Banking & Finance 2019 Second Edition

Last Updated September 10, 2019


Law and Practice


Cabinet d'Avocats O. ANASSIDE et N. ASSOGBA Ancien Cabinet J. DJOGBENOU (Cotonou - HQ) was founded in Cotonou in 2000 and is active in advising on banking litigation, debt collection and project financing. The firm is made up of two departments: one is in charge of litigation, and the other is in charge of legal advice and engineering. The clientele consists mainly of local banks and large or medium-sized companies in Benin and West Africa. The firm maintains partnerships abroad through several networks of lawyers around the world.

Recent economic cycles and the regulatory environment have had a positive impact on the direction and trends of the loan market in Benin. There was important legislative and regulatory activity in 2016-2018, with the aim of improving the business climate. From this point of view, the law on the legal framework of public-private partnerships, the law on leasing, the law organising factoring activity and the law reforming the land code came to meet expectations and favour an increase in the mechanisms and solutions available to lenders and funding agencies in general. From now on, the court of commerce of Cotonou allows litigation from this type of activity to be entrusted to a professional jurisdiction, provided that the judges have a certain level of specialisation and that the treatment files are handled at the appropriate pace. Financing activity has also increased in view of the implementation of important State projects where a large portion of the resources cannot be mobilised directly by the State. Investors flock to Benin from many areas, with proposals and projects that do not fail to materialise.

The high-yield market does not particularly affect financing conditions and structures.

The number of alternative credit providers has not had a decisive influence on the growing lending market in Benin in recent years.

Banking and finance techniques can evolve through the decisions of the regulators of banking activity, taking the concerns of the investors and the borrowers into account. However, these decisions do not affect the ability of investors to enforce agreements, nor the ability of borrowers to enjoy stable and secure transactions.

No legal, tax or regulatory developments that are likely to have a significant impact on the loan market in Benin are expected. The reforms are recent, and their implementation – which has already started – should allow a gradual improvement of the loan market.

Banks and financial institutions are authorised to provide financing to an organised company in Benin as soon as the company fulfils the conditions for undertaking credit distributor activity. The regulation of the West African Monetary Union defines the framework for the exercise of banking activities, which, in turn, sets the market it targets, given its objectives. The Union can then freely negotiate the methods of supplying the financing with its customers or any company. The contract must be registered in most cases, but this does not imply any intervention by the State in the terms of the contract. The Union receives the guarantees it considers appropriate and, if necessary, enters the transaction in the Trade and Credit Register.

There are no restrictions on foreign lenders granting loans governed by Benin law. If the operation takes place in Benin, providers simply need to comply with the national legislation.

The granting of security interests or guarantees to foreign lenders is not limited at all, and there is no discrimination between the foreign lender and the national lender. Lenders can benefit from all the guarantees known in Beninese law, and even more.

There are no restrictions on payments abroad or the repatriation of capital by foreign investors. However, any form of transfer of funds abroad is subject to a prior exchange authorisation from the services of the Ministry of Finance, which is granted when the investor or their local representation fulfills all his fiscal and social obligations. An audit is therefore carried out by the production of a tax clearance and a certificate from the social security fund, in addition to proof of the transaction. If the lawful currency is the CFA franc, a company is nevertheless allowed to manage accounts in a foreign currency, provided it has received authorisation from the competent authorities.

There is no restriction on the borrower's use of proceeds from loans or debt securities – the borrower always has the freedom to dispose of its resources and even to sell them, whether they are already products or interest repaid, or securities held on an entity.

Even if the trust is not implemented in Benin, some contracts of this nature may receive other legal qualifications and be recognised by the courts. It must be pointed out, however, that in specific matters regarding the constitution of guarantees, the security agent is established by law. The proper constitution, monitoring and retention of the guarantees offered to the lender must be ensured. This method is not common, but it can be used.

The assignment of debts is the most common form of loan transfer in Benin, and is governed by the Civil Code in particular, and by the Uniform Security Act when the loan transfer consists of a guarantee mechanism. The creditor transfers his claims to a third party, who becomes the new creditor by a contract. The debtor is not necessarily a party to this contract, but must receive formal notification, preferably through a bailiff act. By this notification, the assignment is opposable to him and he is henceforth obliged to pay the new creditor. Collateral associated with the loan can be transferred with it, although this must this be expressly stipulated in the loan transfer contract, and the collateral provider – if different from the debtor – must receive notification of the transfer made.

Debt buy-back by the borrower or sponsor is permitted. This mechanism is commonly used, because it allows the forms of recovery or refinancing to be adapted to the needs of the activity concerned.

There are no specific rules for certain funds with respect to public procurement financing transactions.

Payments of principal, interest or other payments to lenders are not subject to withholding tax, except in specific cases. It is up to the lender to make his declarations and to pay his taxes.

As a matter of principle, fees and other charges are borne by the borrower, who must pay them. Other taxes, however, are the responsibility of the lender, as determined by the Finance Act, because of his activity or profits from the operation.

There are laws on usury in Benin. At the domestic level, Law No 83-008 of May 17, 1983 defining and repressing usury in the Republic of Benin indicates that a rate is usurious when it exceeds the amount of interest that banks are allowed to collect by more than two thirds. The regulation of the West African Economic and Monetary Union completes this legislation and sets the thresholds that must not be exceeded on an annual basis.

Assets generally available as collateral for lenders include movable and immovable property, and also the social rights and titles either of the beneficiary of the financing, or of a third party who is the constituent of the guarantee. In the case of movable property, the guarantees may be evidenced by private deed; in the case of immovable property, the guarantees must be established by an act drawn up by a notary. Most warranties must be published in the trade and credit register in order to be effective against third parties; they must also be registered at the tax office so that their date can be certified by the administration.

Beninese law authorises a universal security, which is the personal guarantee. A company can therefore commit to all its assets, including current and future assets, so that, in the event of recovery, the lender may take action in respect of all the assets of the grantor of the guarantee.

All forms of downstream, upstream and cross-stream guarantees are authorised under Beninese law, subject to compliance with the law.

In an acquisition, a target cannot advance funds, grant loans or even grant a security for the subscription or purchase of its own shares by a third party. The only possible hypotheses for financing the company's debt buy-back of its own shares are those in which it repurchases them itself with a view to a capital reduction.

There are no other significant restrictions on the granting of collateral or guarantees. All assets that may be traded may be subject to security and collateral. The parties must comply with the Uniform Act relating to the law of security. The guarantee must be granted by an entity after agreement and authorisation of its competent structures, as provided for in the statutes of the company.

Securities are released as a result of the borrower's payment, under the terms of the contract, or at his request, if he establishes proof of the total release of his obligations. Security may also be released as soon as the parties agree to release it.

The rank of registration of the security in the commercial register determines its priority and the privilege granted to the lender in the event of insolvency. The order of conclusion of the security and especially the order of its registration in the trade and credit register are decisive. Priority may be changed conventionally if all interested parties agree to do so. These provisions survive in the event of the insolvency of the borrower, but take effect only when the money is divided.

A secured lender may assert his security at any time, as soon as the loan recipient or borrower fails to fulfill his obligations, including repayment. This is done under the conditions provided for in the contract, which may provide for formal notice and deadlines. In the absence of delay, the lender is not subject to any constraints, and can take precautionary measures and look for a title for enforcement measures.

The essential steps are the search for the enforceable title, the seizure of the goods and finally their sale in order to be paid. In this type of procedure, the lender is assisted by a lawyer, a bailiff and sometimes an auctioneer. The only restriction that exists is that the lender must first realise the property that is given to him as collateral before extending his action on property that is not given to him as collateral.

In contractual matters in general, the parties are free to choose the law applicable to their contract; therefore, if they have the capacity, they can agree that a foreign law will be applied to their contract. The Beninese courts will then be required to apply the law chosen by the parties in order to settle any difficulty that may arise.

Decisions rendered abroad and arbitral awards may be enforceable in the Republic of Benin without the trial being resumed. The judge checks, in a summary way, through the procedure of the exequatur, if the decision fulfills some essential criteria and conforms with the public order of Benin. The judge also checks that the choice of foreign jurisdiction is not fraudulent, and whether the decision is already able to be enforced in that foreign jurisdiction. When these conditions are met, the exequatur is granted and the decision obtains the same force as if it had been rendered in Benin.

There is no factor that could prevent a foreign lender from enforcing its rights in Benin under a loan or guarantee agreement. The nationality of the foreign lender does not constitute an additional difficulty in recovering the claim if necessary. The only downside is that the surety may be called to pay in court when it brings an action to see a Beninese entity convicted. This bond is intended to ensure that it is not a fanciful action and, in this case, to guarantee the payment by the foreign party of any damages. The amount is fixed in relation to the request made, but must not be exorbitant to the point of preventing a foreigner from having access to Beninese justice.

Collective procedures are provided for in Benin and instituted by the OHADA Uniform Act on Insolvency and Restructuring, which provides for three types of procedures: preventative settlement, bankruptcy and asset liquidation. The preventative settlement allows a company in financial difficulty to seek support from the jurisdiction to avoid the cessation of payments. Bankruptcy, meanwhile, allows a debtor that has already ceased making payments, because his available assets no longer meet his liabilities, to obtain the suspension of individual proceedings and, with the assistance of bodies provided by the law, jurisdictional or otherwise, to succeed in restoring its functionality. Asset liquidation ultimately occurs when the company's chances of recovery are irreparably compromised.

In practice, these collective proceedings are increasingly effective because they fall under the jurisdiction of the Commercial Court, which is a specialised jurisdiction equipped to deal with cases of this nature. Depending on the case, the proceedings can be lengthy, but the governing bodies work under the control of the court that can dismiss them, make up for their failures, assess the measures they implement, and so on.

Bankruptcy is the most commonly practised procedure.

The commencement of insolvency processes suspends any individual suit. The lender can no longer immediately enforce his loan contract but is required to submit to the procedure, which groups all the other creditors, and in which he does not have sole control. He must declare his claim, and the trustee represents his interests as much as those of the other creditors. This right is only covered if the procedure is terminated. However, when the lender has a guarantee, he is paid by preference from the proceeds of the sale of this guarantee. The creditor's privileges remain, but the stages of their promotion are different.

The payment order of the creditors is determined according to whether it concerns the fruits of the sale of a piece of furniture or a building. The planned order according to the nature of the good therefore contains some variants.

With regard to the realisation of buildings, the money is distributed in the following order:

  • to the creditors who made a contribution to ensure the continuity of the business;
  • to the creditors of legal costs incurred to achieve the realisation of the property sold and the distribution of the price;
  • to the creditors of super-privileged salaries in proportion to the value of the building in relation to the total assets;
  • to creditors holding a conventional or forced mortgage and to separate creditors registered within the legal period, each according to the rank of its registration in the land register;
  • to the creditors of the estate – ie, those whose claim arose after the opening decision;
  • to creditors with general privilege subject to publicity, each according to the rank of its registration in the Trade and Personal Property Credit Register, and to creditors with general privilege not subject to publicity, according to the order established by the law on security interests;
  • to unsecured creditors with an enforceable title; and
  • to unsecured creditors without an enforceable title.

There are some notable differences with regard to the realisation of movable property: the creditors of the costs incurred for the preservation of the debtor's property in the interest of the creditor are paid before the creditors of wages. Creditors with a special lien in respect of the property precede the creditors of the estate.

The concept of equitable subordination is not known in Benin, and there is no similar concept.

Risk factors in the event of the borrower's insolvency include the following:

  • a lack of insurance;
  • the bad constitution of the guarantees, the cancellation of which can transform a creditor beneficiary of privilege into a creditor without privilege;
  • the initiation of a bankruptcy proceeding where a bad preliminary investigation has been made into the property of the borrower; and
  • mismanagement or lack of management control by a third party.

Project finance has been booming in Benin in recent years. The government's action programme for 2016-2021 provides for a total budget of EUR13.78 billion to be mobilised, of which the private sector will contribute 61%. The government and the structures attached to them therefore rely primarily on the financing of their projects by private, national and especially foreign actors, which justifies a major revival of interest in project finance in Benin. To improve conditions, improving the legal framework to attract foreign investment has become a priority. In addition to Benin's previous business law efforts in ratifying the African Organization for the Harmonization of Business Law (OHADA) treaty and applying uniform acts as its own domestic law, various laws have been adopted by the Beninese parliament, including Law No. 2016-24 of October 11, 2016 on the legal framework of the public-private partnership in the Republic of Benin and its implementing decrees. The administrations are constantly updating themselves in order to offer flexibility adapted to this choice of the State. Finally, the Cotonou Commercial Court was effectively created as a professional jurisdiction serving the business community. With its tools and the quality of its resources, this court is able to settle business litigation and project finance matters within a reasonable time, and may also resort to the existing legal framework of business arbitration if necessary, with the administrative body and jurisdiction of appeal, in some cases, being the OHADA Common Court of Justice and Arbitration (CCJA).

The law adopted on 11 October 2016 and promulgated on 24 October 2016 sets the contractual environment for public-private partnership (PPP) contracts, the management and termination of these contracts, and the settlement of conflicts. Under a PPP contract, a public person entrusts to a private partner (ie, a legal person governed by private law), for a specified period, depending on the amortisation period of the investments or the financing terms selected, a global mission for the transformation, maintenance, operation or management of works, equipment or immaterial goods necessary for the public service for which the contracting authority is responsible, as well as all or part of their funding. The PPP contract may also cover all or part of the design of such works, equipment or immaterial goods, and the provision of services contributing to the exercise by the contracting authority of the public service mission of which it is in charge, and the design of works and services in the framework of their realisation and/or exploitation. It may still be a global mission to mobilise resources and build, operate and transform major structures. The PPP contract is a public payment contract whereby the remuneration of the contracting partner is carried out by the public entity throughout the duration of the contract, from the commissioning of the work.

A project financing transaction does not require State approval if it does not involve the State or one of its branches. No formality is required for the validity of the financing or project agreements but, like any contract, they must be registered and filed with the tax authorities in order to have a certain date and be opposable to third parties. Registration fees must be paid in these cases. These aspects are governed by the General Tax Code.

In the oil, gas, energy and mining sectors, the lead government agency is the Ministry of Mines. Law No. 2006-17 on Mining Code and Mining Taxes in the Republic of Benin governs the matters and various authorisations that may be granted in the context of the exploitation of these resources and the signing of mining conventions. Decrees implementing this law complement and specify the regime of certain operations in these areas.

Beninese law does not require that a project company must be established under Beninese laws: a foreign company can implement its project in Benin without the constraint of setting up a new company. For practical reasons, however, it may be useful to use a branch or subsidiary. The branch exists simply because of the establishment in Benin of the project company and its registration in the trade and credit register. From this registration, the branch can perform many operations and constitute the true local office of the project company. This type of structure is no longer sufficient when the company leaves the project stage and begins to carry out its activity. A subsidiary is sometimes recommended. The subsidiary is a company in its own right, but is made up of a majority or all of the parent company. It must be incorporated under local laws and be registered in the trade and credit register. There is no restriction on foreign investment. In some cases, certain provisions of treaties signed by Benin facilitate the establishment and activity of foreign companies in the jurisdiction. However, foreign companies cannot acquire real estate in Benin in the absence of reciprocity with the country of origin, although they can subscribe various leases for their installation.

Banks are major stakeholders as sponsors and lenders in Benin; this category includes banks and international institutions, regional banks and national banks. Guarantee funds and other international financial institutions are also involved in this process. Development agencies in European countries or the United States of America are still present in Benin. In addition, other economic actors, international firms and large-scale structures intervene as lenders or sponsors, depending on whether the project to be carried out is a matter for their activity. The lender is sometimes confused with the provider. More and more, investment funds are involved in innovative project financing in key sectors of economic life.

The acquisition and export of natural resources follows the specific legislation for each type of resource concerned, relating to the protection of this type of resource and the framework law on the environment.

The framework law on the environment applies to projects involving facilities, operations, installations, plans, construction projects or works. It provides for a mandatory environmental impact study, especially for projects involving the acquisition and export of natural resources. The Benin Environmental Agency is responsible for implementing the environmental policy and overseeing projects and programmes that have an environmental impact, and collaborates as far as necessary with other state institutions.

Benin is a secular country according to its Constitution, so legislation on Islamic finance would be contrary to its Constitution. This type of financing is therefore neither governed nor envisaged immediately in Benin. The question of the competence or applicability of Shari'a law has not been raised either.

See 9.1 The Development of Islamic Finance.

See 9.1 The Development of Islamic Finance.

See 9.1 The Development of Islamic Finance.

See 9.1 The Development of Islamic Finance.

Cabinet d'Avocats O. ANASSIDE et N. ASSOGBA Ancien Cabinet J. DJOGBENOU (Cotonou - HQ)

Lot 957 Sikècodji
Rue 222, Porte 1045
Immeuble Fifamin
01 BP 4452
République du Bénin

+229 95568375

+229 21323861

Law and Practice


Cabinet d'Avocats O. ANASSIDE et N. ASSOGBA Ancien Cabinet J. DJOGBENOU (Cotonou - HQ) was founded in Cotonou in 2000 and is active in advising on banking litigation, debt collection and project financing. The firm is made up of two departments: one is in charge of litigation, and the other is in charge of legal advice and engineering. The clientele consists mainly of local banks and large or medium-sized companies in Benin and West Africa. The firm maintains partnerships abroad through several networks of lawyers around the world.

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