The Shura Council will on Sunday debate the Secured Transactions Bill which introduces jail terms of up to two years and fines ranging from BD1,000 to BD50,000, or both for individuals, along with fines between BD2,000 and BD100,000 for entities that commit violations related to collateral, disclosure, or misuse of secured transaction systems.
According to the financial and economic affairs committee, the punishments are central to ensuring integrity, transparency and trust within Bahrain’s evolving secured lending framework.
The committee stressed that the penalties were crafted to deter fraudulent practices such as concealing collateral, falsifying registry information or obstructing creditor rights.
The bill aims to modernise Bahrain’s financial legal infrastructure, support small and medium enterprises (SMEs) and elevate the kingdom’s ranking in international financial and business readiness indicators.
The committee outlined several serious offences addressed by the bill’s punitive provisions:
- Creating or registering a false or misleading security right: Individuals who intentionally violate legal procedures or conceal essential information face imprisonment or heavy fines.
- Providing inaccurate or deceptive information in the electronic notice register: This includes entering false data that harms a secured creditor’s priority or obstructs debt recovery.
- Tampering with, concealing or improperly disposing of collateral: Actions aimed at hiding or obstructing access to collateral are punishable offences.
- Preventing inspection, valuation or access to collateral: Debtors who interfere with lawful assessments or creditor rights face sanctions.
- Abuse of official authority by persons involved in enforcement: Misusing a position to gain advantage or cause harm during enforcement actions constitutes a punishable offence.
Committee chairman Khalid Al Maskati emphasised that the severity of the penalties reflects the economic importance of the secured transactions system.
“A secured lending framework only works if all parties trust that collateral cannot be hidden, manipulated or misrepresented,” Mr Al Maskati said.
“The jail terms and fines are essential deterrents that ensure fairness, protect creditor rights, and preserve the integrity of Bahrain’s financial sector.”
Mr Al Maskati
He added that the provisions are aligned with global practices adopted in advanced economies.
“We are building a modern credit environment based on transparency and enforceability. Without strong penalties, the system could be abused at the expense of SMEs, lenders, and the economy as a whole,” he said.
The bill allows businesses to use their movable assets – including receivables, inventory and intellectual property – as collateral without transferring possession, thereby expanding access to financing for companies that lack real estate or fixed assets.
The committee noted that the law’s introduction of an electronic notice registry, clear priority rules and out-of-court enforcement mechanisms will significantly streamline the credit process. But, it reiterated, that these benefits depend on strict enforcement of the penalties to prevent abuses that could distort the market.
The law, once approved, will come into force 12 months after its publication in the Official Gazette, giving regulators time to issue executive rules and launch public awareness campaigns.
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