Corporate Governance 2024 Comparisons

The forms of company governed by the OHADA Uniform Act on the Law of Commercial Companies and Economic Interest Groups (AUDSCGIE) are:

• limited liability companies (article 309 and following of AUDSCGIE);
• public limited companies (article 385 and following of AUDSCGIE);
• simplified joint stock company (société par actions simplifiées) (article 853-1 et seq. AUDSCGIE);
• general partnership (société en nom collectif) (article 270 and following of AUDSCGIE);
• economic interest grouping (groupement d'intérêt économique) (article 869 et seq. AUDSCGIE);
• limited partnership (article 293 and following of AUDSCGIE);
• branches (article 116 and following of AUDSCGIE); and
• representative or liaison offices (article 120-1 and following of AUDSCGIE).

The main source of corporate governance requirements for companies in Burkina Faso is the OHADA Uniform Act on Commercial Companies and Economic Interest Groups.

Companies whose shares are listed on the stock exchange must:

• be a public limited company (société anonyme) with a board of directors (article 828 AUDSCGIE);
• have an audit committee (article 829-1 AUDSCGIE);
• publish annual financial statements (balance sheet, profit and loss account, statement of source and application of funds and annexed statement) (article 847 AUDSCGIE);
• at the end of the first half of the year, publish an activity and results table and a half-yearly activity report, accompanied by a certificate from the statutory auditor;
• keep a register of registered shares (article 746-1-2 AUDSCGIE); and
• hold annual general meetings.

In our jurisdiction, corporate governance is an evolving subject, with a growing interest in improving corporate governance practices to enhance transparency, accountability and corporate performance. Thus, the main current issues in corporate governance in our jurisdiction are financial transparency, business ethics and the fight against corruption, training and awareness-raising in corporate governance and ultimate beneficial owner declarations.

The main issues and requirements for companies in terms of information on environmental, social and governance (ESG) issues may be influenced by national regulations and the expectations of local stakeholders. Here are some of the key questions and requirements:

• Regulatory compliance - companies must comply with national ESG regulations, which may include specific disclosure requirements for certain high-risk sectors or industries. This may involve publishing annual ESG performance reports or participating in voluntary reporting initiatives.
• Environmental risk management - companies are required to identify, assess and manage the environmental risks associated with their activities. This may include, energy, pollution water, earth, ground and air.
• Social and community impact - companies must take into account the social impact of their activities on local communities. This may include the creation of local jobs, respect for human rights, consultation with communities affected by their operations and local content in the mining sector. There is also a draft law on local content in all sectors.
• Corporate governance - companies are required to comply with corporate governance and transparency standards. This may include putting in place disclosure of executive remuneration and ultimate beneficial owners registries.

The principal management bodies of a company depend on the type of company. Essentially, these are the general meeting of shareholders, the board of directors, the general management with the general manager, and the deputy general manager. 

The types of decisions of each body are as follows.

Board of directors: the board of directors determines the direction of the company’s business and ensures that it is implemented. It generally takes decisions relating to strategic planning, financial management, risk management, approval of regulatory and loan agreements, and approval of the financial statements.

General management: the general management team, which, depending on the type of company, comprises the managing director(s), the general manager or chief executive officer and is responsible for the day-to-day running and management of the company. They generally take decisions relating to operational planning, budgeting and the implementation of the strategic objectives of the board of directors.

Shareholders meeting: shareholders are the owners of the company and have the right to vote on major decisions, such as mergers and acquisitions, executive appointments, changes to the company's bylaws, and other significant matters.

Shareholders make their decisions at annual or extraordinary general meetings. Subject to the rules specific to each type of company under the provisions of the AUDSCGIE, certain companies, such as limited liability companies, may provide for written shareholders' consultations.

The board of directors takes its decisions at meetings called by the chairman of the board.

General management acts through deeds, contracts, notices, memos and supervises operational teams.

Structure of Boards of Directors

A public limited company (société anonyme) with a board of directors is managed by a chairman and chief executive officer. In this management mode, two different people hold the two posts. Also, the company can be managed by a chairman of the board and a chief executive officer. In this case, the same person holds the two posts. Indeed, a public limited company with a board of directors is managed in two ways.

The first is management by a chairman and chief executive officer. They chair the board of directors and are responsible for the general management of the company.

The second is the institution of a chairman of the board and a chief executive officer, where the functions of chairman of the board and chief executive officer are exercised by two different persons.

Within the board, specialised committees may be set up to examine specific issues. In short, the board of directors is made up of directors headed by a chairman of the board of directors who may also holds the post of chief executive officer.

The board of directors plays a crucial role in corporate governance. Here are some of its main roles:

• Strategic management - the board is responsible for defining the company’s strategic direction, ensuring that it is in the long-term interests of the company and its shareholders.
• Appointment and supervision of senior management - the board of directors appoints and supervises the company’s senior executives, such as the chairman and chief executive officer (CEO) or the managing director (MD). It regularly assesses their performance and may decide to retain or dismiss them.
• Supervision and control - the board supervises the management of the company by its executives, ensuring that it complies with the law, the articles of association and the objectives set. In particular, it can appoint and dismiss directors and monitor their management.
• Fiduciary responsibility - directors owe a duty of loyalty to the company and its shareholders. They must act in the company’s corporate interests, avoiding any conflicts of interest and taking decisions in the collective interests of the shareholders.
• Financial reporting - the board is responsible for approving the company’s annual financial statements and for communicating this information to shareholders and the regulatory authorities.
• Communication with shareholders - the board communicates regularly with shareholders, in particular by organising the annual general meeting and providing them with transparent information on the company’s performance.
• Risk management - the board assesses and manages the risks to which the company is exposed.
• Representation of the company - represents the company in its dealings with third parties, including business partners, regulatory authorities and financial institutions.

Under the terms of article 416 of the AUDSCGIE, a public limited company (société anonyme) with a board of directors is made up of at least three and no more than twelve members, whether shareholders or not, or employees or not. It follows from this provision that the board of directors must comprise a minimum of three and a maximum of twelve members.

However, in the event of a public offering, the maximum number members is increased to fifteen and in the event of a merger, the maximum is increased to the total number of directors in office for more than six months, without exceeding twenty-four.

Also, the board of directors may also be composed of independent directors, for example members who have no personal or professional ties with the company or its management, in order to ensure objective supervision.

Choice of Directors of a Company

The first directors are appointed by the shareholders in the minutes. During the life of the company, the directors are appointed by the ordinary general meeting. In the event of a merger, the extraordinary general meeting may appoint new directors.

Dismissal of Directors of a Company

According to article 433 of the AUDSCGIE, directors may be dismissed at any time by the ordinary general meeting, which means that directors may be dismissed ad nutum, at their own discretion, without reason, notice or compensation.

Restrictions on the Choice of Directors of a Company

Anyone can be appointed as a director, whether they are a natural person or a legal entity, a shareholder or not, employed or not. However, there are restrictions on who can be appointed as a director. The main restrictions are:

• Incompatibilities - certain persons may be incompatible with the office of director due to their status or activities. For example, persons convicted of certain criminal offences may be prohibited from sitting on the board of directors.
• Term limits - there are limits on the number of terms a person may hold as a director. Thus, under article 425 of the AUDSCGIE, a person may not simultaneously be a member of more than five boards of directors of public limited companies having their registered office in the territory of a contracting state.
• The legal entities must appoint a permanent representative who is a natural person.
• As far as the employee is concerned, the requirement in this case is that his or her employment contract must correspond to actual employment.

The AUDSCGIE does not provide for specific rules and requirements on the independence of directors. Although the independence of directors is not mandatory under OHADA law, it is often recommended that boards of directors include a certain number of independent directors to strengthen corporate governance. These directors can bring an objective and impartial perspective to board decisions and act as a counterweight to in-house directors.

Such contracts are referred to in the AUDSCGIE as regulated agreements. These are agreement between the company and one of its directors, managing directors or deputy managing directors, agreements between the company and a shareholder holding 10% or more of the company’s capital, any agreement in which a director, managing director, deputy managing director or shareholder holding 10% of the company’s capital is indirectly interested or in which they deal with the company through an intermediary. These agreements are subject to prior authorisation by the board of directors.

The authorisation must be sought by the director concerned, who must inform the board as soon as they become aware of such an agreement. Failing this, the agreement is null and void and it is up to the company’s governing bodies or any shareholder to bring an action for nullity. When the board grants its authorisation, it must notify the corporate auditor for approval of the authorised regulated agreement within one month of concluding the agreement to enable the auditor to draw up the special report that must be submitted to the annual general meeting.

The Principal Legal Duties of Directors and Officers of a Company

The directors and officers of a company have various legal obligations to the company, to shareholders and sometimes even to other stakeholders. Here are some of the main legal obligations:

• Duty of care and loyalty - directors and officers must act prudently and diligently in the performance of their duties. This means that they must make informed and reasonable decisions in the best interests of the company and its shareholders, avoiding conflicts of interest and acting loyally towards the company.
• Compliance with laws and articles of association - directors and officers must comply with all applicable laws and regulations and with the company’s articles of association. This includes compliance with accounting, tax, environmental, labour and other regulations applicable to the company's business.
• Duty of confidentiality - directors and officers are required to maintain the confidentiality of sensitive and privileged information relating to the company, unless such information is legally disclosed or is necessary for the performance of their duties.
• An obligation not to distribute fictitious dividends.
• A prohibition on the publication of false annual summary financial statements.
• A prohibition on the misuse of company assets and/or credit.

Directors owe their duties to the company and to all the laws and regulations applicable to companies, in particular the AUDSCGIE.

Directors must act solely in the interests of the company.

Holders of Directors’ Liability Claims

In event of breach of their duties, directors may be held civilly and criminally liable. In terms of civil liability, a distinction is made between an individual action brought by a shareholder against a director to compensate for damage caused to the shareholder as a result of misconduct or mismanagement in the performance of his duties. This action is brought by the shareholder or the injured party.

There is also the shareholder’s action, which seeks to compensate the company for the damage it has suffered. This action is brought either by the management, a group of shareholders or an individual shareholder acting on behalf of the company.

The Consequences of a Breach

If they fail to meet their obligations, directors may be held civilly and criminally liable.

Other bases for claims or enforcement against directors or officers may be based on offences such as:

• misuse of corporate assets;
• distribution of fictitious dividends; and
• the publication of false annual summary financial statements.

The Impossibility of Limiting Directors’ Liability

Article 168 of AUDSCGIE provides for the nullity of any clause in the company’s articles of association limiting the right of action against directors. Also, article 169 provides for the nullity of any decision by a corporate body to cover the potential liability of a director or officer. It therefore follows from these provisions that the liability of a director or officer cannot be limited. However, the statute of limitation is three years from the date of the harmful event or its disclosure if it was concealed. Also, the limitation period is ten years for crimes.

Directors’ Remuneration

In accordance with the provisions of article 431 of AUDSCGIE, directors receive only remuneration for their duties and are not entitled to any other remuneration. Only the ordinary general meeting may decide to grant director’s fees and the board of directors has the sole responsibility for allocating them which may be shared equally and unequally between its members.

In addition to their fees, directors may receive exceptional remuneration for assignments entrusted to them. The decision to grant exceptional remuneration is taken by the board of directors. However, they give rise to a special report by the auditor to the shareholder’s annual general meeting.

The Consequences for Failing to Comply With These Approval Requirements

In the event of failure to comply with the requirements for the remuneration of directors, directors will not be entitled to any remuneration.

Public (or Other) Disclosures

The AUDSCGIE does not specifically address the disclosure of remuneration, fees or benefits granted to directors and officers, but it does establish a general framework for transparency and corporate governance. In this context, public limited companies (société anonyme) are generally required to publish an annual report providing detailed information on the management of the company, including the remuneration of directors and officers. This report may include the specific amounts of remuneration, the types of remuneration (salaries, bonuses, benefits in kind, etc) and the company’s remuneration policies. Directors’ remuneration is the subject of a report by the statutory auditor, which is presented to the general meeting of shareholders.

They are also required to disclose directors’ and officers’ remuneration in the annual financial reports filed with the relevant regulatory authorities.

Between the shareholders and the company, there is a relationship of collaboration, information and control for the good management of the company. This relationship requires loyalty and transparency, and is essentially governed by the provisions of the AUDSCGIE.

The shareholders have a key role in decision making and supervision of the company’s management, and in approving certain aspects of the company’s life, such as financial statements, regulated agreements and profit distribution. The shareholders have rights and obligations. They have the right to vote on the company’s strategic decisions and are entitled to dividends.

Although shareholders are not involved in the company’s daily management, they do have the power to influence the company’s strategic decisions by holding management to account and approving major decisions that are in the company’s best interests.

For each type of company governed by the AUDSCGIE, there is an obligation to hold an annual general meeting six months after the close of each financial year which is 31 December. In addition, by law certain decisions, such as a change of registered office or an increase in share capital, must be taken at an extraordinary general meeting.

The rules governing the holding of general meetings are as follows:

• Convening meetings - the AUDSCGIE Law stipulates a minimum notice period of fifteen days for convening shareholders’ meetings, unless shareholders waive the notice period. The notice of meeting must include identification of the company, the day, place and time of the meeting, the agenda and the nature of the meeting (ordinary, extraordinary or special).
• Right of disclosure - at an ordinary shareholders’ meeting, shareholders are entitled to disclosure of summary financial statements, statutory auditors’ reports, management reports by the manager or the board of directors, and so on.
• Compliance with quorum requirements, depending on the type of decisions to be taken - for a simple majority (fifty plus one), a qualified majority (two-thirds) unless a higher majority is provided for in the company's articles of association.
• Indication in the minutes of the meeting of the date and place of the meeting, the full names of the shareholders present, the documents submitted for discussion, the text of the resolutions, a summary of the discussions, the text of the resolutions put to the vote and the results of the votes (article 134 of the AUDSCGIE).

The main claims of shareholders against company or directors concern:

• Unequal distribution of dividends - if shareholders consider that the company is distributing dividends in unfair or discriminatory ways, they can contest this practice in court. Article 889 of the AUDSCGIE stipulates that company directors who, in the absence of an inventory or by means of a fraudulent inventory, knowingly distribute fictitious dividends among shareholders or associates are liable to criminal penalties.
• Decisions prejudicial to shareholders’ interests - shareholders may take legal action against the company or its directors if the latter make decisions prejudicial to shareholders’ legitimate interests.
• Violation of the company’s articles of association - shareholders may contest any action taken by the company or its directors which contravenes the provisions of the company's articles of association;
• Failure by directors to meet their obligations - shareholders can remove directors from office if they fail to meet their obligations, and sue them if their actions cause them prejudice.

Obligation of Information for Publicly Traded Companies

With regard to disclosure requirements, the provisions of article 86 and following of the AUSCGIE provide that companies offering shares to the public must publish a public information document in the country of the company’s registered office and, where applicable, in the other countries in which the public is solicited. This document contains the information necessary to enable investors to make an informed evaluation of the assets and liabilities, financial position, results and prospects of the issuer and any guarantors, as well as the rights attached to the shares.

The information document must be distributed by:

• publication in newspapers authorised to carry legal announcements;
• making a brochure available for consultation by any person at the company’s registered office and at institutions responsible for the financial servicing of the negotiable shares;
• posted on the company’s website or, where applicable, on the websites of financial intermediaries placing or selling the negotiable securities;
• posted on the website of the stock exchange where admission to trading is requested; and
• placed online on the website of the competent authority of the country of the registered office if the latter has decided to offer this service.

Disclosure Obligations in Relation to the Ultimate Beneficial Owner of Publicly Traded Companies

Pursuant to Decree no 2022-0234/PRES-TRANS/PM/MATDS/MJDHRI/MEFP on the obligation to declare and keep a register of the ultimate beneficial owners of legal entities and legal entities, any company, whether or not it is quoted on the stock exchange, must declare its ultimate beneficial owners to the commercial court and keep a register of ultimate beneficial owners endorsed and initialled by said court.

The 2022 and 2023 finance acts amending the General Tax Code (CGI) of Burkina Faso introduced a new system of beneficial ownership declaration, requiring legal entities of all forms and activities to identify their ultimate beneficial owners, and to keep a register of ultimate beneficial owners at their registered office.

The declaration of ultimate beneficial owners is drawn up using a form that conforms to the administration’s standard form. It should be noted that the form used by the tax authorities is different from that used by the commercial court. Information on the stock market of listed companies must be specified.

In a public limited company (société anonyme), simplified joint stock companies (sociétés par actions simplifies) and, where applicable, in limited liability companies (sociétés à responsabilité limitée), the annual summary financial statements and the management report are sent to the statutory auditors at least 45 days before the date of the ordinary general meeting in accordance with article 140 of AUDSCGIE.

Article 269 of the AUDSCGIE also requires commercial companies to file with the Trade and Personal Property Credit Register, within one month of their approval by the competent body, the summary financial statements, ie, the balance sheet, the income statement, the financial table of resources and uses, and the appended statement for the past financial year.

Article 95 of the General Tax Code states that companies are required to declare, by 30 April each year at the latest, the amount of their taxable income for the financial year ended 31 December of the previous year using a form that complies with the tax authorities’ model.

Companies must disclose the following corporate governance arrangements:

• regulated agreements (between a public limited company and one of its directors, managing directors or deputy managing directors);
• agreement between a company and a shareholder holding 10% or more of the company’s capital;
• agreements between a company and a business or legal entity, if one of the directors, managing director or deputy managing director or a shareholder holding 10% or more of the company’s capital is the owner of the business or a partner with unlimited liability, manager, managing director or deputy managing director, managing director or deputy managing director or other corporate officer of the contracting legal entity (article 438 et seq. AUDSCGIE) are presented to the statutory auditors and shareholders;
• sureties, endorsements and guarantees (article 449 AUDSCGIE); and
• prohibited agreements (article 4450 AUDSCGIE).

Companies are required to make the following filings with the companies’ registry in Burkina Faso:

• acts performed at the time of incorporation;
• acts amending the Trade and Personal Property Credit Register (RCCM);
• securities (article 747 AUDSCGIE); and
• the register of ultimate beneficial owners.

The companies’ registry is in principle publicly available but accessing the information may be more difficult in practice as the registries are not all fully computerised.

The consequences of failing to make these declarations are that they cannot be invoked against third parties.

Appointment of External Auditors:

In simplified joint stock companies (sociétés par actions simplifies) and in limited liability companies (sociétés à responsabilité limitée), the appointment of a statutory auditor is only compulsory under certain conditions. However, it is compulsory for public limited companies.

The statutory auditor is independent of the company, although appointed by the shareholders. He certifies the company’s financial statements (article 710 et seq. AUDSCGIE) and is liable for them.

There are requirement for directors in connection with the management of risk and internal controls in the company. Indeed, pursuant to legal provisions, the board of directors:

• determines the direction of the company’s business and oversees its implementation;
• carries out any checks and verifications it deems appropriate; and
• provides each director with all the documents and information required to perform his or her duties (Article 435 of AUDSCGIE).