BRANCH

SLEEPING PARTNERSHIP

JOINT VENTURE

SUBSIDIARY

PRIVATE LIMITED COMPANY

ECONOMIC GROUP PARTENERSHIP

PRIVATE COMPANY

PUBLIC LIMITED COMPANY

THE IMPLICATIONS OF BEING A TRADER OPERATING IN A OHADA MEMBER COUNTRY

==> A " branch " in the meaning of Ohada Law

Article 116 (Uniform Act on commercial companies). A branch shall be a commercial, industrial or service-providing establishment which belongs to a company or a natural person and which has been granted a certain degree of autonomy in its management.

Article 117 : The branch shall not have a separate legal personality distinct from that of the parent company or the natural person who owns it.

The rights and obligations arising from its activities or its existence shall be part of the estate of the company or the natural person who owns it.

==> The status of branches in Ohada member countries

Article 118. The branch may be an establishment of a foreign company or natural person. Subject to international agreements or laws to the contrary, the branch shall be governed by the law of the Contracting State in which it is located..

==> Ohada Law requirements as to the setting up of branches

A branch shall be registered in the Trade and Personal Property Credit Register in accordance with the provisions organizing the said Register (art. 119) .

Where the branch is owned by a foreigner, it shall be attached to a company in existence or to be created, governed by the laws of one of the Contracting States not later that two years after the branch is set up, unless this obligations is waived by order of the minister in charge of trade in the Contracting State in which the branch is located (art. 120).

==> A " subsidiary " in the meaning of Ohada Law

ARTICLE 179 : A company shall be the parent company of another where the former holds more than half the capital of the latter. The latter shall be the subsidiary of the former.

ARTICLE 180 : A company shall be the joint subsidiary of several parent companies where its capital is owned by the said parent companies which shall :

1. own separately, directly or indirectly through corporate bodies, a sufficient proportion of the joint subsidiary company's capital to warrant that no extraordinary decision be taken without their approval ;

2. take part in the management of the joint subsidiary company.

N.B. Subsidiaries are governed by the same laws as local companies proper. For more details, see here under "You are not a consortium. You wish to incorporate a company".

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See here under the corresponding developments under the heading "The implications of being a trader operating in Ohada member countries".

==> You choose the private company (PC)

The private company : it is a company where all the partners are traders and have indefinite liability for the company's debts. (art. 270 of the Uniform Act on commercial companies).

Registered capital : it is divided into shares of the same face value (art. 273). There is no requirement with regard to the amount of the registered capital .

The partners' liability as to the debts of the company : see here-above.

The rules governing the transfer of shares : the shares can be transferred only with the unanimous consent of the partners and any clause to the contrary is deemed to be unwritten. Where the partners fail to reach unanimity, the transfer is impossible but a redemption procedure may be provided for in the articles of association to enable the transferring partner to withdraw (art. 274).

Management :

Article 276. The articles of association may freely organise the management of the company. They may appoint one or several managers who may be partners or not, whether they be natural or legal persons, or provide for such appointment in a subsequent instrument. Where the management is not organized by the articles of association, all the partners shall be deemed to be managers.

Article 277. In his relations with third parties, the manager shall commit the company by acts falling within the company's objects. Any provision of the articles of association limiting the powers of the managers shall not be demurrable to third parties .

==> You choose the sleeping partnership (SP)

The sleeping partnership : it is a partnership in which some partners indefinitely, jointly and severally liable for the company's debts, referred to as " active partners ", coexist with others only liable for the company's debts up to the limit of their shares, referred to as " sleeping partners ", and the capital of which is divided into partnership shares (art. 293).

Registered capital : it is divided into shares. There is no requirement with regard to the amount of the registered capital

The partners' liability as to the debts of the company : see here-above.

The rules governing the transfer of shares : the shares may be transferred only with the consent of all the partners. However, the articles of association may provide for less stringent rules (art. 296).

Management :

Article 298 : A sleeping partnership shall be managed by all the active partners unless otherwise provided by the articles of association which may appoint one or more managers from among the active partners, or provide for the appointment of such manager(s) by a subsequent instrument, under the same conditions and with the same powers as in a partnership.

Article 299 : A sleeping partner may not perform any act of external management, even by virtue of a power of attorney. gestion externe, même vertu d'une procuration.

==>You choose the private limited company (plc)

The private limited company : it is a company where the partners' liability is limited to their contributions and their rights represented by shares.

Registered capital : the minimum is Cfa Francs 1,000,000. It is divided into shares with a face value of at least Cfa Francs 5,000 (art. 311).

The partners' liability as to the debts of the company : see here above.

The rules governing the transfer of shares : The articles of association may freely organize the terms and conditions of the transfer of shares between the partners and their spouse, ascendants and descendants. In the absence of such provisions, the transfer may be carried out freely (art. 318). The articles of association also freely define the conditions for the transfer of company shares against payment to third parties outside the company. Failing this, the transfer shall be possible only with the consent of the majority of non-transferor partners holding three-quarters of the company's shares, excluding the shares of the transferor partner (art. 319). .

Management :

A private limited company may be managed by one or several natural persons or coporate bodies appointed in the articles of association or in a subsequent instrument (art. 323).

In his relations with third parties, the manager shall be vested with the widest powers to act under all circumstances on behalf of the company, subject to the powers which the Uniform Act expressly confers on partners. Any provision in the articles of association limiting the powers of managers is not demurrable to third parties (art. 329).

==>You choose the public limited company (PLC)

The public limited company : it is a company where the shareholders' liabilitiy is limited to their contributions and their rights represented by shares. The public limited company may comprise only one shareholder (sole holder company).

Registered capital - The minimum amount for the registered capital is Cfa Francs 10,000,000 (when there is no public call for capital) and 100,000,000 (when there is public call for capital). The regsitered capital is divided into shares with a minimum face value of Cfa Francs 10,000 (art. 387)

- Shares and bonds shall either be negotiable instruments or registered securities, however, the form of registered securities may be imposed by the provisions of the Uniform Act or the articles of association (art. 745).

The shareholders' liability as to the debts of the company : see here above.

The rules governing the transfer of shares : the shares are freely transferable but the articles of association may entail more stringent rules within the limits set up in the Uniform Act (art. 764 and 765).

Administration/management : in this regard, a choice has to be made between a board of directors (compulsory in the event of public call for capital) and a managing director. This choice may be modified afterwards by decision of an extraordinary general meeting (art. 414).

>>In a PLC with a board of directors and a chairman and managing director

- The chairman and managing director chairs the meetings of the board of directors and the general meetings of shareholders. He is also in charge of the general management of the company and represents it in its relations with third parties. For the performance of his duties, he is given the widest possible powers to be exercised within the limits of the objects of the company and subject to the powers expressly conferred on the general meetings or specially reserved for the board of directors by law or the articles of association (art. 465).

- The chairman and managing director may be assisted by one or several assistant managers appointed by the board on his proposal. In their relations with third parties, they have the same powers as the chairman and managing director (art. 470)

- Any provision of the articles of association and any decision of the general meetings of the board of directors restricting the powers of the chairman and managing director and his assistant(s) is not be demurrable to third parties acting in good faith (art. 465 and 472).

>>In PLC with a board of directors and a chairman of the board

- The meetings of the board of directors and the shareholders' general meetings are chaired by the chairman of the board whereas the general manager is in charge of the general management of the company and represents it in its relations with third parties. For the performance of his duties, he is given the widest possible powers which he shall exercise within the limits of the objects of the company and subject to the powers expressly conferred on the general meetings or specially reserved for the board of directors by law or the articles of association (art. 487).

- The general manager may be assisted by an assistant general manager as indicated hereabove for the chairman and managing director.

- The provisions of the articles of association, the decisions of general meetings or of the board of directors restricting the powers of the general manager and his assistant are not be demurrable to third parties acting in good faith

>>In a PLC with a managing director

The managing director is in charge of the administration and the general management of the company and represents it in its relations with third parties. For the performance of his duties, he is given the widest possible powers which he shall exercise within the limits of the objects of the company and subject to the powers expressly conferred on the general meetings by law or the articles of association (art. 498).

- The managing director may be assisted by an assistant managing director in the same conditions as the assistant general manager mentioned here above.

- The provisions of the articles of association or the decisions of general meetings restricting the powers of the managing director or his assistant are not be demurrable to third parties acting in good faith.

==> You choose the joint venture (JV)

The joint venture : it is a company which the partners have agreed to keep undisclosed. It shall not be registered in the Trade and Personnel Property Credit Register nor have the legal personality. It shall neither be suject to any publicity (art. 854).

Registered capital : not compulsory.

The partners' liability as to the debts of the company : since the company shall not be disclosed to third parties, each partner is personaly committed while entering into agreement with third parties. It shall be otherwise when the existence of the company has been disclosed as precised hereunder.

Management :

Article 861 (EGP): Each partner shall contract in his personal name and shall be solely liable to third parties. However, where the partners act expressly in their capacity as partners towards third parties, each of those who acted shall be liable for the commitments of the others. Any bonds subscribed to under these conditions shall commit them indefinitely, jointly and severally.

The same shall apply to a partner who, by interference, has made the contracting partner believe that he intended to commit himself and it is proved that he derived some profit from the transaction (art. 861).

The economic group partnership : is a business organization aiming exclusively at gathering, for a specified duration, the adequate means necessary to facilitate or develop the economic activity of its members and to improve or increase income from the said activity. Its activity must be related to the economic activity of its members and be of an auxiliary nature in respect of this activity (art. 869).

Registered capital : not compulsory.

The partners' liability as to the debts of the group : the members of the economic group partnership are liable for the debts of the group on their assets proper. They are jointly and severally liable for the payment of the debts of the group, unless otherwise agreed with the contracting party (art. 873)..

The rules governing the transfer of shares : where there is a registered capital, the transfer of shares may be freely organized.

Administration : the economic group partnership is administered by one or more natural persons or corporate bodies, provided that in the case of a corporate body, a permanent representative be appointed, who shall incur the same civil and criminal liabilities as if he was a director in his own name. With this reserve, the agreement or, failing that, the general meeting of members of the economic group, may freely organize the administration of the group and appoint directors whose duties, powers and conditions of dismissal shall be determined.

In his relations with third parties, a director commits the economic group partnership for any act related to the object of the group. No limitation of powers may be invoked against third parties.

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Whether you are operating in the framework of a personal business or of a company in a Ohada member country, you must register in the Trade and Personal Property Credit Register (except if it is a joint venture) and you will thereby have the status of a trader in the meaning of the Uniform Act on general commercial law.

Except evidence to the contrary, any person registered in the Trade and Personal Property Credit Register is presumed to have the status of trader and this has some implications. Thus, in the framework of your business, you shall be governed by a specific set of rules notably in connection with :

- evidence to establish,
- your accounting obligations,
- barring by limitation,
- the right to your lease renewal ,
- the payment of your debts,
- in addition to the publication formalities to be complied with in the Trade and Personal Property Credit Register mentioned hereabove.

<>The rules in the field of evidence to establish in commercial matters

Article 5 of the Uniform Act of General Commercial Law (UAGCL) : Proof of commercial transactions can be brought by any means with respect to traders.

<>Traders' accounting obligations

As any trader, you will have to fulfil the following accounting obligations :

Article 13 (UAGCL) : Every corporate body or natural person who is a trader shall keep a day book in which his commercial transactions shall be recorded on a daily basis. He shall equally keep a general ledger, with a general summary balance, as well as an inventory book. These books shall be kept in accordance with the provisions of the Uniform Act relating to the organization and harmonization of business accounting. Every corporate body which is a trader shall also comply with the provisions of the Uniform Act relating to the Law on commercial companies and economic group partnerships and the Uniform Act relating to the organization and harmonization of business accounting.

Article 14. The day book and the inventory book shall mention the registration number of the natural person or corporate body in the Trade and Personal Credit Register. They shall be numbered and initialled by the President of the court of competent jurisdiction, or the judge delegated for this purpose. They shall be kept without blank spaces or alterations of any kind.

Article 17. Every corporate body engaged in trading shall equally draw up, each year, a summary of its financial statements, in accordance with the provisions of the Uniform Act relating to the organization and harmonization of business accounting, and to the Uniform Act relating to commercial companies and economic groups.

The trade books and evidence to establish in commercial matters

Article 15 : Regurlarly kept trade books may be admitted as evidence by the judge in the framework of disputes between traders.

Article 16 : In the course of a dispute settled in court, a judge may order, even as a matter of routine, the presentation of trade books, in order to extract information relating to the dispute.

<>Barring by limitation

Article 18 : Obligations resulting from trade between traders or between traders and non-traders shall be barred after a five-year period when they are not subject to shorter limitation periods.

<>The right to lease renewal

Traders, whether natural persons or corporate bodies, who meet the requirements provided for in the Uniform Act, are entitled to have the lease relating to their business place renewed.

<>The rules governing the payment of traders' debts

If your undertaking happens to encounter financial difficulties, the payment of its debts shall be governed by specific rules entailed in Ohada Insolvency Law providing for voluntary agreement , administration of insolvent debtors' affairs under supervision of the court and liquidation of their property.

>>To be underlined

When you did not register in the Trade and Personal Property Credit Register, you are not entitled to claim anything in connection with the status of trader but you cannot put this forward to avoid your obligations inherent in thesaid status :

Article 39 : Natural persons and corporate bodies subject to registration in the Trade and Personal Property Credit Register who have not applied for registration within the prescribed deadline, shall not claim, until they are duly resgistered, the status of trader.

However, they shall not rely on their failure to have themselves registered in the Register in order to avoid the liabilities and obligations inherent in that status.


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