Bahrain Issues New Secured Transactions Law (Law No. (3) of 2026)

A Major Reform to Strengthen Credit, Collateral, and Enforcement Frameworks

1 February 2026

His Majesty King Hamad bin Isa Al Khalifa has ratified and issued Law No. (3) of 2026 concerning Secured Transactions, following approval by the Shura Council and the Council of Representatives. The law introduces a modern legal framework governing security interests over movable assets, with the objective of enhancing access to finance, increasing legal certainty, and strengthening creditor protection in the Kingdom of Bahrain.
This legislation represents a significant step in Bahrain’s ongoing efforts to modernise its commercial and civil laws and align them with international best practices in secured lending.

Key Objectives of the Law

The new law seeks to achieve several strategic objectives, including:

• Recognition and regulation of security rights over movable assets without the need to transfer possession, thereby increasing flexibility for borrowers.
• Facilitating access to credit, particularly for small and medium-sized enterprises (SMEs), by expanding the range of assets that can be used as collateral.
• Enhancing legal certainty and transparency through clear definitions of security interests, secured creditors, debtors, and guarantors.
• Reducing disputes and enforcement risks by providing a structured and predictable legal framework for secured transactions.

Scope of Application and Covered Assets

The law applies broadly to movable tangible and intangible assets, including, but not limited to:

• Accounts receivable and bank accounts
• Inventory and stored goods
• Agricultural products and crops
• Intellectual property rights
• Future and present movable assets

Certain categories of assets are excluded, such as public property and endowment (waqf) assets, in accordance with existing laws.

Electronic Registration System

A central feature of the law is the establishment of an electronic central registry for the registration of security interests over movable assets. The registry aims to:

• Ensure priority ranking among secured creditors
• Increase transparency and public accessibility to security information
• Simplify the process of creating, amending, and enforcing security interests

The law assigns responsibility for the accuracy of registered information to the applicant, while administration of the registry is entrusted to a designated authority.

Enforcement Mechanisms and Protection of Parties

The law introduces clear enforcement procedures for secured creditors, both through judicial and non-judicial routes, subject to safeguards including:

• Compliance with principles of good faith, commercial reasonableness, and proportionality
• Protection of the rights of debtors and guarantors
• Special enforcement rules applicable to bank accounts and receivables

The law also provides for criminal and financial penalties in cases of fraud, misuse of the registry, or obstruction of enforcement, reinforcing regulatory oversight and compliance.

Why This Matters

The Secured Transactions Law marks a fundamental shift in Bahrain’s credit and enforcement landscape. It is expected to:

• Improve lenders’ ability to assess and manage credit risk
• Unlock the economic value of movable assets
• Support business growth and liquidity in the market
• Strengthen Bahrain’s position as a regional financial and commercial hub

How We Can Help

Our Dispute Resolution and Banking and Finance, teams regularly advise banks, financial institutions, corporates, and investors on secured lending, enforcement strategies, and risk mitigation in Bahrain.

We can assist with:

• Structuring secured transactions under the new law
• Advising on creation, perfection, and priority of security interests
• Reviewing and updating financing and security documentation
• Assessing the impact of the law on existing security arrangements

Please contact us if you would like tailored advice on how this new law affects your business or financing arrangements.