Uniform Business Laws in Africa: OHADA's Contribution to Legal Predictability March 28, 2012

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

2. 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

3. 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)

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

5. March 28, 2012 OHADA PRESENTATIONXavier ZenoAttorney at LawParis Bar

6. 1. Origins of OHADA1.1 Situation after the independence • Legal insecurity • → Independence in 1960: heterogeneous regulations. • → Context of globalization: regulations no more adapted to the economic situation and to the actual international framework. • 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. • 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…

7. 1. Origins of OHADA1.2 Main steps leading to the creation of OHADA • 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. • 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. • September 1993 → Meeting in Abidjan: presentation of the draft of the Treaty for signature. • October 1993 → Signature in Port-Louis, Mauritius. In force since September 1995.

8. 2. Purposes and objectives • “Ohada is a legal tool conceived and realized by Africa to serve economic integration and growth”, Kéba Mbaye, Funding Father of OHADA. • 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.

9. 3. Member States3.1 Actual Member States Niger Chad Gabon Benin Mali Guinea Burkina Faso Congo Senegal Guinea-Bissau Cameroon Comores Togo Central African Republic Equatorial Guinea Ivory Coast = 16 Member States

10. 3. Member States 3.2 Entry of the RDC into OHADA • February 2010 → Promulgation by the President of the DRC of the Ordinance-Law relating to the OHADA accession. • November 2010 → Expected date for the ratification of the instruments • January 2011 → Expected date for entry of the RDC into OHADA. As to date, still awaiting for the instruments of ratification to be deposited.

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

12. 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: • Commercial law • Company law • Recovery of debts and enforcement measures • Securities • Insolvency • Arbitration • Accounting law • Transport of goods by road • Cooperative companies →Total of 9 Uniform Acts

13. 5. OHADA Uniform Acts 5.2 Applicability • 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. • 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.

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

15. 1. Introduction – main issues • Many expectations of the economic operators as regard investments • Demand of both stability and transparency of regulations and attractive taxation → requirement of good governance of the company • 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. • Notion of good governance within OHADA: 1997, Uniform Act relating to commercial companies and economic interest group 15

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

17. Evolution of the modes of administration in Africa • 1.1 End of the managing board and supervisory board • 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. • 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. • Advantage of the system of the board of directors: a clear distinction of who has the control of the company and manages it. 17

18. 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 • 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. • 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. • 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

19. 2. The Board of Directors: guarantor of a good governance of the company2.1 Composition 19 • 3 members at least and 12 at the maximum. • 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. • Freedom in the choice/recruitment of the directors → problem of incompetency of the directors (solution of creating an Institute of directors, ie. in Senegal). • 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.

20. 2. The Board of Directors: guarantor of a good governance of the company2.2 Functioning 20 • 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. • Validity of deliberations: when at least half of its members are present → efficiency of this rule (no representation allowed), good governance of company. • Validity of decisions: principle of the majority of the present and represented. • 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)

21. 2. The Board of Directors: guarantor of a good governance of the company2.3 The particular case of the Chairman of the Board of Directors 21 • 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. • 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).

22. 2. The Board of Directors: guarantor of a good governance of the company2.4 Functions of the Board of Directors 22 • 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. • Various tools of good governance of the company: ie. internal rules and regulations or an ethic code.

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

24. 1. Countable elements required during the financial year 1.1 Principles of the countable organization 24 • 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. • 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.

25. 1. Countable elements required during the financial year 1.2 Countable journals and other compulsory materials 25 • The Day book • The Big Book • Journals and accessory books, or similar materials: not compulsory • The book of inventory • General balance sheet of the accounts

26. 2. Elements required at the end of the financial year 2.1 By the company 26 • Management report • Annual summaries of the financial statements • Statement Appended • Additional statistical statement

27. 2. Elements required at the end of the financial year 2.2 By the statutory auditors 27 • 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 • Report of the CAC: • Certifying the regularity of the summaries of the financial statements • Certifying with reserves or refusing to certify

28. 2. Elements required at the end of the financial year 2.3 By the general meeting 28 • Minutes of the ordinary general meeting ruling on the financial year, deciding of the assignment of the result, approving the statutory auditor’s report

29. OHADAGENERAL 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

30. 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

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

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

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

34. AGENCY Professional Intermediaries

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

36. OHADA General Commercial Law

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

38. 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

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

40. 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

41. 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

42. OHADA Business Law Reform ProgramXavier Forneris Investment Climate Advisory Services for Africa March 2012

43. OHADA: Organization for the Harmonization of Business Law in Africa (created 1993) Burkina Faso Niger Mali Chad Senegal Central African Republic Guinée Bissau Congo Guinea Comoros Côte d'Ivoire Benin Togo + DRC Cameroon Gabon Equatorial Guinea

44. OHADA BUSINESS LAW REFORM PROGRAM 44 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 • Modernization of registries for companies and secured transactions

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

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

47. OHADA – Legislation Modernization ProcessUniform 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) 47

48. 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 48

49. Examples of changes proposed : • Clarification of the roles of the variousorgans/stakeholders Art.435. Role of the Board of Directors: responsible for strategy and control of the Management. b. Improvedfunctioning of the Board of Directors Art.435. Access to information : Chairman isrequired to ensurethatmembers of the Board (Directors) receivecomplete information. Art.437. Allow establishment of committees, made of directors, acting under supervision of the Board and issuingrecommendations. Art.454-1. Participation in Board of Directors via VC or teleconference Art.459-1. Obligation to givewritten minutes of eachBoard to eachDirector (for more effective monitoring of decisionimplementation) 49

50. c. Reducingrisks of conflict of interest Art.465, 474, 482, 490: The compensation of all top executives (Chairman/CEO, ManagingDirector, Deputy General Manager) must beapproved by the Board of Directors. The executivewhose compensation isunderreview by the Boarddoes not take part in the vote. d. IncreasedTransparency and Accountability Art.523: All candidates to the Board of Directors have to disclose to the shareholders’ meeting all directorshipsthey have (withothercompanies) Art.546 : The CEO informs the shareholder’s meeting of the discussions held and decisionstakenat the Board of Directors. 50