REVISED ACT FOR THE BENEFIT OF INVESTORS IN THE OHADA REGION

On January 30, 2014 in Ouagadougou, Burkina Faso, the Council of Ministers of the Organization for Harmonization of Business Law in Africa (referred to by its French acronym OHADA, which stands for Organisation pour l’Harmonisation en Afrique du Droit des Affaires) adopted a revised version of the 1997 Uniform Act on Commercial Companies and Economic Interest Groups (L’Acte uniforme révisé relatif au droit des sociétés commerciales et du groupement d’intérêt économique), (Revised Act). The Revised Act entered into force on May 5, 2014 and will be applicable in all 17 OHADA member countries: Benin, Burkina Faso, Cameroon, Central African Republic, Chad, Comoros, Congo, Democratic Republic of the Congo, Equatorial Guinea, Gabon, Guinea, Guinea-Bissau, Ivory Coast, Mali, Niger, Senegal and Togo.

The Revised Act is not a complete overhaul of its 1997 version but includes some key clarifications and the acceptance of existing practices such as the formal recognition of shareholders’ agreements (section 2-1). The Revised Act also includes measures facilitating corporate procedures and introduces a new simplified corporate structure, the simplified stock company “SAS,” all such amendments being welcomed by investors in the OHADA region. Existing companies will have a two-year period from the date of entry into force of the Revised Act to amend their bylaws in order to comply with the requirements of the Revised Act.

OVERVIEW OF AMENDMENTS

The Revised Act comprises numerous amendments including the following:

A new corporate structure

  • The introduction of a new corporate form, the SAS (société par actions simplifiée), a limited liability company exempt from numerous statutory requirements applicable to corporate constitution and management such as the minimal capital prerequisite, and providing flexibility in drafting bylaws which may include customized and simplified rules applicable to shareholders’ meetings, voting, composition and election of the board of directors, election of the chairman of the board and determining the scope of powers of directors and decision-making procedures (section 853-1 and following)
  • A company may convert into a SAS following a unanimous vote by its shareholders (section 853-6)

Capitalization of a company 

  • Contributions to the share capital of a company are now possible by providing technical or professional services (sections 37 and 50-1 to 50-4)
  • A company may be incorporated with varied share capital (sections 269-1 to 269-7) with limits on any capital reduction to be stipulated in its bylaws (section 269-5)
  • In the event that the value given by the statutory auditors to an in-kind contribution made to the company at the time of incorporation differs from the value retained, the shareholders are solidarily liable toward third parties for the value given to such in-kind contribution (section 403)
  • At a general meeting of shareholders, decisions relating to the increase of capital can be delegated to the board of directors or to the managing director (section 567-1)

Improved governance 

  • All agreements between the company and a shareholder holding 10 per cent or more of the company’s capital are subject to the prior authorization of the board of directors (section 438)
  • The duty of the chairman of the board of directors to communicate to each director all documents and information necessary for the fulfilment of such director’s mandate (sections 435 and 465)
  • New provisions governing the remuneration of the chairman of the board of directors (section 482) • The mandatory appointment of statutory auditors by general partnerships which meet certain financial conditions (section 289-1)
  • The mandatory requirement of having an audit committee for publicly traded companies covered under sections 828-853 (section 829-1)
  • When managing a company becomes “impossible,” a court may designate a temporary administrator (section 160-1), the procedure for such appointment and the duties and powers of this temporary administrator are subject to specific provisions in sections 160-2 to 160-8

Facilitating corporate procedures 

  • Modernization of managing collective decision-making by allowing shareholders’ meetings to be convened by fax or email, and by granting directors the option, if included in company bylaws, to participate and vote in board meetings via videoconferencing (sections 303 and 454-1
  • A number of publication-related formalities can now be carried out by electronic means (sections 256-1 and 256-2)
  • The establishment of a representative or liaison office in another member state is now expressly recognized (sections 120-1 to 120-5)

Modifications affecting company capital and classes of shares

  • Changes to preemptive subscription rights (sections 587-1 and 587-2)
  • Upon authorization at an extraordinary shareholders’ meeting, free shares may be allocated to the company’s employees, such shares being subject to specific restrictions (sections 626-1 and 626-6)
  • Specific conditions are imposed on the transfer of shares (sections 763-1, 765, 765-1 and 771-1)
  • Specific provisions address the possibility of creating preferred shares, with or without voting rights, (sections 778-1 to 778-15) which can be converted into ordinary shares or preferred shares of another category (section 778-6)

CONCLUSION

The Revised Act is very much in line with an ongoing effort by OHADA to modernize and clarify the organization’s uniform laws in order to provide investors with increased legal certainty in the OHADA region. The Revised Act is a complement to the 2010 OHADA reform of the Uniform Act Organizing Security Interests. See our previous Blakes Bulletin: OHADA Reform of Uniform Act Organizing Security Interests.