Banking & Finance 2021

Last Updated October 05, 2021


Law and Practice


D2A SCPA was formerly Cabinet d'Avocats O. ANASSIDE et N. ASSOGBA, and Cabinet J. DJOGBENOU before that. The firm was founded in Cotonou in 2000 and is active in advising on banking litigation, debt collection and project financing. It 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.

Reforms of the Benin economy and legislation have continued over the past year with the aim of encouraging economic activity and improving the credit market in Benin. As such, tax reforms, for example, have consisted of securing transactions with the tax administration, simplifying them and, above all, digitising them. Other sectors have also been greatly affected by the need for digitalisation, allowing both economic players and banks to obtain coins or carry out checks without the necessary displacement. Finally, recovery has been simplified by the creation of a small claims chamber before the commercial and first instance courts, by the institution of registrar and reception offices in the courts, by clarifying the status of the enforcement judge, by the relocation of a registration office within the Commercial Court, by the dematerialisation of procedures, etc. All of these reforms, of various natures, have had the effect of facilitating the prospects for collection and, as a result, facilitating access to credit.

The COVID-19 pandemic has negatively affected the direction, terms and trends of the lending market in Benin. In fact, this impact has influenced the fall of the regime of several commercial activities, resulting in the freezing of lending processes, the impossibility of establishing securities, and the difficulty of accessing suppliers or certain raw materials, due to the closure of borders. However, this negative impact does not seem to be profound, and activity has started again since the end of the first period of containment or, more precisely in Benin, the end of the sanitary cordon.

Besides, the regulatory environment is favourable to the revival of activities and the economic cycle.

Indeed, in Notice No 005-04-2020 dated 1 April 2020, the Central Bank of West African States (BCEAO) invited West African Economic and Monetary Union (WAEMU) credit institutions to grant a deferral on maturities on loans to companies that have been affected by the effects of the COVID-19 pandemic, if they request it, for a period of three months, renewable once, without interest charges, fees or late penalties. In doing so, the BCEAO uses the regulatory instrument to encourage credit institutions to support businesses, to ensure their survival in these times of health and economic crisis. The debts in question will thus be classified in a specific account within the category of healthy debts, and not as bad debts. In this opinion, the BCEAO specifies that it has set up a monitoring and facilitation mechanism called "COVID-19 device", which aims to maintain dialogue between the companies affected that have not obtained a deadline extension agreement with their partner banks.

In addition, the West African Development Bank (BOAD) has launched a refinancing programme for credit institutions of the WAEMU, which will help meet the liquidity needs of SMEs: “The funds will help the private sector, especially micro, small, and medium enterprises (MSMEs) meet their needs for liquidity inherent to COVID-19, resume their activities in the short term, and in the medium term make productive investments to consolidate or optimise their tools.”

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

In fact, the Public Securities Market is the only regional market, by auction, exclusively dedicated to the financing of WAEMU member states. Sovereign issuers request the issuance of government securities, through appropriate procedures, subscribed by specific actors either for their own account or for that of third parties. Public securities in the WAEMU zone constitute a high value-added investment solution when it comes to growing cash flow or savings. The financial instruments available on this market offer investors the opportunity to diversify their investment portfolios on a single market made up of eight issuers, which provides several possibilities of returns.

The market is made up of issuers, Specialists in Treasury Securities, market intermediaries (banks, management and intermediation companies) and other investors (individuals, companies and organisations).

In this context, on Monday 27 July 2020, Benin launched a Bond Loan by Public Call for Savings for the year 2020 of the State of Benin, called Public Treasury of Benin 6.50% 2020-2028 ("TPBJ 6.50% 2020-2028"), for an indicative amount of CFA100 billion, or 10 million bonds with an individual nominal value of CFA10,000. The amount mobilised by this bond loan will mainly be used to finance part of the investments planned in the national investment programme for the recovery of the economy.

In Benin, "Alternative Credit Providers" refers to the regulatory framework of the decentralised finance sector governed by the law regulating the Decentralised Financial Systems and its application decree. This sector is composed of approved companies, generally in associative form or private capital companies.

These alternative credit providers allow certain companies that do not meet the conditions required for bank loans to benefit from short or medium-term credits to finance their activities.

The sector is heavily monitored by financial market regulators.

Credit regulation is based on instruments and rules that are likely to allow selectivity in the choice of banking customers, an improvement in the quality of the portfolio and a thorough liberalisation of transactions, within the framework of a more competitive and better regulated banking environment.

In addition, support and supervision structures are tasked with supporting companies upstream before and after obtaining financing. They must therefore ensure the proper use of bank loans, the smooth running of business plans and the respect of deadlines downstream, thereby reducing the risk of default.

Since Benin is now resolutely committed to the processes and wishes to be included in the Doing Business rankings, it undertakes to implement all the reforms suggested to it under the inspiration of this organisation, to the extent allowed by Benin's legislation and practice. This justifies most of this year's reforms, which have not been planned for a long time but have been positively concluded.

The following are not taken into account when determining the sums liable to tax:

  • interest on Treasury bills with a maximum maturity of three years or those for which exemption from tax is granted by decree; and
  • the lots, as well as the redemption premiums, attached to the bonds and bonds issued with the authorisation of the Minister in charge of Finance.

To harmonise fiscal practices in the WAEMU area, a tax exemption for securities issued on the regional market is expected for the benefit of investors.

There is no current knowledge of any event or recent development in relation to ESG or sustainability-linked lending in Benin.

Owing to the necessary protection of depositors and the importance of the banking system in financing the economy, the practice of the profession is subject to the prior obtaining of authorisation. Thus, no one may exercise the activities of a bank or a financial institution without having received previous approval.

The Central Bank examines the file and transmits it to the Banking Commission. The Minister in charge of Finance takes the approval order, after a favourable assent from said Commission.

Approval is evidenced by registration on the list of banks or on that of financial institutions. The share capital must be fully paid up on the day of approval up to the minimum amount required in the approval decision. Prudential and reserve requirements must be respected. The institution must also join the Professional Association of Banks and Financial Institutions (APBEF), within one month of its registration.

The approval of microfinance companies is granted by the Minister of Finance.

Foreign lenders are not restricted from granting loans. They just need to comply with the national and regional (WAMU/WAEMU) legislation.

The granting of security interests or guarantees to foreign lenders is not limited, except in the case of public debt where some restrictions apply because of pari passu clauses.

Foreign exchange transactions, capital movements and payments of any kind between a WAEMU member state and abroad, or in WAEMU between a resident and a non-resident, can only be carried out through the BCEAO, The Post Office, an approved intermediary, or an approved manual currency exchange, within the framework of their respective competencies. Current payments to abroad are executed according to the principle of freedom, by approved intermediaries.

The borrower is required to use the loan in accordance with the purpose of the financing mentioned in the loan agreement.

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 their 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 them and they are henceforth obliged to pay the new creditor. Collateral associated with the loan can be transferred with it, although this must be stipulated expressly 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 allows the various loans of the borrower to be grouped together in a single credit; it also allows the restructuring of its debts. If the repurchase of credits and debts is carried out, the borrower will then have only one debt to a single lending institution. The old creditors are reimbursed as soon as the loan buy-back is signed. The borrower can then regain a reasonable debt ratio and financial stability. For this, the lender must accept the borrower's file.

Sponsors often have no difficulty in proving their financial capacity.

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

Income Tax on Transferable Securities (IRVM) is levied at a rate of 15%, reduced to 10% for products from unlisted shares, and to 7% for products from shares listed on the WAEMU financial market. The tax base corresponds to the gross amount of dividends.

Income from bonds is subject to IRVM at a rate of 6%, with a reduced rate of 3% for the proceeds of bonds issued by WAEMU member states as well as those issued by public authorities and their branches.

However, income from bonds allocated to residents outside the WAEMU is exempt from the withholding of income tax in Benin.

The transaction on a loan allows the lender to carry out an economic activity that provides income, including interest. These revenues are taxed according to the rules.

Bank taxes and commissions are applicable, such as the tax on financial activity and the tax on transfer outside WAEMU.

There are laws on usury in Benin. At the domestic level, Law No 83-008 of 17 May 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 their request, if they establishes proof of the total release of their 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. As the sureties are now registered online, the preliminary checks will be easily done.

A secured lender may assert their security at any time, as soon as the loan recipient or borrower fails to fulfil their 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 restriction that exists is that the lender must first realise the property that is given to them as collateral before extending their action on property that is not given to them as collateral. But the tendency of the case law is to also reverse this principle and to consider that, in the event of the presence of a guarantee, real estate or both, the lender will first have to execute the real estate guarantee before executing the guarantee or other assets of the debtor.

The enforcement judge is a special body within each jurisdiction in charge of recovery litigation. Its office is now supervised within strict deadlines: it must issue its decision within 45 days of the first evocation of the case. In the case of foreclosure, the old deadlines set by the uniform act relating to the enforcement processes are maintained. However, their development and the introduction of new rules of procedure by domestic legislation allow them to accelerate.

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, throughout the procedure of the exequatur whether the decision fulfils 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 their available assets no longer meet their 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 their loan contract but is required to submit to the procedure, which groups all the other creditors together, and in which they do not have sole control. They must declare their claim, and the trustee represents their 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 the payment 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, it has become a priority to improve the legal framework in order to attract foreign investment. In addition to Benin's previous business law efforts in ratifying the African Organisation for the Harmonisation 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 11 October 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, starting 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 a project company to 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 ceases to be 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 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.


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Law and Practice


D2A SCPA was formerly Cabinet d'Avocats O. ANASSIDE et N. ASSOGBA, and Cabinet J. DJOGBENOU before that. The firm was founded in Cotonou in 2000 and is active in advising on banking litigation, debt collection and project financing. It 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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