THE PROS AND CONS OF ESTABLISHING A COMPANY BRANCH OFFICE IN CAMEROON
WHAT IS A COMPANY BRANCH IN CAMEROON?
The growth of a company is one of the primary obligations that management owes to the company shareholders. There are various ways in which a company may grow such as the acquisition of other companies, merging with other companies, establishing subsidiaries or branches both domestically and abroad, creating new products, improving R&D and the IP portfolio, etc. Some companies use all these tools jointly while others, especially SMEs employ just a few of them.
Of all the above, one of the most used tools to execute corporate growth and expansion is establishing a branch of a company either in the domestic market of the company or abroad, depending on the corporate strategy. This may be because it is relatively easy, inexpensive, and quick with the same effects of extending the products of the company to a wider client base. In addition to that, the company can continue to maintain hands-on management of its affairs because contrary to unlike a subsidiary, a branch does not enjoy a separate legal personality from the company.
In Cameroon, branches are governed by the OHADA Uniform Act on Commercial Companies and Economic Interest Groups (the Uniform Act). It is very thinly legislated leaving a lot of policy space for OHADA Member States to legislate on certain intricacies such as the registration process and the documentation needed to that effect.
The domestic law in this regard in Cameroon is Law N° 2015/018 of December 21, 2015, relating to Commercial Activities in Cameroon. The provisions of the law relating to branches are almost identical to those of the Uniform Act. We shall answer some of the questions regarding a branch as per the Uniform Act and Cameroonian law.
What is a Branch of a Company in Cameroon?
The Uniform Act as well as the law on Commercial Activities in Cameroon define a branch of a company as a commercial, industrial, or service provider structure owned by a company or a natural person that enjoys a certain degree of autonomy in its management but does not have separate legal personality from the company or natural person.
As per the definition, a branch of the company can be set up by a natural person or a body corporate. Its legal personality is directly linked to that of the natural person or body corporate that sets it up. It can be created by either a domestic company or a foreign company.
There are some nuances between a branch of a domestic company and a branch of a foreign company. A branch of a domestic company can exist during the lifetime of the company. On the contrary, as per the Uniform Act and the law governing Commercial Activities in Cameroon, the branch of a foreign company or foreign natural person can exist only for a maximum period of two years after which it must be affiliated to a domestic company or a newly created company in Cameroon.
However, a waiver for such an affiliation or incorporation of a domestic company can be granted by the Minister of Commerce for another non-renewable maximum period of two (02) years. The inspiration behind this proviso is the lack of legal personality by the branch. In this light, it becomes very challenging to hold a foreign company liable for acts committed by its branch, thus the limited time for existence without domestic affiliation.
What are the motivations behind creating a branch of a company?
There are several reasons that can motivate creating a branch of a company both domestically and abroad. One such reason is to offer visibility and brand exposure, thus positively influencing a company’s profitability. Secondly, it is relatively inexpensive, easy and quick compared to creating a subsidiary or mergers and acquisitions. Thirdly, the company can maintain control and management of the branch’s affairs, which naturally does not have a separate legal personality from the company. In addition, it can be used as a tool to reduce the risk of doing business in the host country by allowing the opportunity to test products or services in new markets without having to set up a company per se.
Moreover, by creating a branch of a company in Cameroon foreign companies can use it to decentralize their business and explore new and potential partnerships within the country. Furthermore, foreign companies can use a branch to execute a short-term contract or project, without going through the hassle of setting up a company and later liquidating it upon completion of the project. Lastly, winding up a branch is quite easy and less costly compared to liquidation or winding up of a company.
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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