The regulations in force establish several forms of company under which local and foreign investors can carry out their economic activities. Each form has its own characteristics, advantages and disadvantages, which inform the investor's choice according to the nature of the project they intend to carry out. The forms include:

• public limited companies;
• simplified joint stock companies;
• limited liability companies;
• general partnerships;
• limited partnerships; and
• co-operative societies.

Entities that do not wish to set up a local subsidiary directly may open simple branches or representative or liaison offices.

The following corporate forms are most commonly used, mainly because they protect the assets of foreign investors:

• simplified joint stock companies offer investors great flexibility in organising the running of their company and fluidity in management;
• public limited companies have good credibility with third parties and make it possible to obtain substantial financing – in some business sectors, such as banking and insurance, this corporate form is compulsory for investors; and
• limited liability companies offer an advantage in terms of the time it takes to set up a business, particularly because they do not require notarisation formalities when they are set up by a single partner or when the envisaged share capital is less than XAF1 million – its management procedures are also simplified.

In return for their shareholders' contributions, incorporated companies issue shares that confer the following rights on their holders:

• the right to vote on collective decisions;
• a right to the distributable profits made by the company at the end of the financial year;
• a right to the company's net assets when they are distributed in the event of the company's dissolution; and
• a right to inspect and be informed about the management of the company, whose manner of exercise may vary depending on the type of company concerned.

However, in a public limited company and a simplified joint stock company it is possible to issue preference shares with or without voting rights, which confer on their holders advantages of all kinds determined in the articles of association. In this case, a distinction is made between ordinary shares and preference shares.

The rights attached to shares, whatever their nature, are already provided for in the legal instruments, in this case the OHADA Uniform Act on Commercial Companies and Economic Interest Groupings (AUSCGIE). However, the articles of association and extra-statutory agreements may supplement the applicable legal instruments without derogating from the provisions therein.

In principle, the shareholder’s rights set out in 1.3 Types or Classes of Shares and General Shareholders' Rights are intended to be fixed for each shareholder. However, in the case of public limited companies and simplified joint stock companies, the rights conferred by the shares may be freely adjusted in the articles of association when preference shares are issued. In this case, for example, it is possible to have shares without voting rights, shares with double voting rights, shares with priority dividends, shares with increased information rights, etc. In any event, the rights conferred by preference shares must be expressly defined in the articles of association.

However, the rights conferred by the issue of any preference shares must be arranged in compliance with the legal provisions and must not create a significant imbalance between shareholders within the company, in which case the clause in the articles of association could be construed as unlawful.

Share capital requirements vary depending on the type of company concerned.

• Public limited companies are required to be incorporated with a minimum capital of XAF10 million, with the requirement for each shareholder to pay up a minimum of 25% of their subscription in cash. Where such companies intend to make a public offering or to introduce their shares for trading on a stock exchange market, they must be incorporated with a minimum share capital of XAF100 million.
• Limited liability companies may be formed with a minimum share capital of XAF100,000, with the option for partners to pay up a minimum of half of their subscription in cash.
• The law does not set a minimum share capital requirement for other forms of company, in particular simplified joint stock companies, general partnerships, limited partnerships and co-operatives. It is therefore up to the founders to determine the amount they consider appropriate for starting up their business.

In addition to these capital requirements, it should be noted that certain sector-specific laws may require much higher share capital, depending on the nature of the business. For example:

• in the banking sector, a minimum of XAF10 billion is required for the capital of banking establishments; and
• in the insurance sector, public limited insurance companies are now required to be incorporated with a minimum share capital of XAF5 billion.

To ease and encourage the creation of new businesses, the legislature allows certain companies (in particular public limited companies, simplified joint stock companies and limited liability companies) to be created by a single shareholder, whether resident or non-resident.

This is not possible for companies in which shareholders are liable for social debts beyond their contributions. Thus:

• general partnerships are formed by a minimum of two partners; and
• limited partnerships are formed by two general partners and one limited partner.

The 2014 revision of the AUSCGIE expressly provided the possibility for shareholders to determine their relationship within the company by signing shareholders' agreements. These agreements have grown in importance, not least because they allow a wide variety of specific situations to be regulated and in some respects enable shareholders with the same interests within a company to join forces and be more influential.

Shareholders' agreements are widely used by private companies, particularly in public limited companies, simplified joint stock companies and limited liability companies, and they complement the statutory provisions as well as the provisions of the articles of association. However, shareholders' agreements cannot be contrary to the provisions of the AUSCGIE and the articles of association. Although in principle they may be signed at any time, it should be noted that, in most cases, they are signed in the event of a change in a company's shareholder structure, particularly by way of a transfer of shares, a merger, a demerger or a partial contribution of assets.

In principle, shareholders establish the shareholders' agreement as they deem fit and according to their interests. The provisions generally included relate to:

• relations between shareholders – shareholders generally insert information or consultation clauses;
• the composition of company bodies – shareholders generally insert clauses relating to the appointment, dismissal and, to a certain extent, powers of corporate officers;

• the conduct of the company's business – financial clauses are generally inserted, particularly with regard to the guarantee of dividends or the non-distribution of dividends;
• access to capital – approval, pre-emption, non-transferability or non-transferability clauses are generally inserted; and
• transfer of shares – compulsory buy-back or compulsory sale clauses and joint exit clauses are generally inserted.

As far as their execution is concerned, shareholders' agreements are enforced on the basis of contract law, which means that they are only enforceable against the signatory shareholders. As regards their visibility, shareholders' agreements are generally marked by the seal of confidentiality. As a result, and by virtue of the relative effect of contracts, they are not, in principle, enforceable against non-signatory shareholders or third parties.

Annual General Meeting

Commercial companies are statutorily obliged to organise an annual general meeting (AGM) once every year, within six months following the closing of their fiscal year (subject to an extension of this period by court order). AGM convening notices are communicated to the shareholders and auditors 15 days prior to the holding of the AGM.

Issues discussed at the AGM

At the end of the financial year, the AGM must decide on the following issues:

• approval of the statutory auditors' reports;
• approval of the management report of the company's chief executive officer;
• approval of the parent company financial statements and appropriation of net income;
• approval of any agreements entered into directly or indirectly between the company and one of its shareholders or one of its managers; and
• where applicable, the question of the termination or renewal of the term of office of the statutory auditors.

It is also possible for the AGM to consider other issues, such as the appointment or dismissal of members of the board of directors or any other ordinary matter that does not require amendment of the articles of association.

Other General Meetings Held By Commercial Companies

Ordinary and extraordinary general meetings

In addition to the AGM, companies may still hold ordinary or extraordinary general meetings if necessary. Extraordinary general meetings must be convened for any matter requiring amendments to the articles of association, in particular transfers of the registered office, mergers, demergers or transformations of the company.

Special meetings

In public limited companies and simplified joint stock companies, it is possible to have special meetings that bring together the holders of shares of a given category within the company. The special meeting approves or disapproves the decisions of the general meetings when these decisions modify the rights of its members.

Combined general meeting

Although this has not been codified by the OHADA legislature, in practice, commercial companies sometimes organise meetings to decide simultaneously on matters falling within the remit of an ordinary meeting and those falling within the remit of an extraordinary meeting. Such meetings are called combined general meetings.

Regardless of the type of meeting, the general rule is that shareholders must be invited to the meeting at least 15 days before the date of the general meeting. The notice must state the place, date and agenda of the meeting.

In principle, the law does not provide for any reduction of this notice period, except in the case of public limited companies where, if the quorum has not been reached after the first regular notice of meeting, shareholders can be notified at least six days before the date of the meeting. Because simplified joint stock companies are freely organised, it is also possible to provide for a shorter period for notice in their articles of association.

In practice, however, it is possible to convene shareholders within a shorter period than that required by the law insofar as the shareholders pass a resolution acknowledging and approving of the actual convening period during the meeting concerned.

Finally, depending on the type of company and the clauses of the articles of association, the notice of meeting may be sent by hand-delivered letter against a receipt or by registered letter with acknowledgement of receipt, by e-mail, by post or by inserting a notice of the meeting in a newspaper authorised to carry legal advertisements.

As soon as a decision is taken beyond the scope of the powers of the company's directors, managers or officers, a general meeting must be convened to take a decision regarding such digression.

Convening By the Management Bodies

In principle, shareholders are called to general meetings by the following management bodies:

• the managing partner in limited liability companies, general partnerships and limited partnerships;
• the chair in simplified joint stock companies; and
• the board of directors or the managing director, as the case may be, in a public limited company.

Shareholders Convening the Meeting

If meetings are not normally convened by the management bodies, shareholders always have the right to demand that a meeting be held by requiring the bodies to convene a general meeting or by applying to the competent court for the appointment of a third party to convene the meeting.

• In limited liability companies, one or more partners holding half of the shares, or one quarter of the shares if they represent at least one quarter of the partners, may require the manager to convene a general meeting. Similarly, any shareholder may apply to the courts for the appointment of a third party to convene a general meeting.
• In public limited companies, any shareholder representing one tenth of the capital has the right to apply to the court for the appointment of an agent to convene the general meeting.
• The articles of association of a simplified joint stock company may specify shareholders' rights to demand that a general meeting be convened.

Other Notices

In addition to the management bodies and the shareholders, the statutory auditor may convene a general meeting when they have requested the management bodies to convene such a meeting without success. This is particularly the case in limited liability companies and public limited companies.

All shareholders are entitled to receive notice of all general meetings held within the company. Shareholders of commercial companies have a permanent right to information on the company's business and affairs. The right to request information shall be exercised within the 15 days prior to the date of the general meeting.

At general meetings, the president of the board of directors or the managing director have to communicate the following to shareholders, within the legal timeframes:

• inventory;
• a summary of the financial statements for the financial year;
• a list of directors;
• a report of the statutory auditor and the board of directors or managing director;
• an explanation of reasons, proposed resolutions and information concerning candidates for the board of directors or the position of managing director; and
• the total amount of remuneration paid to the five or ten highest paid corporate officers and employees, as certified by the statutory auditors, depending on whether or not the company’s headcount exceeds 200 employees.

Shareholders’ meetings can be held virtually or through other means of telecommunication permitting the identification of attendees, insofar as the following conditions are met:

• the articles of association must allow for such remote/virtual meetings; and
• the remote or virtual means transmit at least the voice of the participants and satisfy technical characteristics that allow continuous and simultaneous retransmission of the meeting.

Quorum requirements differ depending on the type of commercial company.

General Partnerships and Limited Partnerships

In these companies, the articles of association lay down the quorum and majority rules. However, the AGM may validly be held only if a majority of partners representing half of the stated capital are present. Any decision taken in violation of this requirement shall be null.

Limited Companies

Decisions shall be adopted by one or more members representing more than half of the capital.

Public Limited Companies

The quorums depend on the nature of the meeting.

Ordinary general meetings

Ordinary general meetings are only valid when the shareholders present or represented hold at least one quarter of shares carrying voting rights. On the second notice of meeting, no quorum is required.

Extraordinary general meetings

For decisions to be valid, the shareholders present or represented should hold at least half of the shares on the first call, and one quarter of the shares on the second call.

When the quorum is not met, the meeting may be called a third time within a period not exceeding two months from the date fixed by the second notice of meeting. The quorum shall remain fixed at one quarter of the shares.

Special meetings

Deliberations of the special meeting are valid only when the shareholders present or represented hold at least half of the shares on the first call, and one quarter of the shares on the second call.

Simplified Joint Stock Companies

Quorum requirements are specified in the company’s articles of association.

The AUSCGIE does not expressly establish different types of resolutions. However, resolutions may vary depending on whether they are passed at an ordinary or extraordinary general meeting. A distinction is therefore made between ordinary and extraordinary resolutions.

Extraordinary resolutions passed at an extraordinary general meeting generally tend to require the amendment of the company's articles of association and generally require a larger majority to be passed. This is particularly the case in public limited companies, where a two thirds majority is required, and in limited liability companies, where a three quarters majority is required. Certain types of resolution sometimes require a unanimous vote, due to their importance; this is particularly the case when the registered office is transferred to another country, or when shareholders' liabilities are increased.

Ordinary resolutions, on the other hand, are passed at an ordinary general meeting and generally deal with matters that do not require an amendment of the articles of association, such as changes of directors or the authorisation of certain levels of company debt. They generally require a simple majority for adoption.

In principle, every matter that does not fall within the competence of the managers or directors (ie, does not concern the day-to-day management of the company) is submitted for shareholder approval. This refers to the following matters.

• Ordinary decisions:

1. the appointment or dismissal of directors and auditors;
2. approval of the summary financial statements;
3. the appropriation of profit at year-end;
4. approval of the statutory auditors' reports; and
5. any other matter(s) determined by the articles of association.

• Extraordinary decisions:

1. the issuance of shares;
2. amendment of the articles of association;
3. transfer of the registered office;
4. M&A transactions;
5. dissolution of the corporation, etc.        

Resolutions are voted on as provided by the company’s articles of association. However, a resolution must appear on the agenda in order to be validly voted on. Therefore, shareholders can adopt several modes, such as voting through proxy, voting through correspondence, voting by show of hands or through ballots and even electronically, provided that the articles of association allow for such modes.

However, shareholders must sign the minutes to confirm the results of the votes.

Shareholders have the right to demand that a specific matter be considered, or that a resolution be proposed, at a general meeting of shareholders. They can do this by requesting that a draft resolution be included on the agenda of the general meeting of shareholders.

In public limited companies, they may only do so under certain conditions and within a limited period of time. These shareholders must represent:

• 5% of the company's capital, where this is less than XAF1 billion;
• 3% of the company's capital, where this is between XAF1 billion and XAF2 billion; and
• 0.5% of the company's share capital if it exceeds XAF1 billion.

In this case, draft resolutions must be sent to the company's registered office by bearer letter with acknowledgement of receipt, by registered letter with acknowledgement of receipt, by telex or by fax at least ten days before the date of the general meeting in order to be submitted to the vote at the meeting.       

Shareholders may challenge resolutions passed at a general meeting if they are passed in breach of the procedural rules laid down by law or the articles of association for convening such general meetings. Similarly, any resolution adopted at a general meeting that is contrary to the law, the articles of association or the interests of the company may be challenged by a shareholder.

As far as procedure is concerned, disputes between shareholders fall within the jurisdiction of the competent court. A shareholder who intends to contest a decision taken at a general meeting may bring an action before the competent court.

Institutional shareholders or other groups of shareholders representing a high proportion of the company’s share capital can influence a company’s actions by exercising their voting rights during general meetings to adopt voting decisions that suit their ambitions. They may propose draft resolutions that aim to influence the company before the general meetings. They can also influence the company’s actions by entering into shareholders' agreements with objectives to influence a company’s actions. Institutional shareholders can initiate legal actions against the company or its directors in case of violation of the law, the articles of association or their rights as shareholders.

Institutional shareholders may monitor the company’s actions by exercising their information rights, through requesting copies of the articles of association, the minutes of general meetings, the annual reports, the financial statements, the auditor’s reports, etc. They can also request specific information from the management or the auditors before or during general meetings.       

When shares are held by a nominee, the company interacts in principle with the nominee, since the shares are registered in the nominee's name. As a result, the true shareholder cannot directly exercise their right to information or their right to vote.

However, when a shareholder holds their shares through a nominee, it is possible for them to contractually arrange the exercise of their right to information and their vote with the nominee. In this case, the shareholder and their nominee may agree that the shareholder will be consulted before voting on any decision within the company. They may also agree that the nominee holder must keep the shareholder informed of the company's affairs.

Apart from annual meetings of shareholders, collective decisions may be taken by written consultation, provided that the company's articles of association expressly permit this.

The articles of association set out the procedures for taking decisions by written consultation. However, when the shareholders decide to take a collective decision by written consultation, this must be stated in the minutes.       

Under OHADA company law, existing shareholders have pre-emption rights in the case of an issue of new shares. This means that they have the right to subscribe for new shares in proportion to their existing shareholding before the shares are offered to third parties.

In public limited companies and simplified joint stock companies, this right is automatically granted to shareholders. In this case, the subscription right must be exercised within a period of at least 20 days from the opening of the subscription period.

In other corporate forms, such as limited liability companies, it is possible to include this preferential right and its exercise procedures in the articles of association or in a shareholders' agreement.

The rules governing the transfer of shares vary according to the company concerned.

• In public limited companies and simplified joint stock company companies, the transfer of shares is generally unrestricted, although the AUSCGIE provides for the possibility of inserting approval clauses, pre-emption rights or non-transferability clauses in the articles of association.
• In limited liability companies, the articles of association are free to determine the terms and conditions for the transfer of shares. In the absence of clauses in the articles of association, transfers between partners are unrestricted, and transfers to third parties are only possible with the consent of 75% of the non-transferring partners. In either case, the transfer can only be enforced against the limited liability company if it is notified to the company by any means that leaves a written record, if the company has recorded the transfer in a notarial deed, or if the transfer deed is deposited with the company against delivery of a certificate. In any event, these conditions of enforceability are alternative.
• In general partnerships and limited partnerships, the transfer of shares can only be made with the consent of all the partners, subject to the provisions of the articles of association.

Shareholders have the right to pledge their shares with the company's consent. However, shares representing contributions in industry (ie, a person's technical or intellectual abilities) may not be pledged as security, as they are non-transferable.

Shareholders' Obligation to Disclose Their Interests

It should be noted that the regulations require the publication of a notice in a newspaper authorised to receive legal announcements in the event of changes occurring in the life of the company. This publication must be made when the company is incorporated and in the event of amendments to the company's articles of association, an increase or reduction in capital, or the transformation or liquidation of the company. It is therefore not excluded that shareholders' interests in a company may be disclosed at the time of this publication.

Shareholders may enter into agreements or transactions indirectly with the company. In such cases, the agreements in question are, in principle, regulated agreements that must be approved by the company. Shareholders are therefore required to declare their interests in such agreements to their company.

Similarly, certain declaration obligations are provided for by sector-specific laws. These include, but are not limited to, the following:

• in taxation, dividends paid to shareholders are taxed as income from movable capital and must be declared to the tax authorities;
• similarly, shareholders are required to declare their assets when they take office and at the end of their term of office, if they are called upon to hold high public or political office; and
• foreign exchange regulations also require foreign direct investment to be declared to the Central Bank and the Ministry of Finance if a foreign company acquires a stake in a local company.

Notification of Changes in Shareholder Structure

Some sector laws provide that changes in a company's shareholder structure must be notified to the regulatory authority responsible for the sector. In practice, this notification is made by the company itself. This is particularly the case in the following sectors, among others:

• in the trade sector, where changes in shareholding in companies with a foreign shareholder must be reported to the Ministry of Trade;
• in the water and energy sector, where the change must be notified to the Ministry of Water and Energy and the electricity regulatory agency;
• in the telecommunications sector, where the change must be notified to the Telecommunications Regulatory Agency;
• in the mining sector, where changes in the shareholding of the holder of a mining permit must be notified to the Ministry in charge of Mines; and
• in the banking sector, where changes in shareholding must be notified to the Banking Commission of Central African States.

Regardless of the type of company, he issuance of shares must comply with certain conditions set out in the AUSCGIE and/or the articles of association. Thus, whatever the case, the issuance of shares must be decided or authorised by a decision taken at an extraordinary general meeting of shareholders. In corporate forms such as a public limited company, a limited liability company or a simplified joint stock company, the AUSCGIE provides, for example, that new shares may only be issued if the share capital subscribed for in cash has been fully paid up, unless the issue concerns shares to be paid up in kind, by capitalisation of reserves or profits or by offsetting a debt owed to the company. In addition, the articles of association may also stipulate conditions for the issue of new shares, which must be met on pain of nullity. In such cases, the issue of shares made in breach of the conditions laid down by the AUSCGIE or by the articles of association may be cancelled, resulting in the cancellation of the shares after issue.

Shares may also be cancelled in the event of a reduction in share capital that is not justified by losses. In this case, the extraordinary general meeting that decides on the reduction in share capital may authorise the directors to buy back the shares with a view to cancelling them.

The possibility of a company buying back its own shares is expressly prohibited in limited liability companies, public limited companies and simplified joint stock companies. However, in certain cases, it is accepted that these companies may buy back their shares.

• First, as indicated in 4.1 Cancellation, in the event of a reduction in share capital not due to losses, the company may buy back its shares with a view to cancelling them.
• Similarly, in a public limited company and simplified joint stock company, the AUSCGIE provides that it is possible for the company to buy back its shares with a view to future allocation to employees or corporate officers. In any event, after the repurchase, the company may not hold more than 10% of the total of its own shares, and the shares subscribed for must be allotted within one year of their acquisition by the company.

The provisions of the AUSCGIE applicable to general partnerships and limited partnerships do not provide for a company to buy back its own shares.

The payment of dividends can be performed when the AGM notes the existence of distributable profits at the end of the financial year. The distributable profits shall be the income of the fiscal year, to which shall be added income brought forward minus past losses and appropriations for reserves in accordance with the provisions of the law or the articles of association.

In order to determine the profit, the general meeting must ensure that it has allocated the funds required by law or the articles of association, either to legal reserves or to retained earnings. Dividends distributed in breach of these requirements would be considered fictitious.

In all cases, shareholders determine how dividends are to be paid. However, when the distribution of dividends has been decided, the payment must take place within a maximum of nine months.

Rights to Appoint Directors

The general meeting of shareholders is competent to appoint directors. The first directors are appointed in the articles of association or by the founders in the minutes of the constituent general meeting, for a term that may not exceed two years. During the life of the company, directors are appointed by the ordinary general meeting of shareholders or co-opted by the board of directors for a term not exceeding six years. In the event of a merger, the extraordinary general meeting has the power to appoint new directors.

Rights to Remove Directors

The dismissal of directors must also be made through a decision taken by the shareholders' meeting. In this respect, the shareholders may decide to remove one or more directors from office at any time and without notice. However, dismissal without just cause may give rise to a claim for damages in the event of loss.

As owners of the company, the shareholders have a right of supervision over the proper conduct of the company's business and may, if necessary, refer to the board of directors any decisions that are contrary or prejudicial to the company's interests.

The general meeting is the highest authority in a company and, as such, can review decisions made by the directors that are prejudicial to the company's interests and overturn them or invite the directors to amend their decisions. In this case, the decision must be taken at a general meeting. In such a case, shareholders have every right to request that a general meeting be convened.

Rights to Appoint Auditors

First of all, it should be noted that shareholders are obliged to appoint an auditor in certain cases. This is particularly the case for public limited companies.

Similarly, in simplified joint stock companies, limited liability companies, general partnerships and limited partnerships, the appointment of a statutory auditor is compulsory when two of the following conditions are met:

• a balance sheet total in excess of XAF250 million in the case of general partnerships and limited partnerships, and in excess of XAF125 million in the case of limited liability partnerships and simplified joint stock companies;
• an annual turnover in excess of XAF500 million for general partnerships and limited partnerships, and in excess of XAF250 million for limited liability partnerships and simplified joint stock companies; and
• the company employs more than 50 people on a permanent basis.

In addition, simplified joint stock companies that control or are controlled by one or more companies are also required to appoint an auditor.

Apart from the cases set out above, the appointment of a statutory auditor is optional for shareholders. However, where the appointment is made optional, the law allows one or more shareholders representing one tenth of the share capital to apply to the competent court for the appointment of a statutory auditor.

Rights to Remove Auditors

The statutory auditors are appointed when the company is incorporated for a term of two financial years and during the life of the company for a term of six financial years. Because of the importance of the task of auditing and certifying the accounts, the statutory auditors may not, in principle, be relieved of their duties until their term of office has expired.

However, while shareholders have the right to demand the appointment of a statutory auditor, they may also demand that they be dismissed. Thus, where it is established that the statutory auditor has been at fault or is prevented from carrying out their duties, one or more shareholders representing one tenth of the share capital may apply to the courts for the statutory auditor to be removed from office.

The shareholders' right to information means that the directors or company officers are obliged to report to the shareholders on the management of the company at the end of the financial year. This obligation is expressly enshrined in law. Indeed, at the end of the financial year, the board of directors, the manager or the managing director, as the case may be, is obliged to draw up a management report describing the situation of the company during the past financial year, its foreseeable development, the major events that occurred during the financial year, the prospects for continuing the business and the cash flow situation. This report is presented to shareholders for approval at the AGM called to approve the summary financial statements.

The law does not expressly impose certain obligations on parent companies. However, like any shareholder, parent companies are bound by obligations of loyalty, good faith and co-operation towards other shareholders. This implies that the controlling company refrains from:

• using its dominant position to prevent other shareholders from enjoying their rights within the company; and
• using its dominant position to vote decisions in its personal interest to the detriment of the interests of the other shareholders or the company.

To this end, the controlling company is liable to the other shareholders for the decisions voted when they constitute an abuse of majority.

Under current regulations, the company's insolvency may lead to the opening of either receivership or liquidation proceedings. In either case, shareholders do not have much room for manoeuvre. Whatever the case, however, they always have the right to demand the opening of receivership or liquidation proceedings.

Receivership

When, for example, a company is placed in receivership, the management and administrative bodies are assisted by a liquidator appointed by the competent court. The only acts that the management bodies may still carry out are those relating to the day-to-day management of the company and conservatory acts to preserve the company's assets. In this case, the shareholders are relegated to the background and have no control over the proceedings. However, shareholders may contribute new financing or assets as part of the reorganisation of the company to ensure the continuation of the business. Shareholders who make these new contributions are given priority with regard to the new contributions made to the company.

Liquidation

Shares give shareholders a right to the company's net assets when they are distributed in the event of liquidation.

However, when liquidation proceedings are opened due to insolvency, the company's assets are sold in order to meet its liabilities. In this case, the company's creditors are paid in priority from the proceeds of the sale of the company's assets. As a result, shareholders will not be able to claim repayment of the principal on their shares, nor benefit from the sharing of the proceeds of the liquidation until all the company's declared creditors have been paid.

Once all creditors have been paid, shareholders are entitled to the repayment of the amount of their contributions as well as a right to share in the remaining proceeds of the sale of assets due under the “Boni de liquidation”.

It should be pointed out that it may be frowned upon in principle for a shareholder to bring an action directly against their company. However, the law does allow shareholders to bring an action for winding-up against the company for just cause, particularly in the event of a shareholder's failure to fulfil their obligations or in the event of disagreement between shareholders that prevents the normal operation of the company.

The law does not expressly provide for any other direct recourse against the company. However, in the event of a loss suffered, the shareholder always has the possibility to take recourse against the company's directors, as explained in 10.2 Remedies Against the Directors. They may also take action against resolutions passed by the general meeting, as explained in 2.11 Challenging a Resolution.

When corporate officers fail in their duties and take actions that do not reflect the interests of the company or the shareholders, the shareholders have recourse against them.

Removal From Office

The first recourse available to shareholders is to demand the dismissal of corporate officers. The principle enshrined in the AUSCGIE is that corporate officers may be dismissed at any time, without prior notice. However, if this decision is taken without just cause, the company director may claim damages before the courts.

Legal Action

In addition to the power of dismissal, shareholders may also decide to sue company officers for compensation for any loss they may have suffered as a result of a fault committed by a company officer in the performance of his or her duties. This action is generally known as an “individual action”.

This action is brought by any shareholder who personally suffers loss as a result of the company's actions, and consists of enforcing the civil liability of the company director. In the context of this action, the assessment of the corporate officer's fault falls within the jurisdiction of the competent court at the location of the company's registered office. In any event, a liability action brought against a corporate officer for misconduct committed in the exercise of their office is time-barred after three years.

In the same way, the criminal liability of the company director may also be brought into play. In this case, and depending on the facts of which the director is accused, the criminal liability action is time-barred after three years for contraventions and misdemeanours, and after ten years for felonies.

The possibility for shareholders to bring an action in the name and on behalf of the company depends on the person against whom the action is brought.

The regulations stipulate that when the actions of one or more company directors have caused damage to the company, one or more shareholders may bring an action in the name and on behalf of the company, seeking compensation for the damage suffered by the company if, after having served formal notice on the directors to bring this action, no action has been taken. This action is known as an “Action ut universi”. The procedures for exercising this action and the limitation periods are those provided for individual actions by shareholders against the company's directors.

Where the loss suffered by the company has been caused by a third party who is not a director of the company, the action may only be brought by the legal representative of the company, namely the chief executive officer, the managing director or the executive chair, as the case may be. Indeed, the possibility for shareholders to bring an action in the name and on behalf of the company is limited to actions against corporate officers: a shareholder is not entitled to bring an action against a third party outside the company for any loss it may have suffered.

As far as is known, there are currently no regulations specifically applicable to shareholder activism. As shareholders of a company, activist shareholders can use their rights to influence the governance of the company, in particular by submitting a proposal to the general meeting of shareholders or by choosing the managers of the company who will implement their demands.

However, there is a non-binding Code of Good Corporate Governance; similarly, certain sectoral laws may encourage shareholder activism.

Code of Good Corporate Governance

On 20 January 2023, the representative body of the private sector, the “Cameroon Inter-Employer Group” (GICAM), adopted a Code of Good Corporate Governance (the “Code”), which is a tool that could be construed to encourage the development of shareholder activism. The Code is inspired by the OECD's principles of good corporate governance and advocates the introduction within companies of non-financial performance indicators and strategies, with a particular focus on corporate social, societal and environmental responsibility. The Code sets out the principles of good governance, which are intended to guide those involved in the company's decision-making chain towards much more responsible governance. These include the principles of:

• sustainability;
• equity;
• integrity;
• accountability;
• collegiality;
• competence;
• inclusion;
• impartiality; and
• transparency.

The Code is not yet compulsory for GICAM member companies, but is a solid local tool for activist shareholders.

Provisions of Certain Sectoral Laws

The provisions of certain sectoral laws can encourage the development of shareholder activism, even if they do not deal specifically with shareholder activism. Such laws include the following, among others:

• Law No 2013-04 of 18 April establishing incentives for private investment, which allows incentives to be granted to companies making investments that help to achieve the objectives of combating pollution and protecting the environment;
• the General Tax Code, which exempts solar and wind energy materials and equipment from VAT;
• Law No 2016-17 of 14 December on the mining code, which makes it compulsory for mining investment projects to include considerations relating to the protection and sustainable management of the environment;
• Law No 98/12 of 5 August 1996 on the framework law for environmental management, which encourages responsible management by the administration;
• Law No 2012/006 of 19 April 2012 on the Gas Code, which requires investors to comply with environmental protection and safety standards, and the oil code; and
• Law No 2019/008 of 25 April 2019 on the Petroleum Code, which also imposes environmental protection requirements.

First of all, it should be pointed out that shareholder activism is still in its infancy in Cameroon and is not yet as developed as it is in other jurisdictions. However, the main aims stated by certain shareholder activists are fully in line with the 17 sustainable development objectives of the United Nations. The main aims are to:

• support sustainable and inclusive economic growth;
• promote gender equality;
• meet demand for essential goods and services;
• create decent jobs;
• develop African entrepreneurship;
• fight against climate change;
• promote sustainable growth; and
• strengthen the local economy.

To support these objectives, some shareholders focus their investments on small and medium-sized enterprises with projects that have a strong social impact. It is also conceivable that shareholder activism is animated by a desire to address governance practices or increase the value of the company.

To effectively influence the running of a company, activist shareholders generally make sure that they directly or indirectly hold control of the company through decision-making power, either by acquiring a majority stake or by means of an extra-statutory agreement.

Activist shareholders employ a variety of strategies to build their stake in a company, including:

• open market purchases – activist shareholders may simply buy shares of the target company on the open market;
• accumulation through derivatives – activist shareholders can also use derivatives, such as stock options and contracts for difference, to build their stake in a company; and
• block purchases – activist shareholders may also try to negotiate block purchases of shares from large institutional investors, such as pension funds and mutual funds. This can be a quick way to build a large stake, but it can be difficult to find sellers who are willing to sell large blocks of shares at a discount.

The agenda of activist shareholders varies depending on the specific company and situation. However, the most common goals of activist shareholders include:

• improving financial performance – activist shareholders may pressure management to improve the company's financial performance by cutting costs, selling assets or making changes to the company's business strategy;
• changing corporate governance – activist shareholders may also pressure management to make changes to the company's corporate governance practices, such as by adding new directors to the board or changing the way the board operates; and
• addressing ESG issues – activist shareholders may also pressure management to address ESG issues, such as climate change, diversity and inclusion, and executive compensation.

In some cases, activist shareholders may have a specific agenda in mind, such as selling the company or forcing a change in CEO. In other cases, activist shareholders may be more open to working with management to improve the company's performance.

The current trend seems to be for activist shareholders to focus on strategic sectors such as energy, mining and infrastructure projects.

We are also seeing the emergence of investment funds that are no longer interested in large companies only, but are also showing an interest in SMEs in sectors such as technology, agri-food and education. The strategy behind this is to finance high-impact small businesses in order to reduce inequalities and promote sustained economic growth. Some investors are even taking an interest in the informal sector and investing in it so that these businesses can be formalised and make a lasting contribution to economic growth.

It seems that the main groups of active shareholders are institutional investors, including foreign investment funds and companies owned by foreign investment funds. International financial institutions also appear to be very active in this area.

They often engage with the companies they invest in on various governance matters, such as board composition, executive compensation, shareholder rights, ESG issues and risk management.

No such information is yet available in Cameroon.

As a preventative measure, it is important for companies to keep abreast of developments in their sector. They should therefore monitor the activity of activist investors very closely, particularly in the sector in which they operate. This will help them prepare in case they are targeted by activist investors.

A company might consider the following strategies in responding to an activist shareholder.

• Engaging the activist early and often. This shows that the company is taking their concerns seriously and is willing to listen. It is important to be open and transparent, and to be willing to negotiate.
• Assessing the activist's demands. Are they reasonable and achievable? Are they in the best interests of all shareholders? The company should carefully consider the activist's demands before making a decision.
• Developing a response plan. This should include a timeline, a budget and a team of people who will be responsible for implementing the plan. The response plan should also include a communication strategy for keeping shareholders informed.
• Being prepared to walk away. If the activist's demands are unreasonable or unrealistic, the company should be prepared to walk away from the negotiation.

Practical steps to minimise the risk of shareholder activism include the following.

• Having a strong governance structure in place, including having an independent board of directors, clear corporate governance policies, and fair and transparent compensation practices.
• Communicating regularly with shareholders helps to build trust and rapport, and to ensure that shareholders are aware of the company's strategy and performance.
• Being proactive in addressing shareholder concerns – if the company is aware of any potential shareholder concerns, it should take steps to address them before they become a problem.