In Cabo Verde, most business organisations are incorporated in the form of companies with distinct legal personality. The corporate forms are as follows.

Public Limited Companies (Sociedade Anónima or SA) – Used for Large Companies

This type of company has the following characteristics.

• Minimum share capital of EUR0.01.
• A minimum of two shareholders. A single-shareholder public limited company incorporation is permitted if the single shareholder is another company.
• As a general rule, public limited companies are incorporated by means of a private document (articles of association). Additional formalities may apply if the shareholders perform contributions in kind.
• As a rule, the transfer of shares is free and may be carried out by means of an agreement between the parties.

The governing bodies of a public limited company are as follows.

1. A management board, generally with a minimum of three members. Management can be entrusted to one director if the turnover for two consecutive years is expected to be less than CVE10 million. In addition to the election of the effective members of the board of directors, substitute directors must be elected in numbers not exceeding one third of the effective directors – this means three effective members and one substitute member, or one effective member and one substitute.
2. A shareholders’ meeting.
3. A supervisory board (three members) or one auditor – a member of the supervisory board or the auditor must be certified.
4. An auditor (for large companies).
• Shareholders’ liability is limited to capital subscribed, but shareholders are jointly and severally liable for all contributions contained in the by-laws.
• Flexibility of capital – only registered shares are allowed. Registered shares are transferred by endorsing the share certificate in the name of the transferee. Notice must be given to the company for the purposes of registration in the share book. Book-entry shares are transferred by registration in the transferee’s bank account. The only limit on the free transfer of shares may arise from any pre-emption rights that have been established by the shareholders in the articles of association.

Limited Liability Partnership (Sociedade por Quotas) – Primarily Used for Small Businesses

This type of company has the following characteristics.

• A minimum share capital of EUR0.01.
• A minimum of two shareholders as a rule. Single-shareholder limited liability company incorporation is permitted.
• As a general rule, limited companies are incorporated by means of a private document (articles of association). Additional formalities may apply if the shareholders perform contributions in kind.
• The transfer of shares may be carried out by means of an agreement between the parties, except when the incorporation has been made through public deed.
• The company is governed by management with one or more directors. An auditor is not mandatory, but companies that do not have a supervisory body must appoint a certified auditor to carry out the statutory audit if turnover is greater than CVE10 million and/or the number of employees is more than ten.
• Shareholders’ liability is limited to capital subscribed, but shareholders are jointly and severally liable for all contributions contained in the by-laws.
• The transfer of shares must be made by written agreement between the parties. The articles of association may set limits or conditions on the transfer of shares or pre-emptive rights in favour of other shareholders or the company itself.

Corporate governance requirements are derived from laws and regulations, recommendations and internal rules set forth by companies themselves.

Laws and Regulations

These contain the majority of corporate governance rules and requirements:

• The Commercial Companies Code (CSC) approved by Legislative Decree No 2/2019.
• The Securities Code in its latest version approved by Law 101/IX/2020.
• The Banking Law approved by Law No 62/VIII/2014.

Recommendations

Listed companies and the ones operating in banking and financial sector are subject to additional recommendations issued by corporate governance codes, to which they must refer.

They must also take into consideration recommendations issued by the by sectoral regulatory entities, such as the Central Bank of Cape Verde or the Multisectoral Economic Regulatory Agency.

Internal Rules

Companies may adopt internal rules, such as by-laws, board internal regulations, codes of ethics or of conduct which set forth specific corporate governance rules and requirements.

Listed companies are subject to mandatory corporate governance requirements and recommendations. First of all, only companies organised as Public Limited Companies (Sociedade Anónima or SA) are authorised to trade their shares on a regulated market.

To promote a high corporate governance standard, the Securities Code contains corporate governance standards, especially with regard to compliance with the duty of information. Companies must produce annual information on corporate governance, in the following terms.

• Capital structure, including indication of shares not admitted to trading, different categories of shares, rights and duties inherent to them and percentage of capital that each category represents.
• Possible restrictions on the transferability of shares, such as consent clauses for sale, or limitations on share ownership.
• Qualified holdings in the company’s share capital.
• Identification of shareholders holding special rights and description of these rights.
• Control mechanisms provided for in a possible system of employee participation in capital, to the extent that voting rights are not exercised directly by them.
• Possible restrictions on voting rights, such as limitations on the exercise of voting depending on the ownership of a number or percentage of shares, deadlines imposed for the exercise of voting rights or systems for highlighting rights with patrimonial content.
• Shareholder agreements that are known to the company and may lead to restrictions on the transfer of securities or voting rights.
• Rules applicable to the appointment and replacement of members of the management body and amendments to the company’s statutes.
• Powers of the management body, particularly with regard to decisions to increase capital.
• Significant agreements to which the company is a party and which come into force, are amended or terminate in the event of a change in control of the company following a public takeover bid, as well as the respective effects, unless, by their nature, their disclosure would be seriously detrimental to the company, unless the company is specifically obliged to disclose such information due to other legal imperatives.
• Agreements between the company and the members of the management body or employees that provide for compensation in the event of the employee’s resignation, unfair dismissal or termination of the employment relationship following a public takeover bid.
• Internal control and management risk systems implemented in the company.

The following mandatory corporate governance mechanisms are also envisaged in these companies.

• The existence of the Certified Auditor as an autonomous body, not being part of the Supervisory Board.
• The Supervisory Board must include at least one member who has a higher education degree appropriate to the exercise of their functions and knowledge in auditing or accounting and that is independent.
• The Supervisory Board must be composed of a majority of independent members.

The members of the board of general meeting:

• are subject to the incompatibility regime;
• must be independent;
• can only be removed by the general assembly with just cause; and
• can only receive fixed remuneration.

As for the members of the management body, a regime prohibiting the waiver of deposits to hold administrators liable is established.

The Conduct Code (Circular 3/2012), issued by the Cape Verdean stock exchange, lays down further rules on the corporate governance of listed companies.

As has occurred in several jurisdictions, the factors underpinning ESG are increasingly being introduced into the reality of companies in Cabo Verde.

The legislative changes resulting from the approval of the new Commercial Companies Code also reinforced the corporate rights of minority shareholders, as well as access to company information.

Furthermore, several companies are creating internal Corporate Governance regulations based on internationally consolidated principles.

There are no mandatory requirements for companies in relation to reporting on ESG issues. However, there are certain recent developments on corporate governance that might impact ESG issues, such as the creation of the Institute for Corporate Governance, a private entity aiming to work and develop the matter in Cabo Verde.

It must also be noted that the launch of some financial products, called social, green and blue bonds, aim to allow the financing of sustainable projects within the framework of ESG policies.

Some entities operating in regulated sectors, such as telecommunications, energy, banking and finance, include information on ESG in their reports.

Principal bodies of Public Limited Companies (Sociedade Anónima, or SA) are as follows.

• Management Board – generally, there is a minimum of three members. Management can be entrusted to one director if the turnover for two consecutive years is expected to be less than CVE10 million. In addition to the election of the effective members of the board of directors, substitute directors must be elected in numbers not exceeding one-third of the effective directors – this means three effective members and one substitute member, or one effective member and one substitute.
• Supervisory Board – composed of three members or one auditor – a member of the supervisory board or the auditor must be certified.
• Shareholders’ Meeting – the board of the general assembly is composed of a President and a Secretary.
• Auditor – applicable in case of large companies and listed companies.

Principal bodies of Limited Companies (Sociedade Por Quotas) are as follows.

• Management board – the company is governed by management with one or more directors.
• Shareholders’ meeting – the board of the general assembly is composed of a President and a Secretary.
• Supervisory board.
• An auditor is not mandatory, but companies that do not have a supervisory body must appoint a certified auditor to carry out the statutory audit if turnover is greater than CVE10 million and/or the number of employees is more than ten.

The powers and types of decisions made by the corporate bodies differ depending on the corporate form of the company.

Sociedade Anónima

The board of directors is competent to determine the strategic orientations of the company’s business and ensure their implementation within the limits of the company’s interest. The board of directors is responsible for managing the activities of company, and must be subordinated to the deliberations of the general meeting or interventions of the supervisory board only in cases where the law or company articles so determine. In particular, the board of directors:

• chooses its president, except when the company’s articles of association attribute this responsibility to the shareholders;
• requests to convene general meetings;
• prepare and submit the annual reports and accounts to be submitted for shareholder approval;
• acquisition, disposal and encumbrance of real estate;
• provision of personal or real guarantees and deposits by the company;
• opening or closing of establishments or important parts thereof;
• important extensions or reductions in the company’s activity;
• establishment or termination of lasting and important co-operation with other companies;
• change of headquarters and capital increases, under the terms set out in the articles of association;
• merger, spin-off and company transformation projects; and
• any other matter on which any administrator requires deliberation by the board.

The CEO and the deputy CEOs, if any, are in charge of the day-to-day management of the company, within the limits of the corporate object of the company and the board of directors’ powers.

Sociedade por Quotas

In the Sociedade por Quotas, the managing directors have the broadest powers to manage the company and represent it to third parties, within the limits of the corporate purpose and shareholders’ powers.

Refer to 5.2 Role of Shareholders in Company Management for a description of the shareholders’ decision-making powers.

The decisions of the Board of Directors are adopted either following a board meeting (held in-person or via a teleconference), or by having all directors sign a decision.

The Board of Directors (BOD) meets whenever it is called to by the President or by two other administrators. The BOD must meet at least once each month, unless otherwise provided for in the articles of association. The directors must be asked to convene in writing, with adequate advance notice, except when the contract of the company or a board regulation provides for the meeting on pre-fixed dates or another form of call.

The BOD cannot deliberate without being present or represented by the majority of its members. Decisions are taken by majority vote of directors present or represented.

Shareholders’ meetings are called by the president or, in the special cases provided for by law, by the supervisory board or by the court, at least 21 days in advance.

The shareholders who, according to the law and the by-laws, are entitled to at least one vote, have the right to be present at the general meeting and discuss and vote at such meeting.

As a rule, the general assembly can make decisions, in the first call, regardless of the number of shareholders present or represented. During second call, the assembly may decide regardless of the number of shareholders present or represented and the capital represented by them.

So that the general assembly can deliberate in the first call on matters for which the law requires a qualified majority, shareholders holding at least 1/3 of the share capital with voting rights must be present or represented.

The general assembly decides by a majority of votes issued, whatever the percentage of share capital represented therein, unless otherwise provided by law or the contract, and abstentions are not counted.

The decision on changing the articles of association, merger, division, transformation, dissolution of the company or other matters for which the law requires a qualified majority without specifying it, must be approved by 2/3 of the votes cast, whether the assembly meets in the first or second call.

In Public Limited Companies (Sociedade Anónima), the Board of Directors is made up of at least three members (there must always be an odd number). However, the law allows administration to be entrusted to a single director whose turnover, for two consecutive years, is less than CVE10 million (GBP76,432.69).

If a legal person is appointed director, they must appoint a natural person to hold the position in their own name.

The Board of Directors can further delegate the management and representation powers to one or more individuals, directors or third parties, or to an executive committee.

In the case of Sociedade por Quotas, management is carried out by one or more natural persons (partners or non-partners).

The Companies Code establishes that the board of directors is a collegiate body. As a principle, the directors collectively exercise the functions assigned to the board and they do not have any individual powers, except for the chairperson of the board. The chairperson is in charge of organising and directing the work of the Board of Directors and reporting to the general meeting.

The Board of Directors may grant specific assignments to individual directors, in order to improve the corporate governance of the company and facilitate the board’s mission.

The following composition requirements are in place.

• The Board of Directors of a Sociedade Anónima is made up of at least three members (there must always be an odd number).
• The Board of Directors of a Sociedade por Quotas is carried out by one or more natural persons (partners or non-partners).
• Directors may be individuals or legal persons. If a legal person is appointed director, they must appoint a natural person to hold the position in their own name.
• Along with the election of effective members of the Board of Directors, directors may be elected as substitutes in a number that does not exceed one third of the effective administrators.

Special Board of Directors composition requirements may also apply to specific types of companies due to the special regime to which they are subject (for example, aviation, banking and finance).

Electing Directors

The members of the BOD are appointed in the by-laws or elected by the general assembly. The directors are appointed or elected for a period set out in the company’s articles of association, and in the absence of an appointment period, it is understood that the appointment is made for four calendar years, with re-election being permitted.

The articles of association may stipulate that the election of the Board of Directors must be approved by a certain percentage of capital or that election of some of them must be approved by the majority of votes cast by a certain category of shares, as well as stating that certain categories of shares are granted the right to elect a certain number of directors, in a number not exceeding one third of the total.

The articles of association may establish that, for a number of directors not exceeding one, two or three, depending on whether the total number is three, five or more than five, an isolated election is carried out, between persons proposed on lists subscribed by groups of shareholders, as long as none of these groups has shares representing more than 20% or less than 10% of the total share capital.

Substitute Directors

If a director is definitely missing, he or she must be replaced, as follows.

• By calling substitutes made by the president, according to the order in which they appear on the list submitted to the general meeting of shareholders.
• By co-option, when there are no substitutes, unless there are not enough current directors for the board to function.
• By designating a substitute by the supervisory board, in the event that there has been no co-option within 60 days of the absence.
• By election of a new director.

Removal and Renunciation

Any member of the board of directors may be removed by resolution of the general meeting, at any time.

One or more shareholders holding shares corresponding to at least 10% of the share capital may, until a general meeting has been called to deliberate on the matter, request the judicial dismissal of a director, based on just cause.

In particular, serious breach of the administrator’s duties and his/her inability to carry out his/her duties normally constitutes just cause for dismissal.

Any director may resign from the exercise of his/her duties, by means of a written document addressed to the chairperson of the BOD. The resignation only takes effect 30 days after it is communicated, unless, in the meantime, a replacement is designated or elected. Resignation without just cause must be communicated within a reasonable period of time.

The Commercial Companies Code enshrines some legal provisions that aim to highlight the need for markedly independent management of commercial companies and avoid conflicts of interest.

Firstly, a general prohibition is established on granting loans or any form of credit to its directors, providing guarantees for obligations assumed by them or providing them with advances on salaries exceeding one month.

Furthermore, it was established that, unless expressly consented to by the General Assembly, transactions are concluded between:

• the company and the director, in their own name, directly or through an intermediary; or
• the company and the director, representing a third party;

and the company is one in which a director performs management functions.

These prohibitions remain in place in the year following the termination of duties by the director and are extended to transactions concluded with companies that are in a controlling or group relationship with the one in which the contracting party is a director.

Furthermore, the Commercial Companies Code establishes that during the period for which they were appointed or elected, directors cannot exercise, in the company or in companies that are in a controlling or group relationship with them, any temporary or permanent functions at the same time, under an employment or service-provision contract, or regarding entering into any such contracts aimed at providing services when a director’s duties cease. When someone who is linked to the company by an employment or service provision contract is appointed or elected as a director, this contract is suspended and is resumed immediately after the termination of duties.

Unless express authorisation is given at a general meeting, the director cannot carry out, on his/her own or on behalf of others, activities competing with those actually carried out by the company, nor can they carry out functions in a competing company or be appointed on behalf of it.

Directors stand in a fiduciary relationship towards the company. Directors are expected to act in good faith and in the best interest of the company at all times. This involves preserving the company’s assets as well as furthering the company’s business interests.

In general, directors must conduct the company’s affairs with the due care of a prudent and diligent business-person, in particular in accordance with the applicable laws and the articles of association (duty of legality) and taking into account the interests of shareholders and employees.

The duty to act diligently includes, in particular, the duty to obtain the necessary technical competence and sufficient knowledge of the company’s activities, and the duty to act in informed terms, free from any personal interest and in accordance with criteria of business rationality.

The members of the supervisory body must act in accordance with high standards of professional diligence and loyalty.

The directors owe their duties to the company. They always have to act in the best interests of the company. As established by the law, they shall act also taking into account, to a certain extent, the interests of the shareholders, creditors and employees of the company.

The Companies Code organises the topic of directors’ civil liability into three large groups:

• civil liability towards company (Articles 78 and 79 of the CSC);
• civil liability for social creditors (Article 84 of the CSC); and
• civil liability towards partners and third parties (Article 85 of the CSC).

Civil Responsibility Towards the Company

Article 79, paragraph 1 establishes the principle that the members of the management body are answerable to the company for damages caused to it by breach of legal and contractual duties. A presumption of guilt is attributed to the members of the management body, which may be revoked “if they prove that they acted without fault”.

Responsibility is joint among directors.

The operationalisation of the civil liability mechanism of the members of the management body towards the company depends on the deliberation of the shareholders, taken by an absolute majority, and must be proposed within a period of six months counting from said deliberation, and for the exercise of the right of compensation, the partners may appoint special representatives. The civil liability of administrators can even be triggered during the meeting that considers the financial statements, although this matter is not included in the notice.

Civil Liability Towards Creditors

The civil liability of the board of directors towards creditors arises from the culpable non-compliance with legal or contractual provisions intended to protect them, and the social assets become insufficient to satisfy the respective credits.

The protection of corporate creditors is reinforced, as the compensation obligation cannot be excluded by the company’s resignation or transaction or by the fact or omission based on a resolution of the general meeting.

Creditors’ rights may even be exercised during the insolvency process by the administration of the insolvent estate.

Civil Liability Towards Shareholders and Third Parties

Finally, the Companies Code establishes a civil liability regime for the management body towards partners and third parties for damages directly caused to them in the exercise of their functions. This regime is complemented by the provisions of the Civil Code, which reinforces liability based on breach of contractual and legal duties.

The responsibility of the members of the management body towards shareholders and third parties is joint and several.

It is important to highlight that the civil liability regime for members of the management body also applies to “other people entrusted with management functions”. In other words, it does not only apply to members of the management body formally designated by the partners. It applies to directors and managers and not just in formal terms.

In Cabo Verde, directors and officers can be held liable for criminal and civil charges. Regarding criminal liability, in certain circumstances, directors may also be subject to criminal penalties for other violations of the Corporate Law – for example:

• for knowingly making a false or misleading statement to the public;
• for knowingly preparing or approving incorrect or misleading financial statements; or
• for obstructing the conduct of an audit by statutory auditors or auditors appointed for the conduct of an extraordinary audit.

Criminal and/or administrative penalties are provided for by other special laws, particularly in relation to tax, labour, health, safety and environmental violations.

Directors and officers can also be civilly liable if they commit a breach of laws and/or regulations applicable to the company (breach of the articles of association or internal regulations).

Liability cannot be limited and the law requires managers to take out insurance. However, it may be waived by the general meeting, except in companies issuing securities admitted to trading on the stock exchange and in large companies.

The general meeting of shareholders or a committee appointed by it is responsible for setting the remuneration of each director, taking into account the functions performed and the economic situation of the company.

The remuneration may be certain or partially consist of a percentage of the year’s profits, but the maximum percentage allocated to directors must be authorised by a clause in the company’s articles of association.

All companies in Cabo Verde are required to disclose the total remuneration of the management board in the annual financial statements.

Directors’ fees must also be disclosed to the tax authorities as a form of income.

The entire structure of the company is defined by the shareholders when the company is formed. The purpose of the company is determined by its shareholders in the articles of association. The company and its shareholders are legally bound by the by-laws, which constitute the company’s internal regulations. As a result, shareholders collectively own the company.

The shareholders have the right to appoint corporate bodies, to attend and vote at AGMs, to receive dividends, and other rights. They may also, in certain circumstances, be called upon to finance the company.

For private limited companies, the identity of shareholders and their respective capital quotas must be registered at the Commercial Registry. This registration is publicly accessible, and anyone may request a certificate from the registry showing the current shareholders. The situation differs for public limited companies. Shareholders are registered in a share register (book) that must be kept at the company’s head office. However, this register is not public, and there is no legal obligation to update the list of shareholders at the Commercial Registry. The only information that is publicly available through the registry concerns the company’s initial shareholders.

One of the basic rules of corporate law under the Companies Code is that the business shall be managed by or under the direction of a board of directors. Thus, shareholders are generally not involved in the direct management of the company.

However, they may have some influence on management, as the law gives shareholders the right and the power to elect the board of directors, as well as the right to vote on and approve extraordinary transactions, such as any amendment to the certificate of incorporation or the by-laws, a merger, consolidation or conversion, the sale of all or a substantial amount of the assets of the corporation or the dissolution.

Shareholders participate in the decision-making process through the exercise of their voting rights in the general meetings.

The ordinary shareholder meeting of the company is held regularly once a year, within the first three months following the end of each financial year, to:

• deliberate on the management report and accounts for the year;
• deliberate on the proposed application of results;
• carry out a general assessment of the administration and supervision of the company and, if applicable and although these matters are not on the agenda, proceed with the dismissal of members of the corporate bodies, when the general assembly has the power to do so, or express their distrust of them, when the authority to dismiss them lies with the supervisory board; and
• carry out elections within its competence.

An extraordinary shareholder meeting may be convened on the initiative of the chairperson of the Board of General Meetings, by the Supervisory Board or by the court, whenever deemed necessary, in order to resolve the matters that are reserved for the exclusive competence of the shareholder meeting or any other matter that the BOD may consider of such importance that it requires the approval of the general meeting or at the request of shareholders holding at least 5% of the company’s share capital (2% in the case of a listed company), in exercise of the minority rights provided under the Companies Law.

The shareholder meeting is convened 21 full days prior to the date of the meeting through the publication of the invitation, which includes the items of the agenda, details of the place and time of the general meeting and rights that the shareholders may exercise within the 21-day period and during the meeting.

According to the law, regardless of the claim for compensation for individual damages caused, one or more shareholders who own at least 5% of the share capital may file a liability action against members of the management body, with a view to reparation, in favour of the company, for the loss it has suffered, when the company has not filed it.

In companies listed on the stock exchange, the law establishes that anyone who reaches or exceeds a shareholding of 10%, 20%, one third, half, two thirds or 90% of the voting rights corresponding to the share capital of a public company, subject to Cape Verdean personal law, and anyone who reduces their participation to a value lower than any of those limits must, within four business days after the day of the occurrence of the fact or its knowledge:

• inform the General Audit of the Securities Market and the company of this fact; and
• make the entities referred to in this section aware of the situations that determine the attribution to the participant of voting rights inherent in securities belonging to third parties.

Companies are required to file various documents relating to their accounts for the previous financial year with the registrar of commercial companies.

The filing covers the following documents:

• the annual accounts;
• the management report;
• minutes of approval of the accounts for the year and application of results;
• balance sheet, income statement and annex to the balance sheet and income statement;
• legal certification of accounts; and
• opinion of the supervisory body, if such body exists.

The management report is prepared by the directors and covers principally the company’s corporate governance arrangements, the performance of the company during the year under review, and the outlook for the coming year.

Corporate governance arrangements are disclosed as part of the regulatory reports expected from companies.

In Cabo Verde, the body responsible for company incorporation and registration is the Commercial Registry Services, under the supervision of the Directorate-General of Registries, Notary and Identification (Direção-Geral dos Registos, Notariado e Identificação), which is part of the Ministry of Justice.

The Commercial Registry does not act as a regulatory or supervisory authority in the corporate governance sense. However, it exercises administrative control over the legality and formal regularity of the documents submitted for registration. Notably, the registry does not supervise the conduct of directors, shareholders, or internal affairs of companies, nor does it intervene in disputes unless by judicial order.

Any updates to the constitutive documents during the life of the company must be filed with the companies registry. These updates and their related corporate documents are publicly available and include amendments to the articles of association, changes to board composition, transfers of the registered office, and changes to the share capital, among others aspects.

In the event of failure to comply with the filing obligations, companies or their officers may be exposed to administrative fines.

The appointment of an external auditor by the shareholders’ ordinary general meeting becomes mandatory if, at the end of the financial year, the company exceeds at least one of the following thresholds:

• turnover exceeding CVE200 million (over GBP1.528 million); and
• total net assets exceeding CVE15 million (GBP114,654.19).

Auditors are subject to certain requirements regarding their independence, which prohibits them from having any personal, financial or professional relationships that are incompatible with the functions of an auditor.

Companies issuing securities admitted to trading on the stock exchange are also required to have an external auditor.

The law establishes that members of the company’s management bodies must act with diligence and loyalty, in the interests of society, having taken into account the interests of partners and employees. The duty to act diligently includes, in particular, obtaining the necessary technical capacity and sufficient knowledge of the company’s activities.

Therefore, such a duty must be understood as also including the obligation of the company’s management to establish risk management policies and internal control systems in the more general context of promoting the company’s interests and business activity.