Project Finance 2023

Last Updated November 02, 2023

Sierra Leone

Law and Practice


Garber & Co was founded in 2003 by Maurice R O Garber. The firm comprises three partners and several associates. Garber & Co’s partners are admitted to practice in the UK, the USA and the Caribbean and are licensed Solicitors of the Law Society of England & Wales. Providing ethical, competent, timely, reliable and seasoned legal advice to all our clients, the firm routinely handles project finance transactions and due diligence exercises on behalf of its international clients such as the Ecowas Bank for Industrial Development, Afreximbank, the IFC, the Islamic Development Bank, the Africa Finance Corporation and numerous others. Garber & Co frequently acts in collaboration with international counsel on complicated investment and financing transactions. The firm has a robust litigation arm, representing clients such as Crown Agent, the US government, banking, shipping and insurance companies, and has a proven track record in handling large project finance and infrastructure transactions.

Most projects are conceived and sponsored either by the government, or from private sector mining, agricultural, infrastructure or telecommunications industry players. The sponsors are usually the development banks such as the International Finance Corporation (IFC), the African Development Bank, DIFID, the Islamic Development Bank or an amalgamation of traditional development banks and investment fund managers or the investment arm of the larger commercial banks such as Standard Chartered bank, FBN Bank UK or Nedbank, SA.

Public-private partnerships in Sierra Leone are subject to the Public-Private Partnership Act 2014 (the “PPP Act 2014”), which provides detailed guidelines on how public-private partnerships should be conducted. It makes provision for the contents of the public-private partnership agreement, the type and nature of security interests, responsibility of the public institution/government, assignment of the PPP contract, cabinet approval of PPPs, competitive bidding, termination and compensation of the PPP contracts, and dispute settlement options.

There are no restrictions as such on embarking upon PPPs save that all PPPs are subject to oversight from the Public Private Partnerships Unit, which is a statutory body created under the PPP Act 2014 that oversees all PPPs and is housed in the Office of the President. Further, all PPPs must receive cabinet approval and, in some cases, parliamentary approval before they can take effect and be legally binding upon all parties.

The deal is normally envisaged either by the public authority based upon its needs assessment or by the private sector participant. It is very important to identify the most appropriate ministry to partner with so that said ministry will take control and spearhead the process of getting the necessary approvals and supplying the relevant documentation needed to actualise the deal.

Funding can be secured through a variety of mechanisms: through the private sector, from a development bank, from a loan from the World Bank or similar institution, fully funded by the private sector participant or via a government-backed guarantee. The latter is difficult to secure given the government’s concern and goal in minimising its debt profile. Consequently, the government leans more favourably upon PPPs whereby there is little financial exposure on the part of the government, such as BOTs, concession agreements, or self-financed deals put together by the private sector in which the government contribution is in the form of land, technical assistance, or the granting of a concession, mining rights or other tangible or intangible interest.

A growth within the power sector in Sierra Leone is expected, including renewable energy projects, the agricultural sector and the mining industry, which is the main source of projects.

Assets available to lenders are varied and may take the form of the PPP agreement itself, a concession agreement, land and mining/property rights, the income stream/receivables, machinery and equipment, shares in the special purpose vehicle (SPV – a new company set up to run the PPP) or guarantees given by the government/private parties or even an insurance-backed guarantee, export guarantee or other financial instrument provided by the financially buoyant third party.

On the loan documents, charges, debentures, finance instruments and pledges are signed by the appropriate parties. Generally, they are registered either with the Corporate Affairs Commission if the grant emanates from a company such as the SPV or involves company assets, or with the Office of the Registrar General if the asset involves real property, or with both entities where there is a hybrid or basket of various securities being pledged as collateral for the loan/financing. The lien can be created in favour of the security agent or security trustee.

The laws of Sierra Leone, which is an extension of general English Common law company principles, do provide for the registration of fixed and floating charges over the assets of a company. Note that with almost all PPPs, incorporation of a local company or the registration of a foreign company in Sierra Leone is mandatory in order to take advantage of the laws of Sierra Leone.

The registration of a floating charge over assets is governed by Section 150 of the Companies Act 2009, which defines a floating charge as:

“an equitable charge over the whole or a specified part of the company’s undertaking and assets including cash and uncalled capital of the company both present and future, but the charge shall not preclude the company from dealing with such assets until

(a) the security becomes enforceable and the holder thereof, pursuant to a power in that behalf in the debenture or the deed securing the debenture appoints a receiver or manager or enters into possession of the assets;

(b) the court appoints a receiver or manager of the assets on the application of the holder; or

(c) the company goes into liquidation.”

There are costs associated with registration of such securities in the form of stamp duty or registration taxes of usually 0.2% of the value of the security or a sliding scale percentage of the value of the security. There will also be legal fees for the preparation and/or review of the security instrument by local solicitors and other miscellaneous expenses such as notarisation and the replication of copies of the instrument. There may also be nominal registration processing costs of about USD100.

When dealing with a floating charge, a general description of the type of collateral is sufficient but the description should be accurate and sufficient to allow a court or the security trustee to easily be able to identify the asset concerned. This means that there is no harm in providing a general description or a description with specificity of the collateral subject to a floating charge where possible. With fixed charges, the specific security to be encumbered must be adequately described.

Clearly, the lender must ensure that the necessary approvals have been obtained for the grant of the security interest or guarantee. If the government is involved, the security instrument must be signed by the appropriate minister overseeing that industry and, if it involves a government asset, it may also require the signature and approval of the Attorney General and the Minister of Finance, and, often, parliamentary ratification of the instrument that creates a charge over government assets.

Normally, a search will be done in the registry of the Corporate Affairs Commission or the Office of the Registrar General. Liens are registered and an unregistered security instrument is unenforceable against a registered interest that took without notice of the unregistered interest. Indeed, the Registration of Instruments Act renders the unregistered interest void as against subsequent lien holders who register their interest.

Security instruments are normally released by the filing of a discharge, satisfaction or release of the encumbrance as reflected in a properly prepared and signed document to that effect.

A secured lender can enforce its collateral where there has been a material breach of contract, breach of covenant, material misrepresentation, cross default where there are multiple lenders, actual or threatened insolvency, illegality or unlawful conduct by the borrower, execution, levy or attachment of assets, repudiatory breach or other ground giving rise to enforcement by the lender. Usually notice of default must be given with an option or opportunity to cure the same if the breach is potentially curable.

If the security is subject to a charge, the right of seizure or attachment may automatically arise wherein the lender may take immediate possession of the asset. In some other circumstances, a court order or judicial intervention may be required to permit the lender to enforce the loan and recover the asset pledged. Note that where the asset in question is a government asset, the State Proceedings Act mandates a 90-day notice of claim to be served upon the Attorney General before any court action can be instituted. Care must be taken to ensure that the asset is not subject to any other liens/encumbrances and has not been transferred/sold to a third party.

A foreign jurisdiction clause in a contact will be recognised and enforced by courts in Sierra Leone provided it is clearly drafted, has been agreed by the parties and there are no public policy reasons or other compelling reasons why it should be ignored. This may occur where the relative contractual bargaining position of the parties was uneven, forum conveniens issues lean against utilising the foreign jurisdiction and/or the affected party may find it difficult to obtain legal redress in that foreign jurisdiction or even to participate in litigation or arbitration in that jurisdiction.

Judgments of foreign courts will be enforced provided the precise procedural and substantive legal requirements of the Cap. 21, the Foreign Judgments (Reciprocal Enforcement) Act are adhered to. It defines “judgment” as a judgment or order of a court in any criminal or civil proceedings including an award in arbitration proceedings. Enforcement under Cap. 21 is based upon “substantial reciprocity” between the treatment of the foreign judgment in the Sierra Leone courts and the treatment of Sierra Leone judgments in that foreign jurisdiction.

An anomaly exists in that the foreign countries that can take advantage of Cap. 21 are supposed to be found in the Order from the Minister identifying such countries. These countries are deemed to satisfy the substantial reciprocity test. To date, no such Order or list of designated countries exist. However, by virtue of Section 9(1) and (2) of Cap. 21, countries which can be described as “His Majesty’s Dominions” can make use of Cap. 21 and it is opined that, using the mischief rule of interpretation, this should now encompass all former British Colonies/Commonwealth countries.

Otherwise, the holder of the foreign judgment must bring an application under Order 16 of the High Court Rules, which provides a procedure whereby a plaintiff may bring a summary judgment application before the court on the premise that the defendant has no defence to the claim. In this case, the plaintiff will be exhibiting and relying upon the judgment or award of the foreign court or arbitral proceedings as res judicata. This is, however, a fresh action which is subject to the court’s perception of the finality of the award, defences to the application and challenges to the validity of the judgment/award raised by the other party. With regards to arbitral awards, now that Sierra Leone is a signatory to the New York Convention and based upon the provisions of the Arbitration Act 2022, which incorporates and domesticates the New York Convention, arbitral awards may be enforced as of right by the courts in Sierra Leone.

Where the foreign lender is trying to enforce a loan or security against the government of Sierra Leone, the writ or court process must be preceded by a 90-day Notice of Claim, which must be served upon the Attorney General on behalf of the government before any lawsuit can be initiated. This then gives the government 90 days to determine whether it ought to settle the matter.

Foreign lenders are not restricted in granting loans. Foreign lenders can give loans provided they are project based, isolated transactions and do not otherwise amount to the foreign lender operating a commercial bank in-country (ie, accepting deposits from the public and providing loans and other facilities in exchange). The loan agreement must, of course, be registered in Sierra Leone if subject to Sierra Leonean law or abroad if subject to some foreign law.

The granting of securities to foreign lenders is not restricted or impeded, provided the decision is made in good faith and there is proper documentation to show the pledge of assets. Note that where the foreign lender has to go to court to enforce the security, then it may need a local agent or SPV to bring the action on its behalf. It should further be noted that there are restrictions in Sierra Leonean land laws as to the leasehold/freehold interest that a foreign entity can acquire on land in Sierra Leone. Usually, a foreign lender cannot acquire a freehold interest in the Western Area and a leasehold interest is usually restricted to a grant of 21 years plus an option to renew for another 21 years. Longer leasehold interest can be acquired but only if a formal waiver is granted by the government or responsible ministry. Land rights in the Provinces, under the Customary Land Rights Act 2022, can now be granted for a maximum of 50 years.

The foreign investment regime in Sierra Leone is largely based upon project finance transactions, loans to government, loans to commercial banks, donations and grants from multilateral development institutions, and other types of foreign direct investment. It may also take the form of new companies (SPVs) that are formed to embark upon trading, mining or infrastructure development and they tend to import into the county their equipment, machinery and other resources required to get the company up and running.

In theory, there are no restrictions on payments abroad to foreign investors. However, there are some procedural and practical restrictions such as the need to secure the Bank of Sierra Leone (Central Bank) no-objection clearance if the amount involved is very large. There are anti-money laundering laws, compliance mandating that relevant documentation be produced to support the payments abroad, such as an invoice, the underlying contract, board approvals, etc. There may also be practical challenges such as the access to or the paucity of supply of foreign exchange available locally which can be remitted abroad. Repatriation of capital is, by and large, permitted provided it is properly documented.

A project company can maintain offshore accounts. Many times, proceeds are due and payable to such offshore accounts and there is no prohibition of same in Sierra Leonean laws. Indeed, it is also permissible for onshore or local foreign currency accounts to be opened in Sierra Leone both for companies and individuals.

The finance or project documents will need to be registered or filed with the appropriate government authority. Many times, finance documents are registered with the Corporate Affairs Commission and project documents with the office of the Registrar General in Freetown. Sometimes these documents are filed abroad, particularly if governed by foreign law, but with complementary filing locally. If the finance or project documents are governed exclusively by foreign law, then the parties may opt to register said documents as a miscellaneous filing with the Office of the Registrar General in Freetown, although not bound to do so.

Ownership of land or natural resources or operating a business does require a licence either in the form of a conveyance, lease, a concession agreement, a licence and a business registration certificate or certificate of incorporation. Such a certificate can be held by a foreign entity, although note the limitation mentioned with regards to freehold ownership of land by foreigners under Sierra Leonean law.

In the Western Area, the Non-Citizens (Interest in Lands) Act 1966 will preclude a foreign lender or investor from acquiring a freehold interest in land in the Western Area of Sierra Leone. He can acquire a leasehold interest for a maximum term of 21 years. If a larger leasehold interest is required, then the special board must be consulted, of which the minister of lands is the chairperson, and that board can provide a waiver for a leasehold interest greater than 21 years to be granted to the foreign entity. Note that a locally incorporated company of which the shareholding interest is more than 50% will still be viewed as a foreign entity (non-citizen) for purposes of the above-mentioned statute.

In the provinces, title to land is governed by customary law and authority is vested in the paramount chief as trustee for the community. In reality, there are several layers of ownership or vested interests shared between the paramount chief(s), the family and the individual. Customary land tenure is quite different from what operates in the Western Area. It differs from community to community. Based upon the Customary Land Rights Act 2022, leasehold interest can now be granted for a maximum of 50 years for land in the Provinces and this leasehold interest is registrable and enforceable at law. Further, all citizens are now assured access to leasehold land in the Provinces regardless of tribe, ethnic origin, age or gender. This is particularly important for foreign investors who require large numbers of hectares of land for their project. 

Agent and trust concepts are recognised under Sierra Leonean laws and are frequently used in project finance transactions where there is a security trustee representing the rights of the lenders. Special trust accounts and escrow accounts are sometimes used as an alternative to the trust structure.

The priority of competing security interests is governed by the date of registration. Debentures or charges created and executed locally must be registered with the Corporate Affairs Commission (CAC) within 21 days after the date of their creation. If the charge is created abroad or executed abroad by one of the parties, then it must be registered with the CAC within 90 days of its creation.

Subordination is permitted under Sierra Leonean laws but obviously requires a clearly drafted subordination agreement duly filed with the CAC. The subordination agreement may impact upon the priority of competing charges and the subordination agreement will be fully enforceable notwithstanding the insolvency of the borrower unless the liquidator can show evidence of a fraudulent preference, a charge created in favour of a related party or company, or some other compelling equitable reason why the agreement should be set aside.

The project company or SPV must be incorporated locally or registered as a local subsidiary of the foreign company in order to have standing and to take advantage of Sierra Leonean laws. It is also envisaged that the project company will have to hire staff, perform services and enter into secondary contracts, all of which will require a registered legal presence in Sierra Leone. Consequently, it is customary for the project company to be organised as a private limited company duly registered with the CAC.

Company reorganisation is permissible under Sierra Leonean laws and may take the traditional form of mergers and acquisitions. Although not very common, such reorganisations are governed by the Companies Act, common law principles and the contractual agreement of the parties. The reorganisation will normally take the form of shares swaps and exchanges, an acquisition of majority shares in the targeted company or the creation of a new company in which both entities take a shareholding interest. There is unfortunately no active stock market in Sierra Leone so the listing and acquisition of shares through public takeovers via the stock market is non-existent. Companies desirous of off-loading their shares normally do so through private placements. Notice of a proposed reorganisation, whether for public or private companies, must be provided to the shareholders of the company and to the Corporate Affairs Commission. A reorganisation may also be conducted through a winding-up of the old company and the transfer of all assets and liabilities to the new company as envisaged in Section 412 of the Companies Act 2009.

In many situations, the commencement of insolvency proceedings will in and of itself trigger a default on the loan, finance or security instrument. It is clear, however, that the commencement of insolvency will vest all powers and authority over the company in the liquidator and court, which will then administer the liquidation process and deal with the competing claims of all creditors of the company.

In Sierra Leone, there are three types of insolvencies/liquidations, otherwise known as a “winding-up” of the company under the Companies Act. Section 343(1) provides for the following:

  • a winding-up by the court;
  • a voluntary winding-up by the members of the company; and
  • a winding-up subject to the supervision of the court.

Winding-Up by the Court

This occurs where:

  • the company has by special resolution resolved that the company be wound up;
  • default is made in filing the required statutory reports;
  • the company does not commence business for a whole year;
  • membership of the company falls below the statutory threshold;
  • the company is unable to pay its debts; or
  • the court is of the opinion that it is just and equitable that the company be wound up.

The application to the court for the winding up of the company can be by petition brought by the company, by a member/shareholder or by its creditors. The lender, depending upon whether its interest is secured or unsecured, and the priority to be granted to that interest, will be affected by the insolvency.

With project finance transactions, where the security instruments are properly drafted, the insolvency will trigger a crystallisation of the charge over the assets if dealing with the floating charge or will entitle the lenders to take legal control over the secured/pledged asset and such lenders will be able to show to the liquidator or court that those assets are beyond the realm of assets available to satisfy the general or unsecured creditors of the insolvent company. Note that assets falling within a floating charge shall be subject to and inferior to those debts that are entitled to preferential payments.

Voluntary Winding-Up by the Members of the Company

In addition to a winding-up by the court, the members/shareholders of a company may opt for a voluntary winding-up under Section 402 of the Companies Act 2009, which occurs where:

  • the period fixed for the life of the company has expired and the company in a general meeting passes a resolution that the company be wound-up;
  • the company resolves by a special resolution that the company be wound up; or
  • the company resolves by special resolution, due to the extent of its liabilities, that the company be wound-up.

Where the members opt for a voluntary winding-up, after the required resolution has been passed, the members should within 14 days of passing the resolution publish in a local newspaper and in the Gazette that the company is being wound up.

Winding-Up Subject to the Supervision of the Court

The last type of insolvency is one subject to the supervision of the court and it occurs where the company has passed a resolution for a voluntary winding-up but the court has made an order that said winding-up shall be subject to the court’s supervision.

Disposition of Assets

Further, any disposition of company assets after the winding-up has commenced shall, unless the court orders otherwise, be deemed void (Section 355, Companies Act 2009). It is customary for a receiver or liquidator to be appointed by the court to oversee the company’s affairs and make all decisions on behalf of the companies.

When a company becomes insolvent, creditors are paid in the following pecking order:

  • secured creditors;
  • preferential creditors comprising government taxes and rates, NASSIT payment – state pension fund, wages and salaries of employees owed for the last 12 months and workmen’s compensation payments;
  • general creditors and unsecured creditors; and
  • unliquidated claim-holders of the company.

The risks for lenders if their borrower, security provider or guarantor becomes insolvent are real unless mitigated by secured asset investments and insurance. Sometimes, even where there are fixed assets that are the subject matter of a secured interest, the cost of identifying, locating, moving and disposing of the equipment and machinery may be significant. There are also other intangible risks such as foreign exchange fluctuation, particularly where the income stream is being generated in Leones, foreign exchange scarcity, or a slow and prolonged court liquidation process in which the lender must participate.

Lenders may also be subject to non-assignability of the asset/concession or licence given that the company is now insolvent and may have defaulted in making payments due under its licensure or concession.

All companies can take advantage of Sierra Leonean winding-up insolvency proceedings. Even government-owned companies that have a separate legal personality are entitled to the protection of bankruptcy proceedings. If the project finance transaction is with the government of Sierra Leone itself, or a ministry, agency or department of the government with no separate juridical identity, then it may not take advantage of the Companies Act legislation dealing with liquidation of companies, and other procedures such as an ICSID judicial intervention may be required.

The payment of insurance premiums on insurance policies are subject to goods and services tax (GST) of 15%.

Once properly procured, insurance policies can be paid to any recipient, be it a foreign or local creditor. Where the policy amount is sizeable and payable in dollars or other foreign currency, it is customary for the policy to be reinsured with a large foreign insurance company or reinsurer.

Withholding tax may be due on interest payments (not the principal) and other payments such as dividends are subject to GST, which applies as a withholding tax. However, a lender that is exempt from local taxes, such as the International Finance Corporation (IFC), the African Development Bank (ADB) and similar institutions that have a treaty with the government exempting them from all national taxes, are not subject to this withholding tax.

There are registration fees due and payable on loans and the Corporate Affairs Commission also charges fees in the form of a percentage of the value of the loan due and payable on debentures and charges on assets. This is usually 0.2% of the loan amount before the charge can be registered.

There are no usury laws in Sierra Leone regulating the interest rate that can be charged on loans. It is simply a matter between lender and borrower as to the term of repayment and the interest rate chargeable. Indeed, local commercial banks charge interest on loans of between 21 and 30% and around 35% penalty interest on defaulting loans. However, when a bank or creditor is trying to enforce and secure judgment on a bad debt, it is within the discretion of the court to discount the level of percentage of interest recoverable if it is of the opinion that the interest rate charged by the creditor is excessive or the interest component of the total debt is disproportionate to the principal amount loaned.

Project agreements are usually governed by the law chosen by the parties or the law of the locus where the project will be performed. In this case, with projects taking place in Sierra Leone where construction is envisaged locally, the project agreement will usually be governed by Sierra Leonean law. Sometimes, the project agreement provides the applicability of more than one legal regime, for example Sierra Leone and England, with the option given to either party to choose the forum in which they want to resolve their dispute. Project agreement can also be governed by foreign law, usually English law, as agreed by and between the parties.

The financing agreements are usually governed by the law the lender is most comfortable with. It is thus quite customary for the finance agreement to be governed by the laws of a foreign jurisdiction, particularly where the lender is domiciled abroad. Indeed, the financing agreement is usually drafted and provided by the lender, and it will generally dictate the choice of law applicable to the financing transaction.

Construction agreements, engineering agreements, employment agreements and most secondary agreements related to the implementation of the project will be governed by local law, to wit, the laws of Sierra Leone. Thus, national employees, contractors, local subcontractors, etc, usually have their underlying transactions governed by domestic law, namely Sierra Leonean law.

Garber & Co

49 Upper Waterloo Street
Sierra Leone

+232 76 671588
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Law and Practice


Garber & Co was founded in 2003 by Maurice R O Garber. The firm comprises three partners and several associates. Garber & Co’s partners are admitted to practice in the UK, the USA and the Caribbean and are licensed Solicitors of the Law Society of England & Wales. Providing ethical, competent, timely, reliable and seasoned legal advice to all our clients, the firm routinely handles project finance transactions and due diligence exercises on behalf of its international clients such as the Ecowas Bank for Industrial Development, Afreximbank, the IFC, the Islamic Development Bank, the Africa Finance Corporation and numerous others. Garber & Co frequently acts in collaboration with international counsel on complicated investment and financing transactions. The firm has a robust litigation arm, representing clients such as Crown Agent, the US government, banking, shipping and insurance companies, and has a proven track record in handling large project finance and infrastructure transactions.

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