Commercial Companies Law 2001: Contents

Commercial Companies Law 2001
Commercial Companies Law
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Location: Commercial Companies Law 2001 > Commercial Companies Law > Part V — Joint-stock Company > Chapter Five — Loans > Article (150)
  • Chapter Five — Loans

    • Article (138)

      The ordinary general assembly of both the public and closed joint stock companies, in which the government or any other public entity owns at least 30% of capital, may decide, by a resolution, to borrow by issuing loan bonds upon a recommendation by the board of directors showing the extent to which the company needs to borrow and the conditions of issuing these bonds. The company shall obtain the approval of the Bahrain Monetary Agency if the loan bonds are denominated in foreign currency or denominated in local currency but shall be offered for subscription in international markets.

      The general assembly may authorize the board of directors to select the issue date, provided that the issue shall be made within the two years following the date of the resolution. The Ministry of Finance and National Economy must approve the company's borrowing by issuing loan bonds. However, the Bahrain Monetary Agency shall be the competent authority if the company is one of those subject to its supervision.

    • Article (139)

      Bonds shall be nominal or for its bearer, negotiable, with equal values and categories and the maturity date shall not be less than two years. The bonds of the same issue shall entail equal rights to their holders towards the company, and any provision to the contrary shall be void.

    • Article (140)

      The company shall not issue bonds except after the issued capital is fully paid up and after the balance sheet and the profits and losses account for at least two financial years have been published unless the state or one of the public entities guarantees such bonds.

    • Article (141)

      The total value of the existing bonds issued by the company shall not exceed the issued and fully paid up capital and the undistributed reserves according to the latest balance sheet approved by the general assembly.

      Excluded from this are the bonds guaranteed by the state or by one of the public entities and the bonds issued by banks and companies that are subject to the supervision of the Bahrain Monetary Agency and upon its approval.

    • Article (142)

      The company shall cover the value of the bonds by one of the following means:

      i— Offering the bonds for public subscription. In this case the rules and provisions applicable to the subscription for shares shall apply without prejudice to the nature of the bonds.
      ii— Selling the bonds through banks, investment companies and subscription underwriters. In this case, the rules and practices commonly used in this regard shall be followed in a manner that does not conflict with the provisions of the law.

    • Article (143)

      The call for public subscription for the loan bonds shall be made by way of a prospectus approved by the competent governmental authority and published in one of the local daily newspapers. The prospectus shall contain the following details:

      i— The resolution of the general assembly authorizing the issue, its date and the approval of the competent governmental authority.
      ii— The total amount of the loan.
      iii— The essential details to be included in the bond certificates as provided for in this law.
      iv— A summary of the balance sheet and the profits and losses account for the two financial years preceding the issue of bonds.
      v— The value of the previous bonds issued by the company before and the outstanding unpaid value at the time of issuing the new bonds.
      vi— The entity conducting the subscription in bonds.
      vii— The amount to be paid for each bond in the case of payment in installments.
      viii— The period specified for subscription.
      ix— The period in which the owners of the convertible bonds may express their desire to convert them into shares, provided that such period shall not exceed the fixed term of bond amortization.
      x— The extent to which the shareholder may subscribe for the convertible bonds.
      xi— The extent to which the company may amortize the bond and the conditions thereof.
      xii— A list of the names of the board members.

      Such details shall be included in all advertisements and bulletins relating to the loan, and the prospectus shall be signed by the chairman of the board of directors and the auditor, who shall be jointly liable for the accuracy thereof.

    • Article (144)

      Subscription shall be deemed complete if 50% or more of the bonds offered for subscription is covered during the specified period or any other extension thereto, otherwise, the general assembly shall have either to retract from concluding the loan and refund the money to the subscribers or to consider the portion of bonds subscribed enough and accordingly cancel the remaining bonds.

    • Article (145)

      The following details shall be contained in the bond certificates:

      i— The name of the issuing company, its entry number in the Commercial Registry and the address of its head office.
      ii— The capital of the issuing company.
      iii— The total amount of the loan.
      iv— The name of the bond's owner if the bond is issued in the owner's name.
      v— The nominal value and the serial number of the bond.
      vi— The interest rate or the return and its due dates, or the annual share determined for the bond from the company's profits.
      vii— The bond collateral, if any.
      viii— The conditions and dates of bond amortization.
      ix— If the bonds are convertible into shares, the dates specified for the bond owner to use his right to convert and the conditions thereof shall be mentioned.

    • Article (146)

      If the conditions and procedures provided for in this law for the issue of and subscription for bonds are violated, any interested party may initiate legal proceedings to nullify the subscription and to compel the company to refund the value of the bonds and to pay compensation for sustained damages.

    • Article (147)

      The bond owner shall have the right to get fixed interest or return in specific times and the right to redeem the nominal value of the bond at its maturity date. The company may issue bonds against a part of the company's annual profits.

    • Article (148)

      The company may issue bonds for which subscription is effected for less than its nominal value, and undertake to pay the nominal value of the bond and to calculate the interests on the basis of such value.

    • Article (149)

      The company, whose shares are negotiable on the Bahrain Stock Exchange, may issue convertible bonds by a resolution of the extraordinary general assembly upon a justified recommendation by the board of directors in accordance with the following provisions:

      i— Specifying the rules of converting bonds into shares, especially the value of the share on the basis of which the conversion shall be made.
      ii— The bond's issue value shall not be less than the nominal value of the share.
      iii— The value of the convertible bonds in addition to the value of the company's shares must not exceed the authorized capital.
      iv— The period during which conversion of the bonds into shares may be requested.
      v— The right of the bond owner to refund its value if he does not want to convert them into shares.

    • Article (150)

      The company's shareholders shall have the priority right to subscribe for the convertible bonds if they express their desire to do so within a period not exceeding fifteen days from the date of calling them to use such right. The shareholder may use his priority right to subscribe for bonds in excess of his share in the company's capital if the offered bonds allow this.

    • Article (151)

      The bond owners who desire to convert their bonds into shares shall express their desire to do so within the period provided for in the resolution of bond issue and specified in the subscription prospectus. Bonds shall be converted into shares in accordance with the procedures and conditions specified in the resolution of the extraordinary general assembly and published in the subscription prospectus. The company shall honor the value of the bonds whose owners do not want to convert them into shares at the maturity date.

    • Article (152)

      After passing a resolution by the extraordinary general assembly to issue convertible bonds and until the date of conversion or paying their value, the company shall not distribute bonus shares or profits from the reserve or issue new convertible bonds except after taking the necessary measures to safeguard the rights of the holders of the convertible bonds who elect to convert them into shares by granting them bonus shares or profits from the reserve or some of these bonds as if they were shareholders. Subject to the provisions of article (150) of this law, if the resolution of the general assembly to issue new convertible bonds, referred to in the foregoing paragraph, provides for the cancellation of the preference right of the shareholders to subscribe, the approval of the body representing the holders of the convertible bonds shall be obtained.

    • Article (153)

      After passing the resolution of the extraordinary general assembly for issuing convertible bonds and until the date of conversion or paying their value, the company shall not reduce its capital or increase the percentage to be distributed as minimum profits on shareholders. In the case of reducing the capital due to losses by way of canceling a number of shares or by reducing the share's nominal value, the rights of the bondholders wishing to convert them into shares shall be reduced by the same percentage of capital reduction as if they were shareholders without the need to obtain the approval of the body representing the bondholders.

    • Article (154)

      The converted shares shall have a dividend in the company's distributable profits for the financial year in which conversion has been effected as from the date of conversion until the end of the financial year.

    • Article (155)

      The company may issue bonds that entitle their holders to priority in subscribing for any capital increase, just as the shareholders, and this shall be undertaken for whoever wishes to do so within a period not exceeding fifteen days from the date of notifying him. The priority right shall be limited to subscription for shares the nominal value of which does not exceed the value of bonds owned by whoever uses such right.

    • Article (156)

      If the company issues bonds guaranteed by mortgages on its property or any other collaterals, the legal procedures for mortgage shall be undertaken in favor of the bondholders or a trustee representing them before offering the bonds for subscription. The company itself shall undertake such procedures or they may be undertaken by the party presenting the guarantee, if it is presented by a party other than the company. The company shall, within a period not exceeding one month from the closing date of subscription, take the necessary measures to enter the loan value together with all related details in the register in which the mortgage has been entered.

    • Article (157)

      The company shall not put forward or put back the date of honoring the bonds unless otherwise provided for in the issue resolution and the subscription prospectus. However, in case the company is wound up for reasons other than merging, the bondholders may request to recover the value of their bonds before the maturity date, and the company may also offer to do so. In both cases the interests shall not be counted for the remaining period of the loan term.

    • Article (158)

      If the payment of the bond value is made in installments and the bondholder fails to pay any installment at the due date, the company may sell the bond and recover its entitlements in accordance with the procedures provided for in article (116) of this law.

    • Article (159)

      The company shall maintain a special register to register the bonds of each issue and the names of their owners if the bonds are issued in the name of their owners, and all acts carried out in relation to these bonds shall be recorded in the register.

    • Article (160)

      The bonds issued in the names of their owners shall be traded in compliance with the procedures provided for in this law regarding dealing in shares, and bearer bonds shall be traded by way of transferring its title from the seller to the buyer. The company shall honor the value of the bond on maturity. The procedures and provisions included in the by-laws of the Bahrain Stock Exchange of dealing on the bonds quoted on the stock exchange shall be observed.

    • Article (161)

      The company may accept its loan bonds as a way of recovering its debts even before maturity. The company shall have the right to resell such bonds unless there is a ban on such sale in the company's articles of association or by a resolution by the general assembly.

    • Article (162)

      A body representing the holders of the bonds of the same issue shall be formed to defend their joint interests, and shall have a legal representative either from among its members or to be elected from non-members, provided that the representative shall not have any direct or indirect interest with the company. The company shall, within one month from the date of the completion of subscription, invite the bondholder's body to approve its statutes and to elect or appoint its representative, and such invitation shall be made by way of publication in a daily newspaper.

      If the company does not invite the body to convene within the period specified in the foregoing paragraph, any interested person may request the Ministry of Commerce and Industry to invite the body to convene within a period not exceeding fifteen days from the date of the application.

    • Article (163)

      The body shall convene whenever it is necessary at a request by its representative, by the company or by a number of bondholders owning 10% of its value. The invitation shall be made in the same manner referred to in the foregoing paragraph including the agenda. The resolutions passed by the body shall not be valid unless the meeting is attended by a number of bondholders representing two thirds of the issued bonds. If the quorum is not available, the body shall be invited to convene a second meeting for the same agenda, and such meeting shall be valid if it is attended by bondholders representing one third of the bonds. The resolutions shall be issued by the majority of the bondholders attending the meeting. If the resolution has to do with the extension of the maturity of bonds, reduction of the return or the loan amount or if it has to do with the guarantees or if it prejudices in any way whatsoever the rights of the bondholders, it shall be valid only if it is approved by bondholders representing two thirds of the loan bonds. In all cases, the body shall not issue any resolution that might result in increasing the obligations of its members or prejudicing the principle of equality among them.

    • Article (164)

      The representative of the body shall have the right to attend the company's general assembly meetings, and the company shall invite him exactly as it does the shareholders. He shall have the right to take part in the deliberations without voting on the resolutions. The representative shall also have the right to take the necessary measures, whenever required, to protect the rights of the bondholders.

    • Article (165)

      If a bond issued to its owner or bearer is lost or damaged, the owner whose name is registered in the company's register or its bearer may request a new bond instead of the lost or the damaged one. The owner shall publish the serial numbers of the lost or damaged bonds and its quantity and numbers in a local newspaper. If no objection is raised to the company within fifteen days from the date of publication, the company shall provide the owner with a new bond indicating that it is instead of the lost or the damaged bond. The new bond shall confer upon its holder the same rights and shall entail the same obligations related to the lost or damaged bonds.

    • Article (166)

      Whoever objects to the issue of a bond instead of the lost or the damaged one referred to in the foregoing article shall initiate his lawsuit before the competent court within fifteen days from the date of submitting his objection to the company, otherwise, his objection shall be deemed as non-existent. The court shall decide on the objection as quickly as possible.

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