ANY shareholder who owns 10 per cent or more of a company’s capital may soon have the right to appoint board members proportional to their shareholding, with fractions rounded to the nearest whole number.
Amendments to the 2001 Commercial Companies Law have been presented by the Strategic Thinking Bloc, led by its president and Parliament’s financial and economic affairs committee chairman Ahmed Al Salloom.
It also eliminates the existing clause that allows company incorporation documents or articles of association to override these provisions.
The proposal aims to strengthen shareholder rights and ensure greater representation for minority investors in corporate governance, Mr Al Salloom said.
It will be voted on during the weekly session on Tuesday.
The amendment further states that shareholders who do not exercise their right to appoint board members, or who do not hold enough shares to appoint additional members, may use their shareholding percentage for voting. The right to appointment shall be forfeited if not exercised in any election or appointment process for board members.
“By granting shareholders, with at least 10pc ownership, the right to appoint board members, the amendment seeks to ensure fair representation and protect shareholder interests,” the proposal said.
“Allowing smaller investors a direct say in board appointments is expected to foster a more balanced governance structure, enhancing corporate accountability.”
The proposal has received positive feedback from key business organisations, including the Bahrain Chamber and Bahrain Businessmen’s Association.
The Chamber noted its potential benefits for small investors.
“The proposed change will have a positive impact on the rights of minority shareholders who own 10pc or more of a company’s capital. It ensures fairness in representation and strikes a balance among all investors,” the Chamber stated.
However, it also recommended reconsidering the restriction that prevents companies from setting a lower percentage for board appointment rights in their founding documents.
“If shareholders mutually agree on a lower threshold in their articles of incorporation, this should be respected, as it does not infringe upon any investor’s rights,” the Chamber added.
The Bahrain Businessmen’s Association has also endorsed the proposal, highlighting its potential to create a more transparent business environment.
“This amendment will provide a crucial layer of protection for small investors, ensuring that their interests are safeguarded in corporate decision-making,” the association noted in its statement.
Parliament’s financial and economic affairs committee has unanimously recommended giving the go-ahead to the proposed legislation, stressing the importance of protecting minority shareholders who play a critical role in the economy.
“This amendment guarantees that they have a voice in boardrooms and that their investments are protected,” Mr Al Salloom said. “Ensuring fairness in corporate governance is essential for investor confidence. With this amendment, we are reinforcing Bahrain’s commitment to transparency and economic growth.”
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