Board of Directors of Public Joint-Stock Companies

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 Companies Law of Bahrain (2001) as amended, the number of the board 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 & not sticking to certain faces).

The Board 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 CBB and a regulation issued by (the competent Minister for commerce) with respect to other companies.

A member of the board shall fulfill certain conditions as, must have full legal capacity, must not have been convicted in a crime involving negligent or fraudulent bankruptcy or a crime affecting honor or involving a breach of trust, unless he has been reinstated, not prohibited from assuming a directorship of a Joint Stock Company pursuant to the laws 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.

In addition to 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 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 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. Each person who has not exercised his right to appoint members on the board, or who does not own a percentage qualifying him to appoint another member, may use this percentage in voting. In all cases, due observance shall be given in the formation of the board 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 the board of directors. All this, so as to make sure that they are qualified and competent to exercise the 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)