Commercial, corporate and M&A
Bahrain Enacts Amendments to the Commercial Law Enhancing Cheque Regulations
His Majesty King Hamad bin Isa Al Khalifa, King of Bahrain, has ratified and promulgated Law No. (23) of 2025, implementing significant amendments to Bahrain’s Commercial Law, originally issued by Decree-Law No. (7) of 1987. These amendments, approved by both the Shura Council and the House of Representatives, aim to modernise and strengthen the legal framework governing commercial transactions, particularly focusing on cheque regulations.
Key Amendments:
Joint Account Holder Regulations: The revised Article (283) Clause (4) mandates that upon the death or legal incapacitation of a joint account holder, the remaining holders must inform the bank of their intention—whether to continue or close the account within ten (10) days. The bank is required to freeze the deceased or incapacitated person’s share as of the date of death or incapacity until a legal successor is appointed by the competent Sharia or civil court, ensuring clarity and security in joint account management.
Cheque Certification and Payment: Changes to Article (451) detail enhanced procedures for cheque certification. The drawee may certify cheques wholly or partially and must do so upon request if sufficient funds are available. Certified cheques have their cover frozen, ensuring funds remain available for the holder until the cheque presentation deadlines expire.
Partial Payment of Cheques: A new dimension is added with Article (465 bis), allowing drawees to make partial payments if the account balance is less than the cheque value, unless the holder refuses. This provision aims to minimize cheque dishonours and improve payment flow, with the Central Bank of Bahrain empowered to regulate the procedures.
Legal Enforcement of Cheques: Article (465 bis 1) establishes that cheques marked for insufficient funds or partial payment are enforceable documents under the Execution Law in Civil and Commercial Matters. This strengthens the legal standing of such cheques, enhancing creditor protection.
Prohibition and Penalties: Article (491 bis) introduces strict penalties for the misuse of blank cheques, including fines ranging from two hundred to ten thousand dinars, depending on the infraction. This aims to deter the use of cheques as credit or guarantee instruments, aligning with consumer protection efforts.
Partial Payment and Enforceability of Cheques
Bahrain has implemented a partial payment mechanism for cheques. Pursuant to Article 465 bis, where the drawer’s account holds insufficient funds to cover the full value of a cheque, the drawee bank must make partial payment of the available amount to the bearer, unless the bearer refuses such partial payment. In such cases, the bank is required to mark the cheque to reflect the partial payment, return the original cheque to the bearer, and issue a certificate confirming the amount paid.
The remaining funds — whether constituting full or partial payment — must be frozen by the drawee bank and held under its responsibility for the benefit of the cheque bearer until the expiry of the cheque’s presentation period, which is six (6) months from the date of issuance, as prescribed under Article 451(4). Once this period lapses, the bank is no longer permitted to process the cheque or make any payments against it, even if sufficient funds become available at a later stage, as per Article 451. In such cases, the bearer must resort to the Execution Court, as the amended law now recognises the cheque as an enforceable instrument under the Civil and Commercial Execution Law (Decree-Law No. 22 of 2021). This allows the bearer to apply directly for enforcement without the need to first obtain a judgment through ordinary civil proceedings.
These amendments aim to protect the rights of cheque bearers while reducing reliance on criminal proceedings against drawers. Previously, where a cheque was issued without sufficient funds, the standard procedure was to file a criminal complaint under Article 393 of the Penal Code (Decree-Law No. 15 of 1976), which often led to lengthy proceedings and, in some cases, custodial sentences or fines. Such outcomes could delay or prevent repayment, especially where imprisonment impacted the drawer’s financial position, thereby diminishing the bearer’s chances of recovery.
By allowing partial payments, the reform enhances confidence in cheques as a means of payment, promotes commercial efficiency, and helps relieve pressure on the criminal justice system by shifting such disputes towards civil enforcement procedures.
Criminalisation of Blank Cheques
The recent amendments introduce an explicit prohibition on issuing blank cheques intended to serve as instruments of credit or security. Any person who issues a blank cheque as a credit or guarantee instrument in contravention of Article 491 shall be subject to a fine of not less than two hundred Bahraini Dinars (BD 200) and not exceeding two thousand Bahraini Dinars (BD 2,000). Moreover, where a bearer completes the details of a blank cheque and presents it for encashment, the bearer is liable to a fine of no less than 10% and no more than twice the amount entered on the cheque. In all cases, the fine must not be less than BD 500 and may not exceed BD 10,000.
The Ministry of Industry, Commerce and Tourism, being the competent ministry responsible for consumer protection under Law No. (35) of 2012, has been assigned responsibility for receiving and acting upon complaints against non-financial institutions that breach the relevant provisions, in accordance with Law No. (35) of 2012 concerning Consumer Protection. This measure forms part of broader efforts to promote good governance and uphold consumer rights. By contrast, financial institutions engaged in lending or financing activities remain under the direct regulatory supervision of the Central Bank of Bahrain.
This legislative reform represents a significant step toward resolving recurring issues in commercial practice and enhancing consumer protection. In particular, it aims to curb the longstanding practice of compelling clients to issue blank cheques as collateral, which has historically given rise to forgery risks and disputes.
Joint Accounts Operation Post-Death or Incapacity
The amended law permits surviving or legally capable joint account holders to continue operating a joint account in the event of the death or legal incapacity of one of the account holders, provided that the bank is notified within ten (10) days from the date of death or incapacity, as required by Article 283(4). In such cases, only the share of the deceased or incapacitated party is to be frozen as of the date of death or incapacity, pending the appointment of a legal successor.
This reform marks a significant departure from the previous approach, under which the entire account would be frozen until a successor was legally appointed. The new mechanism facilitates business continuity, minimises operational disruptions, and helps mitigate potential financial losses or legal complications.
Conclusion
In conclusion, the recent amendments to Bahrain’s Law of Commerce mark a significant advancement in the regulation of cheque transactions, reflecting a modern approach to commercial practices. By introducing partial payment mechanisms and enhancing the enforceability of cheques, these reforms aim to bolster confidence in cheques as reliable payment instruments while reducing the burden on the criminal justice system. The prohibition on issuing blank cheques as credit or guarantee instruments and stringent penalties for misuse further underscore Bahrain’s commitment to consumer protection and financial integrity. Additionally, the updated regulations for joint account operations ensure continuity and security in economic transactions following the death or incapacitation of an account holder. Overall, these legislative changes are poised to enhance commercial efficiency, protect consumer rights, and foster a more robust and reliable financial environment in Bahrain.
Authors:
Saad Al Doseri, Founding Partner, Al Doseri Law
Shooq Mohamed Nimah, Senior Associate, Al Doseri Law
The provisions of the amended Law of Commerce pursuant to Law No. (23) of 2025, amending the Law of Commerce No. (7) of 1987:
Article One
The texts of Articles (283) clause (4), (410) paragraph (1), (451) paragraphs (2), (3), and (4), (474) paragraph (2), (480) paragraph (1), (482), and (491) of the Commercial Law issued by Decree-Law No. (7) of 1987, shall be replaced with the following text:
Article (283) Clause (4):Upon the death or legal incapacitation of one of the joint account holders, the remaining holders must notify the bank of their intention to continue the account within ten days from the date of death or incapacitation. The bank must freeze withdrawals from the joint account equivalent to the share of the deceased or legally incapacitated partner until a legal successor is appointed.
Article (410) Paragraph (1):The holder of a bill of exchange, upon non-payment at maturity, may have recourse against endorsers, the drawer, and others obligated.
Article (451) Paragraphs (2), (3), and (4):
2. The drawee may mark the cheque as certified either wholly or partially, indicating the availability of the full or partial funds at the drawee on the date of certification, and the drawee’s signature on the front of the cheque constitutes its certification.
3. The drawee cannot refuse to certify the cheque if requested by the drawer or holder and if there are sufficient funds to cover the full or partial amount of the cheque.
4. The full or partial cover of a certified cheque remains frozen with the drawee for the benefit of the holder until the cheque presentation deadlines expire.
Article (474) Paragraph (2): If the drawee receives an opposition, it must refrain from paying the cheque’s value wholly or partially to its holder and reserve the full or available amount in the account until a decision is made.
Article (480) Paragraph (1): The holder of a cheque has recourse against the drawer, endorsers, and others obligated if presented within the legal period and not fully paid, and if refusal of full or partial payment is proven by protest. In lieu of protest, refusal of payment or partial payment can be proven by:
a) A statement issued by the drawee mentioning the day of cheque presentation.
b) A statement from the clearinghouse indicating the cheque was presented within the legal period and not fully paid, dated and written on the cheque itself, and signed by the issuer.
Article (482): Non-payment or partial payment must be proven as described in paragraph (1) of Article (480) before the presentation period expires. If the presentation occurs on the last day of this period, refusal of payment or partial payment may be proven on the next business day.
Article (491):
It is prohibited to issue blank cheques for use as credit or guarantee instruments.
The Ministry concerned with consumer protection, under Law No. (35) of 2012 concerning consumer protection, shall take necessary actions to enforce the provision mentioned in paragraph (1) of this article. The Central Bank of Bahrain shall ensure compliance by licensees under the Central Bank of Bahrain and Financial Institutions Law issued by Law No. (64) of 2006 to enforce the mentioned provision.
Article Two
New articles numbered (465 bis), (465 bis 1), and (491 bis) are added to the Commercial Law issued by Decree-Law No. (7) of 1987, as follows:
Article (465 bis):
If the account balance is less than the cheque value, the drawee must partially pay the available amount unless the holder refuses partial payment.
The cheque holder may re-present a cheque partially paid.
The drawee must mark the cheque indicating partial payment upon each partial payment and return the original cheque to the holder with a certificate of partial payment.
The Central Bank of Bahrain may issue a decision to specify an alternative mechanism for proving partial payment other than marking the cheque.
The Central Bank of Bahrain shall issue a decision regulating the conditions, controls, and procedures related to the application of the partial payment provisions of the cheque, whether payment is in cash or by written settlement methods such as account entry, bank transfer, clearing, or other means specified by the Central Bank.
The drawer’s credit record is marked if a cheque is returned due to insufficient funds or if partially paid. The Central Bank of Bahrain will issue a decision defining the cases and procedures of this marking, its duration, and procedures for its removal.
Article (465 bis 1): A cheque marked by the drawee for insufficient funds or partially paid is an enforceable document under the Execution Law in Civil and Commercial Matters issued by Decree-Law No. (22) of 2021.
The Minister of Justice, after approval by the Supreme Judicial Council, may issue a decision regulating the rules and procedures for executing a cheque marked by the drawee for insufficient funds or partially paid.
Article (491 bis): Violators of paragraph (1) of Article (491) shall be fined not less than two hundred dinars and not more than two thousand dinars. Any holder of a blank cheque who completes the cheque details and presents it for payment shall be fined not less than ten percent of the amount recorded on the cheque and not more than twice that amount, with the fine not less than five hundred dinars and not exceeding ten thousand dinars in all cases.
Article Three
The Central Bank of Bahrain shall determine, in coordination with relevant authorities, the stages for implementing the partial payment of cheque values as stipulated in paragraph (1) of Article (465 bis) of Article Two of this law, after ensuring the technical arrangements and readiness of drawees necessary to effectively ensure partial payment of cheques.
22 May 2025