Project Finance 2024 Comparisons

In Guinea, several large-scale projects have been carried out through project finance scheme. The sponsors of these projects are usually foreign companies that act as shareholders of the project companies. A single project may be sponsored by several companies, either to further mitigate the risk or to combine their skills to optimise the project’s success.

Most of the recent project finance operations involved foreign banks who provide the financing, mainly through debt syndication mechanism. Both commercial and development banks are often involved in the financing of major projects in Guinea (energy, infrastructure, natural resources, etc). By way of example, the African Development Bank, the World Bank and the US International Development Finance Corporation (DFC) were involved in recent mining and energy projects in Guinea. Likewise, international commercial banks such as Société Générale or First Abu Dhabi Bank were involved in the financing of strategic projects in Guinea. 

In light of recent investments and projects led by Chinese sponsors in Guinea, it is also to be noted that Chinese banks are increasingly expressing interest in projects in Guinea. Thus, China Exim Bank or China Development Bank have been involved in the funding of structural energy projects.

Finally, one may notice that export credit agencies and credit enhancement institutions are also often involved in the financing of projects in Guinea. By way of example, the China Export and Credit Insurance Corporation, SINOSURE, has followed several projects sponsored by Chinese investors in Guinea.

As regards Guinean financial institutions, it is to be noted that most of Guinean banks are subsidiaries of international commercial banks. In this context, Guinean banks often intervene in the projects as security agents ‒ given that their parent companies are usually exposed as lenders to the project.

As a developing country, Guinea is implementing several structural projects ranging from natural resources to infrastructure to energy projects. Aside from certain specialised areas such as the mining sector where projects are governed by the Mining Code, many major projects are realised through the PPP scheme. To facilitate the structuring of such projects, the country enacted Act L/2017/0032/AN of 4 July 2017 on Public Private Partnerships, promulgated by Decree No D/2017/278/PRG/SGG of 24 October 2017 (the “PPP Law”). The PPP Law repealed and replaced the Act L//97/012/AN – known as the “BOT Law” (Build-Operate-Transfer) – previously used by the Guinean State for the design, financing, construction and operation of major projects.

PPP encompasses different forms of agreement, but it may be construed as long-term agreements entered into between a public entity – in particular, the State or a local authority – and a private entity to carry out missions and services through the design, financing, construction and operation of infrastructure. The PPP Law provides that a PPP agreement is set for a determined period and the remuneration of the private entity is substantially linked to the operation of the service or mission. In practice, a lot of infrastructure projects (eg, port or airport projects) are realised through long-term concession agreements in accordance with the PPP Law. The private entity in charge of such a concession agreement is generally entitled to get paid through royalties levied on the users of the infrastructure.

The PPP Law has established a large scope that is likely to include all projects to be implemented in Guinea. The PPP Law expressly excludes from its scope the mining and oil sectors governed by the Mining Code and the Petroleum Code. In practice, the following industries and projects are negotiated and executed under the guise of the PPP Law:

• the energy sector (eg, building and operating dam or solar power plant projects);
• port projects (eg, building and operating ports);
• transportation (eg, building and operating airport);
• mining infrastructure (the infrastructure built for the extraction of mining assets are governed by the PPP Law); and
• the health sector (eg, building and operating hospitals).

Some of the aforementioned sectors also have their specific legislation to be considered while performing projects within those sectors.

The PPP Law provides certain basic principles intended to guide the negotiation of PPP agreements. The PPP are attributed to private entities either through tender process (appel d’offre) or direct agreement (gré-à-gré). The tender process relies on competition among bidders and is the main rule, whereas direct agreements should be attributed on an exceptional basis. Each of these processes has its own regime and conditions. The PPP Law also provides for an unsolicited bidding process, which is used under very strict conditions.

The PPP Law provides that, unless there is an express authorisation from the Minister of Finance, the duration of a PPP agreement may not exceed 30 years. The PPP Law acknowledges the arbitral procedure and allows the insertion of arbitration clauses within PPP agreements to address litigation between investors and the public authorities, such as the State.

As regards project companies to be incorporated for PPP projects, the PPP Law provides that such project companies are commercial companies incorporated under Guinean law (which refers to the OHADA Corporate Act, as defined in 5.5 Local Law Requirements). The shareholding of the project company is a critical point to address at the early stage of the project. In practice, the sponsors (usually foreign investors) are the majority shareholder of the project company. Unlike the Mining Code where the State is usually entitled to a 15% free shareholding (non-dilutive and non-contributive shares) in the project company, the PPP Law does not impose such a requirement. It is, however, not uncommon to have the State participating in the shareholding of a project company in the context of a PPP project.

As regards the critical issue of financing projects, the PPP Law took into account some concerns usually raised by lenders with regards to security. Thus, the PPP Law clearly provides that receivables against the public authority (such as the State) party to a PPP agreement are eligible to assignment for security in accordance with the OHADA Security Act (as defined in 2.1 Assets Available as Collateral to Lenders). In other words, if the sponsors/project companies hold receivables against the State for the operation of an infrastructure – for instance, such receivables can be assigned by way of security to a lender in the context of the financing.

It is also to be noted that PPP agreements shall be governed by Guinean law. This requirement is an innovation introduced by the PPP Law.

The ongoing projects in Guinea are usually capital-intensive projects with certain complexities and various legal issues. Therefore, it is essential to address the structuring of the deal at the early stage and anticipate Guinean law and administrative issues to overcome.

When structuring the deal, certain issues are to be discussed very early. Thus, many projects are likely to be subject to governmental authorisations and licensing prior to any implementation. Likewise, the legal form and the shareholding of project companies are among the critical issues to address at the early stage of certain projects.

By way of example, major mining operations (bauxite or iron ore, for instance) are subject to the issuance of operation permits or concessions by the Guinean State. These titles are required to operate the project. Likewise, the Mining Code provides that the Guinean State is entitled to a free carried interest in the project companies operating a mining project. The State will be granted with 15% free, non-dilutive and non-contributive shares. The key elements related to the shareholding rights and governance issues are to be discussed early in structuring the deal.

In light of recent projects, the financing of the project is also an important element to be discussed as part of the structuration of the deal. In projects where the State is a key stakeholder (such as energy or mining projects), the funding aspects of the project are usually raised at the early stage of the deal structuring. Even though the sponsor is often the main financial contributor to the project, the State is likely to question the gearing ratio (debt/equity ratio) of the project.

In connection with the financing, the relevant authorisations and tax issues related to the security must be considered very early and raised while structuring the deal. The tax regime as a whole must, in fact, be clearly outlined to get an accurate overview on the profitability of the project.

Guinea is a developing country with a deep need to implement and/or improve major infrastructure or energy projects. Recently two major hydroelectric projects were commissioned, with the building of the Souapiti and Kaleta hydropower plants. These projects were sponsored by Chinese investors and financially supported by Chinese lenders. Further energy projects are anticipated in the next few years, given the critical condition of the energy sector in Guinea. The country is still facing electricity shortage and certain structural industries require a long-term uninterrupted energy supply to succeed.

Transportation infrastructure (airport, port and highway) is also likely to attract further investments in the coming years. The country’s international airport, Ahmed Sekou Touré airport, has recently initiated an expansion project led by the Turkish company, Albayrak. Albayrak also has a port concession agreement in Guinea.

Beyond the aforementioned sectors, it should be noted that Guinea is a mineral-rich country. Guinea is the world second largest bauxite producer. The bauxite industry recently attracted major investments. The iron ore sector is also critical and the country has recently closed one of the world largest iron ore deals – the Simandou iron ore project, with an estimated capital expenditure value of USD15–20 billion. The mining sector is therefore expected to continue playing an important role in the country’s economy in the coming years. One may anticipate further mining projects, particularly in the mining refinery sector.

The assets available as collateral to lenders and the security generally used in Guinea are governed by the OHADA law regime. OHADA stands for Organisation pour l’Harmonisation en Afrique du Droit des Affaires (Organisation for the Harmonisation of Business Law in Africa). It is an organisation formed by 17 African states that established a common set of business law regulations. As a result, certain areas of business law – including (without limitation) security law, corporate law or bankruptcy and insolvency ‒ are regulated by OHADA law. OHADA law directly applies within those member state jurisdictions.

Security Regimes

Security issues in the context of project finance are regulated by the Uniform OHADA Act of 15 December 2010, relating to the organisation of security (the “OHADA Security Act”). Pursuant to the OHADA Security Act, there are several types of assets (both movable and immovable assets) eligible as collateral in the context of project finance. In implementing security in the context of a project, each collateral would fall within a specific regime that is subject to validity and enforceability conditions, as follows.

Share pledge

It is common practice to pledge the shares of a project company to guarantee the financing of a project. By way of example, the shares of a mining company incorporated in Guinea for the development of a mining project are frequently pledged to guarantee the funding of the project. This would require a share pledge agreement that contains mandatory provisions, such as the designation of the lender, the debtor and the pledgor (if different from the debtor), the head office and corporate registration number of the company that issued the shares, elements that would allow identifying the number of pledged shares, and elements that would allow identifying the credit covered by the share pledge.

The aforementioned conditions and other formalities provided by the OHADA Security Act are mandatory requirements to validly implement a share pledge agreement. To become enforceable against third parties, a share pledge must be published in a specific register, the Trade and Personal Property Credit Register (Registre du Commerce et du Crédit Mobilier, or RCCM) held by the Tribunal of Commerce of Conakry (Republic of Guinea). The pledge can also be notified to the company that issued the shares.

Pledge of receivables and over bank accounts

The OHADA Security Act also allows the pledge of receivables and bank accounts. These pledges must also be implemented through a written pledge agreement that includes certain mandatory provisions such as details on the credit covered by the pledges and the identification of the receivables or bank account that are pledged. These pledges will also be published in the RCCM for enforceability purposes.

The OHADA Security Act also provides that the pledge of receivables must be notified to the debtor of the receivables in order to become enforceable against such debtor. Such debtor may also intervene in the pledge agreement, which would entail the same enforceability effect as the notification.

Pledge over a financial securities account

The pledge over a financial securities account is more flexible, with less formalities than the usual pledges often used in practice. This pledge is subject to a pledge statement (declaration de nantissement), which must also outline mandatory provisions for validity purposes. By way of example, the lenders, the debtor and the pledgor must be accurately identified. The number and characteristics of the financial securities must be provided. Once pledged, this ring-fenced account will be treated as a special account held by the issuer of the securities.

Unlike the usual pledges, the pledge over a financial securities account is not subject to registration in the RCCM for enforceability purposes. The enforcement of this pledge is also less complex. The enforcement is only subject to a prior notice (eight-day notice or any other delay agreed by the parties) to be served to the debtor and/or the account holder.

Assignment of receivables by way of security

The OHADA Security Act also provides for the assignment of receivables by way of security. This assignment of receivables (which differs from the Civil Code assignment of receivables scheme) is subject to a written agreement that must clearly designate the assignor and the assignee, the date of assignment, and the description of the guaranteed credit/facilities and assigned receivables.

This collateral becomes enforceable against third parties only after its registration in the RCCM. However, the assignment must be notified to the assigned debtor (or the assigned debtor shall intervene in the agreement) for enforceability purposes against such assigned debtor.

When the assigned debtor is a professional (whose debts result from its professional activities), the OHADA Security Act provides that such assigned debtor may ‒ at the request of the assignee/beneficiary – consent/acknowledge the assignment of receivables. Such consent must be materialised in a deed of consent executed by the assigned debtor. If such a consent is provided by the assigned debtor, the debtor would no longer be entitled to oppose the assignee, rights or legal recourses resulting from its relationship with the assignor. Such a consent is an additional comfort for the assignee/beneficiary, who would expect to receive from the assigned debtor a swift and uncontested payment.

Fiduciary assignment of cash

This form of security is less used in practice because of certain constraints associated with the mechanism. By way of example, the OHADA Security Act provides that the fiduciary (trust) agent who will hold the assigned cash must be a credit institution. This is likely to exclude certain entities.

Mortgages

Beyond the aforementioned security schemes, the OHADA Security Act also provides for mortgages, which is a form of security attached to immovable assets. The registration of mortgages differs from the registration process with the RCCM. In Guinea, mortgages are registered in the land registry for enforceability purposes.

Pledge over business as a going concern

It is to be noted that the OHADA Security Act provides for a security regime intended to cover a set of assets attached to a business. The pledge over business as a going concern is a particular security regime. Unlike the aforementioned security arrangements, this pledge is intended to cover a combined set of assets attached to a business. A pool of assets will be covered by the same pledge. The assets likely to fall within this pledge are usually the trade name, the leasehold rights, goodwill, or IP rights.

This pledge is subject to a written agreement that must include mandatory provisions, such as the assets covered by the pledge and the beneficiary of the pledge. This pledge must be registered in the RCCM. Although it covers a set of assets attached to a business, this pledge shall not be construed as a common-law floating charge.

Security Agents

With regard to the enforceability of security, it is essential to ensure a monitoring of a security over its duration ‒ in particular, to ensure the registration renewal on time. The registration of a security is subject to expiration after a certain delay. Registrations under OHADA law expire after ten years from the initial registration date. Such registrations shall be renewed.

To ensure the creation, the perfection and the monitoring of security arrangements to the benefit of all lenders, the OHADA Security Act provided for a security agent scheme. The security agent regime is not a security arrangement; rather, it us used to hold, monitor or ensure the perfection or the enforcement of the security for the benefit of lenders.

The security agent is often used in project finance transactions. The duties and powers of the security agent shall be defined in the act designating the security agent. The security agent is expected to act in its name as a security agent and manage the security to the benefit of all lenders. The entities entitled to act as security agent are financial institutions or credit institutions. As mentioned in 1.1 Sponsors and Lenders, in practice, Guinean subsidiaries of foreign lenders would frequently act as a security agent in project finance transactions.

OHADA law does not provide for a floating charge or any universal or similar security regime. It is therefore critical for lenders to ensure that each security to be taken and implemented complies with the required conditions and formalities. Although the pledge over business as a going concern results in a security over a combined set of assets, it should not be construed as a common-law floating charge or universal security regime.

As mentioned in 2.1 Assets Available as Collateral to Lenders, collateral security interest must be registered, mainly for enforceability purposes. The registration date will also be relevant for the ranking among the lenders. The security interests over movable assets must be registered in the RCCM, whereas security over immovable rights must be published in the land registry.

Cost of Registration in the RCCM

The registration cost depends on the class of asset and the nature of collateral security interest. There is a percentage grid based on the value of the guaranteed credit/facilities. Pursuant to the current cost grid in force, the movable security registration costs currently range between 1% and 0.12% of the guaranteed credit/facilities.

Tax Registration and Fees

The General Tax Code provides for tax registration and fees for certain security arrangements. Nonetheless, it should be noted that the scope and nature of security subject to tax registration and fees are not accurately outlined in the General Tax Code. Therefore, the tax registration and associated fees for security are likely to raise debates in practice. Certain projects might, however, benefit from tax exemptions to avoid the aforementioned issue. Such tax exemptions shall be duly provided in the relevant project document.

It is very common to have certain project finance transactions exempted from registration costs and taxes. By way of example, when negotiating certain mining transactions, mining projects could be exempted from certain costs and taxes related to the financing of the project. As those mining conventions are ratified by the National Assembly, it grants them the force of a law that validly exempts them from the existing tax and registration costs.

Notary Fees

Furthermore, notary fees are to be considered for certain forms of security. Mortgages are always subject to notary procedures (from creation to perfection), which would involve notary fees. The above-mentioned exemptions would not apply to notary procedures.

As mentioned in 2.1 Assets Available as Collateral to Lenders, the OHADA Security Act provides for different requirements to validly implement the various form of security. Each security has its own regime and conditions outlined in the OHADA Security Act. Generally speaking, almost all security interests are subject to the execution of certain formalities to ensure their validity. By way of example, it would often be required to provide a written agreement (see, for instance, the share pledge or the assignment of receivables as security). The written agreement must also mention certain mandatory provisions. The assets provided as collateral must be accurately specified and identified in the relevant security document.

The registration of security in public registries is not per se a condition of validity of the security, but rather a condition of enforceability.

Except for certain sovereign assets of the State, there are no particular restrictions on granting security or guarantees in the context of project finance. The OHADA Security Act established a wide scope in terms of credits/facilities likely to be covered by a security or guarantees. As explained in 2.1 Assets Available as Collateral to Lenders, the existing law provides for various form of security arrangements.

It should, however, be noted that certain security or guarantees are likely to be subject to consent prior to their implementation or their enforcement. By way of example, concession agreements executed with the Guinean State or certain mining conventions could reasonably provide that the granting or enforcement of any security related to a specific project would be subject to a prior consent of the State. Likewise, even when duly implemented, the enforcement of a share pledge related to a mining company would often be subject to the prior approval of the State. In fact, the Guinean mining regulation requires the prior approval of the State in the event of change of control of a mining company. The realisation of a pledge over shares is expected to result in a transfer of shares to a new shareholder.

In general, project finance transactions performed in Guinea would involve a thorough due diligence process performed by the lenders. Such due diligence will include research in the relevant registries and corporate registries likely to reveal any liens on their collateral or other form of security.

The RCCM used for movable security and the land registry are accessible to third parties, who can obtain all relevant information related to existing security over any relevant asset.

Once the debts have been paid in full, the security shall accordingly fall and be released. As a result, the security must be discharged and removed from all relevant registers.

The OHADA Security Act provides that the discharge and removal of a security is subject to a notarial deed or a private deed pursuant to which the creditor/lender consents to the discharge and release of the security. It is also required to provide a form that contains certain provisions, such as the name or corporate name, the incorporation number and the head office of the person or entity against which a security was registered in the RCCM. The form must also indicate the characteristics and date of the registered documents.

After review and confirmation of the form, the discharge and release shall be mentioned in the RCCM. Upon request, a discharge and release certificate can be issued and provided by the RCCM. In the case of share pledges, the release process also enables the company that issued the shares to mention the release of the pledge in the relevant corporate register following notification.

The same process of release and discharge applies to the release of mortgages in the land registry. In practice, there is a recorded minutes of release process (process verbal de main levée) to be drafted, followed by formalities within the land registry. This process will involve notaries for the formalities to be completed.

In the event of default or failure to comply with any other specific conditions provided for in the agreement, the secured lender may enforce its security in accordance with the agreed provisions and the regulations in force. In addition to the OHADA Security Act, security enforcement is also regulated by the OHADA Uniform Act on Simplified Debt Recovery and Enforcement Procedures (L'Acte Uniforme portant organisation des Procédures Simplifiées de Recouvrement et des Voies d'Exécution, or AUPSRVE), which was revised on 16 October 2023.

There are several methods of enforcing security, depending on the type of security.

After unsuccessful formal notices and precautionary seizures, the creditor may obtain payment by contractual (in accordance with the provisions of the agreement) and/or judicial enforcement. The enforcement generally takes the form of a sale of the secured assets, usually through auction under the control of the judicial system. The creditor is to be paid from the sale price. The value and price of the assets will result from the best offer during the auction.

A creditor/lender may also request from the tribunal a judicial order that attribute it the assets as payment of the debt up to the value of the debt. In such a case, the assets would be valued through the market price or based on an expert assessment.

For certain specific assets (eg, cash, or assets having an official value listed on a market), it is permitted to provide in advance in the agreement that the asset will be attributed to the creditor/lender in the event of default of the debtor.

When the value of an asset attributed to the creditor/lender exceeds the value of the debt, the creditor/lender must put in escrow an amount representing the excess. This amount will benefit other creditors/lenders or will be reimbursed to the pledgor.

In the event of several registrations on the same asset, care should be taken as to the order of registration and the ranking among the lenders.

The choice of foreign law as the governing law of an agreement as well as the submission to a foreign jurisdiction are recognised under Guinean law. Such provisions within agreements are often raised before Guinean courts, especially in the context of preliminary debates relating to the competence of Guinean courts.

However, in the context of project finance transactions, many projects are structured either under the PPP Law or the Mining Code. The PPP Law enacted in 2017 clearly provides that agreements under PPP Law shall be governed by Guinean law. This would, for instance, apply to port or railway projects. As regards the Mining Code, the mining conventions entered into between the Republic of Guinea and mining investors under the existing Mining Code are governed by Guinean laws.

Judgments from foreign courts or foreign arbitral awards are enforceable without retrial of the merit before Guinean courts, provided that such judgment and arbitral award comply with certain formalities and procedure to be admitted within the Guinean jurisdiction. There is an exequatur procedure to follow in order to become enforceable in Guinea. This procedure is intended to recognise such and award within the Guinean judicial system and render them enforceable under Guinean law.

There are minimal requirements to meet in order to become enforceable in Guinea. The judgment from the foreign court or the foreign arbitral award must be a final decision enforceable in such foreign jurisdiction. The foreign judgment or award must not constitute a violation of Guinean public order.

There are no particular restrictions on the ability of a foreign lender to enforce its right in Guinea. The lender must, however, ensure that its security has been validly implemented and that the required formalities and registrations were duly performed. The lender must also ensure that it complied with the prerequisite procedure before the enforcement of its rights. It must, for instance, ensure that all notifications were duly served within the prescribed delay.

Once all the formalities are realised, the lender will follow the enforcement process of its choice in accordance with the terms of its loan and security agreements and the provisions of the law in force. If an enforcement requires a judicial process, the lender must initiate a judicial proceeding before the competent court.

In practice, foreign lenders provide loans and implement security in Guinea, particularly for large-scale projects. These loans are typically governed by foreign law. Given the significant capital requirements of many projects in Guinea (eg, the Simandou iron ore project, which had an estimated capital expenditure of USD15–20 billion), the involvement of foreign lenders is critical to the success of such projects. Thus, entities such as the European Investment Bank or Afreximbank often participate in the funding of projects in Guinea. As mentioned in 1.1 Sponsors and Lenders, some international commercial banks have also participated in the financing of major projects, including China Exim Bank or First Abu Dhabi Bank.

However, Guinean banking regulations provide that certain banking activities (eg, granting loans as a regular professional activity) must be conducted by licensed credit institutions. Only entities that have received a licence from the licensing committee are authorised to perform such operations. Despite this regulation, in practice, the market and various stakeholders generally do not view it as a restriction on foreign lenders’ ability to finance projects in Guinea.

There is no restriction on granting security or guarantees to foreign lenders. However, like any other lenders, such foreign lenders must ensure that their security and guarantees are duly implemented (see 2.4 Granting a Valid Security Interest and 2.5 Restrictions on the Grant of Security or Guarantees).

To attract foreign investments, Guinea has implemented a foreign investment regulation through Act L/2015/No 008/AN of 25 May 2015 (the “Investment Code”). The Investment Code is intended to provide a clear and attractive investment framework with guarantees and protections for investors. However, certain sectors already governed by their own specific regulations with rights and protections granted to investors therein are excluded from the scope of the Investment Code. By way of example, Article 4 of the Investment Code provides that the following activities are excluded from its scope:

• activities falling within the scope the Mining Code and the Petroleum Code; or
• trading activities defined as resale activities under the same conditions as products purchased outside the business.

Despite these exclusions, the Investment Code remains applicable for many other activities likely to be implemented through project finance. Eligible activities include:

• agriculture;
• information and communication technologies;
• social housing;
• activities involving clean-up operations, roads, and the treatment of municipal and industrial waste; and
• the construction of commercial facilities.

The Investment Code guarantees several rights and protections to foreign investors contemplating doing business in Guinea. Beyond its attractiveness, the mission of the Investment Code is to ensure the fair treatment of foreign investors and maintain a free and competitive business environment. By way of example, the Investment Code guarantees the following rights to foreign investors:

• protection from nationalisation, expropriation or requisitioning of their business, except for a duly established public interest and with fair compensation paid in advance;
• access to land under the conditions defined by the laws and regulations in force in Guinea;
• freedom to choose their suppliers and service providers; or
• the right to own up to 100% of the equity or company shares they intend to incorporate in Guinea (excluding certain specific and critical sectors).

In terms of tax incentives, the Investment Code provides for certain tax advantages, such as tax exemptions over specified periods subject to certain conditions. Additionally, major investments may benefit from establishment agreements with the State, allowing for special tax treatment and extended tax exemptions. These provisions are designed to offer stability to foreign investors, helping them to implement their projects effectively over time.

The Republic of Guinea has implemented a regulatory framework governing payments abroad and the repatriation of capital, as well as payments in both foreign currency or Guinean currency. By way of example, there is a restriction on payments made between two entities incorporated in Guinea for goods and services rendered within the country. Payments for such goods and services cannot be made in foreign currency. This is particularly relevant for Guinean subsidiaries of foreign investors, as they cannot receive payments in foreign currency for services provided within Guinea and must instead conduct such transactions in Guinean francs.

Repatriation of dividends and the ability to make payments abroad for foreign workers’ wages are also key elements negotiated in the project documents of any project. In light of recent transactions realised in Guinea, it has become common practice for project documents – particularly those requiring ratification by the National Assembly – to include provisions allowing the free repatriation of dividends and unrestricted payments abroad for foreign workers’ wages. These crucial issues are typically requirements from investors and are outlined in the relevant project documents.

Foreign exchanges issues, in general, tend to be addressed within project documents – often subject to ratification by the National Assembly.

The opening of offshore foreign currency accounts by a project company incorporated in the Republic of Guinea is strictly regulated by the Guinean Central Bank. Pursuant to Instruction No 112/DGAEM/RCH/00, the opening of an offshore foreign currency account by a company incorporated in Guinea is subject to the prior consent of the Central Bank of the Republic of Guinea.

In practice, sponsors seek exemptions to such restrictions and require the provision of such exemptions in the relevant conventions that they execute with the Guinean State.

Generally speaking, the most important project finance documents that are subject to filing and registration are the security documents. The registration with tax authorities is a key element to address in the context of project finance. In practice, tax filing issues are often negotiated and addressed within the tax regime clause of the convention to be executed with the State.

Beyond the filing with tax authorities, the registration of security documents in the RCCM (in particular, for security over movable assets) is a key step to perform and secure for any creditor/lender. This registration is critical for enforcement and ranking purposes. The same registration at the land registry is critical for security over immovable assets (mortgages).

It should also be noted that certain conventions entered into with the Guinean State (such as mining conventions) are subject to a legislative ratification process at the National Assembly followed by a publication in the Official Journal of the Republic in order to become enforceable.

Certain activities in Guinea are subject to a prior licence. The mining industry, for instance, requires a mining title to be issued by the State. In order to operate certain types of mining projects, it is mandatory to obtain a mining concession or an operation permit issued through a Presidential decree. Likewise, telecommunications activities are also subject to the issuance of licence.

When implenementing certain projects, there are different licences or authorisations to be obtained. By way of example, the environmental and social impact studies required in almost all major projects are followed by an Environmental Compliance Certificate to be issued by the Minister for the Environment.

Most of the licences and authorisations can only be granted to entities incorporated in the Republic of Guinea. In the mining sector, concessions and mining operation permits can only be granted to Guinean companies. In practice, foreign entities will always incorporate Guinean subsidiaries to operate as project companies and hold all relevant titles and licences.

It should, however, be noted that foreign investors are entitled to hold lands in accordance with the applicable law. This is also covered in the Investment Code (see 4.3 Foreign Investment Regime) in order to promote foreign investments.

The agent or trust concept is provided in the context of security arrangements. Indeed, the OHADA Security Act provided for a security agent regime. Such a security agent concept is particularly relevant in the context of syndicated financing of projects. The security agent will be appointed by the lenders through an act that must contain certain mandatory provisions. The security agent would act in its name and capacity as a security agent for the benefit of all lenders. However, under the OHADA Security Act, only financial institutions or credit institutions (foreign or national) are entitled to act as security agents. As explained in 2.1 Assets Available as Collateral to Lenders, the security agent concept is not a security arrangement. The security agent concept involves a third party acting in its name and capacity as a security agent for the benefit of all lenders.

In major project finance transactions that involve foreign lenders, it is very common to have Guinean subsidiaries of foreign lenders acting as security agent.

In addition to the security agent concept, one may also mention the fiduciary assignment of cash mechanism, which will result in a sort of trust mechanism. The OHADA Security Act provides for the fiduciary assignment of cash, which requires the cash to be held in a blocked account. However, the OHADA Security Act clearly provides that the blocked account must be in the book of a credit institution who will act as fiduciary agent.

The priority and ranking of lenders are essentially addressed through the formalities to be achieved in filing each security interest in the RCCM or land registry. The priority of competing security interests would then be resolved by the ranking, as it results from the relevant registry – notably, the RCCM in the case of movable assets.

The law does not restrict contractual subordination arrangements between lenders. Certain provisions of the OHADA Security Act refer to such subordination arrangements that might be implemented by lenders. By way of example, the law refers to the contractual subrogation mechanism (subrogation conventionnelle) or the assignment of priority (cession d’antériorité). Pursuant to Article 60 of the OHADA Security Act, any amendment made to the initial filing of a right in the RCCM resulting from a contractual subrogation or an assignment of priority must be registered in the RCCM next to the initial filing to become enforceable. In other words, if lenders implement a contractual subordination arrangement, such an arrangement shall be registered in the RCCM as well.

It shoud also be noted that the OHADA Security Act acknowledges the assignment of priority (cession d’antériorité) for security over immovable rights (mortgages).

In practice, subordination arrangements regarding the priority of competing security interests are not very common in light of the recent project finance transactions completed in Guinea.

Almost if not all the projects to be realised in Guinea require the incorporation of a project company under the corporate law in force in the Republic of Guinea. The organisation and incorporation of companies in Guinea are governed by the OHADA Uniform Act relating to the law of commercial companies and economic interest groups (the “OHADA Corporate Act”). The OHADA Corporate Act provides for several forms of companies, ranging from unlimited liability forms to limited liability forms.

In the context of project finance, project companies are usually organised and incorporated under limited liability forms. The OHADA Corporate Act provides for the following limited liability forms:

• limited liability company (société à responsabilité limitée, or SARL);
• simplified joint stock company (société par actions simplifiée, or SAS); and
• public limited company (société anonyme, or SA).

In practice and in light of recent transactions, it should be noted that project companies in major projects are generally organised and incorporated as a public limited company (SA). This form is strictly regulated by the OHADA Corporate Act, with certain requirements related to the share capital or the corporate governance.

As provided by the OHADA Corporate Act, a public limited company is incorporated with a minimum share capital (currently approximately USD16,000 for an SA not listing its shares publicly). Only cash contributions and contributions in kind are allowed for the contributions to the share capital of public limited companies.

The governance of this form of company is strictly regulated. Public limited companies are generally governed through a board of directors and a CEO – although the OHADA Corporate Act provides for other types of governance. The appointment of an auditor is also mandatory for public limited companies.

As regards shareholders, their liability for the company debts and liabilities is limited to their contribution in the share capital.

Company reorganisation procedures in Guinea are regulated by the OHADA law through the OHADA Act relating to the organisation of collective insolvency proceedings of 25 September 2015 (the “OHADA Bankruptcy Act”). The OHADA Bankruptcy Act mainly provides for four different procedures when a company faces economic distress:

• the conciliation proceeding (la conciliaton);
• the preventive settlement (le règlement preventif);
• the judicial receivership proceeding (le redressement); and
• the liquidation proceeding (la liquidation).

The conciliation and preventive settlement are preventive/pre-insolvency measures. They are used when a debtor faces difficulties likely to put it in default with regard to its due and payable obligations (debts). The purpose of these preventive procedures is to implement measures to avoid defaults and ensure that the debtor will overcome any economic and financial distress.

The judicial receivership and liquidation procedures intervene when a debtor is in default and is no longer able to face its due and payable debt on time. These collective procedures will involve all lenders (secured and unsecured) and may result in a liquidation of the debtor assets if the judicial receivership does not allow the debtor to clean up its liabilities and ensure its survival. In the event the restructuring fails, the liquidation will be used for the disposal of the debtor’s assets and the settlement of the outstanding obligations (debts).

The preventive measures (conciliation and preventive settlement) can be initiated either by the debtor or jointly by the debtor and one or many lenders. The judicial receivership proceeding can be initiated by a lender, regardless of the form of its debt ‒ provided that such debt in default is due and payable.

The commencement of an insolvency process would affect lenders in different manners, depending on the nature of the proceeding that is initiated. It should be noted that the four insolvency proceedings outlined in 6.1 Companies Reorganisation Procedures would all involve the intervention of a judge at different steps.

First and foremost, it is to be stressed that the preventive proceedings (namely, the conciliation and the preventive settlement) are initiated in a context where the debtor is not in default. The debtor is only facing an economic and financial distress likely to put it in default vis-à-vis its outstanding obligations. Nevertheless, lenders could be affected by such proceedings.

Conciliation

By way of example, the conciliation is initiated by a judicial decision following a request. The judge will determine a delay (which may not exceed three months and is likely to be extended for one month) to perform the conciliation process. The opening of the conciliation proceeding will not automatically suspend lenders’ rights relating to their loans or security. However, if the debtor receives a formal notice or is sued by a lender who was called to participate in the conciliation procedure, the judge may ‒ at the request of the debtor – delay the payment owed to such lender and suspend any judicial process initiated by such lender against the debtor. In the event a conciliation proceeding results in a conciliation agreement intended to save the debtor, such agreement will suspend and prevent judicial proceedings against  the debtor’s movable and immovable assets.

Preventive Settlement

The preventive settlement also intervenes when the debtor is not in default. Its purpose is to help a debtor facing serious economic and financial distress to overcome its difficulties and ensure its survival following the implementation of preventive measures. The preventive settlement process is initiated by a judicial decision. The judge will also designate a preventive settlement expert to manage the process. The preventive settlement process is expected to result in a preventive agreement with lenders to be implemented.

When the judge decides to open a preventive settlement proceeding, they will suspend and prevent all legal proceedings seeking payment for a loan contracted prior to the opening of such proceedings. In other words, all lenders’ rights that pre-date the judicial opening of the preventive settlement will be restricted by such judicial decision. Both secured and unsecured lenders will be subject to such restriction for the period decided by the judge (a maximum period of three months, likely to be extended for one month).

Likewise, when a preventive settlement agreement is obtained at the end of the process, all secured and unsecured creditors who participated to the preventive settlement process will be subject to the agreement and restricted from using any legal proceeding that they might rely on. The lenders that denied compromising and granting some relief through the preventive settlement process could be submitted to the terms of the preventive settlement agreement. Indeed, the judge might submit such lenders to the agreement if the extension or relief delay provided in such agreement does not exceed two years and provided that such delay does not put the lenders’ businesses at risk.

Judicial Receivership and Liquidation

The judicial receivership and the liquidation proceedings intervene in much more serious situations for the debtor. In such a case, the debtor is in default and is no longer able to face its due and payable debts.

Therefore, the main purpose of the judicial receivership and liquidation is to either implement measures to restructure the debtor’s obligations and assets or liquidate the debtor’s assets and settle its obligations. The judicial decision that initiates the judicial receivership or liquidation will automatically protect the debtor from its collective lenders and all legal proceedings and rights granted to all lenders are automatically suspended. Both secured and unsecured lenders will be treated under the judicial proceeding. The lenders will collectively be represented in the proceeding by one entity (“the syndic”). The syndic will act in its name in the collective interest of lenders.

The priority in the distribution of the company value following a liquidation of the debtor assets is subject to different factors ‒ in particular, the creditors’ involvement and compromise during the conciliation, preventive settlement and judicial receivership. In fact, there are two types of creditors:

• the creditors that pre-date the petition and opening of a conciliation, preventive settlement and receivership; and
• the creditors that were involved and agreed to give some relief and extension under the terms and conditions of the aforementioned insolvency procedures.

Pursuant to the Insolvency Code, the creditors that agreed to participate in one of the insolvency proceedings and provided new credits or agreed to provide new goods and services to facilitate the survival of the debtor’s activities would be granted with a privilege (“new money privilege”). The new money privilege is an advantage in terms of ranking that is granted to creditors who agreed to take risk and provide additional support in the interest of the survival of the activities.

In the event of payment of creditors when the debtor’s assets are liquidated, the creditors holding new money privilege will always rank first ahead of the creditors that pre-date the petition and opening of the insolvency proceeding. The ranking of creditors varies depending on the type of assets to be liquidated (movable and immovable assets). For the distribution of both movable and immovable assets value, the creditors with new money privilege always rank first.

Immovable Assets

In the context of payment of creditors following the liquidation of immovable assets, the secured lenders (creditors with a duly registered mortgage) would rank fourth after:

• creditors with new money privilege;
• creditors who incurred court costs that arose for the purpose of the liquidation of the asset and the distribution of the value; and
• employees’ super-privilege (wages and remuneration owed to employees) in proportion to the value of the immovable.

The unsecured creditors will rank at the end (ie, eighth or ninth).

Movable Assets

In the context of the payment of creditors following the liquidation of movable assets, the secured lenders (such as lenders with pledges or a pledge over bank account or assignment of receivables) would rank fifth after:

• creditors with new money privilege;
• creditors who incurred court costs that arose for the purpose of the liquidation of the asset and the distribution of the value;
• creditors who incurred costs for the preservation of the movable asset in the interest of a creditor with older rights; and
• employees’ super-privilege (wages and remuneration owed to employees).

Unsecured creditors will rank at the end (ie, ninth and tenth).

When borrowers, security providers or guarantors become insolvent, it raises several risks to be considered by lenders. The risk varies depending on the seriousness of the economic and financial distress that a debtor is facing. In the event the debtor is facing economic and financial distress without being in default, one may anticipate that lenders are likely to have their risk exposure decreased through reasonable preventive measures (conciliation or preventive settlement).

Generally speaking, lenders may face the following risks:

• extension of the debt repayment delay;
• restrictions from using contractual rights or judicial rights;
• inefficiency of security likely to be blocked by an insolvency process under the supervision of a judge;
• changes in the payment ranking and security of lenders vis-à-vis certain assets provided as collateral; and
• decrease of the value of the debtor’s assets.

It is crucial for lenders to perform a thorough due diligence on borrowers and projects prior to any investment and ensure an ongoing monitoring of their exposure throughout the lifetime of the credit.

The OHADA Bankruptcy Act provides for a list of entities falling within its scope. It covers:

• certain individuals (having independent professional activities or having civil, commercial or agricultural activities);
• private legal persons (which mainly refers to companies incorporated under OHADA Corporate Act); and
• state-owned/-supported entities having the form of private legal person.

Hence, the State and sovereign administrations are excluded from bankruptcy procedures as provided for in the OHADA Bankruptcy Act. The OHADA Bankruptcy Act also provides that the insolvency of certain private legal persons having specialised activities could be regulated by their own special legislation (to be enacted in each OHADA member state). The specialised activities refer, for instance, to credit institutions governed by each state’s banking law or to insurance companies.

In Guinea, the Insurance Code must be considered in all project finance transactions. Such Insurance Code provides for certain restrictions and controls to be addressed when negotiating and implementing project documents.

By way of example, Article 6 of the Insurance Code provides that “assets and risks to be covered that are incorporated or located in Guinea shall be insured only by insurance companies duly licensed in the Republic of Guinea”. Such a restriction would, for instance, prevent project companies from using any foreign insurance to cover the risk surrounding the construction of certain infrastructure in Guinea.

Likewise, the Insurance Code also provides that ‒ unless there is an express exemption from the regulating authorities ‒ insurances subscribed to for entities located in Guinea must be denominated in Guinean currency. It should be noted that insurance companies in Guinea are regulated by the Central Bank of the Republic of Guinea.

All those restrictions provided by the Insurance Code must be discussed and addressed during the negotiation of relevant project documents.

The law governing insurance policies does not provide for particular restrictions on payment to foreign creditors. Insurance policy terms and the designation of beneficiaries are discussed and freely negotiated with insurance companies. However, foreign creditors should consider the general restrictions provided for in the Insurance Code (see 7.1 Restrictions, Controls, Fees and/or Taxes on Insurance Policies) and ensure that those restrictions are duly addressed in the relevant project documents.

The Guinean General Tax Code provides for a withholding tax on investment incomes. This withholding tax would apply on interest payable to lenders. The current withholding tax rate is set at 15%.

As mentioned in 5.1 Registering or Filing Financing of Project Agreements, there are tax filing issues to consider for a lender ‒ although such tax filings can be addressed through the tax regime of the relevant project. The Guinean General Tax Code also provides for a tax on financial activities, which is mainly relevant for Guinean regulated credit institutions and foreign exchange entities.

There is no usury law in Guinea regulating lending activities in the context of project finance.

Generally speaking, the project agreements related to major project finance transactions realised in Guinea are governed by Guinean law. This also became mandatory for major infrastructure or energy projects governed by the PPP Law enacted in 2017. The PPP Law clearly provided that PPP agreements will be governed by Guinean law.

In the mining sector, which is also a highly active sector in Guinea, the mining conventions are governed by Guinean law ‒ in particular, the Mining Code.

When referring to Guinean law, there are some important legislations to consider, including (without limitation) the following:

• the Guinean Civil Code;
• the different OHADA Acts (which regulate corporate law, security arrangements, commercial law, insolvency, etc);
• the Land Code; and
• the General Tax Code.

In the context of project finance transactions in Guinea, it is very common to have financing agreements governed by foreign law. In practice, many financing agreements recently executed in connection with ongoing projects in Guinea were governed by English law. The governing law of security documents would, however, be different.

The creation and perfection of security are strictly governed by domestic law and ‒ more particularly – the OHADA Security Act, which regulates security arrangements in Guinea. Likewise, the incorporation of project companies is regulated by OHADA law.

When conducting projects, there are some relevant legal issues and aspects to consider that are governed by Guinean law, as follows.

• Hiring and employment issues are governed by Guinean labour law.
• During the lifetime of a project (energy, mining, infrastructure, etc) there are some licensing, regulatory and compliance matters that are strictly governed by Guinean law.
• Local content requirements are strictly regulated and crucial in ensuring the success of projects. Guinean authorities pay close attention to respect for local content laws. Through the Act L/2022/0010/CNT dated 22 September 2022, the Republic of Guinea enacted a local content law intended to ensure the involvement of Guineans and Guinean interests in all strategic projects in the country.