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Review and update your constitutional documents
Implement required governance committees
Establish conflict-of-interest, remuneration, disclosure policies
Prepare your Corporate Governance Report for annual filing
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Simplified Guide to Bahrain’s Corporate Governance Code
Table of Contents
What Is the Corporate Governance Code?
Who Must Comply & Scope
Key Principles of the Code
Recent Amendments: What’s New (2022 & beyond)
Mandatory Rules vs Best Practices (“Comply or Explain”)
Roles & Responsibilities: Board, Officers, Shareholders
Governance Structures: Committees, Oversight & Reporting
Penalties & Consequences of Non-Compliance
Step-by-Step Compliance Checklist
Case Study: A Company Bringing Its Governance in Line
FAQ: Corporate Governance in Bahrain
What Is the Corporate Governance Code?
Issued by the Ministry of Industry and Commerce (MOIC) under Decree No. 19 of 2018, and amended by Resolution No. 91 of 2022.
Purpose: Provide minimum standards & best practices for governance of joint stock companies in Bahrain to promote transparency, accountability, fairness, responsibility, and integrity.
It complements the Commercial Companies Law (CCL) — doesn’t replace it.
Who Must Comply & Scope
| Aspect | Details |
|---|---|
| Which companies | Public and closed joint stock companies incorporated under the CCL. Excludes WLL companies. |
| Exemptions / Special Regulators | Companies licensed by the Central Bank of Bahrain follow specific governance rules under CBB Rulebook. |
| Application of Code | Applies via “Comply or Explain” — companies should either meet the standards or explain deviations. |
Key Principles of the Code
The Code lays out 11 fundamental principles. Below are the core ones, simplified:
Qualified Board — Board members should be competent, have necessary skills, experience.
Loyalty & Integrity — Directors and executive management must act in the company’s best interest, avoid conflicts.
Financial Audit & Controls — Strong internal control, compliance with law, external audit, transparent financial reporting.
Board Appointment, Training & Evaluation — Procedures for nomination, performance evaluation, training.
Fair Remuneration — Board and senior management compensation should be disclosed and fair. trowers.com+1
Defined Roles & Structure — Clear delineation of roles between board, management. Defined responsibilities.
Shareholder Rights & Communication — Timely communication, enabling shareholder participation.
Disclosure & Transparency — Governance reports, conflict of interest disclosures, gender diversity reporting, record-keeping.
Social Responsibility — Companies should act with responsibility toward society and environment.
Recent Amendments: What’s New (2022 & Beyond)
Recent changes strengthen the Code. Key updates include:
Record keeping ≥10 years: Companies must keep minutes, reports, governance documents, litigation/investigation records for at least ten years.
Female Board Representation: Public joint stock companies now required to consider women on the Board, and disclose gender composition.
Stricter Disclosure of Conflicts of Interest: BOD members/officers must disclose conflicts, abstain from voting or deliberation where there’s a conflict. Enhanced rules.
Audit Committee Changes: More detailed requirement for composition; public vs closed joint stock have slightly different rules.
Remuneration Transparency: Disclosure required for board and senior management pay, including benefits, attendance allowances etc. trowers.com
Penalties: New penalties for non-compliance under Article 362-bis of CCL: fines, CR suspension, etc.
Mandatory Rules vs Best Practices (“Comply or Explain”)
Mandatory Rules: Provisions directly required by law or CCL; companies have to follow, not optional. Examples: external audit, basic conflict of interest disclosure, maintaining financial statements, audit committees.
Best Practices / Guidelines: These are recommended practices. If a company doesn’t comply, it must explain in its governance report why. Examples: gender diversity beyond the minimum, certain committee structures, additional disclosures.
Roles & Responsibilities: Board, Officers, Shareholders
Board of Directors: Oversight, setting strategy, ensuring integrity of financial info, selecting senior management, risk management, ensuring compliance with Code.
Officers & Executives: Implement board decisions, manage operations, maintain transparency and report conflicts.
Corporate Governance Officer: Many companies required to appoint a Governance Officer to ensure compliance and reporting.
Shareholders: Right to inspect books, receive governance report, vote on resolutions, hold board accountable.
Governance Structures: Committees, Oversight & Reporting
| Structure / Element | What Is Required | Purpose |
|---|---|---|
| Audit Committee | At least three members; chairman independent; public vs closed JS differences. | Ensuring accurate reporting, internal control, oversight of financials. |
| Nomination & Remuneration Committees | Required for joint stock companies; independent members; disclosure of pay etc. | Clear process for appointing directors & fair director/senior exec pay. |
| Corporate Governance Report | Annual report section explaining compliance / non-compliance with each principle; template forms exist. | Transparency & accountability to shareholders & regulators. |
| Record Keeping | Maintain minutes, records, paperwork for 10 years; litigation & investigation records until completion. | Ensures accountability, auditability, regulatory compliance. |
Penalties & Consequences of Non-Compliance
Under Article 362-bis of the CCL, violations can lead to: administrative fines, suspension of commercial registration, orders to cease violation, possibly even removal from commercial register.
Public disclosure of non-compliance is required; reputational damage can ensue.
Shareholders may have legal rights to challenge decisions made where proper governance was not followed (e.g. conflicts of interest).
Step-by-Step Compliance Checklist
✅ Confirm your company type (public/closed joint stock) and that you must comply.
✅ Review constitutional documents to ensure they allow virtual meetings / voting if desired.
✅ Appoint a Corporate Governance Officer.
✅ Establish Audit, Nomination, Remuneration Committees as required.
✅ Ensure at least one female board member (for public joint stock companies).
✅ Put in place written procedures / policies for conflict of interest.
✅ Prepare or update Governance Report format.
✅ Begin keeping records (minutes, reports, litigation) for 10 years.
✅ Disclose compensation of board & top management transparently.
✅ Ensure annual external audit; external auditor’s statements include governance compliance.
✅ For any non-compliance, prepare explanation in reports.
Case Study: A Company Bringing Its Governance in Line
Company: Gulf Public Joint Stock Co. (hypothetical)
Challenges prior to reform:
No female representation on the board.
Record-keeping “just in time”, some missing historical meeting minutes.
Weak conflict of interest policy — officers occasionally attended decisions where interest existed.
Steps taken:
Amended Articles of Association to allow virtual meetings and voting.
Appointed female board member.
Adopted conflict of interest policy; ensured abstention in relevant decisions.
Set up remuneration committee; improved disclosure of directors’ pay.
Began keeping all key documents and reports in digital archive for at least 10 years.
Result:
Corporate governance report shows full compliance with mandatory principles.
Shareholders more confident; better investor relations; enhanced transparency; risk of penalties reduced.
FAQ: Corporate Governance in Bahrain
Q1: Is compliance with the Code mandatory or voluntary?
Compliance is based on the “Comply or Explain” principle. For public and closed joint stock companies, it’s expected that they follow the Code; if they deviate from certain best practices, they must disclose and explain why.
Q2: Does the Code apply to Limited Liability Companies (LLCs or WLLs)?
No. WLLs (with limited liability) are generally not bound by the Code. The Code applies to joint stock companies.
Q3: What is required for external auditors under the Code?
Companies must appoint external auditors; closed joint stock companies must also have external auditors if not already required. The audit must include a statement about governance compliance.
Q4: How long must companies keep governance and meeting records?
At least 10 years for minutes, board & committee reports, governance reports, etc., including records related to litigation or investigations until those are concluded.
Q5: What about gender diversity on boards?
Public joint stock companies are required to consider women’s representation; at least one female member should be part of the Board. Also, companies must disclose gender composition in annual governance reports. Closed joint stock companies are not currently required to.
Q6: How are conflicts of interest handled?
Board members and officers must disclose conflicts; cannot participate or vote on decisions where they have interests. Violations can be challenged by shareholders.
Q7: Can companies have virtual or electronic meetings & voting?
Yes. The law & Code allow electronic/virtual shareholder and board meetings, and electronic voting (subject to conditions such as verification, records etc.). Mondaq
Q8: What is the penalty for violating the Code?
Penalties may include administrative fines, suspension of commercial registration, orders to cease violations, and in severe cases striking off from the registry.
Q9: Must the Code be included in company constitutional documents?
While the constitutional documents do not need to replicate the entire Code, they must not prevent compliance. Companies should ensure documents allow required governance practices. Chambers Practice Guides
Q10: Is there a required structure for committees?
Yes. At least an Audit Committee; many companies also establish Remuneration, Nomination, and a Governance Committee. The chairman of the Audit Committee in public joint stock companies should be independent.
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Step by Step Process (Explained)
✅ Step 1: Confirm Your Company Type & Applicability
Action: Verify whether your business is a public or closed joint stock company (BSC / BSC(C)) under the Bahrain Commercial Companies Law (CCL).
Why It Matters: The Corporate Governance Code applies only to these entities. WLLs are generally exempt, but voluntary compliance is encouraged if you want to attract investors.
Best Practice: Keep a copy of your CR (Commercial Registration) and Articles of Association updated. If there is ambiguity, seek legal counsel.
✅ Step 2: Review & Amend Constitutional Documents
Action: Examine your Articles of Association, Memorandum of Association, shareholder agreements, and board charters.
Focus Areas:
Authority for holding virtual or electronic meetings.
Voting mechanisms (electronic or proxy).
Procedures for appointing directors and committees.
Quorum requirements and meeting notice periods.
Best Practice: Amend these documents to remove obstacles to compliance and to support flexibility (e.g., electronic board meetings).
✅ Step 3: Appoint a Corporate Governance Officer (CGO)
Action: Nominate a dedicated CGO or assign responsibility to a senior compliance/legal officer.
Responsibilities of CGO:
Ensure the company’s governance framework is applied correctly.
Coordinate governance report preparation.
Serve as a liaison with regulators (MOIC, CBB if applicable).
Best Practice: Choose a CGO with knowledge of Bahrain CCL, corporate law, and internal controls. Provide training and reporting access to the Board.
✅ Step 4: Set Up Key Committees
Action: Form the required committees with clear terms of reference.
Audit Committee: Minimum three members (majority independent). Oversees financial reporting, internal controls, external auditor appointments.
Nomination Committee: Manages board selection, evaluation, succession planning.
Remuneration Committee: Ensures fair, transparent compensation structures.
Best Practice:
Publish committee charters on company website (if public).
Rotate committee membership every few years to ensure independence.
✅ Step 5: Ensure Gender Diversity & Board Composition
Action: For public joint stock companies, appoint at least one female director.
Best Practice: Go beyond the minimum — diverse boards perform better and attract investor confidence. Consider diversity in age, background, and professional experience.
✅ Step 6: Draft & Implement a Conflict-of-Interest Policy
Action: Develop a written policy requiring directors and executives to disclose any personal interest in contracts, decisions, or transactions.
Key Elements:
Procedures for declaring conflicts.
Abstention from voting or deliberations where conflict exists.
Maintaining a conflict register updated regularly.
Best Practice: Train board members annually on ethical obligations and reporting requirements.
✅ Step 7: Prepare or Update Your Corporate Governance Report
Action: Adopt the MOIC’s governance report template (or create your own aligned with Code principles).
Report Content:
Board composition and attendance.
Gender diversity disclosure.
Remuneration disclosure.
Compliance status (with explanations for deviations).
Best Practice: Make your report public (on your website) to enhance transparency and build investor confidence.
✅ Step 8: Strengthen Record-Keeping & Documentation
Action: Implement a system to store:
Board & shareholder meeting minutes.
Committee reports and decisions.
Governance policies, training records, audit findings.
Requirement: Retain all records for at least 10 years; keep litigation or investigation documents until final resolution.
Best Practice: Use a secure cloud-based board portal or document management system to ensure easy retrieval and version control.
✅ Step 9: Disclose Remuneration & Incentives Transparently
Action: Report directors’ and key executives’ salaries, bonuses, meeting fees, and benefits.
Why Important: Investors and regulators expect fairness and alignment with performance.
Best Practice: Adopt a remuneration policy approved by shareholders; publish a summary in your annual report.
✅ Step 10: Conduct Annual External Audit with Governance Statement
Action: Engage a licensed external auditor to audit your financials and confirm compliance with governance requirements.
Best Practice:
Rotate audit firms every few years to maintain independence.
Share key audit findings with all board members and committees.
Implement internal control recommendations promptly.
✅ Step 11: Manage Non-Compliance Transparently
Action: If you cannot fully comply with a principle, explain why in the governance report (“comply or explain”).
Examples: Small closed joint stock companies may not have enough directors to form multiple committees — disclose this and explain mitigating steps.
Best Practice: Have a corrective action plan with timelines for achieving compliance in future.
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