director is held personally accountable to the company and its shareholders by Bahrain’s Company Law, if he violates his duty of loyalty to the company. He can be personally sued by the company or the shareholders for such violations. The CG Code endorses this view.
CG Code – Principle 2.1: The duty of loyalty includes a duty:
•not to use property of the company for his personal needs as though it was his own property,
•not to disclose confidential information of the company or use it for his personal profit,
•not to take business opportunities of the company for himself,
•not to compete in business with the company,
•to serve company’s interest in any transactions with the company in which he has a personal interest
To perform the above key responsibilities, the Board can be guided by following:
•Each Director should ensure that he/she has familiarized himself/herself with the by-laws of the Company, its internal regulations and the general and specific obligations of his office
•Each Director should represent the interests of all Shareholders and should act under all circumstances in the best interests of the Company
•Each Director should ensure the effective functioning of the Board of Directors (a director should not accept more than a number of other directorships so as to be able to properly discharge his duties)
•Each Director must take into account the legitimate expectations of all of the Company’s partners or stakeholders (employees, clients, executives, suppliers and creditors)
•Each Director must report to the Board any conflict of interests, whether actual or potential and abstain from taking part in voting on the related resolution
•The Director should apply to his/her duties the necessary time and attention, and should, subject to all applicable laws and regulations, consult the corporate governance and nomination committee before accepting any additional seat on another Board of Directors
•The Director should attend all meetings of the Board and meetings of the committees on which he/she sits
•The Director is under a duty to obtain all necessary information and request from the Chairman that such information be communicated
•Regarding non-public information, each Director should consider himself bound by confidentiality obligations with regards to all information learnt upon nomination or during exercise of his/her functions
•Attend the meetings of the Shareholders
•Ensure that the company has established an effective governance system and process
•Refrain from rushing into decision-making. Provide adequate time for deliberations and evaluations of transactional and financial matters
•Require sufficient notice and distribution of board papers and explanatory appendices in advance of meetings
•Convene supplemental meetings in response to requests for further information before the final decision
•Make informed decisions based on the information provided and analysis and recommendations of the company’s independent professional advisers
1.4 RIGHTS AND POWERS OF THE BOARD OF DIRECTORS
In order to fulfill above responsibilities, the Board should be fully authorized, by shareholders, to act on company’s behalf and make all high level business decisions. The Board should be authorized to make all decisions relating to:
•Right to Access Independent Advice: The CG Code (section 1.5) states that the directors should be authorized to seek independent legal or other professional advice at the company’s expense whenever they judge this necessary to discharge their responsibilities as directors. However, this should be in accordance with the company’s policy approved by the board
•Right to Access Company Secretary: The CG Code (section 1.5) states that each director should have direct access to the company secretary who should have responsibility for reporting to the board on board procedures. Moreover, the appointment and removal of company secretary should be a matter for the board as a whole, not for the CEO or any other officer
•Right to Access Company Management: The CG Code (section 1.6) states that the Board as well as each director should have free access to the company’s management beyond that provided in board meetings. Such access should be through the Chairman of Audit Committee or CEO
The board should collectively be authorized to make decisions relating to following aspects:
•Appointment, remuneration and terms and conditions of employment of the Chief Executive Officer (CEO) and other executive directors
•Investment and disinvestment of capital
•Write-off of bad debts, advances and receivables and determination of a reasonable provision for doubtful debts
•Write-off of inventories and other assets
•Determination of the terms of and the circumstances in which a law suit may be compromised and a claim/ right in favor of the company may be waived, released, extinguished, or relinquished
•To make calls on shareholders in respect of moneys unpaid on their shares
•To issue shares
•To issue debentures or any instrument in the nature of redeemable capital
•To borrow moneys otherwise than on debentures
•To make loans
•To approve annual or half-yearly or other periodical accounts as are required to be circulated to the members
•To approve bonus to employees
1.5 BOARD SIZE & COMPOSITION
1.5.1 Classification of Board Membership
The CG Code classifies board membership into three types:
•Executive director
•Non-Executive director
•Independent director
1.5.1.1 Executive Director
As defined in CG Code, an Executive Director is an officer or employee, or is otherwise involved in day-to-day management, of either:
•The company,
•Another company which is a controlling shareholder of the company,
•Another company of which the company is a controlling
