• OFS-3.5 OFS-3.5 Role and Responsibilities of Trustees and Custodians

    • OFS-3.5.1

      Borrowing corporations and issuers of debt securities (hereinafter referred to as borrowing corporations) must appoint trustees to whom the ownership of the trust property must be transferred.

      January 2014

    • Eligibility

      • OFS-3.5.2

        A Bahrain domiciled trustee must be established and authorised in accordance with the Bahrain Trust Law of 2006. In the case of overseas domiciled trustees, they must be registered in their own jurisdiction and be acceptable to the CBB.

        January 2014

    • Appointment of Trustee

      • OFS-3.5.3

        Every issuer of debt securities must make provision in those debt securities, or in a trust deed relating to those debt securities, for the appointment of a trustee corporation as trustee for the holders of the debt securities within a maximum of one month from the allotment date.

        January 2014

    • Independence

      • OFS-3.5.4

        A trustee corporation must not be appointed, hold office or act as trustee for the holders of debt securities of a borrowing corporation if that trustee corporation is:

        (a) A shareholder who beneficially holds shares in the borrowing corporation;
        (b) Beneficially entitled to monies owned by the borrowing corporation to it;
        (c) A corporation that has entered into a guarantee in respect of the principal debt secured by those debt securities or in respect of interest thereon; or
        (d) A corporation that is related to:
        (i) Any corporation referred to in Subparagraphs (a), (b) or (c); or
        (ii) The borrowing corporation.
        January 2014

      • OFS-3.5.5

        The trustee must be independent of the issuer, or any of the issuer's related party, subsidiaries and/or associates, and must exercise the powers and duties as defined in the Trust Law of 2006 and the trust deed, without interference or guidance from the issuer.

        January 2014

      • OFS-3.5.6

        An issuer may remove a trustee after obtaining CBB approval if he exceeds the limits or is otherwise in contravention of the trust deed, or if he violates the provisions of the Trust Law of 2006.

        January 2014

    • Contents of a Trust Deed

      • OFS-3.5.7

        Where a corporation or any other entity makes an offer or invitation in respect of debt securities, the debt securities or the relevant trust deed must contain a limitation on the amount that the borrowing corporation may borrow, pursuant to those debt securities or that deed and must contain covenants by the borrowing corporation, or if the debt securities do not or the trust deed does not expressly contain those covenants, they or it are deemed to contain covenants by the borrowing corporation, to the following effect:

        (a) That the borrowing corporation will use its best endeavours to carry on and conduct its business in a proper and efficient manner;
        (b) That the trustee or any auditor or director appointed by the trustee shall:
        (i) Be entitled to require the borrowing corporation to make available for its or his inspection the whole of the accounting or other records of the borrowing corporation; and
        (ii) Give to it or him such information as it or he requires with respect to all matters relating to the accounting or other records of the borrowing corporation; and
        (c) That the borrowing corporation must, on the application of persons holding at least 10% in nominal value of the issued debt securities give notice:
        (i) To each of the holders of those debt securities at his address as specified in the register of debt securities;
        (ii) By an advertisement in at least two local daily newspapers, one each published in the Arabic and English languages addressed to all holders of those debt securities; and
        (iii) Call a meeting of the holders of those debt securities to consider the accounts and balance sheet which were last submitted to the trustee for the holders of the debt securities by the borrowing corporation, and to give to the trustee directions in relation to the exercise of the trustee's powers. Such meeting is to be held at a time and place specified in the notice and advertisement under the chairmanship of a person nominated by the trustee, or such other person as appointed on behalf of the holders of those debt securities present at the meeting.
        Amended: July 2018
        January 2014

      • OFS-3.5.8

        Trust deeds for convertible securities must not include any provisions for:

        (a) The extension or shortening of tenure of the convertibles; and
        (b) Changes to the number of shares received for the conversion of each convertible security, or changes to the pricing mechanism for the conversion of the convertible security, except where these changes are adjustments pursuant to capitalisation issues, rights issues, or consolidation or sub-division of shares or capital reduction exercises.
        January 2014

      • OFS-3.5.9

        Any changes in the terms of convertible securities must be clearly determined and disclosed in the trust deed and offering document/listing document/circular, or any other documents issued in relation to the proposal.

        January 2014

      • OFS-3.5.10

        Once determined, the terms and conditions of the convertible securities may not be altered unless approved by the holders of the securities and the CBB.

        January 2014

    • Retirement of Trustees

      • OFS-3.5.11

        A trustee for the holders of debt securities must not cease to be the trustee until a corporation qualified for appointment as trustee for the holders of debt securities has been appointed and has taken office as such. The holders of the securities and the CBB must be informed immediately of this event.

        January 2014

      • OFS-3.5.12

        Where provision has been made in the debt securities or in the relevant trust deed for the appointment of a successor to a trustee for the holders of the debt securities upon retirement or otherwise, the successor may be appointed in accordance with such provision.

        January 2014

      • OFS-3.5.13

        Where no provision has been made in the debt securities or in the relevant trust deed for the appointment of a successor to a retiring trustee, the borrowing corporation may appoint a successor which is qualified for appointment.

        January 2014

      • OFS-3.5.14

        Notwithstanding anything in any debt securities or trust deed, a borrowing corporation may, with the consent of an existing trustee for the holders of the debt securities, appoint as successor to the existing trustee any corporation which is qualified for such appointment.

        January 2014

      • OFS-3.5.15

        Where the trustee for the holders of the debt securities has ceased to exist or to be qualified, or fails or refuses to act or is disqualified, the court may, on the application of the borrowing corporation or the CBB, appoint any corporation qualified to be the trustee for the holders of the debt securities in place of the trustee which has ceased to exist or to be qualified, which has failed or refused to act as trustee, or which is disqualified.

        January 2014

      • OFS-3.5.16

        Where a successor is appointed to be a trustee in place of any trustee, the successor must immediately after the appointment submit to the holders of the securities and the CBB notice of such appointment.

        January 2014

    • Roles and Responsibilities of the Trustees

      • OFS-3.5.17

        A trustee for the holders of debt securities must:

        (a) Exercise reasonable diligence to ascertain whether or not the assets of the borrowing corporation and of each of its guarantor corporations which are or may be available, whether by way of collateral or security or otherwise, are sufficient or are likely to be or become sufficient to discharge the principal debt as and when it becomes due;
        (b) Satisfy itself that each prospectus relating to the debt securities does not contain any matter which is inconsistent with the terms of the debt securities or with the relevant trust deed;
        (c) Ensure that the borrowing corporation complies with the CBB Law, rules and regulations and any other laws, rules and regulations related to the debt securities as applicable;
        (d) Exercise reasonable diligence to ascertain whether or not the borrowing corporation and each of its guarantor corporations have committed any breach of the covenants, terms and provisions of the debt securities or the trust deed;
        (e) Except where it is satisfied that the breach will not materially prejudice the collateral or the security, if any, for the debt securities or the interests of the holders of the debt securities, take all steps and take all such actions as it is empowered to do to cause the borrowing corporation and any of its guarantor corporations to remedy any breach of those covenants, terms and provisions;
        (f) Where the borrowing corporation or any of its guarantor corporations fails when so required by the trustee to remedy any breach of the covenants, terms and provisions of the debt securities or the trust deed, place the matter before a meeting of holders of the debt securities and submit such proposals for the protection of their interest as the trustee considers necessary or appropriate and obtain the directions of the holders in relation thereto; and
        (g) Where the borrowing corporation submits to those holders a compromise or arrangement, give to them a statement explaining the effect of the compromise or arrangement and, if it or he thinks fit, recommend to them an appropriate course of action to be taken by them in relation thereto.
        January 2014

      • OFS-3.5.18

        Where a trustee for the holders of the debt securities after due enquiry, at any time is of the opinion that the assets of the borrowing corporation and of any of its guarantor corporations which are or should be available, whether by way of collateral or security or otherwise, are insufficient, or likely to become insufficient, to discharge the principal debt as and when it becomes due, it must apply to the CBB for an order under Paragraph OFS-3.5.19.

        January 2014

      • OFS-3.5.19

        The CBB, on receiving an application under Paragraph OFS-3.5.18 may:

        (a) After giving the borrowing corporation an opportunity to make representations in relation to the application, and by order in writing served on the corporation at its registered office in Bahrain, impose such restrictions on the activities of the borrowing corporation, including restrictions on advertising for deposits or loans and on borrowing by the corporation as proposed by the trustee and/or issuer or the CBB considers necessary for the protection of the interests of the holders of the debt securities; or
        (b) If the CBB so requires, direct the trustee to apply to the court for an order; and the trustee shall act in accordance with the court order.
        January 2014

      • OFS-3.5.20

        Where:

        (a) After due enquiry, the trustee is at any time of the opinion that the assets of the borrowing corporation and of any of its guarantor corporations which are or should be available, whether by way of collateral or security or otherwise, are insufficient or likely to become insufficient to discharge the principal debt as and when it becomes due; or
        (b) The borrowing corporation has contravened an order made by the CBB under Paragraph OFS-3.5.19.

        the trustee may apply to the court for an order.

        January 2014

    • Powers of the Trustee to Apply to Court

      • OFS-3.5.21

        A trustee for the holders of debt securities may apply to the court:

        (a) For directions in relation to any matter arising in connection with the performance of the functions of the trustee; or
        (b) To determine any question in relation to the interests of the holders of debt securities.
        January 2014

      • OFS-3.5.22

        Prior to making any application to the CBB or to the court, a trustee must consider the nature and kind of collateral or security given when the offer or invitation in respect of the debt securities was made to the public, and if no security was given must consider the position of the holders of the debt securities as unsecured creditors of the borrowing corporation.

        January 2014

      • OFS-3.5.23

        A trustee may rely upon any certificate or report given or statement made by any legal advisor, auditor or officer of the borrowing corporation or guarantor corporation, if it reasonably believes that such legal advisor, auditor or officer was competent to give or make the certificate, report or statement.

        January 2014

    • Obligations of the Issuer or Borrowing Corporation

      • OFS-3.5.24

        The directors of the borrowing corporation must:

        (a) At the end of a period not exceeding 3 months (being a day after the date of the issue of the relevant prospectus); and
        (b) At the end of each succeeding period thereafter, being a period of 3 months or such shorter time as the trustee may, in any special circumstances allow,

        prepare a report that relates to that period and complies with the requirements of Paragraph OFS-3.5.25, and within one month after the end of each such period submit a report relating to that period to the trustee with a copy being submitted to the CBB.

        January 2014

      • OFS-3.5.25

        The report referred to in Paragraph OFS-3.5.24, must be signed by not less than two of the directors on behalf of all of them and must set out in detail any matters adversely affecting the collateral or security, or the interests of the holders of the debt securities and, without affecting the generality of Paragraph OFS-3.5.24, state:

        (a) Whether or not the limitations on the amount that the corporation may borrow have been exceeded;
        (b) Whether or not the borrowing corporation and each of its guarantor corporations have observed and performed all the covenants and provisions binding upon them respectively by or pursuant to the debt securities or any trust deed;
        (c) Whether or not any event has happened which has caused or could cause the debt securities or any provision of the relevant trust deed to become enforceable and, if so, particulars of that event;
        (d) Whether or not any circumstances affecting the borrowing corporation, originator, group companies or its guarantor corporation(s) or any of them have occurred which materially affect any collateral or security or charge included in or created by the debt securities or any trust deed and, if so, particulars of those circumstances;
        (e) Whether or not there has been any major change in the nature of the business of the borrowing corporation or any of its group companies, originator or any of its guarantor corporation(s) since the debt securities were first issued which has not previously been reported upon as required by Section OFS-3.5 and, if so, particulars of that change; and
        (f) Where the borrowing corporation has deposited money with or lent money to or assumed any liability of a corporation which is related to the borrowing corporation, particulars of:
        (i) The total amounts so deposited or lent and the extent of any liability so assumed during the period covered by the report; and
        (ii) The total amounts owing to the borrowing corporation in respect of money so deposited or lent and the extent of any liability so assumed as at the end of the period covered by the report, distinguishing between deposits, loans and assumptions of liabilities which are secured and those which are unsecured, but not including any deposit with or loan to or any liability assumed on behalf of a corporation if that corporation has guaranteed the repayment of the debt securities of the borrowing corporation, and has secured the guarantee by a charge over its assets in favour of the trustee for the holders of the debt securities of the borrowing corporation.
        January 2014

      • OFS-3.5.26

        The trustee must demand that the borrowing corporation and each of its guarantor corporation(s) which has guaranteed the repayment of the monies raised by the issue of debt securities to:

        (a) Furnish in writing to the trustee, within 30 days after the creation of a charge, with the particulars of any charge created by the corporation or the guarantor corporation, as the case requires; and
        (b) When the amount to be advanced on the collateral or the security of the charge is indeterminate, furnish the trustee in writing within 10 days after the advance, particulars of the amount or amounts actually advanced.
        Amended: April 2014
        January 2014

      • OFS-3.5.27

        Where any such advance referred to in Subparagraph OFS-3.5.26(b) is merged in a current account with bankers or trade creditors, it shall be sufficient for particulars of the net amount outstanding in respect of any such advance to be furnished every 3 months.

        January 2014

      • OFS-3.5.28

        The trustees must submit to the CBB a report addressing the requirements stipulated under Paragraph OFS-3.5.17 on a regular basis but not later than each occurrence of the payment of periodic interest or income or when the trustee deems necessary to keep the CBB informed about the compliance with those requirements.

        January 2014

      • OFS-3.5.29

        The directors of every borrowing corporation and of every guarantor corporation must cause to be made out and submitted to the CBB and trustee:

        (a) A profit and loss account for the first 3 months of every financial year of the corporation and a balance sheet as at the end of that period, not less than 3 months after the expiration of the period of 6 months; and
        (b) A profit and loss account for every financial year of the corporation and a balance sheet as at the end of that period, not later than 3 months after the end of that financial year.
        January 2014

      • OFS-3.5.30

        Where:

        (a) The directors of a borrowing corporation do not submit to the trustee the report as required by Paragraph OFS-3.5.25; or
        (b) The directors of a borrowing corporation or the directors of a guarantor corporation do not submit with the trustee the balance sheets and profit and loss accounts as required by Paragraph OFS-3.5.29, within the time prescribed;

        the trustee must immediately notify the CBB of this fact.

        January 2014

    • Obligations of Guarantor

      • OFS-3.5.31

        For the purpose of the preparation of a report that, by this Module, is required to be signed by or on behalf of the directors, or persons approved by the CBB of a borrowing corporation or any of them, that borrowing corporation may, by notice in writing, require any of its guarantor corporations to furnish it with any information relating to that guarantor corporation which is, by this Module, required to be contained in that report.

        January 2014

      • OFS-3.5.32

        The guarantor corporation must furnish the borrowing corporation with that information required under Paragraph OFS-3.5.31 before the specified date, being a date not earlier than one month after the notice is given.

        January 2014