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	The Commercial Companies Law DECREE LAW NO. (21) OF 2001 PROMULGATING We, Hamd Ben Essa Al Khalifa, Amir of the State of Bahrain Having reviewed the Constitution; And Amiri Order No. (4) 1975; And Decree No. (1) finance of 1961 On The Commercial Registry as amended; And the Civil and Commercial Proceedings Code promulgated by Decree No. (12) of 1971 as amended; And the Notarization Law promulgated by Decree No. (14) of 1971; And the Bahrain Monetary Agency Law promulgated by Decree No. (23) of 1973 as amended; And the Commercial Companies Law promulgated by Decree No. (28) of 1975 as amended; And the Labor Law for the Private Sector promulgated by Decree No. (23) of 1976 as amended; And the Bahrain Stock Exchange Law promulgated by Decree No (4) of 1987; And the Commerce Law promulgated by Decree No. (7) of 1987 as amended; And the Bankruptcy and Composition Law promulgated by Decree No. (11) of 1987; And the Insurance Companies and Organizations Law promulgated by Decree No. (17) of 1987, amended by Decree No. (35) of 1996; And the Commercial Agency Law promulgated by Decree No. (10) of 1992, amended by Decree No. (8) of 1998; And the Auditors Law promulgated by Decree No. (26) of 1996; And the Civil Code promulgated by Decree No. (19) of 2001; And Upon the submission of the Minister of Commerce and Industry; And after consulting the Shura Council; And after the approval of the Council of Ministers. Hereby Decree the following Law Article (1) The provisions of the attached law with respect to Commercial Companies shall come into effect. Article (2) The Commercial Companies Law promulgated by Decree No (28) of 1975 shall be repealed as well as any other provision in conflict with the provisions of the attached law. Article (3) The Minister of Commerce and Industry shall issue the executive regulation and orders necessary to implement the provisions of this law. Until such time this executive regulation and orders are issued, the orders in force at the time when this law was promulgated shall continue to apply to the extent they do not conflict with the provisions of the law. Article (4) The ministers, each in his respective capacity, shall implement the provisions of this law, which shall come into effect on the beginning of the next month after the lapse of six months from the date of the publication thereof in the Official Gazette. Hamad Bin Essa Al Khalifa Amir of the State of Bahrain Issued at Al Refaa Palace: on 28 Rabie el-Awal 1422H Corresponding to 20 June 2001G COMMERCIAL COMPANIES LAW PART I General Provisions Article (1) The company is a contract by which two persons or more undertake to participate in a profit-making economic project, with each of them offering a share in the form of money or work to divide the yield of this project, whether profit or loss. Notwithstanding the provisions of the foregoing paragraph, a company may consist of a single person in accordance with the provisions of this law. Article (2) a- A commercial company incorporated in the State of Bahrain shall take one of the following forms: 1-General partnership company 2-Limited Partnership company 3-Association in participation 4-Joint Stock Company 5-Limited Partnership By Shares 6-Limited Liability Company 7-Single person Company 8-Holding Company b-Any commercial company that does not take one of the above forms shall be null and void, and the persons who have entered into contracts in its name shall be personally and jointly liable to third parties for the obligations resulting therefrom. Article (3) The provisions applicable to commercial companies shall also apply to civil companies having a commercial form regardless of its purpose. Article (4) Any commercial company of whatever type incorporated or based in Bahrain shall be subject to the provisions of this law. However, notwithstanding some or all of the provisions of this law, companies may be established, by virtue of a decree or law, between governments of other countries or between the government of Bahrain and another country or other countries. Any company incorporated in Bahrain shall be domiciled therein, and shall be of Bahraini Nationality without necessarily being entitled to the rights exclusive to Bahrainis. Article (5) All commercial companies shall, in general, be subject to the provisions of this Part, without prejudice to the special provisions applicable to each commercial company included in this law. Article (6) Except for Associations in participation, the company's memorandum of association and any amendment thereto shall be drawn up in Arabic and legalized by the Notary Public, or else the Memorandum of Association and its amendments shall be null and void. Companies may not plead before third parties for the nullity of the memorandum of association or the amendment thereto which has not been formalized in the way mentioned above. Nullity shall not take effect among partners before a partner files a lawsuit to nullify the company's memorandum of association, and the persons who have entered into contract in its name shall be personally and jointly liable for all their acts. In all cases, the provisions of the memorandum of association shall apply to the liquidation of the company adjudged null and void and to the settlement of partners' rights towards each other. Article (7) Except for Associations in Participation, the managers or board members shall publish the company's Memorandum of Association and subsequent amendments thereto according to the provisions of this law; otherwise, the Memorandum of Association shall not take effect towards third parties. If failure to make publication applies only to one particular or more of the Memorandum of Association, only such particulars shall not take effect towards third parties. The company's managers or board members shall jointly be liable for any damages sustained by the company, partners or third parties as a result of non-registration. Article (8) Except for Associations of Participation and unless otherwise provided for in the law, all commercial companies acquire a corporate entity upon registration in the Commercial Registry. Article (9) The partner's share may be an amount of money (cash share) or in-kind share. It may also be in the form of work in cases not specified in the provisions of this law. However, the partner's share shall not be in the form of his influence or financial standing. Cash and in-kind shares only form the capital of the company. Article (10) Unless otherwise agreed upon by way of an agreement or in custom, the partners' shares shall be of equal value and relate to property ownership rather than usufruct. Article (11) Each partner shall owe the company the value of his share. If he fails to pay this value on the date agreed upon, he shall be liable to pay compensation to the company for any damages that may result from the delay. If the partners define the compensation value in advance, such compensation shall be subject to the court assessment. Article (12) If a partner's share is in the form of a title, usufruct or any other real right, the sale provisions shall apply in respect of registration procedures and insuring the share against destruction or falling due, or when there appears a defect or a shortage therein. However, if the share is in the form of usufruct of funds, lease provisions shall apply thereto. Article (13) If the partner's share is in the form of a claim on a third party, his obligation towards the company shall be discharged only upon the settlement of this claim. Moreover, the partner shall be liable to pay compensation to the company for any damages that may result from the delay in the settlement of this claim. Article (14) If the partner's share is in the form of work, he shall undertake the services he pledged and submit an account of the return thereon as from the date at which the company started to exercise the services he pledged as his share. All earnings that result from this work shall belong to the company. However, the partner shall not give up to the company what he might have earned from a patent right unless otherwise agreed upon. Article (15) If the company's memorandum of association does not define each partner's dividend in profit and loss, such dividends shall be determined in proportion to the partners' respective shares in the capital. If the memorandum of association specifies only each partner's dividend in the profit, the same dividend shall apply to the loss, and vice versa. If a partner's share is in the form of work and the company's memorandum of association does not specify his dividend, he may request for an evaluation of his work, and his dividend shall be determined on the basis of this evaluation unless otherwise provided in an established custom. If a partner provides cash or an in-kind share, in addition to work, he shall receive a dividend for his work and another for the other share. Article (16) If it is agreed that a partner shall not have a dividend in the company's profits or shall be exempted from the loss, such an agreement shall be null and void. However, it can be agreed that a partner whose share is in the form of work be exempted from sharing the loss provided that he receives no remuneration for this work. Article (17) A personal creditor of a partner shall not recover his rights out of the partner's share in the company's capital; yet, he may recover his rights out of the partner's dividend in the profits according to the company's balance sheet. If the balance sheet has not yet been prepared, the creditor may garnish the dividend that may accrue to the partner in the profits. If the company is wound up, the personal creditor may recover his rights from the share of his debtor in the company's assets upon dissolution, and he may, before dissolution, seek a garnishment over this share. Article (18) In all types of commercial companies, the claims against partners shall be time barred after five years from the date of the company's dissolution, or from the date at which a partner withdraws from the company in respect of the claims against this partner. This period shall start on the date of the company's registration in the Commercial Registry in all cases in which registration is required, and from the date of registering the liquidation in the cases relating to the liquidation itself. Article (19) If fictitious profits are distributed among partners, the company's creditors may request each partner to refund what he has received even if the partner may have acted in good faith. The partner shall not repay the real profits he has actually received even if the company may have made losses in subsequent years. Article (20) If any of the shareholders or partners or their representatives withdraws from the meeting of the general assembly after the quorum has been obtained, such withdrawal shall not affect the legality of the meeting or the decisions taken by the general assembly regardless of the number of the withdrawing shares or stakes. Article (21) The Minister of Commerce and Industry may issue in an order a model for the memorandum of association of some or all types of companies or for their articles of association. The model shall comprise all the particulars and conditions required by law or by its Executive Regulation in this respect, and shall specify the conditions that the founding partners must comply with and those which they may not comply with. The partners may also add any other conditions that do not conflict with the provisions of law and its Executive Regulation. Article (22) The particulars that are required by law shall be published as ordered by the Minister of Commerce and Industry in the Official Gazette and in one of the local daily newspapers. Article (23) If the provisions of this law require a certain quorum to incorporate a company, and if one partner or more withdraws after its incorporation, the company may continue to exist among the remaining partners without prejudice to the obligations it has undertaken before the withdrawal of any partner. Article (24) The provisions of article (333) of the Civil and Commercial Procedures Code shall be observed in the calculation of the periods provided for in this law. PART II General Partnership Company Article (25) A General Partnership company is a company established by two persons or more under a certain name, and in which the partners are jointly liable to the extent of their all property for the company's obligations. Without prejudice to the provisions of laws regulating self-employment professions, general partnership companies may be formed - regardless of its type - among Bahraini or Non Bahraini partners in accordance with the rules and guidelines decreed by the Minister of Commerce and Industry. Article (26) The Memorandum of Association of a general partnership company shall comprise the following details: The company's name and trade mark, if any. The company's headquarters and branches. The company's objectives. The partners' names, titles, nationalities and domiciles. The names of the executive managers and persons authorized to sign for the company and their competence and power limits. The company's capital and the share of each partner therein. The manner in which profits and losses are distributed among partners. The company's term, if any The beginning and end of the company's financial year. The manner in which the company shall be liquidated and its assets be divided up. Article (27) The name of a general partnership company shall consist of the names of all partners or the name of one or more of them accompanied by (& Co.) or by a similar word giving the same meaning. The name of the company, wherever mentioned, shall be followed by (A Bahraini Partnership Company); and shall always conform to its current status. Article (28) Any non-partner whose name is included in the company's name with his knowledge and consent shall be jointly liable for its obligations towards any other person who has counted in good faith on this name. Article (29) The partners may draw up in a written and certified official document articles of association for the company, which shall include the detailed provisions they agree upon for managing the company. A copy thereof shall be attached with the Memorandum of Association of the company. Article (30) The company's Memorandum of Association and subsequent amendments thereto shall be notarized by entering it in the Commercial Registry in conformity with the law of this registry. A summary of the company's Memorandum of Association and subsequent amendments thereto shall be published in the Official Gazette at the company's expense. Article (31) The summary of the company's memorandum of association shall specifically include the following details: The company's name, objective, headquarters and branches, if any. The partners' names, domiciles, professions and nationalities. The company's capital and sufficient definition of each partner's shares and its due date. The names of the managers and the persons authorized to sign for the company. The date of the company's incorporation and its term. The beginning and the end of the company's financial year. Article (32) Each partner shall have the capacity of a merchant who undertakes trade under the company's name. The bankruptcy of the company shall be deemed bankruptcy of all partners. Article (33) The partners' shares shall not take the form of tradable instruments, and the partner shall not assign his share in the company to other persons without the consent of all partners or to the prejudice of the provisions of the company's memorandum of association. Procedures of publication and registration of such assignment shall be undertaken in accordance with the provisions of articles (7&30) of this law. Any agreement that permits unconditional assignment of shares shall be deemed null and void. Article (34) The company's employees or affiliates who share profits in lieu of their wages for all or part of their work shall not be considered partners. Article (35) The company's creditors shall have a claim on the company's assets, and shall have also a claim on the private assets of any partner who used to be a member of the company at the time of contracting. All partners shall jointly be liable towards the company's creditors, and any agreement to the contrary shall not be valid towards third parties. Article (36) If a new partner joins the company, he shall be liable jointly with the other partners, to the extent of his property, for the company's preceding and subsequent obligations, and any agreement to the contrary shall have no effect towards third parties. If any partner withdraws from the company, he shall not be liable for the company's obligations subsequent to the publication of his withdrawal. If any partner assigns his share in the company, he shall remain liable for the company's obligations towards its creditors unless they approve this assignment. Article (37) A partner's property shall not be subject to execution due to the company's obligations without a court decision against the company and before soliciting the company for the settlement thereof. The court decision shall be evidence against the partner. Article (38) Any partner shall not, without the consent of the other partners, undertake any activity for himself or for other persons in competition with the company, or be a partner in another general partnership company or a partner or a sleeping partner in a limited partnership company or a limited liability company if such companies are exercising competing activities to those of the company. If any partner fails to honor his obligations under the foregoing paragraph, the company may claim compensation from him or consider the activities he conducted for himself as conducted for the company. He shall then surrender to the company all the profits resulting from these activities without netting them out with the profits he is entitled to from the company. Article (39) If any partner takes or retains an amount of money that belongs to the company, he shall refund it without prejudice to the right of compensation if required. If any partner provides the company with his own money or spends in good faith to its benefit, the company shall refund such money together with compensation equal to the benefit it has gained from such money. Article (40) Management of the company shall be undertaken by all partners unless the partners appoint, in the memorandum of association or in a separate contract, a manager or more from among the partners or non-partners to manage the company Article (41) The manager shall undertake the day-to-day management of the company as specified in the Memorandum and Articles of Association. If there is more than one manager without specifying the competence of each of them, and in the absence of a provision confining the management to any of them, each manager may individually take managing actions, provided that the other managers shall have the right to object to these actions before they are completed. In such a case the actions taken shall be passed by the numerical majority of managers and, in the case of equal vote, shall be referred to the partners. Article (42) If there is more than one manager without a stipulation that they shall collectively undertake management, their decisions shall be taken unanimously unless the memorandum of association provides for a specific majority. This condition shall not be violated except in the case of urgency where the company may incur a heavy loss or loose a substantial profit if it fulfills it. Article (43) In the absence of a provision on the way the company shall be managed, each partner shall be considered authorized by the other partners to manage the company, and he shall take the charge of management without recourse to the other partners provided that they shall have the right to object to any action before it is completed. The majority of partners shall have the right to overrule the objection. Article (44) If the manager is a partner appointed in the company's memorandum of association, he shall not be dismissed except by a court decision upon application by the majority of partners and on the basis of acceptable justification. Any agreement to the contrary shall be null and void. The company shall be dissolved if the manager is dismissed unless otherwise provided for in the memorandum of association. If the manager is a partner appointed in a separate contract, or a non-partner appointed in the memorandum of association or in a separate contract, he may be dismissed by the majority of partners. Such dismissal shall not bring the company to dissolution. If the manager is paid for his job and has been dismissed at an unsuitable time or for unacceptable reasons, he may claim compensation for any damages he may have sustained. The dismissal and the appointment of a manager shall be registered in accordance with the provisions of articles (7) & (30) of this law. Article (45) If the manager is a partner appointed in the memorandum of association, he shall not resign his office for unacceptable reasons, otherwise, he shall be liable to pay compensation. The manager's resignation shall result in dissolving the company unless otherwise provided for in the memorandum of association. If the manager - whether he is a partner or not - is appointed in a separate contract, he may resign his office, provided that the time is opportune and that he brings his resignation to the notice of the other partners, otherwise he shall be liable to pay compensation. In this case the company shall not be dissolved. Article (46) The non-manager partner shall not interfere in the company's management. However, he may monitor the performance of the company at its headquarters and inspect its books and documents. He may also get a summery statement of the financial position of the company from its books and documents and provide the manager with his advice. Any agreement to the contrary shall be null and void. Article (47) The company shall be bound by all actions taken by the manager within his powers if he ascribes his actions to the company's commercial name even if he is working for his own interest so long as the third party he deals with is acting in good faith. Article (48) The decisions of a general partnership company shall be taken by unanimity of the partners unless the memorandum of association provides for the majority. In this case, majority means simple majority unless otherwise indicated in the memorandum of association. The decisions pertinent to the amendment of the company's memorandum of association shall not be valid if not taken by the unanimity of the partners. Article (49) Profits and losses and the dividend of each partner therein shall be determined at the end of the company's financial year as per the balance sheet and the profit & loss account. Each partner shall be deemed a creditor of the company with his dividend in profits upon determining it by approving the balance sheet. Any reduction in the company's capital resulting from losses shall be covered from the profits of subsequent years unless otherwise agreed upon. In any event, no partner shall be obliged to cover the reduction in his share in the capital without his consent. PART III Limited Partnership Company Article (50) A limited partnership company is a company set up by one or more partners, who shall be jointly liable for the company's obligations to the extent of all their property, and by another or more partners, who have shares therein but are out of its management. The latter partners are called sleeping partners and shall be liable for the company's obligations only to the extent of their share in the capital. Article (51) The company shall be registered in the Commercial Registry and made published in accordance with the provisions of article (30) of this law. The names of the sleeping partners may not be included in the summery of the company's contract, which must include however sufficient details of their shares in the capital and the values thereof. Article (52) The rules applicable to the general partnership company shall apply to the limited partnership company, even in respect of the sleeping partners, as regards its incorporation, management, termination and liquidation with due consideration to the following articles. Article (53) The name of the limited partnership company shall only include the names of the joint partners. If there is only one partner who is liable in all his property, the word (& Co.) shall be added to his name. The name of the sleeping partner shall not be included in the name of the company. If it is included with his knowledge, he shall be liable as a joint partner towards third parties acting in good faith. Article (54) The sleeping partner shall not interfere in the company's management even by a letter of delegation; otherwise he shall be jointly liable with the joint partners for the obligations arising from his management. He may be liable for all or some of the company's obligations depending on the seriousness and frequency of such actions, and depending on the trust held in him by third parties by virtue of such actions. However, supervision of the acts of the company's managers and the advice given to them and the authority granted to them to act beyond the scope of their powers shall not be deemed interference. Article (55) The joint partners and the sleeping partners shall be specified in the company's memorandum of association. The joint partners shall be Bahrainis and their share in the capital of the company shall not be less than 51%. PART IV Associations in Participation Article (56) An association in participation (joint venture) is a concealed company. It neither has a corporate entity nor is subject to publication procedures. Article (57) The company's memorandum of association shall specify the Partners' rights and obligations and the manner in which the profits and losses are distributed among them as well as any other terms and conditions. The company shall not issue shares or tradable instruments. Article (58) The company's memorandum of association may be proved by any means, including evidence and presumptions. Article (59) Third parties shall have no legal connection in respect of the company's activities except with the partner or partners whom they have dealt with. The partners shall thereafter have recourse to each other in connection with the company's activities, their association with it and the dividend of each partner in the profits and losses as agreed upon in the company's memorandum of association. Article (60) Notwithstanding the provisions of the foregoing article, third parties may insist on the company's memorandum of association if the company has dealt with him in this capacity. Article (61) If the partner who is dealing with third parties is non-Bahraini, a Bahraini national shall sponsor him in these dealings. Article (62) Each partner shall remain the owner of the share he has pledged unless otherwise agreed upon. If the share is a specific asset and the partner who holds it has got bankrupt, the owner shall have the right to restore it from bankruptcy after paying his share in the company' losses. However, if the share is not specified, the owner shall have only to participate in the bankruptcy as a creditor with the remaining part after deducting his share in the company's losses. PART V Joint-stock Company General Provisions Article (63) A joint stock company consists of a number of persons who subscribe in it by way of negotiable shares. They shall be liable for the company's debits and obligations only to the extent of the value of their shares. Article (64) All shareholders in a general joint stock company shall be of Bahraini nationality, without prejudice to the right of the Golf Cooperation Council's nationals to establish and own joint stock companies in Bahrain. Article (65) Subject to the provisions of this law, Bahraini public joint stock companies may be founded - by a decision of the Minister of Commerce and Industry in collaboration with the relevant minister - with foreign capital or expertise in accordance with the percentages determined by the Minister of Commerce and Industry. No dealing in the stocks and shares representing the foreign capital shall be permitted in any way for three years from the date of registering the company in the Commercial Registry unless such dealing is done only among the persons representing the foreign partner. Article (66) Every Joint Stock Company shall have a special commercial name indicating its objectives. Such name shall not be derived from the name of a natural person unless the objective of the company is to invest a patent registered in the name of that person, or unless the company acquires, upon its incorporation or thereafter, another commercial establishment and uses the name of such establishment as its own. The name of the company shall - whenever mentioned - be followed by the phrase (A Bahraini Joint-Stock Company). Article (67) The company may change its name by a resolution by the extraordinary general assembly. The new name shall be registered in the Commercial Registry in accordance with the provisions of law and be published in the Official Gazette and in one of the local daily newspapers. The change in the name of the company shall not affect its rights or obligations or legal proceedings taken by or against the company. Article (68) Except for the case of representing the State in a public company, a public servant shall not in his personal capacity occupy a public position and be at the same time a board member of a joint-stock company or participate in the incorporation thereof or do any paid or unpaid job for it whether permanent or occasional. The violator shall refund all what he has received from the company to the state without prejudice to the administrative penalties. Article (69) A board member of a public organization or entity shall not, in his personal capacity or on behalf of a third party, be a board member of a joint-stock company or act as a manager thereof or undertake a permanent or occasional work or consultancy for it if one of its objectives is to exploit any public utility that exists in the jurisdiction of the board of which he is a member, or that is linked with it by a contract of public works or monopoly. The member shall be deemed resigned from the company as soon as he is elected in the board. The defaulter shall refund what he has received from the company to the State's treasury. Article (70) A decree by the Minister of Commerce and Industry shall regulate the Joint stock companies of variable capital. CHAPTER ONE Incorporation of the Company Article (71) The founder is a person who actually participates in the incorporation of a company for the purpose of shouldering the responsibility arising therefrom. A person shall be considered a founder if he, in particular, has offered an in-kind share upon the incorporation of the company or has signed the preliminary contract or has applied for licensing the company. Article (72) The founders shall submit an application for incorporating a company to the Ministry of Commerce and Industry. Article (73) A special registry shall be held at the Department of Commerce and Companies' Affairs at the Ministry of Commerce and Industry to register the applications for incorporating joint stock companies. The applications shall be given serial numbers. Article (74) An adequate statement on the company's particulars, drawn from the company's preliminary Memorandum and Articles of Association, shall be attached with the application for incorporating the company. The statement shall include the name of the founders' agent and his profession and address. Other attachments shall include: A copy of the company's preliminary Memorandum and Articles of Association duly signed by the founders as shown in the model form referred to in article (21) of this law. An evaluation of in-kind shares, if any, as provided for in article (99) of this law. An evidence, if the company's name is derived from the name of a natural person, of any intellectual property rights or patents registered in the said person's name the company intends to invest, or an evidence, if the company's name is derived from the name of an acquired commercial entity, of acquiring this entity. An evidence, if the company takes another company's name, that the other company is under dissolution and that it agrees to assign its name to the company. A certified copy, if there is a corporate person among the founders, of the founding document of the said person, and an evidence that the competent authorities approve its participation in incorporating the company. Article (75) The company's preliminary contract shall include the following details: The name of the company. The company's head office. The company's objectives. Names of the founders who shall not be less than seven persons, except for the companies exclusively incorporated by the government or in which the government participates in its incorporation. The company's authorized, issued and paid-up capital on corporation, and the number of shares that form the capital. The term of the company, if any. A statement on every in-kind share, including the conditions thereof, the name of its owner and the real rights associated therewith. An approximate estimate of the incorporation's expenses fees and costs. Article (76) The provisions of this law shall not apply to the companies exclusively incorporated by the government, or those in which the government contributes more than 50% of its capital or those whose shares have been transferred to the government or to any other public entity that is incorporated by an Amiri Decree, except to the extent that these companies are not in conflict with the conditions considered at the time of their incorporation and with the provisions of their articles of association. Article (77) Upon submitting the application referred to in article (72) of this law, the Ministry of Commerce and Industry shall ascertain that the company has been incorporated on a sound basis and that the preliminary contract and articles of association do not contravene with the provisions of the law. To this effect, the Ministry may request the founders to provide additional details and supporting documents whenever necessary. It may also request that amendments be made to the company's articles of association to make them consistent with the provisions of this law or compliant with the model form referred to in article (21) herein. Article (78) The Minister of Commerce and Industry shall decide on the application within thirty days from the date of its submission. If the said period lapses without taking a decision, the application shall be deemed rejected. The applicant whose application has been justifiably rejected or considered to be rejected shall have the right to appeal before the High Civil Court within thirty days from the date of notifying him of the rejection of his application or from the date his application is deemed rejected. The court decision whether confirming or overruling the application rejection shall be final. The founders shall not have the right to apply anew for the company's incorporation before removing the reasons of rejection or the lapse of six months from the date of the court's rejection decision. Article (79) If the company's draft Memorandum and Articles of Association have been approved, the founders shall notarize them in accordance with the latest amendment with the competent notarization authority and return them to the Ministry of Commerce and Industry for issuing the incorporation order. Article (80) If the order of incorporation is issued, it shall be published in the Official Gazette at the expense of the company and a copy thereof shall be sent to the founders. Article (81) The company shall have a corporate entity from the date of publication of the incorporation order in the Official Gazette. Article (82) The issue of the company's incorporation order represents at the same time certification of the company's Memorandum and Articles of Association and the other particulars contained in the application. Article (83) The founders shall begin subscription for the shares following the publication of the incorporation order in the Official Gazette. Article (84) The founders shall subscribe for shares representing at least 10% and not exceeding 40% of the company's capital and shall pay - before the publication of the subscription prospectus - the amount equal to the percentage required to be paid by the public for each share upon subscription. However, the founders may be authorized, subject to the approval of the Council of Ministers, to subscribe for more than 40% of the company's capital. Article (85) The founders shall submit to the Ministry of Commerce and Industry - before inviting the public to subscribe for the company's shares - a certificate from the bank proving that they have subscribed for the company's shares within the limits specified in the foregoing article, and that they have already deposited, in the company's account with the bank, an amount equal to the percentage required to be paid by the public for each share upon subscription as provided for in the company's articles of association. Such amount shall be referred to in the subscription prospectus. The bank certificate shall be accompanied with the subscription invitation prepared by the founders in accordance with the provisions of the following article. Upon the completion of the above, the Ministry of Commerce and Industry shall authorize the publication of the invitation prospectus in one of the local daily newspapers. Article (86) The founders shall - upon offering shares for public subscription - issue a prospectus approved by the Ministry of Commerce and Industry and Bahrain Stock Exchange calling the public for subscription and including the particulars specified in the Executive Regulation. The subscription prospectus shall be published in one of the local daily newspapers at the expense of the company at least five days before the subscription commences. The founders who signed the application for the company's incorporation shall sign the prospectus and be jointly liable for the accuracy of the particulars contained therein. Article (87) Subscription shall be undertaken at one or more of the commercial banks licensed to operate in Bahrain or at one of its branches or representatives abroad or through securities companies or other parties approved by the Ministry of Commerce and Industry. Article (88) The installments due upon subscription shall be paid at the bank; and the bank shall record such payments in a special account to be opened in the name of the company. Subscription shall remain open for a period of not less than ten days and not exceeding three months. Subscription shall not close-in case of covering subscription at any period-before the lapse of five days from the date of publication of a notice that subscription for shares has been fully completed, provided that the minimum period of subscription has lapsed. Article (89) Subscription shall be effected by a note indicating the number of shares subscribed for, the subscriber's acceptance of the company's Memorandum and Articles of Association, his selected domicile, and any other details that may be deemed necessary. The subscriber or his deputy shall sign the subscription document. The subscriber shall submit the note to the bank and shall pay the installments due against a receipt signed by the bank indicating the name of the subscriber, his selected domicile, nationality, date of subscription, the number of subscribed shares and paid installments. Subscription shall be deemed final upon receiving such receipt. The subscriber shall not cancel his subscription, without prejudice to the provisions of article (102) of this law. Article (90) Printed copies of the Memorandum and Articles of Association shall be given to each subscriber against an amount determined in the company's articles of association, and such amount shall be mentioned in the receipt provided for in the foregoing article. Article (91) The bank shall keep all funds received from subscribers for the account of the company under incorporation and shall give such funds only to the first board of directors as provided for in this law after refunding excess subscribed capital immediately following the allotment of shares in accordance with article (94) of this law. Article (92) The bank through which subscription is undertaken shall perform related operations according to the company's articles of association and shall be liable for compliance with its provisions and for any violation thereof. Article (93) The Joint Stock Company may have upon incorporation or upon increasing its capital one underwriter or more to subscribe the remaining shares. If the shares have not been fully subscribed for during the subscription period, the underwriters shall purchase the unsubscribed shares and may re-offer these shares to the public without complying with the procedures and restrictions of dealing in shares provided for in this law. The Minister of Commerce and Industry shall decree the procedures, requirements and conditions of applying the provisions of this article. Article (94) If subscription exceeds the offered number of shares after closing, the shares shall be allotted among subscribers in the manner agreed upon between the founders and the subscribers or in the manner defined in the company's articles of association. The Minister of Commerce and Industry may decide at the beginning to allot a number of shares not exceeding 15% of the company's capital among the subscribers, and the allocation proceeds thereafter as provided for in the foregoing paragraph. Article (95) Every subscription undertaken in contravention of the above provisions may be contested before courts by whom it may concern within thirty days from the closing date. Subscription may be judged null and void even if the company is in a state of liquidation. Article (96) The founders shall invite the subscribers for a constituent assembly to be held within twenty-one days from the closing date of subscription. The provisions of article (199) of this law shall apply to the procedures of the invitation. Each subscriber shall have the right to attend the constituent assembly regardless of the number of shares he owns. The assembly shall be chaired by the person elected by the absolute majority of the shares represented therein. Article (97) The constituent assembly shall consider, in particular, the founders' report on the company's incorporation, the expenses incurred and the evaluation of the in-kind shares. It shall also elect a board of directors, appoint the auditors and declare the company finally incorporated. Article (98) For the constituent assembly to be valid, a quorum of at least half the capital shall be available. If the quorum provided for in the foregoing paragraph has not been fulfilled in the first meeting, an invitation shall be sent for a second meeting to be held within twenty-one days from the date of the first meeting. The second meeting shall be valid regardless of the number of subscribers represented therein. The constituent assembly's resolutions shall be taken by the absolute majority of the shares represented therein. Article (99) If the capital of the company comprised upon incorporation or upon increasing the capital material or intangible in-kind shares, the founders or the board of directors - as the case may be - shall refer to experts to verify the accuracy of the evaluation of the in-kind shares in accordance with the principles and provisions defined in the Executive Regulation of this law. The share evaluation shall only be final after approving it by the constituent assembly or by the majority of shareholders representing two-thirds of the shares mentioned above. The holders of these shares shall have no vote in approving the evaluation thereof even if they are holders of cash shares. If it appears that the value of an in-kind share has been less than the supposed amount by more than one-tenth, the company shall reduce its capital by an amount equal to the difference. However, the holder of this share may pay the difference in cash or he may withdraw from the company. If the in-kind share has been presented by all subscribers or partners, their evaluation of it shall be deemed final with no need for any other procedure. However, if it appears that the estimated value is higher than the real value of the in-kind share, the said subscribers or partners shall be jointly liable towards third parties for the difference between the two values. The shareholder shall be given fully paid shares. Article (100) The first board of directors shall provide the Ministry of Commerce and Industry and the Bahrain Stock Exchange with the following: A declaration that capital has been subscribed for in full, the amount paid by the subscribers, their names and domiciles and the number of shares subscribed for by each one of them. The minutes of the meeting of the constituent assemble signed by its chairman. The resolutions of the constituent assembly approving the report of the founders and the evaluation of the in-kind and intangible shares - if any - and the election or appointment of the members of the first board of directors and the appointment of the auditors. The supporting documents of the validity of the incorporation procedures. Article (101) The first board of directors shall register the company and its articles of association in the Commercial Registry in accordance with the provisions of the law. The members of the first board of directors shall be jointly liable for any damages arising from the failure to effect registration as provided for in the foregoing paragraph. Article (102) If the company is not incorporated, the subscribers shall get back the amounts they have paid, and the founders shall be jointly liable for refunding these amounts in addition to paying compensation if necessary. The founders shall also bear all the incorporation expenses and shall be jointly liable towards third parties for the acts they made during the period of incorporation. If the company is incorporated, the consequences of the acts made by the founders in the course of the company's incorporation shall be born by the company together with all related expenses paid by the founders. Article (103) Any act made between the company under incorporation and the founders shall not bind the company after incorporation unless approved by the board of directors, provided that the board members do not have connection with the founder who had made such act or that they shall not profit from this act, or unless such act is approved by the group of partners or by a resolution adopted by the company's general assembly provided that any of the interested founders has no counted votes in the meeting. In all cases the interested founder shall put all related facts before the authority approving such act. Article (104) Subject to the provisions of the foregoing article, all contracts and acts made by the founders in the name of the company under incorporation shall bind the company after incorporation if they were necessary for the company's incorporation. Article (105) The founder shall exercise, in his dealing with the company under incorporation or for its account, due care and diligence expected from the ordinary man. The founders shall be jointly liable for any damages the company or third parties may sustain as a result of their failure to comply with this provision. If a founder has received any funds or information pertaining to the company under incorporation, he must repay these funds to the company together with any profits he may have gained as a result of using these funds or information. Article (106) The founders shall be jointly liable for what they have undertaken to do. Article (107) The company's articles of association shall be kept in its office, and any person may obtain a copy thereof against reasonable fees. The company's name, form, head office, date of incorporation, authorized, subscribed and paid up capital and its number in the Commercial Registry shall appear in all the company's contracts and correspondence. Article (108) If a joint-stock company is incorporated in a way incompatible with the law, any concerned party may request the company to undertake the necessary correction within one month from the date of his request. If the company does not effect the required correction within this period, the concerned person can claim at the High Civil Court the nullity of the company within one year from the date of incorporation. However, the shareholders shall not use the nullity of the company as an excuse against third parties. The company shall be liquidated as a going concern without prejudice to the right of any concerned party to institute legal proceedings for joint liability against the founders, the members of the first board of directors and the first auditors. CHAPTER TWO The Company's Capital Article (109) The company's capital must be sufficient enough to achieve its objectives, and be denominated in the Bahraini currency. However, subject to the approval of the Minister of Commerce and Industry, the company's capital may be denominated in another currency valued in the Bahraini currency. The capital shall be divided into equal shares and the Executive Regulation shall specify the minimum capital of the company and the nominal value of the share. Article (110) The company shall have an issued capital, and the company's articles of association may specify an authorized capital not exceeding ten times the issued capital. The Executive Regulation of this law may specify a minimum issued capital for each activity the company undertakes and the portion paid thereof on the company's incorporation. The issued capital shall be fully subscribed for, and each subscriber shall pay at least one-fourth of the nominal value of cash shares, provided that the remaining amount shall be paid within a period not exceeding five years from the date of the company's incorporation. Article (111) Some privileges to certain types of shares with respect to voting, profits, or liquidation's proceeds or any other rights may be provided for in the company's articles of association on incorporation, or in a resolution by the numerical majority of the partners representing at least two-thirds of the capital in an extraordinary general assembly meeting upon increasing the company's capital, provided that the shares of the same type shall be equal in respect of the advantages, the rights or the restrictions. The privileges, rights or restrictions pertaining to a specific type of shares shall not be amended unless otherwise decided by the extraordinary general assembly with the approval of the majority of votes referred to above. The Minister of Commerce and Industry shall decree the provisions, requirements and conditions of issuing preferred stocks. Article (112) Preferred stocks shall only be issued by the companies whose articles of association provide for the redemption of their shares before the expiry of their term that is linked to a concession to exploit one of natural resources or one of public utilities granted to it for a limited period of time, or to exploit any other non-renewable resource. Article (113) The shares shall be issued in its nominal value, but not in a lower value. If they are issued in a higher value, the deference shall be used to pay issue expenses and the remaining amount shall be added to the statutory reserve. Article (114) The share shall be indivisible. However, two or more persons may jointly own one share or a number of shares provided that only one person shall represent them before the company. The partners in the same share(s) shall be jointly liable for the obligations resulting from such ownership. Article (115) The shares shall be issued in the name of their owners and be negotiable. However, the company may issue bearer shares in accordance with the rules and requirements decreed by the Minister of Commerce and Industry. Article (116) The shareholder shall pay the value of the shares on the due dates. Interests shall be charged for the delay in payment once the date falls due without the need for serving a notice. If a shareholder fails to pay a due installment, the board of directors shall be entitled to sell the share after serving a notice to the defaulting shareholder by registered mail with a delivery note. If the shareholder does not pay the amount within ten days from the date of receiving the notice, the company may sell the share in the Bahrain Stock Exchange or in a public auction. However, the defaulting shareholder may pay the due installment until the date of the auction in addition to the expenses incurred by the company. The company shall recover from the proceeds of the sale the delayed installments and expenses and refund to the shareholder any excess amounts. If the proceeds fall short of the company's entitlements the company shall claim the difference by using the ordinary methods. Article (117) The first board of directors shall deliver to each shareholder - within three months from the date of the final publication of the company - an interim certificate of the shares he owns. The certificate shall particularly include the name of the shareholder, the number of shares he has subscribed for, the amount paid and the method of payment of its value, the date of payment, the serial number of the interim certificate, the company's capital and its head office. The board shall deliver, within three months from the date of payment of the last installment or of full payment of the shares value, a final certificate of the shares with a serial number, signed by two board members and stamped with the company's seal. The certificate shall especially contain the registration number of the company in the Commercial Registry, the authorized, issued and paid up capital and the number of the shares into which the capital is divided, the type and properties of the shares, the company's head office and term, if any. The minister of Commerce and Industry may exclude all or some of such details. No specific form is required for the certificate so long as it contains the details mentioned above. Article (118) The company shall maintain a register to record therein the shareholders' names, their nationalities and domiciles, the number and the serial numbers of the share certificates, and the dealings made thereon. A copy of these details shall be forwarded to the Ministry of Commerce and Industry and the Bahrain Stock Exchange. CHAPTER THREE Transfer, Disposal, Mortgage And Distraint of Shares Article (119) The shares and the interim certificates may be traded, and the company may purchase its shares in the cases and in accordance with the rules decreed by the Minister of Commerce and Industry. The disposal of the shares shall be effective against the company or third parties only upon the registration thereof in the relevant register. Trading in the shares shall be effected in pursuance of the provisions of the law of the Bahrain Stock Exchange and the internal regulation of the market. The purchaser must be a Bahraini national. However, non-Bahrainis may own and trade in shares of the Bahraini joint stock companies in accordance with the provisions of this law and with the rules and the conditions and the percentages decreed by the Minister of Commerce and Industry, except for the companies excluded by a Ministerial decree. The company may suspend the registration of the shares transfer during the period between the date of the call for a general assembly meeting and the date of this meeting. The company may refuse to register the disposal of the shares in the following cases: If the shares are mortgaged or distrained by a court order. If the shares or the interim certificates are lost and no other shares or certificates are given in lieu thereof. If dealing in the shares or the title transfer is in contravention of the provisions of law or of the rules, the conditions and the percentages decreed by the Minister of Commerce and Industry or of the company's articles of association. If the value of the shares has not been fully paid to the company or if the company claims a debt thereon. Article (120) The shares and the interim certificates may be mortgaged, donated, disposed of in any manner. The provisions of the foregoing article shall apply to such disposal. The share mortgage shall be made by marking it overleaf, and the rank of the mortgagee shall be determined from the date of entering the mortgage in the share register. The mortgagee shall receive dividends and use the rights attached to the share unless otherwise agreed upon in the mortgage contract. However, the mortgagee shall not attend the general assembly meetings or take part in its deliberation or approve its decisions. The mortgage shall not be deleted except by a declaration of acceptance of such deletion by the creditor or by a final court order. The deletion shall be marked in the share register. Article (121) No heirs or creditors of a shareholder are entitled for any reason whatsoever to request for the seizure of the company's books, documents, or property, or to demand the winding-up or the sale of the whole company, or to interfere in any way whatsoever in the management of the company's business. In exercising their rights, they shall rely only on the company's records, financial accounts and the general assembly's resolutions. Article (122) The company's property shall not be distrained to discharge debts owed by one of the shareholders. However, the shares of the debtor and its dividends may be distrained, and such distraint shall be entered in and deleted from the relevant register upon a notice by a competent authority. The distrainer and the mortgagee shall be subject to all the resolutions passed by the general assembly in the same way they apply to the distrainee or the mortgagor without having membership rights in the company. Article (123) The holders of the in-kind shares shall not dispose of their shares before the elapse of two years from the date of the final incorporation of the company. However, the holders' heirs, in the case of his death, or the bankruptcy trustee, in the case of his bankruptcy, may dispose of his shares during such period. Article (124) The founders shall not trade in the shares they have subscribed for before the publication of the balance sheet and the profit and loss account for a financial year of not less than twelve months from the date of publication of the company's incorporation unless the company's articles of association provides for a longer period. A notation shall be made on these shares indicating its type and the date of the company's incorporation. However, the titles of the shares may be transferred during the ban period by way of sale from one founder to another or from the heirs of one founder to a third party or from the bankruptcy trustee of the bankrupt founder to a third party. The provisions of this article shall apply to the shares subscribed for by the founders in the case of increasing the capital of the company before the expiry of the ban period. CHAPTER FOUR Changing The Capital 1- Increasing The Capital Article (125) The extraordinary general assembly may increase the authorized capital; and the ordinary general assembly may increase the issued capital up to the limit of the authorized capital, if any, provided that the issued capital must be paid in full before the increase. The approved increase in the issued capital must be made within the next three years to the date of the decision authorizing the increase. This period shall be calculated for any increase adopted or authorized before this law has entered into effect as of this date. However, in the cases specified in the Executive Regulation, some companies may issue new shares before the full payment of the value of the previous shares upon the approval of both the ordinary general assembly and the Minister of Commerce and Industry. The Ministry of Commerce and Industry and the Bahrain Stock Exchange shall be notified of the reports and the reasons requiring such increase. Article (126) The capital may be increased in one of the following ways: Issuing new shares for the amount of the increase. Transferring the reserve into capital through one of the following methods: Increasing the nominal value of the original shares without asking the shareholders to pay the difference, which shall instead be paid from the reserve, and the shares shall be marked with their new value. Issuing new shares for the amount of the increase and distributing them free of charge to the original shareholders in proportion to the original shares each shareholder owns. Article (127) The nominal value of the new shares must be equal to the nominal value of the original shares. The extraordinary general assembly may decide to add a premium to the nominal value of the shares and determine its amount. The net amount of this premium shall be added to the statuary reserve even if it exceeds half the capital. Article (128) The shareholders shall have priority right to subscribe for the new shares, and any condition to the contrary shall be deemed non-existent. A statement shall be published in one of the local daily newspapers declaring priority of subscription given to the shareholders, the starting and closing dates thereof and the value of the new shares. The shareholders may also be notified of this statement by registered mail. Each shareholder shall express his willingness to exercise his priority right in subscribing for the new shares within fifteen days from the date of publication of the statement referred to in the foregoing paragraph. The priority right may be assigned to a third party against a quid pro quo, to be agreed upon by the shareholder and the assignee. Article (129) The new shares shall be distributed among the shareholders who have applied for subscription in proportion to the shares they own in the company, provided that this proportion shall not exceed the new shares they have applied for. The remaining new shares shall be distributed among the shareholders who have applied for more than they own in accordance with the provisions of the foregoing paragraph. Any remaining new shares shall be offered for public subscription, and the same provisions relating to public subscription on the company's incorporation shall apply. Article (130) In the case of offering new shares for public subscription, a prospectus shall be issued containing, in particular, the following details: The reasons of the capital increase. The resolution of the extraordinary or the ordinary general assembly, as the case may be, authorizing the capital increase. The capital of the company at the time of issuing the new shares, the amount of the proposed increase, the number of the new shares and the issue premium, if any. A statement on the in-kind shares, if any. A statement on the average profits distributed by the company during the three years preceding the capital increase. A declaration from the auditor certifying the details mentioned in the prospectus. The chairman of the board of directors and the auditor shall sign the prospectus and shall be jointly liable for the accuracy of the details contained therein. Article (131) The board of directors shall publish the resolution of increasing the capital in the Official Gazette and in one of the local daily newspapers, and the resolution shall be entered in the Commercial Registry within one month from the date of increasing the capital. 2- Reducing The Capital Article (132) The company may, by a resolution of the extraordinary general assembly, reduce its capital if it is more than the company needs or if the company has sustained a loss and decides to reduce the capital to the actual value that exists. The resolution reducing the capital shall be issued only after reading the reports of the board of directors and the auditor on the reasons of the reduction, the obligations of the company and the effect of such reduction on these obligations. A copy each of the reports of the board of directors and the auditor shall be forwarded to the Ministry of Commerce and Industry. Article (133) Capital shall be reduced by one of the following means: Reducing the nominal value of the share. Canceling a number of shares equal to the amount of the decided reduction. Article (134) Capital reduction shall be made, if it is more than the company needs, by reducing the nominal value of the shares, either by giving back a part of it to the shareholders equal to the decided percentage of reduction or by discharging them of the unpaid installments of shares' value in proportion to the decided reduction. If the reduction is due to the company's losses, a number of shares equal to the decided amount of reduction shall be cancelled. In all cases the nominal value of the shares must not be less than the minimum value stipulated by law. Article (135) If the capital reduction is made by way of canceling a number of the company's shares, a number of shares owned by each shareholder shall be cancelled in proportion to the percentage of capital reduction, provided that the shareholder shall not be deprived of sharing in the company. The company shall, within one month from the date of cancellation, redeem the cancelled share certificates from the shareholders and destroy them and enter the same in the shareholders' register and notify the Ministry of Commerce and Industry and the Bahrain Stock Exchange accordingly. Article (136) Any resolution reducing the company's capital shall be entered in the Commercial Registry in accordance with the provisions of the registry law and be published in the Official Gazette and in one of the local daily newspapers. Article (137) Reduction shall not be effective against the creditors who make an objection thereto and submit their documents within sixty days from the publication date in the Official Gazette unless they are paid their due debts or have been provided with adequate guarantees for the payment of their deferred debts. 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: 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. 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: The resolution of the general assembly authorizing the issue, its date and the approval of the competent governmental authority. The total amount of the loan. The essential details to be included in the bond certificates as provided for in this law. A summary of the balance sheet and the profits and losses account for the two financial years preceding the issue of bonds. The value of the previous bonds issued by the company before and the outstanding unpaid value at the time of issuing the new bonds. The entity conducting the subscription in bonds. The amount to be paid for each bond in the case of payment in installments. The period specified for subscription. 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. The extent to which the shareholder may subscribe for the convertible bonds. The extent to which the company may amortize the bond and the conditions thereof. 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: The name of the issuing company, its entry number in the Commercial Registry and the address of its head office. The capital of the issuing company. The total amount of the loan. The name of the bond's owner if the bond is issued in the owner's name. The nominal value and the serial number of the bond. The interest rate or the return and its due dates, or the annual share determined for the bond from the company's profits. The bond collateral, if any. The conditions and dates of bond amortization. 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: Specifying the rules of converting bonds into shares, especially the value of the share on the basis of which the conversion shall be made. The bond's issue value shall not be less than the nominal value of the share. The value of the convertible bonds in addition to the value of the company's shares must not exceed the authorized capital. The period during which conversion of the bonds into shares may be requested. 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. CHAPTER SIX Membership of the Company Article (167) Subject to the provisions of the law, the founders signing the company's memorandum of association and the shareholders subscribing for its shares shall be members of the company. They shall be entitled to equal rights and liable for the same obligations. Article (168) The shares shall confer equal rights and obligations. The member shall in particular have the following rights: Receiving profit dividends decided for the shareholders. Receiving a share of the company's total property on liquidation. The company shall, when distributing dividends to the shareholders, distribute such dividends to the shareholder whose name is registered as the