•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 shareholder,
•Another company which is controlled by a controlling shareholder of the company.
CG Code requires that executive directors should provide the board with all relevant business and financial information within their cognizance, and should recognize that their role as a director is different from their role as an officer.
1.5.1.2 Non-Executive Director
As defined in CG Code, a Non-Executive Director is any director who is not an executive director.
Non-executive directors should be fully independent of the management and should constructively scrutinize and challenge management including the management performance of executive directors.
1.5.1.3 Independent Director
An Independent Director is a non-executive director who is also independent as defined in the CG Code copied below for easy reference).
CG Code: Appendix ‘A’ – Independent Director Formal Requirements
Independent director means a director of the company 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 company (not counting director’s remuneration for this purpose) and in particular who, during the one year preceding the time in questions met all the following conditions:
(i)Was not an employee of the company,
(ii)Did not:
a.Make to, or receive from, the company payments of more than BD 31,000 or equivalent (not counting the director’s remuneration).
b.Own more than a 10% share or other ownership interest, directly or indirectly, in an entity that made to or received from the company payments of more than such amount,
c.Act as a general partner, manager, director or officer of a partnership or company that made to or received from the company payments of more than such amount,
d.Have any significant contractual or business relationship with the company which could be seen to materially interfere with the person’s capacity to act in an independent manner,
e.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 company,
f.Was not engaged directly or indirectly as an auditor or professional advisor for the company,
g.Was not an associate of a Director or a member of senior management of the company.
1.5.2 Size of the Board
Organizations are generally faced by many questions when establishing the board of directors; like how many board members should be appointed; or what are the competencies required from a board member. Bahrain’s corporate governance rules as well as company law provide guidance on what needs to be done in this regard.
Company Law – Article 172: Company shall be managed by a board of directors the formation and term of which shall be specified in the company’s articles of association. The number