Ohada Uniform Act on Commercial Companies and the Economic Interest Group revised in January 2014 has required the harmonisation of the statutory documents of commercial companies and economic interest groups operating in the Ohada zone as follows, after specifying the purpose of this formality, its modalities and the time limit for its completion:
Article 909. Amendment for purpose of compliance is done in order to repeal, amend and replace, where necessary, the provisions of the articles of association that are contrary to the mandatory provisions of this uniform Act and provide supplements this uniform Act makes mandatory.
Article 910. Amendment for compliance purposes may be accomplished by amending the old articles of association or by adopting newly drafted articles of association, in their entirety.
It may be decided by the meeting of shareholders or members ruling under the conditions of validity of ordinary decisions, notwithstanding any contrary legal provisions or provisions of the articles of association, provided to amend only, with regard to substance, the provisions that are inconsistent with the new law.
Article 908. Companies and economic interest groups formed prior to the entry into force of this uniform Act are subject its provisions. They are required to amend their articles of association to make them compliant with the provisions of this uniform Act within a period of two (2) years from its entry into force.
This Act adopted on January 30, 2014 having entered into force since May 5,2014, the deadline for completing this formality was therefore early May 2016, and this thus lead to the subsequent sequence of sanctions, which are not without consequences on the security of the business structures which did not comply with these requirements.
The consequences of the lack of statutory harmonisation
The Uniform Act has provided for various sanctions recalled below:
Article 914. Failing to have increased their stated capital by at least the minimum amount provided for in article 311 of this uniform Act for private limited liability companies, and article 387 of this uniform Act for public limited liability companies, private limited liability companies, and public limited liability companies whose capital is less than these amounts must, before the expiration of the period set forth in article 908 of this uniform Act, shall declare their dissolution or transform themselves into a company of another form for which this uniform Act does not require a minimum capital above the existing one.
Companies which do not comply with the provisions of the foregoing paragraph shall be automatically dissolved on the expiration of the time limit provided.
Article 915. Failing amendment of the articles of association to make them compliant with the provisions of this uniform Act within a period of two (2) years from its entry into force, provisions of the articles of association that are contrary to these provisions shall be deemed unwritten and the new provisions shall apply.
It thus appears that the consequences of non-compliance with this statutory harmonisation formality are serious.
Consequences in connection with Article 914 of the Uniform Act.
Failure to comply with the provisions of Article 914 is indeed serious because it is sanctioned by the automatic dissolution of the company or economic interest group, with in addition, unclear and dangerous consequences, particularly for third parties and contracting partners.
Indeed, on the one hand the automatic dissolution is supposed to take place automatically, on the day of the event, even without the knowledge of the partners or shareholders, and there is, in principle, no way back. However, on the other hand, this dissolution for lack of statutory compliance cannot be governed by the rules on voluntary dissolution by the shareholders / partners, or by judicial decision.
In fact, it should be recalled that Ohada law on commercial companies includes two main cases of automatic dissolutions:
. one, in Article 30, related to the expiry of the term of companies, with the possibility of circumventing this situation by decision of the shareholders/partners to extend its term,
. the other one related to limited partnerships indicated in Article 308 of the Uniform Act, mentioning this dissolution, however without any further detail, as in Article 914 paragraph 2 recalled above.
The question may then be raised as to whether, in the absence of a decision to dissolve by the shareholders / partners or by a court, the automatically dissolved company could be considered as a de facto company if it continues to operate ? The answer should be no since these data do not correspond to the cases described in Articles 864 and 865 of the Uniform Act.
Let us add that normally, when a company is dissolved, the rules of Article 201 of the Uniform Act must apply, namely the dissolution has no effect towards third parties until it is published in the legal notices newspaper, but it however automatically entails the winding-up of the structure if it is a multi-partners company, with the subsequent procedural scheme.
Now, if the harmonisation work on the articles of association has not been carried out or has not been carried out in accordance with the required standards and the shareholders / partners are not aware of this situation, how will all these rules apply, with an automatic dissolution no one will in fact be aware of, but which may perhaps, in the event of litigation, be put forward in a timely manner by someone who will have an interest to do so ?
Thus, too many uncertainties, sources of legal insecurity from a double point of view:
. internal legal insecurity with regard to the concerned company or economic interest group,
. external legal insecurity in the event of contract(s) that the structure in this situation may itself happen to sign, which may occur in two ways:
- it is not law-abiding and it may put its contracting partner in danger,
- or it is law-abiding but this is not the case of its contracting partner with whom it will have signed...
hence the importance of harmonisation compliance by your structure, and moreover, the necessity of requiring from your contractual partners to show harmonised articles of association before signing contracts with them.
Consequences in connection with Article 915.
When the harmonisation was not done, or was not done correctly, pursuant to the provisions of this Article, the non-harmonised provisions of the articles of association become invalid and are automatically replaced by the rules and standards of the revised Uniform Act, without however being formally and expressly included in the statutory documents, which will also be a source of confusion as regards their readability.
It will indeed be normal for any person with such articles of association in hand to stick to what he or she has under his or her eyes, which will however be in conflict with the harmonised standard, anomaly which will certainly be recalled in the event of dispute.
If the concerned provisions which became invalid relate to ancillary subjects, there may obviously be disturbing consequences, but how much more important will be the damages if these points are related to essential subjects impacting on the validity of decisions and else ..... as the loss of statutory eligibility relating to some permits, authorizations and licences, necessary to carry out or maintain the company’s activities.
Indeed, great damages, which may often show up quite late downstream, during a pre-litigation or litigation when this anomaly will need to be put forward, while your company is very busy managing its outstanding affairs ...
The statutory harmonisation required by the 2014 Uniform Act on Commercial Companies and the Economic Interest Group is therefore not just a small, side formality. It may jeopardize the legal security of your structure in an unexpected way.
It is therefore important :
. on the one hand to check if your structure is law-compliant, and if not, take the necessary steps in view the time already elapsed,
. and on the other hand to secure your contracts to avoid dealing with structures with potential uncertain profiles, by requiring that your contracting partners incorporated before this 2014 Act (therefore concerned by these statutory harmonisation requirements) hand over harmonised articles of association, since the other business structures incorporated after are supposed to operate with articles of association in compliance with the standards drafted on the basis of the provisions of the revised Act which should be checked anyway.
MANDESSI BELL EVELYNE
PHD in Law
Lawyer – Consultant
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