a contract or transaction involving the director or officer. The director or officer should understand that any approval of a conflict transaction is effective only if all material facts are known to the authorizing persons and the conflicted person did not participate in the decision.

HC-10.2.6

The board should establish formal procedures for:

HC-10.2.7

The CMSP should disclose to its shareholders in the Annual Report any abstention from voting motivated by a conflict of interest and should disclose to its shareholders any authorization of a conflict of interest contract or transaction in accordance with the Commercial Companies Law.

HC-10.3.2

To encourage management accountability for the financial statements required by the directors, the CMSP's CEO and chief financial officer should state in writing to the audit committee and the board as a whole, that the CMSP's interim and annual financial statements present a true and fair view, in all material respects, of the CMSP's financial condition and results of operations in accordance with applicable accounting standards.

HC-10.4.2

The chairman of the board should ensure that each new director receives a formal and tailored induction to ensure his contribution to the board from the beginning of his term. The induction should include meetings with senior management, visits to company facilities, presentations regarding strategic plans, significant financial, accounting and risk management issues, compliance programmes, its internal and external auditors and legal counsel.

HC-10.4.3

All continuing directors should be invited to attend orientation meetings and all directors should continually educate themselves as to the CMSP's business and corporate governance.

HC-10.4.4

Management, in consultation with the chairman of the board, should hold programmes and presentations to directors respecting the CMSP's business and industry, which may include periodic attendance at conferences and management meetings. The board shall oversee directors' corporate governance educational activities.

HC-10.5.1

The CMSP should remunerate approved persons fairly and responsibly.

HC-10.5.2

Remuneration of approved persons should be sufficient enough to attract, retain and motivate persons of the quality needed to run the CMSP successfully, but the CMSP should avoid paying more than is necessary for that purpose.

Alignment of All Staff Remuneration with Compliance with AML/CFT Requirements

HC-10.6.2

The board should appoint senior management whose authority must include management and operation of current activities of the CMSP, reporting to and under the direction of the board. The senior managers should include at a minimum:

And where relevant, should also include such other approved persons as the board considers appropriate as outlined in Paragraph HC-6.2.1 and HC-6.2.2 or as required in terms of the relevant rulebook Module in Volume 6.

HC-10.6.3

The board should adopt by-laws prescribing each senior manager's title, authorities, duties and internal reporting responsibilities. This should be done in consultation with the CEO, to whom the other senior managers should normally report.

HC-10.6.4

These provisions should include but should not be limited to the following:

HC-10.6.5

The board should also specify any limits which it wishes to set on the authority of the CEO or other senior managers, such as monetary maximums for transactions which they may authorize without separate board approval.

HC-10.6.6

The corporate secretary (where appointed) should be given general responsibility for reviewing the CMSP's procedures and advising the board directly on such matters. Whenever practical, the corporate secretary should be a person with legal or similar professional experience and training.

HC-10.6.7

At least annually, the board shall review and concur in a succession plan addressing the policies and principles for selecting a successor to the CEO, both in emergencies and in the normal course of business. The succession plan should include an assessment of the experience, performance, skills and planned career paths for possible successors to the CEO.

HC-10.7.2

The board should observe both the letter and the intent of the Commercial Companies Law's requirements for shareholder meetings. Among other things:

HC-10.7.3

The CMSP should require all directors to attend and be available to answer questions from shareholders at any shareholder meeting and, in particular, ensure that the chairs of the audit, remuneration and nominating committees are ready to answer appropriate questions regarding matters within their committee's responsibility (it being understood that confidential and proprietary business information may be kept confidential).

HC-10.7.4

The CMSP should require its external auditor to attend the annual shareholders' meeting and be available to answer shareholders' questions concerning the conduct and conclusions of the audit.

HC-10.7.5

A CMSP should maintain a company website. The CMSP should dedicate a specific section of its website to describing shareholders' rights to participate and vote at each shareholders meeting, and should post significant documents relating to meetings including the full text of notices and minutes. The CMSP may also consider establishing an electronic means for shareholders communications including appointment of proxies. For confidential information, the CMSP should grant a controlled access to such information to its shareholders.

HC-10.7.6

In notices of meetings at which directors are to be elected or removed, the CMSP should ensure that:

HC-10.7.7

The chairman of the board (and other directors as appropriate) must maintain continuing personal contact with controllers to solicit their views and understand their concerns. The chairman must ensure that the views of shareholders are communicated to the board as a whole. The chairman must discuss governance and strategy with controllers. Given the importance of market monitoring to ensure the "comply or explain" approach of this Module, the board should encourage investors, particularly institutional investors, to help in evaluating the CMSP's corporate governance.

HC-10.7.8

In companies with one or more controlling shareholders, the chairman and other directors should actively encourage the controlling shareholders to make a considered use of their position and to fully respect the rights of minority shareholders.

HC-10.8.2

In each CMSP:

HC-10.8.3

The CBB may issue a template as a guide for a CMSP's annual meeting corporate governance discussion.

HC-10.9.2

Islamic CMSPs which are guided by the principles of Islamic Shari'a have additional responsibilities to their stakeholders. CMSPs which refer to themselves as "Islamic" are subject to additional governance requirements and disclosures to provide assurance to stakeholders that they are following Shari'a Principles. In ensuring compliance with Shari'a Principles, each Islamic CMSP should establish a Shari'a Supervisory Board consisting of at least three Shari'a scholars.