Uniform Business Laws in Africa OHADA s Contribution to

Uniform Business Laws in Africa: OHADA's Contribution to Legal Predictability March 28, 2012 10: 00 AM – 11: 30 AM US EST

Presented by ABA International Rule of Law Committee: Jason Matechak · Steven Hendrix · Lelia Mooney · Carol Mates · Matthew Nicely · Alexandra Wrage Africa Committee: Ricardo A Silva · Nancy Kaymar Stafford · Roland D Abeng · Tiago Martins Cruz · Christina Theresa Holder · Angelia Wade Co-Sponsoring International Law Committees: ABA Young Lawyers Division (International Law Committee) · International Securities and Capital Markets · Islamic Finance · Task Force on Financial Engineering for Economic Development

Introduction: Jason Matechak, Rule of Law Officer Moderator: Ricardo Alves Silva, Africa Committee Panelists (in order of presentation): Me. Xavier Zeno: Attorney, Jeantet & Associés (France) Prof. Claire Dickerson: Tulane University Law School (USA) Dr. Jean Alain Penda: Fubla & ACP Legal (Cameroon) Mr. Xavier Forneris: World Bank (USA)

Please email all questions during the presentation to introl@americanbar. org

March 28, 2012 OHADA PRESENTATION Xavier Zeno Attorney at Law Paris Bar

1. Origins of OHADA 1. 1 Situation after the independence Ø Legal insecurity → Independence in 1960: heterogeneous regulations. → Context of globalization: regulations no more adapted to the economic situation and to the actual international framework. Ø Judicial insecurity → Degradation in the way in which justice is returned, either in right or as regards deontology, in particular because of a lack of material means, an insufficient formation of the magistrates and auxiliaries of justice. Ø Economic stagnation Legal insecurity + judicial insecurity = Economic stagnation. Regional economic development, restore the foreign investor’s confidence, make exchanges between countries easier and develop competitive industries… 6

1. Origins of OHADA 1. 2 Main steps leading to the creation of OHADA Ø April 1991 → First summit (Burkina Faso). Finance Ministers of the Franc Zone’s initiative. Entrusts 7 jurists, led by Mr Kéba Mbaye in charge of the technical feasibility of the project. Ø October 1992 → Feasibility report approved by all the Finance Ministers of the Franc Zone (summit held in Libreville). → Constitution of a steering committee (3 members) in charge of drafting an international treaty and identifying areas of law to be harmonized. Ø September 1993 → Meeting in Abidjan: presentation of the draft of the Treaty for signature. Ø October 1993 → Signature in Port-Louis, Mauritius. In force since September 1995. 7

2. Purposes and objectives Ø “Ohada is a legal tool conceived and realized by Africa to serve economic integration and growth”, Kéba Mbaye, Funding Father of OHADA. Ø The idea behind the creation of OHADA sprang from a political will to strengthen the African legal system by enacting a secure legal framework for the conduct of business in Africa, which is viewed as indispensable for the development of the continent. 8

3. Member States 3. 1 Actual Member States Benin Burkina Faso Cameroon Central African Republic Chad Congo Gabon Niger Guinea Mali Comores Guinea-Bissau Equatorial Guinea Ivory Coast Senegal Togo = 16 Member States 9

3. Member States 3. 2 Entry of the RDC into OHADA Ø February 2010 → Promulgation by the President of the DRC of the Ordinance-Law relating to the OHADA accession. Ø November 2010 → Expected date for the ratification of the instruments Ø January 2011 → Expected date for entry of the RDC into OHADA. As to date, still awaiting for the instruments of ratification to be deposited. 10

4. OHADA institutions Ø The Conference of Heads of State and Government Ø The Council of Ministers Ø The Permanent Secretary Ø The Common Court of justice and arbitration (CCJA) Ø The regional training centre for legal officers (ERSUMA) 11

5. OHADA Uniform Acts 5. 1 Harmonized legislation – Uniform Acts Broadly speaking, the Treaty provides for the promulgation of harmonized legislation (Uniform Acts). 9 Uniform Acts have been adopted: Ø Commercial law Ø Company law Ø Recovery of debts and enforcement measures Ø Securities Ø Insolvency → Total of 9 Uniform Acts Ø Arbitration Ø Accounting law Ø Transport of goods by road Ø Cooperative companies 12

5. OHADA Uniform Acts 5. 2 Applicability Ø Pursuant to Article 10 of the Treaty, Uniform Acts are directly applicable and binding in the Member States, notwithstanding any conflicting provision of national law, be it previous or subsequent. Ø However, this provision can lead to certain problem of interpretation concerning the extent to which national laws are abrogated by virtue of the Uniform Acts. 13

March 28, 2012 OHADA AND INVESTMENTS: EXPECTATIONS OF THE ECONOMIC OPERATORS

1. Introduction – main issues Ø Many expectations of the economic operators as regard investments Ø Demand of both stability and transparency of regulations and attractive taxation → requirement of good governance of the company Ø Background on the notion of good governance of the company: • Notion originally unknown • First appeared in 1934 in the United States with the creation of the “Securities and Exchange Commission” (SEC) • Intervention of American authorities so as to organize a regulation system with subsequent mechanisms of sanctions (ie. ENRON case law, 2001: bankruptcy of the Central PEN for which the SEC blamed the administrations incompetency, their passivity and the absence of discussion within the Board of Directors) • “Sarbanes Oxley” law, 2002: legal reform tending to better frame and control the companies’ operations. Ø Notion of good governance within OHADA: 1997, Uniform Act relating to commercial companies and economic interest group 15

PART 1 The Board of Directors: guarantor of the good governance of the company

1. Evolution of the modes of administration in Africa 1. 1 End of the managing board and supervisory board Ø System before the adoption of the Uniform Act of 1997: system of the managing board (directoire) and supervisory board (conseil de surveillance) → common mode of administration. Ø Article 414 of the Uniform Act of 1997: the shareholders can from now on chose either a new mode of administration, the board of directors, or the previous common mode of administration. ØAdvantage of the system of the board of directors: a clear distinction of who has the control of the company and manages it. 17

1. Evolution of the modes of administration in Africa 1. 2 Institution of a new way of managing the SA: SA with a Board of Directors Ø This new way of managing the SA was not surprising as most of the African civil law countries not entered yet into OHADA were governed by business law provisions which referred to a system close to the actual board of directors’ system. Ø The most widespread method in the countries of the Franc Zone was that of the chief executive officer (president directeur general) holding concurrently the position of chairman of the board of directors and executive officer (directeur general) → raised difficulties of governance of company. Ø Idea of independence of the board of directors towards the management: • Executive officer: administrative duties of managing and representing the company • Chairman of the board of directors: decision maker 18

2. The Board of Directors: guarantor of a good governance of the company 2. 1 Composition Ø 3 members at least and 12 at the maximum. Ø Members are often stated to be shareholders, however, employees not holding any shares within the company can become members of the board of directors as far as they do not together represent more than 1/3 of the total members of the board. Ø Freedom in the choice/recruitment of the directors → problem of incompetency of the directors (solution of creating an Institute of directors, ie. in Senegal). Ø Guarantee of the availibility of the directors and limit the risks of conflicts of interests: rule of prohibition to be director of an anonymous company being registered on the territory of a same member State for more than five terms (Uniform Act 1997), however possible when registered in different member States. 19

2. The Board of Directors: guarantor of a good governance of the company 2. 2 Functioning Ø Periodicity of meetings: • • Meetings as often as the interest of the company requires it. Right of the third of the members to convene the board in case it has not met for more than two months. Ø Validity of deliberations: when at least half of its members are present → efficiency of this rule (no representation allowed), good governance of company. Ø Validity of decisions: principle of the majority of the present and represented. Ø Participating to the meetings: • • • Directors Chairman Statutory auditors Executive officer Secretary And “any person called to take part to the board of directors’ meetings” (ie. in particular experts, valuers) 20

2. The Board of Directors: guarantor of a good governance of the company 2. 3 The particular case of the Chairman of the Board of Directors Ø 3 essential prerogatives: • Convenes and chairs the board meetings and the shareholders general meetings • Takes care that the board of directors ensures the control of the management of the company • Power of carrying out investigations and right of information. Ø Prohibition → not allowed to held concurrently the same functions in more than 3 companies whose registered office is stated to be on the territory of a same member State, and to be general manager (administrator general) or executive officer of an anonymous company being registered on the territory of a same member State for more than 2 terms (note that this prohibition only concerns companies of a same member State and not those of other OHADA States). 21

2. The Board of Directors: guarantor of a good governance of the company 2. 4 Functions of the Board of Directors Ø Functions: • Define and guide the strategy of the company • Supervise the practices of the company and carry out the necessary changes • Recruit the main leaders, determine their remunerations, follow up their activities • Supervise and manage the conflicts of interest enter into between the managing department, the directors and the shareholders • Supervise the process of circulation of information and communication of the company, etc. Ø Various tools of good governance of the company: ie. internal rules and regulations or an ethic code. 22

PART 2 TRANSPARENCY OF THE ACCOUNTS: A REQUIREMENT OF THE INVESTORS 23

1. Countable elements required during the financial year 1. 1 Principles of the countable organization Ø Countable organization must ensure: • • • A day to day exhaustive registration and without any delay of the basic information A data processing within a convenient time The availability of the necessary documents for the users within the fixed delivery legal delays. Ø Conditions of regularity and security: • • Book-keeping The use of the technic of the double parts The justification of the accounts by parts The respect of the chronological registration of the operations Identification of each one of these registrations Control by inventory of the existence and the value of the goods, debts and liabilities of the company The recourse to a plan of standardized account Hold the account books and other authorized material as well as the implementation of approved processing procedures enabling to establish the annual financial statements. 24

1. Countable elements required during the financial year 1. 2 Countable journals and other compulsory materials Ø The Day book Ø The Big Book Ø Journals and accessory books, or similar materials: not compulsory Ø The book of inventory Ø General balance sheet of the accounts 25

2. Elements required at the end of the financial year 2. 1 By the company Ø Management report Ø Annual summaries of the financial statements Ø Statement Appended Ø Additional statistical statement 26

2. Elements required at the end of the financial year 2. 2 By the statutory auditors Ø Report of the CAC mentioning: • Controls and verifications carried out • Balance and other accountant documents to which amendments appears to him to necessary • Irregularities and inaccuracies • The conclusions arising from the observations Ø Report of the CAC: • Certifying the regularity of the summaries of the financial statements • Certifying with reserves or refusing to certify 27

2. Elements required at the end of the financial year 2. 3 By the general meeting Ø Minutes of the ordinary general meeting ruling on the financial year, deciding of the assignment of the result, approving the statutory auditor’s report 28

OHADA GENERAL COMMERCIAL LAW Claire Moore Dickerson Prof. & Breaux Chair in Business Law Permanent Visiting Professor Tulane University Law School, LA, USA University of Buea, SW, Cameroon

Introduction • OHADA’s Uniform Acts’ Uniform Goals – Favor investment, foreign & domestic – Favor rules over standards • The General Commercial Law – At the heart of business operations – Breadth & clarity

• • The GCL’s Four Goals Disseminates business information Facilitates raising capital Formalizes professional agency Reinforces contracts of sale

Making Information Available • Trade and Personal Property Credit Register – Registre de Commerce et Crédit Mobilier (RCCM) • Commerçant (economic operator) • Entreprenant (enterpriser)

Raising Capital with the Register • • “Business” (Fonds de commerce) Professional lease Security interests Trade payables

AGENCY • Professional Intermediaries

Sales Contracts • • Influence of CISG Scope: economic operators, enterprisers Formation Performance & warranties Delivery & Risk of loss Breach & Remedies Statute of limitations

OHADA General Commercial Law

OHADA’s Impact on the Rule of Law Dr. Jean Alain Penda Laws’ sophistication, laws’ accessibility Confidence in the justice system Certainty in a contract & assurance on contract enforcement

OHADA’s Evidence of success Practical and easy to use rules Fast setting-up of business Facilitate access to credit Secured lending Simple and quick access to justice Confidence in the judicial system Protection of companies’ assets and their staff Assurance on contract enforcement and Efficient dispute resolution

How OHADA Shaped Businesses From informal to formal entrepreneurs Fast growing private sector Reliability on the banking system

Findings in the World Bank’s Doing Business report on OHADA Global Doing Business 2012: Average ranking of the OHADA member states is 166 out of the 183 Mali is 146, the easiest place among OHADA member states The average cost of starting a business decreased from 338 percent to 110 percent of the average per capita income. average time required to register property also decreased by 28 percent Construction permits in Burkina Faso takes only 98 days, 3 months faster than the EU countries

OHADA Registry’s Computerization, a Revolutionary Improvement The security of existing and future national TPPCR Accessibility of data to different user groups Reliability of data consolidated from different national TPPCR The distribution and availability in real-time data recorded The production of regular statistics to monitor developments of TPPCR Compliance with the commitment of member states vis-à-vis OHADA The legal validity of electronic data and The recovery of data existing in paper format

OHADA Business Law Reform Program Xavier Forneris Investment Climate Advisory Services for Africa March 2012

OHADA: Organization for the Harmonization of Business Law in Africa (created 1993) Burkina Faso Niger Mali Senegal Chad Central African Republic Congo Guinée Bissau Guinea Comoros Côte d'Ivoire Togo Benin Cameroon Equatorial Guinea + DRC Gabon World Bank Group Multilateral Investment Guarantee Agency THE WORLD BANK

OHADA BUSINESS LAW REFORM PROGRAM Objectives: Facilitate creation and operation of businesses Facilitate Access to Finance For SMEs (secured transactions, leasing…) For Infrastructure development (secured transactions, PPP, BOT) Developing regional financial markets through creation of new financial products (securitization, IPOs…) Strengthen confidence and improve access to reliable business information Ø Modernization of registries for companies and secured transactions 44 World Bank Group Multilateral Investment Guarantee Agency THE WORLD BANK

OHADA BUSINESS LAW REFORM PROGRAM Complex, Rigorous and Participatory process: ü Diagnostic: analysis of the Law by independent/reputed experts; consultation of regional stakeholders (public and private); report with recommendations to OHADA Secretariat ü Drafting: OHADA commissions a group of independent lawyers to prepare amendments based on diagnostic ü Consensus-Building: informal presentation of draft amendments in the region, comments, and re-drafting ü Official Review by National OHADA Commissions, comments by Member States sent to OHADA Secretariat 45 World Bank Group Multilateral Investment Guarantee Agency THE WORLD BANK

OHADA BUSINESS LAW REFORM PROGRAM Complex, Rigorous and Participatory process: ü Re-drafting or finalization of the draft ü Review by OHADA Court of Justice Legal Opinion ü Submission to OHADA Council of Ministers for review/adoption ü Publication in Official Journal ü Training of Lawyers, Judges, Law Professors, etc. • First Reforms adopted December 2010: General Commercial Law and Secured Transactions Law. 46 World Bank Group Multilateral Investment Guarantee Agency THE WORLD BANK

OHADA – Legislation Modernization Process Uniform Company Law (AUDSCGIE) DForms, Creation and Organization of corporate entities Examples of measures proposed: Setting-up the company: Make recourse to notary (notaire) optional and not mandatory for the founder(s). SARL (LLC): reduce the amount of mininum capital to be actually deposited in a bank account New form of joint-stock company: the Societe par Action Simplifiee (SAS) World Bank Group 47 Multilateral Investment Guarantee Agency THE WORLD BANK

OHADA – Uniform Company Law (AUDSCGIE) Changes In Corporate Governance Objectives: bring the OHADA Company Law up to best international practices in the area of Corporate governance through : Clearer definition of the stakeholders and their roles Improved functioning of the Board of Directors Reduced risk of conflicts of interest Enhanced transparency and accountability Strengthened Shareholders’ Rights Higher standards for public (=listed) companies World Bank Group 48 Multilateral Investment Guarantee Agency THE WORLD BANK

Examples of changes proposed : a. Clarification of the roles of the various organs/stakeholders Art. 435. Role of the Board of Directors: responsible for strategy and control of the Management. b. Improved functioning of the Board of Directors Art. 435. Access to information : Chairman is required to ensure that members of the Board (Directors) receive complete information. Art. 437. Allow establishment of committees, made of directors, acting under supervision of the Board and issuing recommendations. Art. 454 -1. Participation in Board of Directors via VC or teleconference Art. 459 -1. Obligation to give written minutes of each Board to each Director (for more effective monitoring of decision implementation) World Bank Group 49 Multilateral Investment Guarantee Agency THE WORLD BANK

c. Reducing risks of conflict of interest Art. 465, 474, 482, 490: The compensation of all top executives (Chairman/CEO, Managing Director, Deputy General Manager) must be approved by the Board of Directors. The executive whose compensation is under review by the Board does not take part in the vote. d. Increased Transparency and Accountability Art. 523: All candidates to the Board of Directors have to disclose to the shareholders’ meeting all directorships they have (with other companies) Art. 546 : The CEO informs the shareholder’s meeting of the discussions held and decisions taken at the Board of Directors. World Bank Group 50 Multilateral Investment Guarantee Agency THE WORLD BANK

e. Strengthened Rights / Protection of Shareholders Art. 133 -1, 518 et 531 -1 : Clearer rules for vote through proxy or by mail. Art. 130 : Liability of the Board members who have voted in favor of a decision that is not in the best interest of the company or detrimental to minority shareholders. f. Higher Standards for Public (listed) Companies Art. 829 -1: directors. Stricter rules for financial information. Art. 831 -1 : CEO reports to the Shareholder’s Meeting of the internal control and risk management procedures. Art. 832 -2: Detailed report on the compensation for top executives and directors. World Bank Group 51 Multilateral Investment Guarantee Agency THE WORLD BANK

Q&A Please email all questions to introl@americanbar. org For previous panels or additional information, please visit http: //ambar. org/introl World Bank Group Multilateral Investment Guarantee Agency THE WORLD BANK