Board Charter

1.0 OVERVIEW:

1. The purpose of the Board Charter is to outline the principal role of the Board of Directors (Board), the demarcation of the roles, functions, responsibilities and powers of the Board, various Board Committees of the Bank and matters reserved for final decision-making or pre-approval by the Board; and the policies and practices of the Board in respect of matters such as conflicts of interest and convening of Board meetings. Bank, the Bank or BBK shall mean Bank of Bahrain and Kuwait. Board or the Board shall mean the Board of Directors. Chief Executive, CE shall mean Group Chief Executive of the Bank

1.1 This charter is superseded by the articles of association of the Bank for matters not covered in the charter or for matters conflicting with the provisions of the articles of association. It is developed bearing in mind all prevailing relevant laws, rules and regulations of the Kingdom of Bahrain including the Commercial Companies Law No. 21 for the year 2001 and its subsequent amendments, the CBB Law and Rulebook particularly relating to Corporate Governance and Bahrain Bourse Company exchange rules and any other statutory rules or regulations.

1.3 This Charter further defines the specific responsibilities of the Board of Directors, in order to enhance coordination and communication between the Group Chief Executive and the Board and more specifically, to clarify both Board and Management accountability for the benefit of the Bank and its stakeholders

2.0 BOARD’S ROLE, AUTHORITY AND COMPOSITION:

2.1 Role of the Board:

2.1.1 The principal role of the Board is to oversee the implementation of the Bank’s strategic initiatives and its functioning within the agreed framework, in accordance with relevant statutory and regulatory structures. The Board ensures the adequacy of financial and operational systems and internal control, as well as the implementation of corporate ethics and the code of conduct.

2.1.2 The Board has delegated responsibility for overall management of the Bank to the Group Chief Executive.

2.1.3 The Board reserves a formal schedule of matters for its decision to ensure that the direction, management and control of the Bank rests with the Board at all times. This includes strategic issues and planning, performance reviews, material acquisition and disposal of assets, capital expenditure, authority levels, appointment of auditors and review of the financial statements, financing and borrowing activities including annual operating plan and budget, ensuring regulatory compliance and reviewing the adequacy and integrity of internal controls.

2.1.4 All policies pertaining to Bank’s operation and functioning are to be approved by the Board.

2.1.5 The Board is responsible to decide and circulate the agenda for the Annual General Meetings or any other meetings of the shareholders.

2.1.6 The Board must ensure equitable treatment to the minority shareholders.

2.2 Authority:

2.2.1 The Board of Directors is the ultimate decision making body of the Bank except for matters reserved for the shareholders of the Bank as delegated by the shareholders in the Bank’s article of association.

2.2.2 Consistent with the Board’s power to delegate to the Management the day-to-day operation of the Bank’s business, the Board shall exercise judgment in establishing and revising the delegation of authority for Board Committees and Management. This delegation could be for authorization of expenditures, approval of credit facilities and for other corporate actions. Such delegation may be approved and expressed under various policies of the Bank. The thresholds for the identified authorities will depend upon the operating requirements of the Bank.

2.2.3 The issues of major capital expenditure, divestitures, mergers and acquisitions, certain strategic investments would be within Board’s authority.

2.2.4 The recommendations of the Committees will be referred to the Board. In the event that the Board is unable to approve a decision of the Committee due to lack of material information or otherwise, the matter will be referred back to the Committee for further consideration.

2.2.5 The Board has full authority to seek any information it requires from the Management or any employee of the Bank at any time.

2.2.6 The Board reports to and is accountable to the shareholders of the Bank.

2.3 Board Appointment and Remuneration:

2.3.1 Bank has rigorous and transparent procedures for the appointment of Board members. Directors shall be issued with Letters/Agreements of Appointment and other relevant policies/procedures of the Bank, to familiarise each new Director with his/her powers, duties, responsibilities and accountabilities and other matters relating to his appointment. The letters of appointment shall be countersigned and acknowledged by Directors. The appointment will be subject to the criteria set out in the articles of association, which are also mentioned in the letters of appointment.

2.3.2 The form and amount of Director compensation is determined by the Board based on the Directors Remuneration and Compensation Guidelines Policy.

2.4 Board Composition and Skills:

2.4.1 The Board composition will be guided by the Bank’s Memorandum of Association and Articles of Association and shall presently comprise of 12 members.

2.4.2 The definitions of ‘executive directors’, ‘non-executive directors’ and ‘independent directors’, shall carry the same meanings as that defined (from time to time) by the Central Bank of Bahrain. The present definition as per the Rulebook is reproduced in Appendix 1.

2.4.3 The Board of the Bank recognises the need for composition of the Board to reflect fair mix of independence, skills and expertise; and facilitate objectivity in decision making. High levels of professional skills and appropriate personal qualities are pre-requisite for directorships.

2.4.4 Candidates for the Board whether appointed by shareholders or submitted for elections shall be considered by the Nomination, Remuneration and Corporate Governance Committee, and recommended to the Board for onward recommendation to the shareholders for appointment, at their next general meeting, in accordance with the qualifications acceptable by the Board taking into consideration the overall composition and diversity of the Board and areas of expertise that new Board members might be able to offer.

2.4.5 Appointment of Directors is subject to prior CBB approval.

2.4.6 The Board shall consist of only non-executive directors. The Board will have adequate number of “Independent” Directors in keeping with regulatory requirements.

2.4.7 There will be separation and clear division in the roles and responsibilities of the Chairman and the Chief Executive. The Chairman shall not be the Chief Executive in any case. The Chairman of the Board shall be an “Independent” Director.

2.5 Other Board Memberships:

2.5.1 No Board member may have more than one Directorship of a Retail Bank or a Wholesale Bank. This means an effective cap of a maximum of two Directorships of banks inside Bahrain. Two Directorships within the same Category (e.g. Retail Bank) are not permitted. The Bank may approach the CBB for exemption from this limit where the Directorships concern the Banks or financial institutions within the same group.

2.5.2 A Director should not hold more than three directorships in public companies in Bahrain with the provision that no conflict of interest may exist, and the Board shall not propose the election or reelection of any director who does.

2.5.3 The number of other company boards on which a Director may serve shall be subject to a case-by-case review by the Nomination, Remuneration and Corporate Governance Committee, in order to ensure that each Director is able to devote sufficient time to perform his or her duties as a Director.

3.0 PRINCIPAL RESPONSIBILITIES OF THE BOARD,
THE CHAIRMAN AND THE CHIEF EXECUTIVE:

The key responsibilities of the Board, the Chairman and the Group Chief Executive are outlined in Appendix 2.

4.0 ELECTION OF DIRECTORS, BOARD MEETINGS,
RIGHTS OF DIRECTORS:

4.1 Election:

4.1.1 Directors will be elected/appointed by the shareholders at the Annual General Meeting.

4.1.2 Each proposal by the Board to the shareholders for appointment or election or re-election of a Director shall be accompanied by a recommendation from the Board, a summary of the advice of the Nomination, Remuneration and Corporate Governance Committee, and the following specific information:

a. The term to be served
b. Biographical details and professional qualifications
c. In the case of an Independent Director, a statement that the Board has determined that the criteria of independent Director have been met
d. Any other directorships held
e. Particulars of other positions which involve significant time commitments
f. Details of relationships between the candidate and the Bank or other Directors of the Bank.

4.1.4 In notices of meetings at which Directors are to be elected, the Bank should ensure that:

(a) Where the number of candidates exceeds the number of available seats, the notice of the meeting should explain the voting method by which the successful candidates will be selected and the method to be used for counting of votes; and
(b) The notice of the meeting should present a factual and objective view of the candidates so that shareholders may make an informed decision on any appointment to the Board.
(c ) The Bank will at all times comply with the regularity time lines for receiving names and other regularity requirements of candidates and submission of these to the Central Bank of Bahrain as well as announcements thereof.

4.2 Board Membership and Tenure:

Members of the Board of Directors shall be elected/appointed for a three year renewable term subject to CBB approval. but shall be eligible for re-election/reappointment, if recommended by the Board, for a further three-year period.

4.3 Procedure for resignation of Directors:

If a Director needs to resign from the Board he/she should provide a written statement to the Chairman, for circulation to the board and after acknowledgment by the Board.

The Bank must immediately notify the CBB when a Director, for whatever reason, ceases to hold his position. The notification must include the reasons for the action taken.

4.4 Filling of Vacancies on the Board of Directors:

If the office of one of the Board members becomes vacant, he/she shall be replaced by the member next to him in the number of votes in the latest elections of the Board. The new member shall complete the unexpired term of his predecessor. If the vacant offices are equal to one-fourth of the original offices, the Board of Directors shall invite the ordinary general assembly to convene within two months from the date of the last office becoming vacant to fill them. If the vacant offices exceed more than half the number of the Board members, the Board shall be deemed dissolved and new elections shall be called for to elect a new Board of Directors for the company.

4.5 Board Attendance:

4.5.1 All Board members must attend at least 75% of all Board meetings within a calendar year. Attendance by proxy is prohibited.

4.5.2 Board membership may be terminated if Board members are unable to attend three consecutive Board meetings (without lawful excuse notified in writing to the Board).

4.5.3 In the event that a Board member has not attended at least 75% of Board meetings in any given financial year, the Bank shall immediately notify the CBB indicating which member has failed to satisfy this requirement, his level of attendance and any mitigating circumstances affecting his non-attendance.

4.5.4. The absence of Board members at Board and committee meetings shall be noted in the minutes including attendance of part of the meeting.. Board attendance percentage will also be reported during any general assembly meeting when Board members stand for re-election.

4.5.5. Voting and attendance proxies by Directors for Board and committee meetings are prohibited at all times.

4.5.6. The Board members can attend Board meetings via telephone conference or video conference subject to the following:
Each Board member can only attend one Board meeting via telephone conference or video conference per annum and only two Board members are allowed to participate via the said means per meeting (on a first apply first serve basis) for scheduled meetings only. However, for unscheduled meetings it will be decided upon on a case by case basis. Further, the level of participation using these means shall be decided on a case by case basis during force majeure events.

4.6 Appointment of Group Corporate Secretary:

The appointment and removal of the Group Corporate Secretary is subject to the approval of the Board. The Board recognises the fact that the Group Corporate Secretary should be suitably qualified and capable of carrying out the duties required of the post.

4.7 Meetings and Quorum:

4.7.1 Board meetings will be conducted at least on a quarterly basis (minimum four) and Board Committees will meet as often as required. At least half the Board meetings in any twelve-month period must be held in the Kingdom of Bahrain.

4.7.2 The Group Corporate Secretary shall prepare and distribute a timetable for the meetings.

4.7.3 Meetings may also be held through video/tele-conferencing facility as per the rules set out in clause 4.5.6 above.

4.7.4 At least seven Directors (including the Chairman or Deputy Chairman) are required to attend the Board meetings in person including one independent Director in order to ensure a quorum. Should one or more members be required to leave the meeting room at the time of discussing a matter due to conflict of interest, this would not affect the quorum. Attendance by proxy is prohibited. Quorum must be maintained throughout the meeting.

For the sake of this document in person shall also mean attending via telephone or video conferencing.

4.7.5 The Chairman will chair all sessions of the Board. In absence of the Chairman at a meeting, the Deputy Chairman will chair the meeting.

4.7.6 The Group Chief Executive or his delegate will be aninvitee in all Board and its committee meetings.

4.7.7 Any member of the Executive Management or other Management members may be invited to attend for particular items within their responsibility. The Board may also invite external parties such as the auditors, solicitors and consultants as and when the need arises. The CE or any other invitee from the Management shall leave the meeting room if requested so by the Chairman.

4.7.8 To facilitate free and open communication among Independent Directors, each Board meeting can be preceded or followed with a formal meeting at which only Independent Directors are present, except as may otherwise be determined by the independent Directors themselves. The said meeting will take place at least once a year.

4.7.9 Bank has an automated system of communication with Directors and maintenance of Board records. This facilitates the Board to take timely and studied decisions and adopting resolutions, either during the meetings or by circulation.

4.8 Voting Rights:

4.8 Voting Rights:

4.8.2 Any attendee who is not a member of the Board shall not vote on any matter coming before the Board for a vote.

4.8.3 All decisions of the Board will be based on a simple majority of the members present at the meeting in person. In the event of a tie, the Chairman or in his absence, the Deputy Chairman of the Board will have a casting vote.

4.8.4 The Board may adopt resolutions by correspondence, including electronic means, provided that in order for resolutions taken in this manner to be valid, they shall be approved by all the members. Any member to whom a proposed resolution is sent and who fails to respond within three working days following the date on which the proposed resolution is sent to him shall be considered to have approved the resolution. It is the responsibility of the Group Corporate Secretary for the timely follow up in case it is needed

4.9 Meetings and agenda:

4.9.1 The Board of Directors shall meet at the summons of its Chairman or his Deputy or if requested to do so by at least two Directors. A meeting of the Board of Directors shall be valid if attended by not less than seven Directors in person including one independent Director

4.9.2 The notice of a Board meeting should be given in advance of the meeting. The Chairman, Group Chief Executive and Group Corporate Secretary shall undertake the primary responsibility of preparing the Board’s agenda. The agenda should include matters specifically reserved for the Board’s decision.

4.9.3 Save in urgent cases, as a matter of best practice and to allow sufficient time for Directors to consider the information, the Group Corporate Secretary shall provide the members with an agenda and any necessary documentation as early as possible and in general, at least seven calender days before a meeting takes place. Where there is a need to table a report, a brief précis of findings and/or recommendations should be presented.

The report for the Board or its committees may also be uploaded to the Board of Director portal at any time.

4.9.4 A record of Board submissions and papers, and of materials presented to the Board, shall be maintained and held by the Group Corporate Secretary together with minutes of meetings. All such records are accessible to members.

4.9.5 Directors shall have access to the Bank’s Executive Management through the Group Chief Executive or through the Group Corporate Secretary as per arrangement consented by the Group Chief Executive relating to meeting and agendas. In all other cases the Directors shall have complete access to the Executive Management through the Chairman of the Board.

4.10 Independent Professional Assistance:

The Board members are entitled to obtain independent professional advice relating to the affairs of the Bank or to their individual responsibilities as members subject to approval by the Board.

4.11 Director’s Professional Development:

4.11.1 The Board is required to be up to date with current business, industry, regulatory and legislative developments and trends that will affect the Bank’s business operations.

4.11.2 Immediately after appointment, the Bank will provide a formal induction to the new Board members.

4.11.3 Meetings will also be arranged with Executive Management, Heads of Divisions and the Bank’s auditors. This will foster a better understanding of the business environment and markets in which the Bank operates.

4.11.4 The induction program will also include meetings with the Chairman and, if necessary, legal counsel or compliance officer to review the Board’s role and duties, particularly covering legal and regulatory requirements.

4.11.5 A continuing awareness program is essential and it may take many different forms, through distribution of publications, workshops, presentations at Board meetings and attendance at conferences encompassing topics on directorship, business, industry, regulatory developments. Bank will have rigorous training procedures for the continuous development and awareness of Board members, on need-based basis and as a minimum 15 hours of training shall be arranged and attended by Board members or otherwise compensated by Board members attending sessions outside the Bank or using the Bank’s E-Learning platform.

5.0 CODE OF CONDUCT, CONFLICTS OF INTEREST, INSIDER TRADING:

5.1 The members of the Board should ensure that they conduct their affairs with a high degree of integrity, taking note of applicable laws, codes and regulations.

5.2 A member of the Board must not take any benefit from any projects or investments which are managed by the Bank or promoted to its customers or potential customers except for Board related remuneration in the performance of his/her fiduciary duties to the investors of the project/investment (i.e. Director is appointed as member of the Board of special purpose vehicle or other operating companies set up by the Bank for projects/investments). The Director must not receive any commission, fees, shares/consideration in kind or other remuneration of incentives in respect of the performance of the project/investment. Any Board-related remuneration received by the Director must accordingly be declared to the Board on an annual basis.

5.3 The Board has approved a Code of Conduct for Directors. The Board has also approved the Code of Ethics for Executive Management and members of staff of the Bank. In addition, the Bank has adopted a separate gifts policy to govern the receipt and acceptance of gifts by members of staff and the appropriate declaration of any gifts received. ‘A separate Whistle Blowing Policy’ covering Directors and all the staff of the bank is adopted’. The Code of Conduct binds signatories to the highest standard of professionalism and due diligence in discharging their duties. The Codes outline areas of conflict of interest, confidentiality and responsibilities of the signatories.

5.4 A Director shall declare to the Board any personal interest, whether direct or indirect (of ‘connected persons’), he may have in matters brought before the Board. This declaration shall be recorded in the minutes and the interested Director shall leave the meeting room during the debates or voting on the resolutions to be adopted in this respect and if the issue is sent by circulation the concerned Director shall not receive any information or correspondence on the issue and will not be asked to vote. For previously undeclared or unknown conflict of interest the Director concerned will immediately inform the Group Corporate Secretary of his conflict and shall not take part in the decision.

5.5 Any decisions to enter into transactions, under which Bank’s Directors would have conflicts of interest that are material, shall be formally and unanimously approved by the full Board. Directors must inform the entire Board of (potential) conflicts of interest in their activities with, and commitments to other organizations as they arise and leave the meeting room during the time of discussing those subjects and if the issue is sent by circulation the concerned member shall not receive any information or correspondence on the issue and will not be asked to vote. For previously undeclared or unknown conflict of interest the Director concerned will immediately inform the Group Corporate Secretary of his conflict and shall not take part in the decision. This disclosure must include all material facts in the case of a contract or transaction involving the Director.

5.6 All Directors must declare in writing all of their other interests in other enterprises or activities (whether as a shareholder of above 5% of the voting capital of a company, a manager, or other form of significant participation) to the Board (or the Nomination, Remuneration and Corporate Governance Committee or Audit & Compliance Committee) on an annual basis.

5.7 The Chairman of the Board shall communicate to the Annual General Meeting, when it is convened, the result with respect to the significant transactions in accordance with article 189 of the Commercial Companies Law or amendments thereof.

5.8 The Board shall disclose to the shareholders in the Annual Report any abstention from voting as a result of a conflict of interest and will disclose to the shareholders any authorisation of a conflict of interest contract or transaction.

5.9 All Board members and members of Executive Management must declare in writing all of their and of their ‘connected persons’ holding and interests in BBK and other entities, annually in the form and manner as provided in the Insider Trading/Key Persons Procedure.

5.10 The Bank has established Insider Trading/Key Persons Procedures, consistent with the CBB and Bahrain Bourse Company guidelines, to ensure that the Insiders/Key Persons are aware of the legal and administrative requirements regarding holding and trading in the Bank’s securities, with the primary objective of preventing abuse of inside information. The responsibility for ensuring compliance with Insider Trading/Key Persons procedure is entrusted to the Audit & Compliance Committee of the Board. The procedural details and requirements are contained in the Insider Trading/Key Persons Procedure.

5.11 All Directors (individuals and institutions who nominate Directors along with their ‘connected persons’) are considered as ‘Insiders’ or ‘Key Persons’. The definitions of ‘Insider’ and ‘Key Person’ are included in Appendix 1.

5.12 Bank protects members of the Board by insuring them against personal liability as per the Directors’ Compensation Policy through a Directors and Officers Liability Insurance cover.

6.0 BOARD RESOLUTIONS AND MINUTES:

6.1 The Group Corporate Secretary shall minute the proceedings and resolutions of all Board and its Committee meetings. These Resolutions will be promptly no later than 2 business days communicated to concerned executives of the Bank.

6.2 Minutes will be tabled for circulation for endorsement at the subsequent meeting by the Group Corporate Secretary and approved by the Chairman of the Board of Directors and the members present at the meeting.

6.3 A Director who objects to any resolution adopted by the Board shall have his objection recorded in the minutes and if not present or take part of in discussion of an item in the meeting shall request to record his objection if any at the time of ratifying the resolution in the subsequent Board meeting.

6.4 All resolutions by circulation should be tabled at the subsequent Board meeting for ratification.

7.0 BOARD, DIRECTORS AND COMMITTEE EVALUATION:

7.1 The Board shall perform a self-evaluation on an annual basis and its own effectiveness and composition; and initiate suitable steps for any amendments. The Board shall review its Charter at the start of each new term of the Board or whenever needed.

7.2 The evaluation process shall also cover the review of the performance of each individual Board member, his attendance and his constructive involvement in discussions and decision making.

7.3 The Board will also review self-evaluations of the Board Committees and consider appropriately any recommendations arising out of such evaluation.

7.4 While the evaluation is a responsibility of the entire Board, it will be organized and assisted by the Nomination, Remuneration and Corporate Governance Committee.

7.5 The Board will report to the shareholders, at each annual shareholder meeting, that evaluations have been done and report its findings.

7.6 The Chairman or the Group Corporate Secretary shall confirm to shareholders when proposing re-election of a Director that, following a formal performance evaluation, the person’s performance continues to be effective and continues to demonstrate commitment to the role.

8.0 COMMUNICATION WITH SHAREHOLDERS

8.1 The Bank has an open policy on communication with its shareholders. The Bank has an approved ‘Disclosure Policy’ which is consistent with Basel III requirements.

8.2 The Board will ensure that the Annual General Meeting (AGM) and any other general shareholders meetings are conducted in an efficient manner and serves as a crucial mechanism in active shareholder communications. Key ingredients behind this include the supply of comprehensive timely information to shareholders and the encouragement for their active participation in the AGM.

8.3 Shareholders are invited by the Chairman to attend the General Shareholders meetings. The Chairman and other Directors attend that attend will be available to answer any questions.

8.4 On annual basis, the Board shall submit report on Corporate Governance to the AGM as a separate agenda item, addressing implementation of and non-compliance with corporate governance regulatory requirements.

8.5 The Bank is at all times mindful and conscious of its regulatory and statutory obligations regarding dissemination of information to its shareholders.

8.6 A suitable section on the website provides appropriate and useful information to the shareholders.

8.7 Bank would advise the Bahrain Bourse Company issues relating to the shareholders on a timely basis and it would be posted on the Bulletin Board of the exchange.

8.8 Shareholders can complete an online form on the Bank’s website to forward any queries they may have.

8.9 Shareholders Meeting:

a. The ordinary General Meeting of the shareholders will be summoned by the Chairman of the Board of Directors at the time and place as decided by the Board of Directors subject to provisions of the law in this respect. The Ordinary General Meeting will be held at least once in every financial year within three months following the end of the financial year of the company. The Board of Directors may summon the Ordinary General Meeting at any time if requested to do so by the Auditors or a number of shareholders representing 10% of the capital of the company provided that they shall have serious cause for such request.

b. The Auditor may summon the Ordinary General Meeting in the cases as per provisions of the Law.

c. The Ministry of Industry Commerce & Tourism may summon the General Meeting to convene on the lapse of one month following the date fixed for convening such meeting without a meeting being convened, or if the number of members of the Board of Directors falls below the required quorum for holding the Board’s meetings, or at the request of a number of shareholders representing 10% of the capital of the Company provided that they shall have reasonable grounds justifying such request.

d. The Minister of Industry Commerce & Tourism may by resolution summon the General Meeting to convene whenever he deems that if there are reasons requiring such action.

9.0 SHAREHOLDERS RIGHTS

9.1 Shareholders of the Same Class:

a. All shareholders of the same type, class and series shall be treated equally and will carry the same rights.

b. All investors shall be able to obtain information about the rights attached to all types, series or classes of shares before they purchase, where applicable. Any changes in voting rights shall be subject to approval by those shareholders which are negatively affected.

c. Bank shall protect the interests of minority shareholders and ensure their equitable treatment.

d. The Bank shall encourage the attendance of shareholders at all shareholder meetings.

e. Where shareholders are unable to attend, the Bank will make provision for such shareholders to vote by proxy, subject that such proxy is revocable and provides for two-way voting item.

f. Processes and procedures for general meetings shall allow for equitable treatment of all shareholders.

9.2 Other Shareholders Rights

a. The Bank will protect all rights of shareholders in keeping with the Memorandum and Articles of Association of the Bank, Article 168 of the Commercial Companies Law No. 21 of 2001 or amendments thereof and other legal and regulatory provisions.

b. Basic shareholders rights include but are not limited to:

Secure methods of ownership registration
The transfer of shares
Obtaining relevant and material information on the Bank on a timely and regular basis
Electing and removing members of the Board
Sharing in the profits of the Bank and receiving profit dividends decided for the shareholders
Receiving a share of the Bank’s total property on liquidation
Participating in the Bank’s management, whether through the general assemblies and as a member of the Board of Directors, according to the Articles of Association Obtaining information/details comprising the Bank’s balance sheet for the past financial year, the profit and loss account and the reports of the Board of Directors and the Auditor, in hard copy format or in soft copy as available on the website Filing lawsuits to invalidate any resolution issued by the general assembly or by the Board in contravention of the law, the public order or the Memorandum or the Articles of Association Disposing of the shares and having a priority in subscribing for new shares in accordance with the provisions of the law Examine the Bank’s records and obtain copies according to the conditions and procedures defined in the Articles of association, provided that the use shall not prejudice the Bank’s interests or financial position or third parties

c. Shareholders shall also have the right to participate in, and to be sufficiently informed on decisions concerning fundamental corporate changes, such as:

Amendments to the statutes, or articles of incorporation or similar governing documents of the Bank;
The authorization and approval of additional or new shares or securities; and
Extraordinary transactions, including the transfer of all or substantially all assets that in effect result in the sale of the Bank.

Shareholders’ rights shall be disclosed on the Bank’s website.

10.0 EXTERNAL TRANSPARENCY:

10.1 The Bank provides information on all events that merit announcement, either on its website – www.bbkonline.com – or social media, through newspapers, stock exchanges and other channels.

10.2 The Bank’s three-year financials are posted on the website together with the last two years’ financials in Bank’s Annual Reports.

10.3 The Bank uses an electronic intranet bulletin board for communicating with its staff on general matters and sharing information of common interest and concern.

10.4 The Annual Report will contain a separate section on Corporate Governance and Disclosures, which will cover details on the number of Board meetings, information on Directors, Board Committees and other related information. The Chairman’s Report in the Bank’s Annual Report may review major events during the past financial year and the outlook for the future.

10.5 On an annual basis, the Bank will submit, as an attachment to the year-end quarterly Prudential Information Returns (PIR), a report recording the meetings during the year by the Board as per the requirement of the Central Bank of Bahrain.

10.6 The remuneration paid to the Chairman and members of the Board shall be published in the Annual Report.

11.0 CONCLUSION:

11.1 This Board Charter had been developed with the intention of providing an informative written reference for Board members and for others who work with the Board. The provisions in this document are consistent with the regulatory requirements under the Central Bank of Bahrain Rule Book and with best market practice. Although this document sets forth the key principles under which the Board operates; it is a statement of intention.

Accordingly, it is a working document that can change from time to time as the Board considers appropriate and as circumstances and conditions change.

11.2 Wherever necessary, CBB/Board approval should be obtained for any material exceptions.

11.3 This document is not intended to supersede the requirements under Bank’s Memorandum of Association and Articles of Association. In the case of a conflict between this document and the Memorandum of Association and Articles of Association, the provisions in the Memorandum of Association and Articles of Association will govern, unless and until the relative provisions are duly amended through appropriate corporate action.

Appendix 1

Definitions:

1. Directors:

The Directors must be identified in the annual report as executive, non-executive, and independent, as follows, as per CBB Rule Book:

a) Executive Director (or ‘Managing Director’ under the Commercial Companies Law ‘) – A person who is involved in the day-to-day management and/or is in full-time employment of the bank and/or any of its affiliates or subsidiaries or parent companies. An Executive Director may not occupy the post of ‘Chairman’;

b) Non-Executive Director – A person not involved in the day-to-day management and/or is not a full-time salaried employee of the bank and/or any of its affiliates, or subsidiaries or parent companies;

c) Independent Director –

Determination by the Board: Under Module HC an ‘independent director’ is a director whom the board has specifically determined has no material relationship which could affect his independence of judgment, taking into account all known facts. The board should consider that, although a particular director meets the formal requirements, he may not be independent owing to specific circumstances of the person or the bank, ownership structure of the bank, or for any other reason. The board’s determination should be a good faith finding after diligent review and full discussion.

Formal Requirements:
‘Independent director’ means a director of the bank who, or whose family shareholders either separately or together with him or each other, does not have any material pecuniary relationships or transactions with the bank (not counting director’s remuneration for this purpose) and in particular who, during the one year preceding the time in question met all the following conditions:

(a) Was not an employee of the company;

(b) Did not:

(i) Make to, or receive from, the bank payments of more than 31,000 BD or equivalent (not counting director’s remuneration); This excludes dividends, deposits, investment accounts and credit facilities from the payments referred; reference to such payments only applies to contractual payments for services rendered and to which the BD 31,000 threshold should apply

(ii) Own more than a 10% share or other ownership interest, directly or indirectly, in an entity that made to or received from the bank payments of more than such amount;

(iii) Act as a general partner, manager, director or officer of a partnership or company that made to or received from the bank payments of more than such amount;

(iv) Have any significant contractual or business relationship with the bank which could be seen to materially interfere with the person’s capacity to act in an independent manner. Dividends, deposits, investment accounts and credit facilities are to be considered here.

(c) Did not own directly or indirectly (including for this purpose ownership by any family member or related person) 5% or more of the shares of any type or class of the bank;

(d) Was not engaged directly or indirectly as an auditor or professional advisor for the bank, and

(e) Was not an associate of a Director or a member of senior management of the bank.

The Board on annual basis shall review the independence of Directors as per the above mentioned criteria.

Any term beyond six years for a director shall be subject to particularly rigorous review from the point of ‘independence,’ and shall take into account the need for progressive refreshing of the Board. Appropriate disclosure to CBB shall be made and the appointment will be subject to CBB approval.

Note 1

A controller of a conventional bank licensee is a natural or legal person who either alone, or with his associates:

(a) Holds 10% or more of the shares in the licensee, or is able to exercise (or control the exercise of) 10% or more of the voting power in the licensee; or

(b) Holds 10% or more of the shares in a parent undertaking of the licensee, or is able to exercise (or control the exercise of) 10% or more of the voting power in the parent undertaking; or

(c) Is able to exercise significant influence over the management of the licensee or the parent undertaking.

Note 2

“Associate” includes:

(a) The spouse or child of a controller;
(b) An undertaking of which a controller is a Director;
(c) A person who is an employee or partner of the controller;
(d) If the controller is a corporate entity, a Director of the controller, a subsidiary of the controller or a Director of any subsidiary undertaking of the controller.

Note 3

‘Senior Management’ as per CBB would mean ‘Executive Management’ of the Bank, which is defined below.

2. Executive Management:

The definition of Executive Management for the purpose of this document is as adopted by the Nomination, Remuneration and Corporate Governance Committee.

‘Executive Management’ shall mean Group Chief Executive, General Managers, Assistant General Managers (or equivalent), Direct reports of the Group CE at senior manager level and higher, General Managers of wholly owned subsidiaries, GM Internal Audit and the Group Corporate Secretary.

3. Insiders/Key Persons:

(a) “Insider” as per CBB Rule Book means any person who has obtained inside information;

(1) By virtue of his employment or profession;
(2) Being an officer or shareholder of the issuer of the securities; or
(3) Through illegal means.

A person may be an insider if he is already aware that such information is classified as inside information even though none of the above applies to him.

All persons who have access to or come into possession of material inside information before its public release are considered insiders. Such persons include controlling shareholders, “directors and senior management”, officers and employees, and frequently should also include any officials of the CBB and the Exchange who have access to such information, outside attorneys, accountants, auditors, underwriters, investment bankers, public relations advisers, advertising agencies, consultants and other independent contractors. The husbands, wives, immediate families and those under the control of insiders may also be regarded as insiders. Where acquisition or other negotiations are concerned, the above relationships apply to other parties to the negotiations as well.

(b) Key Persons:

As per Bahrain Bourse Company, Key Persons refer to members of the Bank’s Board of Directors, Senior Management, the Bank itself, and such other persons as decided by the Board to have access to inside information relating to the Bank from time to time. While key persons may have access to inside information from time to time by nature of their duties performed, they do not necessarily always possess inside information.

(c) Under BBK’s framework, key persons will include:

“Permanent Insider” means The Bank itself, Managers and above involved in treasury stock trading, the stock brokerage staff, the Board of Directors, the CE, the Deputy CE’s, all General Managers and Assistant General Managers, the Head of institutional Banking, the Head of business development, all employees of level Manager and above in the Financial Control and Planning Division, the Group Chief Internal Auditor, the Head of Compliance and AML, the Group Corporate Secretary and Assistant Group Corporate Secretary, the Head of Corporate Communications Department and the persons under the guardianship or control of all the persons mentioned herewith. “Temporary Insiders”: means any person who is an insider, but not a permanent insider namely: The External Auditor firm, the Advertising agency firm, the share registrar and the Employee shares trustee firm.

All key persons will be considered as insiders.

Appendix 2

Principal responsibilities of the Board

Governance

Approve the Bank’s corporate governance framework and ensure it conforms to best practices and regulatory and statutory requirements.
Approve the organisational/management structure and responsibilities.
Provide effective oversight over Management’s activities.

Strategic

Approve the vision and strategy proposed by Management.
Approve Management’s long term corporate strategy and performance objectives and ensure appropriate resources are available.Review the bank’s business plans and the inherent level of risk in these plans. Assess the adequacy of capital to support the business risks of the bank.
Appropriately disseminate strategic plan of Bank.

Performance Measurement Systems

Approve performance objectives and performance measurement systems.
Review the performance of Board, Board Committees and Executive Management.

Business Decisions

Approve and monitor the progress of material financial restructurings, including mergers, acquisitions, divestitures and acquisitions, annual budgets, dividends etc. affecting the balance sheet.

Approve financings and changes in authorised capital.
Approve entering into, or withdrawing from, businesses or service lines.

Human Resources

Define the goals and objectives of the CE and Executive Management and review performance at least annually. Ensure that succession programs and plans are in place.

Financial Performance

Approve the annual budget and targets, annual financials and interim results and monitor financial performance.
Ensure financial results are reported fairly and in accordance with IFRS.
Recommend to shareholders the Annual Report / financial statements released by Management and ensure that any reports issued by the Bank, including the financial statements, present a ‘true and fair’ view of its position and performance.

Compliance

Ensure the Bank operates at all times within applicable laws and regulations, including an effective Code of Conduct and Anti Money Laundering and Countering Financing of Terrorism policies.
Ensure that the Bank’s policies and procedures manuals comply with all government and regulatory requirements covering all operations.

Communications

The Board should ensure that there is an agreed communications strategy and procedure including agreement about appropriate channels and spokespersons. Develop and implement an investor relations programme or shareholder communications process for the Bank.

Risks

Approve the risk parameters / policies and the Bank’s risk appetite.
Ensure principal risks are identified and Management has implemented appropriate systems to manage these risks.
Ensure that the systems and controls framework, including the Board structure and organizational structure of the Bank is appropriate for the Bank’s business and associated risks.

Internal Controls

Assess the adequacy of the systems of risk management, internal control, control environment and legal compliance.

Delegation of Authority

Approve the delegation of responsibilities and authorities to Board Committees and to Executive Management; and reserve certain powers for the Board.

External Auditors

Recommend the appointment of the external auditors (and the remuneration payable); to the shareholders and seek their no objection.

Reporting to Shareholders

Report annually to the Shareholders on the Board’s stewardship for the preceding year.

Litigation

Monitor litigation that may have a material impact on the Bank.

Appropriation of Profit

Recommend to shareholders on appropriation of profit, payment of dividend, allocation to reserve account, donations and remuneration to Directors.

Succession Planning

Determination of a succession plan for CE and Executive Management.

Listing Requirements

Oversee the ongoing obligations in respect of the listing requirements, including but not limited to issues relating to disclosure, dissemination of price sensitive information and other communication, and the prevention of market abuse and insider trading;

Principal Responsibilities of the Chairman:

The Chairman is responsible for the overall leadership and efficient functioning of the Board of Directors. The Chairman of the Board shall have the following duties:

Maintain a role in recommending the skills and experience that the Board should contain and exhibit , for its effective operation;
Encourage active engagement and participation by all members of the Board;
Ensure that new Directors participate in a full, formal and tailored induction program;
Identify the development needs of the Board as a whole to enhance its overall effectiveness as a team;
Promote the highest standards of corporate governance;
Ensure the long-term sustainability of the Bank
Ensure the continual improvement in quality and caliber of the Executive Management;
Establish a close relationship of trust with the Chief Executive and the Executive Management, provide support and advice while respecting their executive responsibility; Meet regularly with the Chief Executive to discuss issues of importance and to ensure the effective alignment of goals of Executive Management with that of the Board; Provide coherent leadership to the Bank including, in conjunction with the Chief Executive, representing BBK with customers, suppliers, governments, financial institutions, the media, the community and the public; Set the Board’s agenda;

Ensure that Directors receive accurate, timely and clear information to enable the Board to take sound decisions, monitor effectively and provide advise to promote the success of BBK; Ensure clear structure for the effective running of the Board Committees.

Principal Responsibilities of the Group Chief Executive:

The Group Chief Executive is responsible for the day-to-day management, operations and administration of the Bank.

The Chief Executive shall have the following duties:

Implement, manage and administer corporate business strategy with the aim of executing the business plans and budgets of the Bank; Manage the overall human resources and skills/competencies pool to ensure the effective and efficient running of the Bank; Represent BBK with customers, suppliers, governments, financial institutions, the media, the community and the public; Formulate and recommend strategic objectives and plan of action for continuously enhancing shareholders’ value to Board of Directors; Ensure adherence to policies and procedures, applicable regulations and laws, and monitoring exceptions and serious deviations; Manage the Assets and Liabilities of the Bank in accordance to Board policy and regulatory requirements; Manage the risk portfolio of the Bank.