Banking & Finance 2023 Comparisons

Recent economic cycles and regulations are key drivers in Cameroon’s loan market. Banking regulation is pivotal and is governed by laws and institutions both nationally and within the community, such as the Bank of Central African States (BEAC), the Central African Banking Commission (COBAC), and the Central African Economic and Monetary Community (CEMAC).

Economic Impact

Real GDP growth fell slightly to 3.4% in 2022, down from 3.6% in 2021, primarily due to sustained investment and non-oil activities. Inflation rose sharply to 6.2% in 2022, surpassing the CEMAC target of 3%.

Despite a 2020 recession owing to COVID-19 countermeasures, the economy bounced back with 3.4% growth in 2021.

Regulatory Landscape

Notable national laws include Law No 2022/006, addressing banking secrecy, and Law No 2019/021, regulating credit activities in banking and microfinance.

Community rules also apply, particularly in crisis management of credit institutions, anti-money laundering, and foreign exchange regulation.

Market Trends

Financial institutions can publicly raise funds, provide loans, and offer other services, subject to approval.

With 13 operational banks holding assets of approximately XAF1,700 billion (approximately USD3 billion), Cameroon’s banking system demonstrated resilience even during the 2008-2009 financial crisis.

The Ukraine conflict has had far-reaching economic consequences globally, with notable repercussions on Cameroon’s loan market.

• Inflation: The war has exacerbated inflation, affecting both global and local markets, and eroding household purchasing power.
• Trade: Cameroon’s significant trade with Russia and Ukraine could be disrupted, potentially driving up import costs.
• Export relations: The increasing exports from Ukraine to Cameroon are at risk, affecting foreign exchange rates and potentially the loan market.
• African impact: While the exact impact on African nations like Cameroon is not yet quantified, the war could have a domino effect on financial markets across the continent.

The high-yield market in Cameroon plays a crucial role in financing, yet it remains under-researched. Several factors hint at its evolving landscape:

• Bond market: Recent expansion has diversified offerings, from domestic bonds with three-month to five-year tenures to a ten-year Eurobond. This variety may influence the high-yield market’s financing terms.
• Macroeconomic factors: A slight decrease in GDP growth in 2022 and rising inflation beyond CEMAC targets could affect the high-yield and broader loan markets.
• EIB financing: The European Investment Bank committed EUR27 million for long-term investments in Cameroon, possibly affecting the high-yield market by altering financing terms to accommodate this influx.

Alternative credit providers like MFIs and microcredit agencies have gained prominence in Cameroon, affecting financing terms and structures:

• MFIs: Emerging as key financiers for underserved communities, MFIs in Cameroon meet African benchmarks, albeit with a possible trade-off between performance and outreach.
• Microcredit for SMEs: Proparco signed a financing agreement with Cameroon Private Enterprise Credit Agency, providing a loan of XAF2 billion to bolster microcredit for SMEs.
• Digital expansion: A growth in the microfinance sector is anticipated due to the increased adoption of mobile money and micro-insurance.
• Credit accessibility: Efforts to ease credit access are likely to positively impact financing terms and structures, though specifics are lacking.
• Credit provision: BEAC reported increased credit provision in Q1 2020 compared to the previous year, which may influence financing terms.

Cameroon’s banking and finance sector is adapting to meet the demands of a diversifying investor base and borrower needs. Key trends are outlined below:

• HoldCo structures are increasingly being used for efficient asset management and investment consolidation.
• Preferred equity appeals to conservative investors with dividend preference and higher liquidation claims.
• Digitalisation is improving access to banking services, including in remote areas.
• Microfinance lending is a viable alternative for borrowers not meeting traditional criteria.
• Regulatory changes are being made to safeguard investors and borrowers, including enhanced risk disclosure and capital requirements.
• There is an increase in customised bonds and derivatives for specific needs.
• Policies like tax breaks are designed to encourage FDI.
• Ethical/sustainable finance, aligned with global and local sustainability goals, is on the rise.
• Initiatives are underway to improve informed participation in the sector.

The rise in ESG and sustainability-linked lending reflects a global trend, driven by regulatory shifts and stakeholder pressures. In Cameroon, while direct data on ESG lending is limited, key developments indicate a move toward sustainable finance.

Climate-Action Investments

World Bank studies propose that poverty in Cameroon could be significantly reduced by 2050 through climate-action reforms.

Green Growth

The African Development Bank (AfDB) suggests leveraging natural resources to fund green initiatives in Cameroon.

Alternative Financing

A UNDP forum emphasised the role of sustainable finance in Cameroon’s economic agenda.

Green Bonds

Such bonds are recognised as a viable method for funding green projects, potentially laying the groundwork for sustainability-linked lending in Cameroon.

Project Funding

AfDB has financed sustainable urban sanitation and port development, indicating a shift toward green project finance.

In Cameroon, entities wishing to offer financial services to companies must abide by regulatory requirements. These requirements differ for banks and non-banks, as summarised below.

Requirements for Banks

Credit institution license

Banks in the CEMAC zone must procure a unified license, facilitating cross-border operations.

Corporate structure

Banks must be established as public limited companies with board governance.

Shareholder information

Detailed data, including shareholding distribution and notarised declarations, must be provided.

Management profiles

Necessary personal and professional details of directors and officers must be submitted.

Procedures for Banks

Application

The bank must first draft an authorisation request.

MINFI submission

A duplicate of the application must then be presented to the Ministry of Finance.

COBAC process

The Central African Banking Commission then reviews and decides on the application within six months.

For Non-Banks

Equity financing

Equity Financing is possible via angel investors, venture capital, private equity, and IPOs.

Strategic partnerships and joint ventures

Companies can form partnerships or joint ventures with other firms to access capital, technology, or distribution channels.

Debt financing

Debt financing is possible through the issuance of bonds, convertible debt, compound transferable securities, supplier credit, and trade credit (companies can negotiate deferred payment terms with customers, effectively obtaining financing from their accounts receivable).

Collective Investment Schemes (CIS)

These are structured as portfolios that can pool funds from multiple investors. The types of CIS available include:

• CIS in Transferable Securities (CIS-TS); and
• Alternative Investment Funds (AIFs).

Innovative financial instruments

The introduction of instruments like Islamic finance securities.

Emerging Regulatory Frameworks

Regulatory changes

These include:

• General Regulation of COSUMAF as of 23 May 2023; and
• Regulation No 1/22/CEMAC/UMAC/CM/COSUMAF dated 21 July 2022.

Regulation of Foreign Lenders Providing Loans in Cameroon

Freedom to lend

Foreign lenders can issue loans in Cameroon, according to Regulation No 02/18/CEMAC/UMAC/CM of 2018, governing CEMAC’s foreign exchange.

Declaration

Loans from non-resident entities must be declared to the Ministry of Finance (MINFI) 30 days prior to disbursement.

Documentation

Declarations must include the loan contract, repayment schedule, and borrower’s financial statements.

Post transaction

Within 30 days post-loan, borrowers must provide proof of effective loan utilisation.

Credit institutions

It is permitted to execute international transfers for loan repayment upon furnishing relevant documentation.

Repayment reporting

The MINFI and Central Bank must be informed within 30 days of repayments.

The Uniform Act on Securities (AUS) under OHADA does not restrict the nationality of lenders or the provision of security to foreign entities.

The AUS categorises securities as personal and real, stating that real securities are valid per Uniform Act provisions and may be established by debtors or third parties.

Community law specifies some securities, like those related to water, air, and maritime law, as well as interests not covered by the Uniform Act or between financial institutions, that could be subject to specific legislation.

Restrictions and Controls on Foreign Currency Exchange

Enhanced administrative control

Transactions exceeding XAF1 million per month per entity are generally unrestricted, provided the origin of the funds to be transferred is justified, and the requested documents are supplied to certified commercial banks. These measures aim to combat money laundering and terrorism financing.

Opening foreign currency accounts

Opening a foreign currency current account outside the CEMAC member states now requires authorisation from the BEAC (Bank of Central African States). Similarly, opening such accounts within CEMAC member states also necessitates BEAC authorisation.

Repatriation of export earnings

The obligation to repatriate export earnings remains in place, with no exceptions provided.

Importation of goods

Importation of goods within the CEMAC region is generally unrestricted, except for gold and other goods subject to specific regulations. Member states, including Cameroon, have some discretion to impose additional restrictions on goods imports for humanitarian, health, security, or environmental reasons. All goods imports must be declared to customs.

Expanded role of BEAC

The foreign exchange regulation strengthens the role of the BEAC by involving it more in transaction reporting, authorisation, monitoring compliance with exchange regulations, and interpreting CEMAC regulations.

Restrictions on the Use of Loan Proceeds and Debt Securities

• In principle, borrowers must use the proceeds from loans or debt securities in accordance with the terms and conditions specified in their contract.
• Borrowers are obliged to adhere to the principles of public policy and good morals as per Article 1134 of the Cameroonian Civil Code.
• Borrowers must provide documentation verifying the origin of the borrowed funds or issued securities to prevent money laundering and terrorist financing.
• Suspicious transactions may be reported to relevant authorities to ensure compliance with anti-money laundering and counter-terrorism financing regulations.
• When funds are borrowed from foreign sources, borrowers must additionally comply with foreign exchange regulations, particularly as outlined in Article 105.
• Failure to comply with foreign exchange regulations may result in the borrower losing access to the funds.
• Borrowers are required to meet both contractual obligations and regulatory requirements to use the borrowed funds effectively.

Agent

According to OHADA’s Uniform Act on General Commercial Law, a commercial agent negotiates and possibly finalises contracts for third parties in sectors like sales and services. There are the following agent types:

• A placement agent facilitates issuance and distribution of securities.
• A security agent oversees compliance with secured financing terms.
• A facility agent mediates between syndicate lenders and borrowers.
• A financial agent offers financial services like payment processing and treasury management.

Trust

In finance, a trust is a legal construct where a trustor assigns a trustee to manage assets for a beneficiary.

Equivalents

• Fiduciary transfer: as defined in the AUS, it involves transferring money to a restricted account as collateral.
• Collective investment schemes: similar to trusts, they manage assets for third-party benefits.

In CEMAC, loan transfer mechanisms rely on contractual practices, as well as legal statutes. Key contractual elements are outlined below:

• Assignment of loans involves contractual agreements between the assignor (current lender) and assignee (new lender) and spells out rights and obligations being transferred.
• Transfer of securities like pledges are transferred as part of the agreement and terms of securities are laid out in the contract.
• Borrower’s consent is obtained via formal acknowledgment and ensures transparency and compliance.

Under Cameroonian law, this transaction can take two forms:

• an assignment of a claim under the Cameroon Civil Code; or
• an assignment of a claim by way of security (which is a security in its own right) under the AUS.

In accordance with Article 1689 of the Cameroon Civil Code, in the transfer (assignment) of a claim, right or action against a third party, delivery takes place between the assignor and the assignee by delivery of the document of title. The essential element in an assignment of claims is the guarantee of the existence of the claim, without which the assignment will be devoid of any purpose (Article 1693 of the Civil Code).

Under OHADA law, the assignment of a claim by way of security must be notified to the debtor of the assigned claim in order to be enforceable against them. Failing this, the debtor must intervene in the deed (Article 84 of the AUS). With regard to registration, in accordance with Article 82 of the AUS, a contract for the assignment of a claim by way of security takes immediate effect between the parties, regardless of the date on which the assigned claim arises, falls due or is payable, and is enforceable against third parties from the time it is entered in the Trade and Personal Property Credit Register (TPPCR).

Debt buy-back by the borrower or sponsor is not specifically regulated in the CEMAC region by specific regulations or legal provisions.

However, this does not mean that debt buy-back is entirely prohibited. On the contrary, the possibility of repurchasing debt depends primarily on the terms and conditions specified in the loan or borrowing agreement between the borrower and the lender. These terms can vary from one contract to another and may either permit or restrict the repurchase of debt by the borrower or sponsor.

In the context of CEMAC banking law, it is important to note that “certain funds” provisions are not explicitly regulated by specific legal provisions within the region. Rather, they are typically governed by contractual agreements between parties involved in acquisition finance transactions.

The ways in which certain aspects of “certain funds” may be addressed in CEMAC banking practice are outlined below.

Contractual Agreements

The rules regarding “certain funds” in public acquisition finance transactions within CEMAC countries are primarily established through contractual agreements between the relevant parties, including the borrower, lenders, and arrangers. These agreements specify the obligations of the parties to ensure that the necessary funds are available and committed for the acquisition.

Documentation

The choice between short-form or long-form documentation in CEMAC banking transactions may depend on the complexity and size of the transaction. Short-form documentation is commonly used for straightforward transactions, while long-form documentation provides more comprehensive details for complex deals.

Public Filing

In CEMAC, the documentation related to acquisition finance transactions is not typically publicly filed unless required by local regulations or stock exchange rules.

We have not encountered any recent legal or commercial developments that necessitated revisions to our legal documentation.       

There are legal provisions that limit the amount of interest that can be charged in the CEMAC region, including Cameroon. Here are the key points to consider:

Usury Laws in CEMAC

Regulation No 04/19/CEMAC/UMAC/CM regarding the Effective Global Rate, the prevention of usury, and the publication of banking conditions in the CEMAC region indicates that any agreement concealing a loan in any form and by any person, at a rate which, at the time it is granted, exceeds the usury rate set by the Central Bank’s Monetary Policy Committee, constitutes a usury loan.

Cameroon’s Legal Framework

In Cameroon, Article 1907 of the Civil Code requires that loan agreements do not exceed the legally set interest rate.

Article 3 of Law No 2004/015 of 21 April 2004, which fixes the legal interest rate for the execution of judicial decisions and the conventional interest rate, states that the conventional interest rate cannot exceed the rate set by the monetary authority, plus one point.

The reference rate is the average annual Effective Global Rate (TEG) used by credit institutions. For the fourth quarter, the TEG average is communicated by the Minister of Finance.

Penalties for Non-Compliance

The CEMAC Regulation provides for penalties, including imprisonment ranging from one to six months and fines ranging from XAF100,000 to XAF100 million or one of these two sanctions (Article 32).

The Cameroonian Penal Code prescribes a fine ranging from XAF5,000 to XAF1,000,000 and a prison sentence of 15 days in case of recidivism, along with a doubled fine.

Cameroon’s Banking Secrecy Law, enacted on 27 April 2022, outlines rules for financial contract disclosure. Key provisions include the following:

• Confidentiality: Financial institutions must maintain client confidentiality.
• Limited disclosure: Exceptions exist for judicial, tax, and anti-corruption authorities.
• Client protection: The law aims to safeguard clients’ personal and financial information.

In Cameroon, payments to lenders are subject to specific tax regulations:

• VAT of 19.25%:
1. applicable to banking services based on the borrower’s location;
2. exempt if the borrower is overseas; and
3. can apply to principal, interest, and other associated sums.
• Capital gains tax of 16.5%:
1. applies to interest income among financial institutions within the same corporate group.

In lending to entities in our jurisdiction, two main charges are typically relevant:

• Registration duties: 1-5% fees may apply to formalise financing agreements.
• Stamp duty: This is levied on legal instruments like promissory notes or loan contracts.

In Cameroon, foreign lenders and non-traditional banks face several tax and regulatory issues, which can be mitigated as follows:

• Double Taxation: This is mitigated through double taxation treaties.
• Withholding tax: This is reduced by structuring loans or leveraging tax treaties.
• Transfer pricing: This is addressed by setting arm’s length loan terms.
• Regulatory compliance: Risks here can be mitigated through consultation with local legal experts and strong compliance procedures.
• Exchange rate risk: This is typically managed via financial instruments like forwards or swaps.
• Political risk: This can be mitigated by acquiring political risk insurance.

Under OHADA law, assets available as collateral to lenders fall into three categories:

• personal security, which includes surety, guarantee, and counter-guarantee;
• movable property security, which covers rights of retention, property as collateral, pledges, and liens; and
• mortgages, which pertain to immovable property.

The AUS outlines formalities for these collaterals, modernising credit guarantees and procedures. Failure to meet these formalities renders the security unenforceable. In bankruptcy, new security against old debt is unenforceable if taken 18 months before insolvency.

OHADA law allows for a universal security interest over a company’s current and future assets, akin to the “floating charge” in other jurisdictions. Under the AUS, assets can be assigned to secure obligations, covering both present and future assets.

However, implementation specifics may vary and certain conditions must be met. For instance, the AUS allows parties to agree that, upon non-payment, the secured creditor gains ownership of money or officially quoted assets pledged.

In Cameroon, entities can offer downstream, upstream, and cross-stream guarantees, involving both parent companies and their subsidiaries provided that the formalities of validation of regulated agreements are followed according to Articles 350, 438, 502 and 853-14 of the OHADA Uniform Act on Commercial Companies and Economic Interest Groups. Under OHADA law, various security interests can be employed in such contexts:

• Mortgage: A mortgage on real estate or significant assets can secure debts between a parent and its subsidiaries.
• Pledge: A pledge allows a creditor to seize the subsidiary’s personal property upon default, securing financial obligations.
• Pledge of bank accounts: This grants creditors rights over a subsidiary’s bank accounts, used for financial security between the parent and subsidiary.
• Pledge of receivables: A creditor gains rights to the subsidiary’s third-party receivables, serving as security.
• Assignment of receivables: This transfers the right to claim from the subsidiary to the parent or creditor, serving as debt collateral.
• Suretyship: A third party, often the parent, guarantees the subsidiary’s debts (useful for inter-company guarantees).

Under Article 639 of the OHADA Uniform Act on Commercial Company and Economic Interest Group Law, the target company is explicitly prohibited from “granting security for the subscription or purchase of its own shares by a third party”. This means that, in the context of an acquisition, the target company may not grant guarantees or securities to facilitate the acquisition of its own shares.

This article makes no exception for the possibility of granting security for the acquisition of its own shares. The extraordinary general meeting may authorise the purchase of its own shares only as part of a capital reduction not motivated by losses, but this does not extend to the granting of securities for the same purpose.

We have not identified any other specific restrictions, significant costs, or consents required beyond those mentioned elsewhere in 5. Guarantees and Security. It is essential to consider that the applicability of additional restrictions or requirements may vary depending on the specific circumstances and the relevant legal jurisdictions involved.

Under OHADA law, security is typically released when the underlying obligation is met.

Obligation Fulfilment

The main way to release security is by meeting the obligation it was designed to cover. Once met, the creditor’s claim on the security ceases.

Pledge Rules

If the pledged property has an official valuation, parties can agree that, upon non-payment, the creditor takes ownership. This does not happen if the debtor meets their obligation.

Enforcement

In case of non-payment, creditors may enforce the security, such as through public auction. This is unnecessary once the obligation is met.

Under OHADA’s AUS Articles 225 and 226, the priority of competing security interests in Cameroon is as follows:

Priority in Immovable Property

• creditors for judicial costs;
• creditors with super-priority for wages;
• registered mortgage and security creditors, by registration order;
• creditors with publicly noted general privileges;
• other general privilege creditors, as per AUS Article 180;
• unsecured, enforceable-title creditors intervening via attachment; and
• if funds are insufficient, categories 1, 2, 5, and 6 share proportionally.

Priority in Moveable Property

• creditors for judicial costs;
• creditors for preservation expenses;
• wage-based super-priority creditors;
• publicly noted or pledged creditors, by enforceability date;
• special privilege creditors per specific asset;
• other general privilege creditors, per AUS Article 180;
• unsecured, enforceable-title creditors via attachment;
• enforceable-title creditors via attachment; and
• if funds are limited, categories 1, 2, 3, 6, and 7 share proportionally.

Contractual Priority Variations

Priority can be contractually altered within lender groups, provided it aligns with mutual agreements.

Contractual Subordination

Provisions survive a Cameroon-incorporated borrower’s insolvency if well-drafted, legally enforceable, and OHADA-compliant.

Under Cameroon law, material security interests that can prime a lender’s security interest by operation of law typically involve statutory liens or claims that take precedence over other creditors’ interests. Some examples include:

• tax liens: government entities can place tax liens on a company’s assets for unpaid taxes; these liens typically have priority over other creditors, including secured lenders;
• creditors (public entities) with a treasury lien;
• wage-based super-priority creditors; and
• environmental liabilities: in cases where a company is responsible for environmental remediation costs, statutory environmental liens can arise, giving government agencies priority claims over other creditors.

There are several ways to structure around priming liens and protect a lender’s security interest:

• Obtaining subordination agreements: The lender can negotiate with the holders of priming liens to obtain subordination agreements. These agreements would stipulate that the priming lienholders agree to subordinate their claims to the lender’s security interest.
• Use of structured financing: Companies may use structured financing arrangements that involve special-purpose entities (SPEs) or bankruptcy-remote vehicles. These structures can isolate the lender’s collateral from potential priming claims.
• Escrow accounts: Companies may set up escrow accounts to hold funds that will satisfy potential priming claims. This ensures that there are adequate funds available to address any priority claims.
• Insurance: Companies can purchase insurance policies to cover potential losses resulting from priming claims. This provides an additional layer of protection for the lender’s collateral.
• Due Diligence: Prior to lending, thorough due diligence can help identify existing or potential priming liens. Addressing these issues upfront through negotiation or other means can reduce the risk to the lender.

Under OHADA law, loan default typically triggers collateral enforcement for secured lenders. The initial enforcement step involves notifying the debtor of the intended action. Failure to comply leads to legal action for debt repayment. If unsatisfied, the creditor may initiate insolvency proceedings.

The OHADA Uniform Act on Simplified Recovery and Enforcement Procedures (AUVE) outlines two methods to compel payment: injunction to pay and injunction to deliver or return property.

AUVE also regulates enforcement measures, including:

• provisional seizure: this encompasses tangible assets, debts, shareholder rights, and movable properties; and
• enforceable seizure: this includes methods like seizure and sale, garnishee, wage attachment, and attachment of immovable property.

According to the general principles of private international law applicable in Cameroon, a clause that chooses a foreign law as the law governing the contract, or which submits to a foreign jurisdiction, will generally be accepted by Cameroonian courts, subject to certain conditions, outlined below.

Choice of Foreign Law

The choice of a foreign law as the law applicable to the contract is generally upheld, provided that it does not violate Cameroonian international public policy or mandatory local laws.

Submission to a Foreign Jurisdiction

The choice of a foreign jurisdiction to settle disputes arising from the contract is also likely to be recognised, unless the Cameroonian courts consider themselves exclusively competent due to the nature of the dispute or for reasons of public policy.

Waiver of Immunity

A waiver of immunity clause would require careful consideration. Jurisdictional immunity, particularly for states or state entities, is a complex issue that cannot easily be waived by a simple contractual clause.

Formal Requirements

The contract must be properly formalised, and jurisdictional clauses must be clearly set out to avoid any ambiguity.

Under the legal framework provided by Law No 2007/001 of 19 April 2007, which governs the recognition and enforcement of foreign judicial decisions and foreign arbitral awards in Cameroon, the enforceability of a judgment given by a foreign court or an arbitral award in Cameroon is subject to specific procedures and conditions, as outlined below.

Competent Authority

The President of the Court of First Instance or a judge delegated by the President serves as the judge for disputes related to the enforcement of foreign judicial decisions and acts and foreign arbitral awards in Cameroon (Article 5 of the law).

Application for Recognition and Enforcement

To seek recognition and enforcement in Cameroon, the party must submit an application to the competent Cameroonian authority. This application should include the following documents:

• a copy of the foreign decision meeting the necessary conditions for authenticity;
• the original document that was used for service of the decision or any other act equivalent to service;
• a certificate from the clerk confirming the absence of opposition or appeal against the decision; and
• if applicable, a copy of the summons or notice to the party who defaulted in the proceeding, certified by the clerk of the court that rendered the decision, and any evidence demonstrating that this summons or notice reached the party in a timely manner (Article 6).

Verification by the Judge

The Cameroonian judge responsible for the enforcement of foreign decisions and arbitral awards will verify certain criteria:

• whether the decision originates from a competent foreign court;
• whether the parties were duly summoned, represented, and declared in default;
• whether the decision is enforceable in its country of origin; and
• whether the decision does not contradict Cameroonian public policy or a final Cameroonian judicial decision (Article 7).

Decision on Enforcement

The Cameroonian judge will issue a decision based on the verification results (Article 8). If the conditions are met, the judge may grant “exequatur” (recognition and enforcement). This recognition may be partial, applying only to specific aspects of the foreign decision.

Appeal

The decision of the judge responsible for enforcement can only be appealed before the Supreme Court (Article 8).

There are no other matters that might impact a foreign lender’s ability to enforce its rights under a loan or security agreement.

The commencement of insolvency processes under OHADA law significantly impacts a lender’s ability to enforce its loan, security, or guarantee. The key implications are outlined below.

Suspension of Individual Actions

When insolvency proceedings begin, all individual creditor actions against the debtor are suspended or prohibited. Creditors cannot pursue outstanding debts individually during insolvency.

Creation of Collective Mass

Insolvency proceedings automatically create a collective mass of creditors represented by the appointed trustee (syndic). The trustee acts on behalf of this group and can take legal actions on its behalf, linking individual creditors to the process.

Impact of Redress Proceedings

If insolvency aims at redress or rehabilitation (redressement judiciaire), a concordat de redressement must be negotiated between the debtor and creditors, seeking solutions to the debtor’s financial issues. Court approval marks the end of redress proceedings, and the debtor regains control while following the concordat’s terms.

Outcome of Liquidation

In cases of liquidation (liquidation des biens), the business dissolves, and creditors are organised into a union. Creditors await the liquidation’s outcome, with claims settled based on a legal hierarchy. Some creditors may not recover fully, resulting in losses.

Creditor Claims

Regardless of redress or liquidation, creditors must submit claims to insolvency proceedings, specifying the nature, amount, and guarantees. The court reviews and acknowledges these claims before determining their rank among creditors.

In the event of a company’s insolvency under OHADA law, the order in which creditors are paid is determined by their legal ranking (Articles 225 and 226 of the AUS).

In Cameroon, insolvency proceedings’ duration varies based on several factors like initiator, outstanding debts, and procedure type (preventative settlement or liquidation). Creditor objections and the firm’s financial health can also affect the timeline.

The quickest cases, initiated by companies keen on uncontested liquidation, may wrap up in approximately six months.

In OHADA jurisdictions, company rescue procedures outside formal insolvency are governed by two mechanisms: conciliation and preventive settlement (règlement préventif).

Conciliation

The conciliation process is preventive, consensual, and confidential. The goal of negotiations between debtors and creditors is to reach a consensus and formalise it in a conciliation agreement. The key traits of this approach include a focus on prevention, achieving mutual agreement, maintaining confidentiality, and the involvement of a neutral conciliator. The overarching objective is to restructure either the finances or operations of the company to avoid insolvency.

Preventive Settlement (Règlement Préventif)

The preventive settlement mechanism aims to prevent insolvency and resolve debts through a concordat (debtor-creditor or court-approved concordats). The primary purpose is to avert insolvency and settle debts using a concordat as the resolution framework.

In Cameroon, there are several risk areas for lenders if the borrower, security provider, or guarantor were to become insolvent:

Enforcement of Loan

The commencement of insolvency proceedings generally triggers a stay of enforcement actions against the debtor. This means that lenders may be prevented from enforcing their loans during the insolvency proceedings.

Enforcement of Security

Similarly, the enforcement of security interests may also be stayed during the insolvency proceedings. However, secured creditors generally have priority over unsecured creditors in the distribution of the debtor’s assets.

Value of Collateral

As a lender, one main risk is that the value of the collateral decreases below the cost of the security that was lent out.

Invalidation of Cover

The interests of the lender are completely separate from those of the borrower, so the lender’s right to claim is unaffected if the borrower does anything to invalidate the cover.

Automatic Liability

The guarantor to a facility automatically becomes liable to the creditor upon default by the borrower.

Project finance in Cameroon aims to fill infrastructure gaps and stimulate economic growth. Key insights include:

Major Projects

Cameroon’s government has laid out noteworthy second-generation projects for 2020-2030. The IMF highlights financial challenges and advises prudent planning.

Infrastructure

Focus areas are transportation, hydropower, sanitation, and ports. Notable is the Nachtigal Hydropower Project, a public-private initiative to address power issues.

Financing

Central sectors are transportation, energy, and sanitation. Funding combines government resources, loans, and collaborations with international financial entities like the African Development Bank.

Cameroon is committed to fostering public-private partnerships (PPPs) to address infrastructure deficits and drive economic development.

Significantly, the legal framework for PPPs was strengthened with the enactment of Law No 2023/008 of 25 July 2023, establishing the general regime for public-private partnership contracts in Cameroon. This recent legislation underscores Cameroon’s commitment to structuring and promoting PPPs for crucial infrastructure projects and to boost economic growth.

In addition to these laws and regulations, there are guidelines for PPP procurement in Cameroon, covering the Expression of Interest document, bidding advice, bid evaluation, and bidder prequalification, among other aspects.

The country established its PPP policy framework between 2005 and 2009, with 21 projects disclosed in 2013 in areas like transport, urban development, energy, and agri-food.

Potential PPP transaction challenges may include strict regulations, bureaucracy, regulatory ambiguity, and financing difficulties. Understanding Cameroon’s PPP legal and regulatory landscape is vital for effective engagement.

The applicable laws and dispute resolution procedures for project documents in Cameroon can be complex and depend on contract terms and the nature of the relevant project. Here is a condensed overview.

Dispute Resolution

Litigation or ADR

Cameroon offers litigation or alternative methods like arbitration or mediation for disputes.

Arbitration for projects

Arbitration, chosen in project contracts, may streamline future disputes under different contracts.

Governing Law

Contracts specify the governing law and dispute resolution procedure. Parties often have autonomy unless local laws restrict choices.

International arbitration is common in international contracts, impacting enforceability and dispute resolution.

Local Laws and Regulations

Cameroon’s legal framework is influenced by both the French civil law and the English common law traditions due to its bilingual and bijural nature. This duality could impact the governing laws and dispute resolution mechanisms for project documents.

Cameroon has a Public Contracts Code that sets out the rules applicable to the award, execution, and control of procurement, which might influence project contracts within the country.

Foreign Ownership of Real Property

Based on Ordinance No 74-1 of 6 July 1974 regarding the real estate regime in Cameroon

Foreign individuals or legal entities wishing to invest in Cameroon can conclude leases or acquire real estate properties, except in border areas, as stipulated by Article 10 of the aforementioned ordinance. The acts for such transactions must be endorsed by the relevant ministerial authorities to be valid.

Water Rights

In Cameroon, water rights are generally exercised over lands of the public maritime and fluvial domains, among others. According to Ordinance 74/2, establishing the domain regime, lands of the public domain are inalienable, meaning they cannot be transferred to others either for a fee or for free. They cannot be part of any transaction leading to their transfer to individuals or state organs.

Remedial Rights on Liens by Foreign Lenders

The ordinance does not explicitly address the rights of foreign lenders holding or exercising remedial rights on liens on any such property. However, Articles 7 and 8 set out the conditions for obtaining land titles and the establishment of real estate rights on properties, which could extend to remedial rights on liens by lenders.

Restrictions and Legal Requirements

Certain legal formalities are required for the validity of acts relating to real estate transactions, as laid out. Furthermore, in case of resale, the state has a pre-emptive right to repurchase the property.

Structuring a deal and determining the legal form of a project company in Cameroon entails a thorough understanding and consideration of various legal, regulatory, and financial facets. Here is an overview of the main issues and relevant laws.

Legal Form of Project Company

Project companies in Cameroon often take the form of a corporation or a limited liability company.

The key laws are the OHADA Uniform Act on General Commercial Law, OHADA Uniform Act on Commercial Companies and Economic Interest Groups.

Foreign Investment

There are no general restrictions on foreign investment, but certain sectors may have specific regulations.

The key laws are the Investment Charter of Cameroon, and specific regulatory laws.

Central Bank Regulations

Monetary policy and financial regulation are overseen by the Bank of Central African States (BEAC).

Key regulations pertain to foreign exchange control, monetary transfer, and lending regulations.

Relevant Treaties

Cameroon is a party to various international treaties and agreements that could impact project structuring and operations.

Examples include treaties within the CEMAC (Economic and Monetary Community of Central Africa) region, and bilateral investment treaties.

Regulatory Approvals and Compliance

The relevant approvals are required from governmental and regulatory bodies like the Ministry of Finance, the National Anti-Corruption Commission, and sector-specific authorities.

Local laws, including labour laws, environmental regulations, and tax laws, must be complied with.

Financing

Financing of the project must be structured in compliance with local and international financial regulations and standards.

Taxation

Adequate planning and compliance with taxation laws are crucial for the financial viability of the project.

The key laws are the General Tax Code of Cameroon, the various Finance Acts and their implementing circulars.

Contractual Agreements

Clear and enforceable contracts for construction, supply, operation, and other critical project components must be drawn up in accordance with local laws and international standards.

Dispute Resolution

Clear dispute resolution mechanisms must be established within contracts. It is also important to understand the legal framework for dispute resolution in Cameroon.

Insurance

Appropriate insurance cover should be in place to mitigate project risks.

Environmental and Social Compliance

National and international environmental and social standards and regulations must be complied with.

Intellectual Property Protection

Any intellectual property associated with the project must be complied with in accordance with Cameroonian laws and international treaties.

Project finance in Cameroon encompasses a variety of funding sources and structures. The financing framework often mirrors international standards, while also reflecting the country’s economic landscape and regulatory environment. Below is an overview of typical financing sources and structures employed in project financings within Cameroon.

Bank Financing

Traditional bank loans remain a prevalent source of project financing. Local and international banks provide loans with varying terms and conditions based on the project’s viability and the borrower’s creditworthiness.

Syndicated loans, involving multiple banks, are also common for larger projects.

Export Credit Agency (ECA) Financings

ECAs provide financial support to promote exportation and often support projects that will utilise exports from their respective countries.

ECA financing can provide favourable terms including lower interest rates and extended repayment periods, enhancing the project’s financial feasibility.

Project Bonds

While not as common as bank financing, project bonds can be issued to raise capital from public or private investors. This method is more likely to be used for larger, well-established entities or projects with predictable cash flows.

Alternative Financing Sources

Streaming or royalty financing

This is more common in the mining sector where a company receives upfront financing in exchange for a percentage of future production or revenues.

Private equity funding

Private equity firms may provide capital in return for equity stakes in the project. This is a common financing mechanism for startups and growing companies.

Commodity trader financing

This involves financing from commodity trading companies, often structured around the purchase and sale of the project’s output.

Development Financial Institutions (DFIs)

DFIs like the African Development Bank provide financing with preferential terms to promote economic development. They often participate in project financings, especially in infrastructure and energy sectors.

Multilateral and Bilateral Funding

Funding from multilateral institutions and bilateral agreements between countries can also be a significant source of project financing, especially for large-scale infrastructure projects.

Government Grants and Subsidies

Governmental grants and subsidies may be available for projects aligning with national development goals or those in priority sectors.

PPPs

PPPs are increasingly being used to finance infrastructure projects. These partnerships leverage both public and private sector resources to finance, develop, and operate projects.

Microfinance Institutions

For smaller projects or entrepreneurs, microfinance institutions offer an accessible source of financing, though usually at higher interest rates.

Supplier Credit

Supplier credit can also be a source of project financing, where suppliers provide goods or services on deferred payment terms.

Leasing

Leasing arrangements for equipment or other assets are also common, especially in projects where upfront capital is limited.

In Cameroon, managing natural resources involves various considerations linked to the nation’s legal framework. Key aspects include export limitations and local beneficiation.

Export Control

Cameroon restricts the export of raw materials, especially petroleum products, aiming to promote local processing and value addition. This approach maximises economic benefits from natural resources and boosts the nation’s industrial sector.

Local Value Addition

Cameroon encourages local processing of natural resources to generate more economic value. This process drives industrial development, job creation, and economic diversification. The regulatory framework, including the Mining Code, emphasises local transformation before resource utilisation or export.

Legal Framework

Cameroon’s natural resources sector operates under several laws and ordinances, notably the Mining Code and Petroleum Code. These legal instruments outline rights, obligations, and regulatory compliance for stakeholders. They govern exploration, exploitation, and resource management within Cameroon’s jurisdiction.

In Cameroon, various laws and regulatory bodies oversee environmental, health, safety, and community consultation concerns for projects. Below is an overview of some of the key aspects.

Environmental Laws

Topics covered under environmental laws include environmental management, water and land law, conservation of biodiversity, resource protection, mining and energy law, climate change law, environmental justice, and human rights. The legal frameworks pertaining to international trade and sustainable development are also under the purview of environmental laws.

A significant legislation is Law No 96/12 of 5 August 1996 relating to Environmental Management in Cameroon, which encompasses aspects such as Environmental Impact Assessment (EIA).

Occupational Safety and Health (OSH) Laws

The primary legislation for health and safety at workplaces is Order No 039/MTPS/IMT of 26 November 1984, which sets the general rules of hygiene and safety at the workplace as well as Law No 96/03 of 4 January 1996 establishing a framework law in the field of health.

The national regulatory framework for Occupational Safety and Health (OSH) is outlined on the International Labour Organization’s (ILO) platform, providing a picture of the main elements of OSH legislation in Cameroon.

Health Regulations

The Directorate of Pharmacy, Medicines and Laboratories (DPML) regulates pharmaceuticals under Law No 90-035 of 10 August 1990, which establishes general rules for the practice and organisation of the pharmacy profession. Additionally, Framework Law No 2018/020 of 11 December 2018 regulates food and supplements. Each body oversees compliance in their domains, adhering to national health standards in synergy with the National Authority for Standards and Quality (ANOR).

Community Consultation

While the specific laws or bodies governing community consultation were not found in the provided sources, the Environmental Impact Assessment (EIA) process usually involves community consultation to assess and mitigate the social impacts of projects.

Regulatory Bodies

Various ministerial decrees and orders form the scope of health and safety legislation for companies and industries, implicating different governmental departments in the oversight of these areas.