Modification of the share capital of a company in the Republic of Congo is an official corporate operation, regulated by the OHADA Uniform Act on Commercial Companies and those of the company. Both in growth capital and restructuring, the process must be followed by a strict procedure that complies with the legal requirements to facilitate the change as legal, enforceable and in a legal manner.
Baseline and starting point: The strategic decision
Any alteration to share capital, whether through an increase to finance growth or a decline to absorb losses, should be correlated with a well-defined company plan. It starts with the company managing body (the Board of Directors, in the case of an SA, or the managers, in the case of SARL). Preparing a comprehensive report explaining why the suggested change is justified. It is then presented in the form of this report detailing the method, reasons and implications to the final decision-makers: the shareholders or partners in a General Assembly.
Shareholder resolution: The mandate
Shareholders are the only people who have the power to alter the share capital. A General Assembly should be convened properly, and capital change should be one of the main issues on the agenda. The above change involves a special majority vote as stipulated by the OHADA Uniform Act and the company statutes. To most firms, that would translate to a minimum of three or four quarters of the voting shares. The terms of resolution, the exact amount, the mode, and the conditions are to be carefully registered in the official minutes of the assembly.
Courses to a capital increase
There are various methods of capital increase with a unique process:
Cash contributions: New shares are also issued and subscribed to by cash. Pre-emptive rights usually give existing shareholders a right to subscribe on the same basis as existing holdings before an external offering.
Conversion of claims: Creditors can make an agreement to convert debt into equity of the company.
Incorporation of reserves: Capital may be increased through the conversion of capital of retained earnings, revaluation reserves or share premiums into new shares, which are usually distributed to the existing shareholders as bonus shares.
In case of cash contributions, it is a period of subscriptions, and the money should be deposited. Often, a notarial deed is necessary to formalise the increase.
The tender way of capital reduction
Capital cuts are a more sensitive action, which is aimed at cushioning creditors. It is usually allowed to offset accumulating losses, or they can repatriate excess capital to shareholders. This purpose should be clearly mentioned in the shareholder resolution. Most importantly, the Congolese legislation requires a high-protection creditor regime. The company should also announce the capital reduction in a journal of legal announcements, giving any creditor the right to object. The decrease can not be completed until all the objecting creditors are either paid off or given satisfactory guarantees on the claims made.
Forms of formality: The notarization and registration
The increase or decrease in the capital modification agreement has to be formalised in a notarial deed (acte authentique) that should be drawn up by a notary based in Congo. This action becomes the official legal document of the change.
After being notarised, the company has to be registered with the Trade and Personal Property Credit Register (RCCM). The application should contain the notarial deed, the approved shareholder meeting minutes and an updated version of the company statutes with new capital. It is only following this registration that the change becomes opposable to the third parties.
The key obstacle: Tax clearance and final
One of the preconditions to complete the registration of RCCM is the acquisition of a Tax Clearance Certificate (Quitus Fiscal) with the tax authorities of Congolese origin (Direction Générale des Impôts). This confirms that the transaction has paid all the taxes payable on it (including stamp duties and any taxes imposed on capital gains). Moreover, the revised laws should be posted in a journal of legal announcements to make people aware.
Conclusion: A process requiring accuracy and expert leadership
The process of changing a company’s share capital in the Republic of Congo is a multi-step process that constitutes a balance between the flexibility of the corporation and the legal protection of the shareholders and creditors. Between the strategic shareholder vote, including the notarial deed, the creditor notification process (to cut), and the critical tax clearance, there is no room for error in each step. It is more than just helpful to hire a local notary and a legal advisor with good knowledge of OHADA law and with the commercial practice of the Congolese. Their experience makes the sale of the company conducted perfectly, which protects its legal status and allows the company to develop its business on its new financial basis.
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