A closer look at branch companies in OHADA
The OHADA Uniform Act relating to Commercial Companies and Economic Interest Groups was revised in 2014. Key changes included the introduction of a Société par Actions Simplifiés, a flexible corporate structure which has no minimum capital requirement, and the revision of article 120, which requires a branch registered by a foreign company to be converted into a local subsidiary within two to four years of its registration.
However, the revision of article 120 has resulted in much uncertainty.
Before the Act was revised, article 120 provided that a branch registered by a foreign company had to be converted into a subsidiary within two years (from its registration date). However, an unlimited waiver could be granted by order (arrêté) of the OHADA member State in which the branch was located. The revised Act has now limited this waiver period to a non-renewable maximum of two years.
However, the revised Act also provides for an exemption to the non-renewable two-year waiver, for companies that are subject to a “specific regime”. The scope of this exemption and how it applies is unclear; for instance in Gabon, the domestic legislation provides that the branch of a foreign oil and gas company does not have to be converted to a Gabonese company during the exploration period, which can last up to seven years.
Further uncertainty surrounds the criminal and civil sanctions applicable in the event of breach of the provisions of article 120, as well as the lack of an interim regime for branches registered by foreign companies prior to the revised Act’s entry into force.
For a full discussion of the issues with the revised article 120, please read our new article here.