Bahrain Middle East Bank - Apparent Way Forward to Hold EGM

A while back I wrote that it was highly likely that ANI (BMB's Turkish-owned) major shareholder would not attend Extraordinary General Meetings (EGMs) and that given their roughly 81% shareholding there could not be a quorum for the EGM. 

This would frustrate the ability of BMB to comply with the Commercial Companies Law (CCL) requirements to enable it to continue as a “going concern” given the bank’s negative capital.

It seems that a “solution” has been found in the CCL Section 203 as outlined in BMB’s announcement on the Bahrain Bourse of its upcoming AGM and EGM.

For the purposes of discussing and passing this Resolution, AN Investment W.L.L. shall not be entitled to count in the quorum or to vote on said Resolution, on the basis that the Bank’s total outstanding exposures which has caused the said loss of capital are to one or more related parties of AN Investment W.L.L. Such shall be in accordance with Article (203) of the Commercial Companies Law No. 21 of 2001, as amended.

This appears to be based on a broad reading of the last sentence in Section 203.

No member may vote for himself or on behalf of whoever he represents on issues in which he has personal interest or on a dispute existing between him and the company.

As outlined here, the minimum acceptable quorum for a BMB EGM (third meeting) is 25% of shareholders.

Eliminating ANI’s 80.77% from the base, means that to get a quorum at a third meeting, shareholders with 4.81% of BMB’s shares would have to attend. 

AlFawares is the registered owner of 14.48%.

If AA has done his sums right, always a concern, then unless ALF participates, an EGM cannot proceed.

Why?

Netting out ALF’s shareholding, all other shareholders comprise 4.75% short of the 4.81% required.

It’s almost certain that all of them will not attend as attested by past history. As well the substantial unclaimed dividends indicate many are sleeping, perhaps eternally. Note 27 in BMB’s FY2019 Audited Report.

If ALF or its proxy participates, then it’s likely the call for the first EGM will be successful because ALF’s 14.48% would be over 75% of BMB outstanding shareholding after exclusion of ANI’s shares.

What this means is that it is likely BMB will cross one hurdle to remain a going concern.

One step forward.

However, the key issue is finding new capital. And that will be a journey of more than 999 li.

Probably at least 200 million li.

The proverb cited above gives no guidance on the success of so long a journey.