Appointment of Board of Directors in Public Joint-Stock Companies

TDT | Manama

Email: mail@newsofbahrain.com

DR. ABDELGADIR WARSAMA GHALIB

Public joint stock companies, have many shareholders. Here comes the issue, of how to manage such companies with many unlimited shareholders. To overstep this point, such companies shall be managed by “Board of Directors”, to be elected by the shareholders. The management of the company based on this, shall be undertaken by a board of directors the formation and term of which shall be specified by the company’s Articles of Incorporation.

As per Article (172) of The Commercial Companies Law of Bahrain (2001) as amended, the number of members of the board of directors shall not be less than five (5), and the term of membership shall not be more than three (3) years which may be renewed (based on this renewal, we see the terms extended to many long tears? This is clear contravention of the corporate governance rules calling for changing faces in the Board of Directors & not sticking to certain faces). The Board of Directors must include independent directors and non-executive directors in accordance with rules specified in a regulation issued by (the Central Bank of Bahrain) with respect to companies which are licensed by the Central Bank and a regulation issued by (the competent Minister for commerce) with respect to other companies. A member of the board of directors shall fulfill certain conditions as, must have full legal capacity to act, must not have been convicted in a crime involving negligent or fraudulent bankruptcy or a crime affecting honor or involving a breach of trust or in a crime on the account of his breach of the provisions of the law, unless he has been reinstated, not prohibited from assuming a directorship of a Joint Stock Company pursuant to the laws in force in the Bahrain, with respect to the chairman and the deputy chairman, must not assume simultaneously such position and the position of the most senior executive in the company, any other conditions specified in a regulation applicable to the executive, non-executive and independent directors of companies that are not licensees of the Central Bank of Bahrain as specified in a regulation issued by the competent Minister for commerce, any other conditions specified in a regulation applicable to the executive, non-executive and independent directors of companies that are licensees of the Central Bank of Bahrain as specified in a regulation issued by the central Bank of Bahrain subject to Article (65) of the Central Bank and Financial Institutions law and any other conditions that may be specified in the company M o A or A o I.

Any person, who owns ten percent (10%) or more of the capital, may appoint members on the board of directors for the same percentage of the capital he owns, by rounding the digits of the number to the nearest round figure. If he exercises this right, he shall lose his right to voting for the percentage for which he appointed a proxy. Each person who has not exercised his right to appoint members on the board of directors, or who does not own a percentage qualifying him to appoint another member, may use this percentage in voting. His right to appoint members shall be forfeited in case he does not exercise it in any election or to appoint members on the board of directors, in each case separately, unless it is provided otherwise in the M o A or A o I.

In all cases, due observance shall be given in the formation of the board of directors to the rules under the Articles of Incorporation and those specified under Article (172) of the company law. As we can see, there are many particulars to be observed in appointing members of the board of directors. All this, so as to make sure that they qualified and competent to exercise the great essential powers conferred on them.

(The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of the Daily Tribune)