Bahrain Enhances Commercial Law Framework with Key Amendments to Cheque and Banking Provisions

The Kingdom of Bahrain has enacted substantial amendments to its Commercial Law in 2025, reinforcing protections around cheques, banking practices, and consumer rights. These legislative updates are set to modernise key financial instruments and enhance transparency in the commercial landscape.

Law No. (23) of 2025: Amending the Commercial Law

On 11 May 2025, His Majesty King Hamad bin Isa Al Khalifa ratified Law No. (23) of 2025, introducing targeted amendments to the Commercial Law issued by Legislative Decree No. (7) of 1987 (the “Amendment Law”). These changes took effect the day following publication in the Official Gazette and are intended to strengthen cheque enforcement, reduce financial risk, and promote orderly commercial transactions.

Key Amendments to the Commercial Law

1. Joint Bank Accounts – Article 283(4)

In cases of death or legal incapacity of a joint account holder, the remaining account holders must notify the bank within 10 days of their intent to continue or close the account. Banks are required to freeze the share of the deceased/incapacitated until succession is confirmed.

2. Enforcement of Bills of Exchange – Article 410(1)

Holders of bills of exchange may now directly pursue payment from all liable parties, including the drawer and endorsers, upon maturity if unpaid.

3. Cheque Certification Requirements – Articles 451(2)-(4)

Banks are obligated to certify cheques—partially or fully—if sufficient funds are available. Certification confirms that such funds are reserved and cannot be denied under compliant circumstances.

4. Payment Objections – Article 474(2)

Upon receiving an objection from the drawer, the drawee must immediately withhold payment and reserve the relevant amount until the issue is legally resolved.

5. Proof of Non-Payment – Articles 480(1) & 482

Non-payment must be evidenced through a bank statement confirming the date of presentment or via clearinghouse confirmation, secured during the presentment period.

6. Prohibition of Blank Cheques – Articles 491 & 491

Bis Issuing blank cheques as credit or guarantee instruments is now illegal. Violators may face fines between BHD 200 and BHD 2,000. Submission of blank cheques for payment may result in penalties ranging from 10% to 200% of the cheque value (minimum BHD 500; maximum BHD 10,000).

New Provisions: Cheques and Execution

Partial Settlement of Cheques – Article 465 Bis

Banks are now mandated to partially honour cheques when accounts lack full coverage, unless explicitly refused by the cheque holder. Each partial settlement must be recorded on the cheque and accompanied by a formal certificate. The Central Bank of Bahrain (CBB) will oversee the implementation of electronic and procedural systems governing such payments.

Enforceable Cheques – Article 465 Bis 1

Cheques marked as “no funds” or “partially paid” are now treated as enforceable instruments under Bahrain’s Civil and Commercial Execution Law (Decree Law No. 22 of 2021), enabling direct execution without prior litigation.

Regulatory Oversight and Implementation

The CBB is entrusted with supervising licensed financial institutions, issuing implementation guidelines, and coordinating with relevant authorities to enforce the new provisions. This includes oversight on credit reporting obligations tied to returned or partially paid cheques.

The implementation of the partial cheque settlement regime will be phased, depending on the readiness of technical infrastructure and procedural protocols.

Implications for Businesses and Financial Institutions

These reforms demand immediate attention from corporates, financial institutions, and consumers handling cheque-based transactions. Stakeholders should:

• Review existing cheque issuance and handling policies
• Update internal banking procedures and compliance frameworks
• Train staff on partial settlement and cheque certification processes
• Reassess contractual documentation for alignment with new legal obligations

How Can We Help?

For further guidance on compliance with Law No. (23) of 2025 or navigating the amended commercial and banking framework, our team stands ready to assist.