Bahrain Introduces a Modern Framework for Movable Asset Security under the Secured Transactions Law

5 min 34 sec

Written by

Noor Al Rayes

Partner, Head of Litigation - Bahrain

n.alrayes@tamimi.com View LinkedIn Profile

Fatema Sarhan

Senior Associate

f.sarhan@tamimi.com View LinkedIn Profile

Bahrain has recently issued Law No. (3) of 2026 issuing the Secured Transactions Law, following its approval by the Shura Council and the Council of Representatives and its ratification by His Majesty King Hamad bin Isa Al Khalifa. The law was published in the Official Gazette on 29 January 2026.

Pursuant to Article 4 of the issuing law, the Secured Transactions Law does not apply immediately. Instead, it enters into force on the first day of the month following the lapse of twelve months from the date of publication, meaning that it will enter into force on 1 February 2027.

In parallel, Article 3 of the issuing law requires the minister responsible for commerce (or any other minister designated by decree), after Cabinet approval, to issue the executive regulations within eight months from the day following publication in the Official Gazette. Based on the publication date of 29 January 2026, this eight-month period runs from 30 January 2026, and the executive regulations must therefore be issued by 30 September 2026.

The law introduces a comprehensive statutory framework governing the creation, effectiveness, priority and enforcement of security rights over movable assets, replacing fragmented approaches previously spread across multiple legislative instruments.

Legislative Context and Scope

Article 1 of the issuing law provides that the attached Secured Transactions Law shall apply as a standalone regime governing security right over movable assets. At the same time, Article 2 clarifies that the provisions of the Commercial Law, the Civil Code and the Central Bank of Bahrain and Financial Institutions Law continue to apply only where no specific provision exists in the Secured Transactions Law and to the extent that there is no conflict.

The law applies to security rights over movable tangible and intangible assets, whether existing or future, subject to the express exclusions set out in the text. These exclusions include wages, salaries, labour entitlements, public property, waqf property, and future inheritance or testamentary rights.

Objectives of the Law

Article 2 of the Secured Transactions Law sets out its core objectives, which include:

• recognising security rights over movable assets without requiring transfer of possession;
• enabling the creation of security rights through simple and non-complex mechanisms;
• allowing the use of the full economic value of movable assets, including future assets and multiple security rights over the same collateral; and
• facilitating fair and orderly enforcement of security rights and enabling secured creditors to recover their entitlements.

These objectives guide the interpretation and application of the law.

Types of Assets Eligible as Collateral

The law adopts a broad definition of “collateral”, expressly covering assets such as:

• receivables;
• bank accounts;
• securities;
• negotiable instruments and documents of title;
• equipment and work tools;
• intellectual property rights that are legally transferable;
• commercial establishments and their tangible and intangible components;
• inventory;
• agricultural crops and livestock; and

• fixtures (movable assets allocated for service of real estate).

Special coordination rules apply to movable assets that are subject to separate registration regimes, with the executive regulations expected to govern coordination between the Notice Register and sector-specific registers.

Creation of a Security Right

A security right is created by a written security agreement, subject to the conditions set out in Article 6, including:

• ownership or authority of the grantor over the collateral;
• sufficient description of the collateral, whether specific or generic;
• sufficient description of the secured obligation; and
• provision or commitment of value by the secured creditor.

Security rights may secure present or future obligations, whether fixed or fluctuating, and may include future advances and revolving credit facilities. The law also permits negative pledge arrangements to be included in security agreements.

The Notice Register and Third-Party Effectiveness

A central feature of the law is the establishment of an electronic Notice Register, regulated under Article 7. The register is designed to record notices of security rights and determine their effectiveness against third parties.

Security rights become effective against third parties primarily through registration of a notice, although possession-based effectiveness is also recognised in limited circumstances. Notices may be registered before the execution of the security agreement, subject to written consent and subsequent execution within a specified timeframe.

Responsibility for the accuracy of registered information rests with the registrant, and the registry authority bears no responsibility for verification of content.

Priority Rules

The law adopts a time-based priority system, under which priority is generally determined by the date and time of effectiveness against third parties. Article 9 establishes that secured creditors take priority over unsecured creditors in accordance with their ranking.

Certain claims are granted statutory priority, including:

• judicial costs incurred in preserving and disposing of the collateral;
• taxes and fees directly connected to the collateral; and
• expenses incurred in preserving or improving the collateral.

The law further regulates priority in complex scenarios such as mixed assets, future assets, purchase-money security rights, inventory financing and proceeds.

Receivables as Collateral

A dedicated chapter governs security rights over receivables. Contractual restrictions on assigning receivables do not invalidate the creation or effectiveness of a security right, although they may give rise to contractual remedies between the original parties.

The law permits direct collection from debtors through payment instructions upon default, subject to detailed procedural rules, and regulates the discharge of debtors, competing instructions and evidentiary requirements.

Enforcement Mechanisms

Upon default, the secured creditor may enforce the security right either judicially or non-judicially, subject to compliance with notice requirements and the obligation to act in a commercially reasonable manner.

Non-judicial enforcement may include taking ownership of, selling, leasing or licensing the collateral, provided that advance notice is given and affected parties are afforded an opportunity to object. Judicial enforcement falls under the jurisdiction of the execution judge, with expedited timelines for decisions and appeals.

Proceeds of enforcement are applied first to enforcement costs, then to secured obligations, with any surplus deposited with the court for distribution.

Conflict of Laws

The law includes detailed conflict-of-law rules governing:

• the law applicable to security agreements;
• the law governing effectiveness, priority and enforcement;
• cross-border collateral, receivables, bank accounts and securities; and
• intellectual property and financial instruments.

These provisions are designed to clarify the applicable legal regime in transactions with a foreign element.

Penalties and Liability

The law introduces criminal sanctions for specified violations, including providing false information in registered notices, damaging collateral, obstructing enforcement or misappropriating enforcement proceeds. Legal entities may also be held criminally liable where offences are committed in their name or for their benefit.

Conclusion

Law No. (3) of 2026 establishes a unified and comprehensive legal framework for secured transactions over movable assets in Bahrain. While the law was published on 29 January 2026, it will enter into force on 1 February 2027, allowing market participants time to prepare for implementation.

Parties engaging in secured financing involving movable assets should review existing structures, documentation and registration practices in advance of the effective date to ensure alignment with the new statutory regime once it becomes applicable.