Reinforcing Security Rights in Bahrain
On 28th January, 2026, Law No. 3 of 2026 promulgating the Secured Transactions Law (the “Law”) was ratified and promulgated in the Official Gazette. Notably, the objective of the Law, were, among other factors, recognition of security rights over movable assets without requiring transfer of possession and its enforcement in a fair and equitable manner. While the Law is set to come into effect from the first day of the month following twelve months from the date of publication in the Official Gazette (with its executive regulations, within eight months from the day of publication), it is necessary to highlight the Law’s inherent aspects as follows:
1. Scope of Application
By virtue of Article 3 of the Law, the collateral is effectively extended to cover tangible and intangible movable assets (whether current or future) and includes but is not limited to accounts with financial institutions, securities, equipment and work tools, etc. However, it excludes from its scope: (1) expenses, wages, salaries and labor compensation, (2) public funds and waqf funds and (3) future rights related to inheritance and wills.
2. Creation of Security Right
Article 6 of the Law, as a prerequisite towards the creation and effectiveness of a security right between parties, requires the security agreement to be in writing (subject to the manner to be described in the Law’s executive regulations) and includes other characteristics such as but not limited to including a clear and identifiable description of the collateral in the security agreement and possessing ownership or authorization to create a security right. Furthermore, a security right may be secured on present or future obligations.
3. Establishment of Electronic Registry
Article 7 of the Law envisages the creation of an electronic registry to record notices of security rights with public accessibility, as subject to the controls to be specified by the Law’s executive regulations. The electronic registry effectively acts as a database and where concerned parties may submit a request to obtain a report consisting of information contained in the electronic register with such report acting as authoritative evidence against all persons on aspects of proof of date, time of notice registration and information contained therein.
4. Enforcement of Security Rights
Article 8 of the Law sets out the various manners in which security rights under the Law can be enforced against third parties and includes (1) registering a notice in the electronic registry and (2) registering a notice in the electronic registry regarding a security agreement containing a condition for the transfer of possession.
Towards enforcement of security rights, Article 40 of the Law permits the secured party, upon a debtor’s breach of obligations under the secured right to undertake actions such as acquiring, selling, leasing, or licensing the use of the collateral, without court involvement, provided certain conditions are met.
Conclusion
The Law plays a significant role in expanding the scope of security rights while creating a streamlined enforcement and transparent registration system which altogether, builds towards a more dynamic and accessible financial market. As such, even with its implementation deferred to a later date, stakeholders are given sufficient time to adapt and prepare effectively.
