Growth, restructuring and adaptation are necessary in the lifecycle of every business. The change of a share capital is one of the most important financial and legal steps to be performed by a company in Mauritania. This is either done to increase capital to finance expansion or decrease the same to create value to shareholders or reorganise through other operations but this is all tightly controlled by Mauritanian law. The alterations have to be made by the steps that were stipulated by the Mauritanian Commercial Code and the legislation of your company. This process is also very important to navigate through and the wrong move would influence the legal position of your company, its credit position, as well as its relationship with shareholders.
Familiarising with the forms of capital change
The thing is that before doing anything it is important to know what type of change is being made because the processes vary greatly.
The first reason is an increase in the share capital, which is often done in order to consolidate the financial base of the company or to fund new projects or attract new investors. This is possible in a number of ways: through the issue of new shares as cash shares, through the conversion of reserves or retained earnings into capital, or through the conversion of debt into equity. Both approaches possess certain accounting and legal consequences.
Second, the decrease of share capital is a more sensitive procedure. It can be done to cover up accumulated loss and clean up the balance sheet or to distribute excess capital to the shareholders when the company possesses more than it requires to run its operations. The legislation is cautious of any cuts to ensure it does not harm the creditors of the company since it entails reducing the financial cushion that assures them of their place in the queue. Other operations, including the consolidation or division of shares (modifying the nominal value and the number of shares without any change in the total capital) or transfer of headquarters which may coincide with a change of capital are also subject to formal procedures. The golden rule is that any change should be allowed within the statutes of your company and with the motive that it is an honest corporate interest.
The in-house decision-making process
Any process of transforming your share capital always starts with an internal corporate resolution. Such a fundamental change can only be made by the shareholders of the company which is virtually the most powerful body. You have to hold an Extraordinary General Meeting (Assemblée Générale Extraordinaire). The quorum, convocation and the voting majority of this meeting are usually more strict in comparison with the ordinary meetings and correspond to what your company statutes provide and typically require a two-thirds majority vote. The main result of such an encounter is the official resolution of shareholders (proces-verbal). This is the legal basis of the whole operation. It has to be specific and detailed and put the exact nature of the capital change, the new capital amount, the reason why the changes took place, and the thorough process of executing it. In the case of an increase, it should give the number of new shares, the price of issue, any favours of new shares by existing shareholders and the time within which it should be completed. To make a reduction, it should describe the process (e.g. the retreat of the nominal value of shares or cancellation of the shares) and ensure that the processes of creditor protection are adhered to.
Legal formalities and protecting creditors
After the change is accepted by the shareholders, you have to go through the legal formalities that are there to bind the change. The new company statutes to incorporate the new capital should be prepared or modified. These are the key documents of the following step: The filing of the change at the Trade and Personal Property Register (Registre de Commerce et du Credit Mobilier – RCCM). This has been achieved via the Business Formalities Centre (Centre de Formalites des Entreprises – CFE). The dossier to be required is the notarised shareholders” resolution, updated statutes, the statement of conformity, and evidence of payment of related registration fees. Protection of creditors is a critical step, particularly where there is a reduction in capital. Mauritanian law requires that the companies inform known creditors about a capital reduction, by registered letter, and provide a notice in a journal of legal announcements, e.g. the Journal Officiel de la République Islamique de Mauritanie. This notice provides creditors with a legal time frame (typically two months) to protest the reduction in case they do not think that their claims are at risk. This opposition period cannot be reduced until it has elapsed and whatever objections to the reduction may be made by valid creditors are overridden or served.
Post approval activities and finalisation
Once you have met the requirements of the publication formalities and creditor notification, you now have to secure an important document, which is the certificate of non-objection with the tax authority (Direction Générale des Impôts – DGI). This certificate will affirm that the firm has no unpaid taxes in the transaction. In the same manner, social security clearance can be required.
Holding these clearances, you go back to the RCCM/ CFE and complete the registration. The officials will submit a revised RCCM extract which is a legal reflection of the new share capital of the company. This revised extract is evidence of the change in the people. On the internal front, you should revise the share register of the company to indicate a new share structure and issue new share certificates where needed. Last but not least, you should properly inform the bankers of the company of the change by submitting a new RCCM extract because the capital of the company is one of the aspects of its banking profile and credit terms.
Conclusion
The balancing of corporate strategy and legal rigour in changing a company’s share capital is a process that is undertaken in Mauritania. It requires planning, following statutory and legal procedures closely and open communication with the shareholders as well as creditors. Although the procedure in the case of an increase is usually easier, a decrease involves going around the guarded nets to ensure that there is economic confidence. Considering the legal implications and the complexity involved, it is strongly recommended that a Mauritanian corporate lawyer or a qualified statutory auditor be hired. They are able to make sure that the resolution of the shareholders is legally valid, they are able to do the filings to CFE and RCCM and they can supervise the process of key creditor notification. Through this systematic approach, the directors of the company will be able to implement these crucial changes in the financial structure with ease and be certain that their company structure will develop in a sound and complete manner according to Mauritanian law.
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