BAHRAIN: An Introduction to Corporate & Finance

The Transition to a Digital Court Service 

Since the COVID-19 pandemic, the judicial system in Bahrain has been converted to a digital one through the e-government platform which now provides complete electronic access to all legal services provided by the civil, commercial and execution courts. These services include – without limitation – filing of lawsuits and/or appeals, service of notifications via email or mobile, receiving responses and/or applications from the parties involved in the litigation, and the court’s issuance of verdicts. Additionally, the legal system offers full access to the execution courts, enabling the claimant to conduct daily follow-ups with the court in order to execute a favourable judgment and impose preventative measures.

New Legislation in Bahrain 

Several laws have recently been issued and amended to keep up with the economic, investment, and technological developments and to meet international standards, by modernising laws and, where relevant, simplifying and consolidating to reflect changes in the market affecting both the judicial system and clients positively.

The Law of Execution in Civil and Commercial Matters

The execution of civil and commercial matters is now regulated under Legislative Decree No 22 of 2021 (the “New Execution Law”) published on 16 September 2021. The New Execution Law allows private sector entities to act as private executors. This should increase the pace of enforcement and execution of judgments and is considered a radical change in the execution process.

In addition, the New Execution Law provides for a new system of placing a limits on the credit of the judgment debtor for seven years if there are insufficient funds to pay the judgment debt, providing more effective protection for judgment creditors. This is a leap forward in the judgment execution process ensuring security and confidence in the Bahraini legal system.

The Commercial Companies Law Amendments 

The latest amendments to the Commercial Companies Law were issued by Legislative Decree No 20 of 2021 (the “CCL Amendment”) and published on 16 September 2021.

Language of Constitutional Documents: Prior to the CCL Amendment, the Companies Law required all companies aside from joint venture companies to draft their memoranda of association in Arabic. However, the amendment to Article 6 now specifies that the Memorandum of Association shall be considered null and void if it is not written in Arabic or English. With this change, Bahrain now complies with the standards of the modern corporate sector around the world, where the use of two languages in constitutional papers from the outset is essential for both internal corporate governance and potential dispute settlement.

Disclosure of Board Remuneration: The company’s articles of association must outline how the board of directors’ salaries should be determined. A detailed account of all amounts paid to the board – including salaries, dividends, attendance allowance, and any other amounts paid – must be included in the report that is given to the shareholders at the annual general assembly, according to Article 188. Previously, Article 188 of the Commercial Companies Law stipulated less information about the various payments a member of the board of directors would have to disclose. The CCL Amendment now requires a Bahrain Shareholding Company to disclose various types of remuneration paid to the board, including the above payments as well as payments received as employees or administrators of the company in exchange for technical, administrative, consulting, or other work.

The Social Insurance Law 

The latest amendments to the Social Insurance Law were issued by Legislative Decree No 14 of 2022 (the “SIL Amendment”) and published on 18 April 2022 in the Official Gazette, coming into effect on 19 April 2022.

Participation in Social Insurance: In general, participation in social insurance is accomplished through payment by the employer and employee in percentages specified in the Social Insurance Law. The new amendment to Article 33(1) and (2) states that the employer’s share must be increased from 11% of the insured’s salary (as previously provided) to 17%. This 6% increase in the overall percentage has no effect on the employee’s share, which remains at 7% of the salary.

Retirement Pension: The retirement age was previously 60 for men and 55 for women. The Social Insurance Law was brought into compliance with prior changes to Bahrain’s Labour Law for the Private Sector by increasing the retirement age to 60, regardless of gender, in accordance with the new SIL Amendment, specifically Article 34(1). This Article is concerned with the employee’s involvement in the social insurance programme for a minimum of 240 months. In addition, the official retirement age for women was raised from 55 to 60, and the duration of participation was expanded from 120 to 180 months, as specified in Article 34(2). This change further unifies the criteria between men and women regarding retirement age.

The Maritime Law  

Maritime issues are now regulated under Legislative Decree No 10 of 2022 (the “New Maritime Law”) published on 7 April 2022. This repeals the maritime law that had been in place since 1982 and brings the applicable maritime law into the 21st century.

The New Maritime Law covers much more ground than the repealed legislation, touching upon vessel registration, carriage of goods, bills of lading, mortgages, seizures, and insurance requirements. The New Maritime Law now also sets out a limitation period of two years with respect to claims arising from (i) the towage of vessels, (ii) pilotage, (iii) collision, (iv) liability of vessel owners, (v) insurance and (vi) contracts for the carriage of goods by sea.

The Judicial Authority Law  

The amendments to the Judicial Authority Law promulgated by Legislative Decree No 42 of 2002 (the “Judicial Authority Law Amendment”) were issued by Legislative Decree No 27 of 2021 published on 30 September 2021.

The Judicial Authority Law Amendment now provides in Article 4 that litigators are allowed to agree in writing, before submitting the case, to choose a language other than Arabic from among the languages that can be used before the courts. This is a monumental step forward in terms of Bahraini litigation and will allow for greater flexibility before the courts of Bahrain.