Reporting on Corporate Governance Requirements

The corporate Governance Code

On 19th March 2018, the MOICT issued the Decree No. (19) for 2018 concerning the issuance of the Corporate Governance code, which was published in the official gazette No. 3360 on Thursday 5th of April 2018, which is applicable to all joint stock companies incorporated in Bahrain expect for joint stock companies licensed by the Central Bank of Bahrain.

The purpose of the Corporate Governance Code

The Code aims to provide guidance to companies on the best ways to manage, lead, organize and monitor their businesses through a series of transparent, clearly defined policies, processes and procedures.

Governance aims to establish a system that governs and controls the companies’ businesses and practices in order to create efficient institutions which contribute to build a strong, transparent and competitive national economy for the purpose of reducing any adverse effects on the national economy, acting parties and local community due to not committing to the best practices in managing joint stock companies.

Key Pillars of Governance

Ensuring that the information required by regulators, shareholders and investors, as well as related parties is provided in a timely and appropriate manner to enable these parties to take decisions and run their businesses properly, while the matters of interest to shareholders and various related parties are transparently disclosed by the company and its BoD, which would help attract more businesses to the company, including various investors within the Kingdom of Bahrain.

Accountability, which means that the board of directors are aware that they are responsible for their decisions and actions in relation to the management and leadership of the company before the shareholders and are held accountable to them, and they shall subject themselves to evaluation in accordance with best practices.

Justice, which means that all shareholders, employees and related parties shall enjoy fair and equitable treatment by the directors and Executive Management, without bias or any concealed interests.

Responsibility, which means that the directors shall perform their duties with honour, integrity, impartiality and sincerity towards the economy and society in general, and the company in particular, exercise caution, care and due diligence in the performance of their duties, put the company’s best interest ahead of their own self-interests and takes into account the corporate social responsibility.

The companies which apply the code

The Code is applicable to all joint stock companies incorporated in the Kingdom of Bahrain and registered pursuant to the Commercial Companies Law.

In the application of this Code to the joint stock companies of a family nature, the provisions thereof that suit to their financial, administrative conditions and capacities shall be observed, in order to achieve the results which this code is aiming for.

Structure of the Code

The code contains eleven fundamental principles of corporate governance, each of which contains several guidelines and directives to be applied and considered by every company when declaring its compliance with the provisions of the Code.

The company shall be headed by an effective, qualified and expert Board.

The board and the executive management shall have the full loyalty to the company.

The board shall have rigorous control for financial audit and reporting, internal control and compliance with the law.

The Company shall have effective procedures for the appointment, training and evaluation of Board members.

The company shall remunerate directors and officers fairly and responsibly.

The board shall establish a clear and effective management structure for the Company, and define job titles, powers, roles and responsibilities.

The company should communicate with shareholders, encourage them to participate and respect their rights.

The company shall disclose its corporate governance.

Companies which offer Islamic services shall adhere to the principles of Islamic shari’a.

The board shall ensure the integrity of the financial statements submitted to shareholders, through the use of external auditors.

The company must seek social responsibility to exercise its role as a good citizen.

The requirement of the MOICT for the corporate governance

Appointment of a corporate officer.

A written guide and procedures for corporate governance shall be existed within the company.

An independent corporate governance report shall be included in the company’s annual report.

Separate item for governance shall be included in the company’s general assembly agenda.

Disclosure of Related Party Transactions

A. Unless otherwise disclosed in the audited financial statements, a Company is liable to provide the information required below for the whole of the issuer’s last two financial years up to the date of the document, with respect to transactions or loans between the issuer and:

Persons that directly or indirectly through one or more intermediaries, control or are controlled by, or are under common control with, the issuer;
Associates, other than those transactions in the ordinary course of business. An associate is an unconsolidated enterprise in which the issuer has a significant influence, or which has significant influence over the issuer, and includes enterprises owned by directors or major shareholders of the issuer and enterprises that have a member of key management in common with the issuer.
Significant influence over an enterprise is the power to participate in the financial and operating policy decisions of the enterprise, but does not have control over those policies. Shareholders beneficially owning 10% or more interest in the voting power of the issuer are presumed to have a significant influence on the issuer.
Individuals owning, directly or indirectly, an interest in the voting power of the issuer that gives them significant influence over the issuer, and close members of any such individual’s family.
Close members of an individual’s family are those that may be expected to influence, or be influenced by that person in their dealings with the issuer.
Key management personnel, i.e. those persons having authority and responsibility for planning, directing and controlling the activities of the issuer, including directors and senior management of issuers, and close members of such individuals’ families; and
Enterprises in which a substantial interest in the voting power is owned, directly or indirectly, by any person described in (2) or (3), or over which such a person is able to exercise significant influence.

B. Describe the nature and extent of any transactions or currently proposed transactions that are material to the issuer or the related party, or any transactions that are unusual in their nature or conditions, involving goods, services, or tangible or intangible assets to which the issuer or its holding company, or any of its subsidiaries was a party.

C. Describe the amount of outstanding loans (including guarantees of any kind) made by the issuer or any of its holding companies or subsidiaries, to or for the benefit of any of the persons mentioned in A above. The information given should include the largest amount outstanding during the period covered, the amount outstanding as of the latest practicable date, the nature of the loan and the transaction in which it occurred, and the interest rate on the loan.