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4. Additional Requirements or Exceptions

Pursuant to Articles (138), (141) and (143) of the Commercial Companies Law, the following conditions and exceptions to the qualifications for the issuance, offering and listing apply to the Debt Securities listed below:

4.1 Islamic Private Debt Securities:
4.1.1 In relation to Islamic Private Debt Securities that come within the scope of these Guidelines, the issuer must appoint either:
a) An independent Sharia adviser or committee who has been approved by the Agency, in case of an issuer who does not have an existing Sharia advisor or committee.
b) An Islamic bank or a licensed institution approved by the Agency to carry out Islamic banking to advise on all aspects of the Islamic Private Debt Securities, including documentation, structuring, investment as well as other administrative and operational matters in relation to these securities.
4.1.2 Any Sharia principle and concept adopted in order to structure Islamic Private Debt Securities must be based on such principles and concepts as accepted by the Agency.
4.2 Asset-backed Securities:

For the purpose of these Guidelines, Asset-backed Securities include Mortgaged-backed Securities (certificates).
4.2.1 The issuer must normally be a single purpose undertaking. The requirement to be a single purpose undertaking does not preclude the addition to the pool of further assets during the life of the securities. Furthermore, other classes of Debt Securities may be issued by the undertaking, backed by separate pools of similar assets.
4.2.2 The audited financial statements requirements for previous years statements (referred to in 2.3(a); (b) and 2.4) do not apply to issuers of asset-backed securities.
4.2.3 Where an issue of asset-backed securities is backed by equity securities, those securities must be listed and/or traded on a stock exchange; the equity securities must represent minority interests in and must not confer legal or management control of the companies issuing the equity securities; where options or conversion rights relating to equity securities are used to back an issue, these requirements apply in respect of the securities resulting from the exercise of those options or rights; and
4.2.4 There must be a trustee or other appropriate independent party representing the interests of the holders of the asset-backed securities and with the right of access to appropriate, timely information relating to the assets.
4.2.5 Subject to Article (156) of the Commercial Companies Law, if the issuer issues Debt Securities guaranteed by mortgages on its property or any other collaterals, the legal procedures for mortgage shall be undertaken in favour of the debtholders or a trustee representing them before offering the Debt Securities for subscription. The issuer itself shall undertake such procedures or they may be undertaken by the party presenting the guarantee, if it is presented by a party other than the issuer. The issuer shall, within a period not exceeding one month from the closing date of subscription, take the necessary measures to enter the loan value together with all related details in the register in which the mortgage has been entered.
4.3 Convertible Debt Securities:

Subject to Articles (149) and (150) of the Commercial Companies Law, the issuance, offering and listing of Convertible Debt Securities is subject to the following additional requirements or exceptions.
4.3.1 All Convertible Debt Securities must, prior to the issue thereof, be approved by the Agency and the Agency should be consulted at the earliest opportunity as to the requirements which will apply.
4.3.2 All Convertible Debt Securities which are convertible into new equity securities or outstanding securities of the issuer or a company in the same group as the issuer for which an issuance, offering and listing is to be sought must comply both with the requirements applicable to the Debt Securities for which an issuance, offering and listing is sought and with the requirements applicable to the underlying equity securities to which such Convertible Debt Securities relate. In the event of any conflict or inconsistency between the various requirements, those applicable to such equity securities shall prevail.
4.3.3 Convertible Debt Securities which are convertible into property, other than equity securities, may be listed only if the Agency and the Exchange are satisfied that holders have the necessary information available to form an opinion concerning the value of the other property to which such convertible Debt Securities relate. This principle does not apply to an issue of convertible Debt Securities by a state or a supranational.
4.3.4 Any alterations in the terms of Convertible Debt Securities after issue must be approved by the Agency, except where the alterations take effect automatically under the existing terms of such convertible Debt Securities.
4.3.5 Subject to Article (150) of the Commercial Companies Law, the issuer's shareholders shall have priority right to subscribe for the Convertible Debt Securities if they express their desire to do so within a period not exceeding 15 days from the date of calling them to exercise such right. The shareholder may use his priority to subscribe for such Debt Securities in excess of his share in the issuer's capital if the offered Debt Securities allow this.
4.4 States and Supranationals:
4.4.1 Copies of all enabling Governmental or legislative laws, authorizations, consents or orders must be submitted with the Agency.

However, the requirements for submission of the following documents do not apply:
i. Certificate of incorporation or equivalent document.
ii. Memorandum and Articles of Association.
iii. Annual financial statements.
iv. The resolutions of the issuer at the general meeting authorizing the issue of the Debt Security.
v. The resolution(s) of the board of directors.
vi. Notice(s) of shareholders meeting.
vii. Any other documents that are required which are not applicable to the issuing and offering of Debt Securities issued by States and Supranationals.
4.5 State Corporations:
4.5.1 The Agency will not normally require an accountants' report in relation to an issuing and offering of Debt Securities issued by a State corporation incorporated or otherwise established in Bahrain. In such case, the latest audited financial statements, which must relate to a financial period ended not more than 15 months before the date the document is issued, should be included in or appended to the issuing and offering document.
4.5.2 The Agency will not normally be prepared to approve the issuance of Debt Securities issued by a State Corporation incorporated or otherwise established outside Bahrain where the latest financial period reported on by the external auditors exceeds 15 months before the date of the issuing and offering document, unless reviewed interim financial statements relating to a period ended not more than 9 months before the date of the issuing and offering document are included in the document and appropriate evidence is given to the Agency that there has been no material adverse change in the financial condition of the issuer or the guarantor, in the case of a guaranteed issue, since the end of the period last reported on by the external auditors.
4.5.3 The requirement of submission of the following documents does not apply to the Debt Securities issued by a State Corporation.
(a) Certificate of incorporation or equivalent document of the issuer and guarantor, in case of a guaranteed issue.
(b) Certificate entitling the issuer and the guarantor, in the case of guaranteed issue, to commence business.
(c) Notice(s) of shareholders meeting.
4.6 Banks and Financial Institutions:
4.6.1 The Agency will not normally be prepared to approve the application of issuing, offering and listing of Debt Securities issued by a bank or financial institution, where the latest financial period reported on by the external auditors exceeds 15 months before the date of the application, unless reviewed interim financial statements relating to a period ended not more than 5 months before the date of the issuing and offering documents are included in the application and appropriate evidence is given to the Agency that there has been no material adverse change in the financial condition of the issuer or, in the case of a guaranteed issue, the guarantor since the end of the period last reported on by the external auditors.
4.7 Overseas Issuers:
4.7.1 The issuance, offering and listing Guidelines apply as much to overseas issuers as they do to local issuers, subject to the additional requirements, modifications or exceptions set out or referred to below herewith.
4.7.2 Overseas issuers are encouraged to contact the Agency if they envisage any difficulties in complying fully with the relevant requirements.
4.7.3 The following additional requirements apply:—
(a) the Agency reserves the right, in its absolute discretion, to refuse any issuing, offering or listing application of Debt Securities of an overseas issuer if:—
(i) it believes that it is not in the public interest to approve such application; or
(ii) the overseas issuer's equity capital does not have a primary listing on the exchange, and it is not satisfied that the overseas issuer is incorporated or otherwise established in a jurisdiction where the standards of securities holders' protection are at least equivalent to those provided in Bahrain; and
(b) in the case of registered securities, provision must be made for a register of holders to be maintained in Bahrain, or such other place as the Agency may agree, and for transfers to be registered locally. The Agency may, however, consider an alternative proposal for registering transfers for holders in Bahrain, in exceptional circumstances.
4.7.4 The following modifications apply:—
(a) The references in the Guidelines to "Directors" should be read as references to members of the overseas issuer's governing body;
(b) The issuing and offering documents must be signed by two members of the governing body of the overseas issuer or guarantor, in the case of a guaranteed issue, or by their agents authorised in writing rather than signed by or on behalf of every director or proposed director; and
(c) The declaration to be submitted to the Agency may require adjustment by virtue of the laws to which the overseas issuer is subject and may be signed by a director's and secretary's agent, authorised in writing, rather than by a director and the secretary.
4.7.5 The Agency may be prepared to agree modifications to the Listing Agreement as it considers appropriate in a particular case. In particular, in the case of an overseas issuer whose primary listing is on another regulated stock market recognised by the Agency, the Agency may accept a Listing Agreement which incorporates equivalent continuing obligations to those imposed by that other stock market.
4.7.6 Conversely, the Agency may impose additional requirements in a particular case. In particular, if the overseas issuer's equity capital has or is to have a primary listing on the exchange, the Agency may impose such additional requirements as it considers necessary to ensure that investors have the same protection as that afforded to them in Bahrain.
4.7.7 Attention is particularly drawn to the obligations regarding the circulation and contents of annual financial statements and accounts to ensure simultaneous release of information to other exchanges and to the market in Bahrain.
4.7.8 Attention is particularly drawn to the requirement for the external auditor to be independent both of the overseas issuer and of any other company concerned.
4.7.9 A financial statement will not normally be regarded as acceptable unless the relevant statements have been audited to International Financial Reporting Standards (IFRS), or a standard acceptable to the Agency.
4.7.10 Financial statements in respect of overseas issuers are required to conform with accounting standards acceptable to the Agency which will normally be at least the IFRS as promulgated from time-to-time by the International Accounting Standards Committee. The relevant standards will normally be those current in relation to the last financial year reported on and, wherever possible, appropriate adjustments should be made to show profits for all periods in accordance with such standards.

Where the Agency allows reports to be drawn up otherwise than in conformity with accounting standards set by the International Accounting Standards Committee, the Agency may, having regard to the jurisdiction in which the overseas issuer is incorporated or otherwise established, require the report to contain a statement of the financial effect to the financial statements of the use of accounting standards other than IFRS.
4.7.11 Where the figures in the report differ from those in the audited annual financial statements, a statement of adjustments must be submitted to the Agency enabling the figures to be reconciled.