KEY POINTS:
STARTING AND CREATING A LIMITED LIABILITY COMPANY IN CAMEROON
The concretization of a business project can in particular be carried out through the creation of a limited liability company. In the OHADA area which Cameroon is part, the process of creating a limited liability company (LLL) is governed by the Uniform Act on Commercial Companies.
The LLC is a company in which the partners are only responsible for the social debts up to the number of their contributions, and whose rights are represented by shares.
It is characterized in particular by the following points:
It is a limited-risk company
It is a hybrid or mixed company because it has both characteristics:
Partnerships (intuits personae)
Capital companies (liability of partners limited to contributions, partners are not necessarily traders).
Basic conditions
They relate to the corporate purpose, the partners, and the share capital.
Social object
The principle of freedom of trade and industry implies that any economic activity can be constituted in the form of a limited liability company.
However, certain sectors of activity such as banking or insurance must obligatorily have the status of a public limited company (PLC), by the particular legislation governing these fields of activity.
Shareholders
The LLC can be formed by a single natural or legal person called a “shareholder” and this using a unilateral act. In addition, it can also be formed by two (2) or more natural or legal persons.
In the OHADA space, the partners/shareholders of an LLC can also be spouses, prohibited persons (minors), or even persons subject to incompatibility (lawyer, civil servant, etc.).
Share capital
The share capital is the sum of the contributions in cash or in kind at the time of the incorporation of the company. It is at least one million (1,000,000) CFA francs [8] and divided into shares of a minimum nominal value of five thousand (5,000) CFA francs each, per Article 311 of the Uniform Act mentioned above. Thus, the contributions can be:
(i) Cash contributions
In principle, the shares must be fully subscribed by the partners. They are paid up during the subscription of the share capital at least by half of their nominal value, under the terms of article 311-1 of the said uniform Act. The release of the surplus occurs in one or more instalments within two (2) years, from the registration of the company in the Register of Commerce and personal property credit (RCCM). The withdrawal of funds is only possible after the registration of the company with the RCCM.
(ii) Contributions in kind
They must be fully paid up when the company is incorporated; they relate to movable and immovable property, tangible or intangible (trademark, invention patent, goodwill). The valuation of contributions in kind is carried out in principle by the partners. However, if the value of the contribution exceeds five million (5,000,000) F.CFA, this evaluation will be carried out by an auditor.
The formal conditions
The procedure for setting up a limited liability company requires the prior drafting of the articles of association and the completion of publicity formalities.
(i) Drafting of articles of association
The articles of association must contain at least the following information:
The form of the company
Its duration
Its corporate name
It’s the head office
Its corporate purpose
The amount of share capital
In addition, the articles of association must be drawn up by notarial deed or by private deed filed in the minutes of the Notary, under Article 10 of the said Uniform Act.
(i) Legal Announcement/notice
On the one hand, the LLC is subject to mandatory registration with the RCCM, giving it a legal personality.
On the other hand, the insertion of a notice in a newspaper of legal announcements to inform third parties of the creation of a business.
Management Structure
An LLC is managed by one or more managers. A manager is a natural person, partner or not.
The manager can be named in the articles of association (in the appendix) or the Constitutive General Assembly.
The duration of his mandate is indefinite or determined by the article of association.
In the absence of statutory provisions, the manager is appointed for four (4) years and is eligible for re-election.
The manager has an uncapped combination of mandates with other LLCs. He can also combine an employment contract with his mandate to administer the LLC.
The functions of the manager are free or remunerated under the conditions determined in the articles of association or a collective decision of the partners, under Article 325 paragraphs 1 of the said uniform Act.
A manager may be dismissed by the decision of the partners representing more than half of the shares, in particular for just cause. This revocation implies the change of the manager, hence the fulfilment of the following legal formalities: RCCM, and publication of a notice in a journal of legal announcements, to inform third parties.
Conversely, a manager can freely resign. However, if the resignation is without just cause, the company may seek legal compensation for the damage.
The obligations
(i) Holding an annual Ordinary General Assembly
The LLC is required to hold an annual Ordinary General Meeting, within six (6) months of the end of the financial year, to approve:
(ii) Management report
The inventory and the summary financial statements
Nevertheless, the manager may request an extension of this period from the competent court, in this case, the Court of First Instance.
The partners are convened at least fifteen (15) days before the date of the General Meeting, in particular by modern means of transmission of information (letter to the bearer, registered letter, electronic mail), under the terms of article 338 of the aforementioned Uniform Act.
During this General Assembly, the decisions are adopted by one or more partners representing more than half of the share capital.
Preparation of summary financial statements
The LLC is a commercial company, it is subject to the obligation of keeping commercial books and annually, it must draw up summary financial statements. For the details of these statements, refer to the article OHADA: Summary Financial Statements on this blog
Advantages
The LLC is the ideal tool for the operation of small and medium-sized businesses. It has a simplified management method, which does not include the duality of the management body specific to the PLC with the Board of Directors.
The presence of an auditor is only mandatory if two (2) of the following three (3) conditions are met:
Balance sheet total greater than one hundred and twenty-five million (125,000,000) CFA francs
Annual turnover above two hundred and fifty million (250,000,000)F.CFA Permanent staff of more than 50 people.
The auditor (if necessary) is appointed for three (3) financial years by one or more partners representing more than half of the share capital.
The partners of the LLC do not necessarily have the quality of traders, so even minors can be partners (Under the guardianship of course).
In addition, the liability of the partners is limited to the number of their contributions, hence there is a distinction between the assets of the company and that of the partner; the creditors of the company cannot sue the partners for their assets.
It is therefore the ideal structure for the protection of the partner’s assets.
Additional flexibility, the LLC includes a possibility of progressive release of the shares subscribed in cash.
Disadvantages
An LLC has some disadvantages: First, it cannot issue securities; hence it cannot appeal to the financial market, the prerogative of the PLC. Then, the transfer of shares is subject to rigorous formalism, in particular, either by:
Notification of the transfer to the company by bailiff’s writ or notification by any means making it possible to establish its effective receipt by the recipient’s acceptance of the assignment by the company in an authentic deed
the deposit of an original of the deed of transfer at the registered office against delivery by the manager of a certificate of this deposit
This assignment is only enforceable against third parties after completion of one of the above formalities, plus the modification of the articles of association and publication in the RCCM.
Conclusion
The LLC is the most widespread legal structure for medium-sized businesses, it presents a simplified management method, hence its appeal for the realization of a business project.
However, its constitution must be done following the rules and great rigour becomes necessary in the event of contributions in kind, progressive release, multiple managements… and involves the assistance of a business law professional
In practice, the assistance of a professional is recommended in all cases to save time and peace of mind.
Finally, the establishment of the Summary States involves the implementation of accounting skills, internal and/or external to the company.
Finally, in the long term, the SARL can be a springboard for entrepreneurs who, as soon as their project is successful, “drop ” it for a supposedly more credible structure, in this case, the (PLC)!
Hoping that this article has answered your concerns and removed some grey areas when it comes to LLCs, do not hesitate to ask your questions in the comments below for any clarification.
What obstacles and fears do you identify if you plan to create an LLC?
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Article by CHUO ANGABUA JUNIOR
‘’The content of this article is intended to provide a general guide to the subject matter. We insist specialist advice be sought depending on your specific circumstance’’
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