Public Offerings Under OHADA and other regional statutes

- By Philip Webster

Public offerings enable companies to raise money and finance their projects, notably by issuing shares or bonds which may be acquired by either local or foreign investors . OHADA (‘Organisation pour l’Harmonisation des Affaires en Afrique’), is an international organisation created by a Treaty signed in Port-Louis (Mauritius) on 17 October 1993 by fourteen African States.

OHADA endeavours to harmonise the legal environment, inter alia, by issuing ‘Uniform Acts’ on various aspects of the law.

Pursuant to Article 10 of the Treaty Uniform Acts are directly applicable and binding on the Member States, and supersede any conflicting provision of national law. However, Public Offerings in two of the OMVG Member States, Senegal and Guinea-Bissau are also regulated by the regional and integration organisation ‘UEMOA’ and three of the OMVG Member States, Senegal, Guinea and Guinea-Bissau are also Member States of ECOWAS . Since each of these organisations has its own rules, different sources of supra-national law need to be consulted in order to understand the legal regime applicable to companies which want to seek funding in the Member States. The legal concept of public offerings is referred to in the Uniform Act. Articles 81 to 96 contain general provisions, Articles 823 to 853 contain specific provisions applicable to companies having the status of a ‘Societé Anonyme’ (‘SAs’), and Article 905 contains criminal law provisions. In addition, UEMOA have put into place an institutional and legal framework to promote and organise public offerings.

In the context of UEMOA, the regional financial market is organised around three major institutional bodies: the Conseil Regional de l’Epargne Publique et des Marches Financiers (Regional Council for Public Savings and Financial Markets or CREPMF), which is a public body regulating and controlling public offerings; the Bourse regionale des Valeurs Mobilieres (Regional Stock Exchange or BRVM) replacing the pre-existing Abidjan Stock Exchange in Cote d’Ivoire; and the Depositaire Central/Banque de Reglement (Central Depository/Settlement Bank or DC/BR), the latter two bodies being SAs which have been granted a concession to operate a public service. Authorised societes de gestion et d’intermediation (management and intermediation companies or SGI) also exist in each UEMOA Member State.


Companies which make public offerings are defined as those which, in order t obtain funds, seek investment from the public. The establishment and operation of such companies is governed by specific rules aimed at protecting investors. The Uniform Act provides that there is presumed to be a public offering in any of the following three situations.
• The listing of securities on the official list of a stock exchange in a Member State, i.e either the BRVM, the BCVM (‘Bourse Comerounaise des Valeurs Mobilieres’) or the BVMAC (‘Bourse des Valeurs Mobilieres d’Afrique Centrale’);
• The public offering of securities through credit institutions or brokers, or through canvassing and advertising; or
• The placing of securities with over 100 persons.
In other words, it is possible for a company to be subject to the rules governing public offerings even if it is not listed on a stock exchange. In particular, issuers of securities must pay particular attention to the fact that a company will be deemed to make public offerings if it has a total of at least 100 shareholders and bondholders..


Only SAs are allowed to issue negotiable securities and offer them to the public. The Uniform Act specifies that SAs making public offerings must have a registered capital of not less than 100 million FCFA (currency of the CFA Franc Zone ) and must be administered by a board of directors.
A peculiarity of the Uniform Act lies in the fact that any company with its registered office in any of the Member States may issue securities in any other Member States, offering them to residents in those other countries. The regime applicable to international public offerings within the OHADA region therefore does not raise any particular problems when the issuing company has its registered office in a Member State. However, foreign companies making public offerings in OHADA countries need to comply with UEMO or CEMAC regulations, as the case may be. For instance, Article 174 of the UEMO Regulation provides that no person, State-owned or privately owned entity or mutual fund which is not resident in the UEMO region may be listed on the regional stock exchange. Furthermore, for unlisted securities, Article 176 of the same Regulation provides that any offering of such securities to the public by or on behalf of a non-resident company is subject to the prior approval of the Regional Council.


The Uniform Act provides that securities may be offered in the context either of a new issue or of a sale existing securities (‘titres’), without giving a definition of the word ‘titre’. Although in various other provisions rules are laid down for the issuance of both shares and bonds, and also shares in non-closed mutual funds, it should be borne in mind that the definitions of securities and instruments may differ depending on whether reference is made to the Uniform Act or to the UEMO or CEMAC regulations.

In addition, although the Uniform Act has not created a specific regime, it may be possible in practice to create hybrid securities combining both shares and bonds and/or representing a receivable against the company. Such securities may for example be bonds reimbursable in shares or convertible into shares, or shares or bonds giving a right to subscribe for shares. In the context of the development of the African financial markets and/or venture capital transactions, these instruments may be very useful. However, in the absence of any specific OHADA regulations, it will be necessary to verify whether any national or other supranational regulations are applicable to such securities or may restrict the contractual freedom of shareholders and companies in this regard.


With a view to protecting investors the Uniform Act lays down certain procedures for public offerings and creates certain requirements as to information and publication of offers made to the public. The Uniform Act also requires increases in capital or the floating of new securities to be made according to specific terms.


Companies making public offerings must fulfil three main conditions, which are required as guarantees: (i) they must obtain a performance bond from one or more credit institutions in the country where the public offering is made, if the value of the public offering, regardless of its form, exceeds 50 million FCFA; (ii) they must use the services of any such credit institution to provide financial support and make a presentation of the public offering; and (iii) when the value of the public offering exceeds 50 million FCFA, they must appoint one or more auditors in the Member State or States where the offering is made, to verify the financial statements and sign a prospectus.


a. The Prospectus

A company making a public offering must prepare a prospectus to inform the public, if the total value of the public offering exceeds 50 million FCFA. It must be prepared and distributed in every country where the public offering is to be made. The prospectus includes in particular information regarding the structure of the issuer, its financial standing, its activities and prospects for development, as well as any information relating to the securities offered to the public. However, it is not necessary to prepare a prospectus in the following circumstances:
• The amount of the public offering does not exceed 50 million FCFA;
• The offering is made in consideration for contributions made on the occasion of a merger or a partial business transfer;
• It concerns shares in non-closed mutual funds;
• It is addressed to particular persons in the context of their professional activities;
• It relates to securities that are given free of charge in the event of payment of a dividend or incorporation of reserves in the share capital;
• The securities are offered as a result of the exercise of a right attached to securities which have already been the subject of a prospectus; or
• They are offered in replacement for shares in the same company and their issuance does not result in an increase of the share capital of the issuing company.
The prospectus must be signed by the statutory auditor and/or by auditors appointed in the Member States where the transaction is being made. It is then submitted for approval to the competent stock exchange supervisory body in the Member State in which the issuer is registered and in each of the Member States where securities are being offered to the public (i.e in the UEMO countries to the Regional Council). If there is no such body, the draft memorandum is submitted for approval to the Ministry of Finance f the State or States concerned. The supervisory body may require amendments or order further investigations from the auditors or the insertion of a warning in the document, and may require the company to provide an appropriate guarantee if the public offering is made in a State other than the State where the company has its registered office.
Approval must be granted or refused within one month of delivery of the prospectus to the supervisory body, unless further investigations are required, in which case the period may be increased to two months. Failure to respond is deemed to be an approval of the document. Reasons must be given for any refusal, the usual reasons being either insufficient information given to the supervisory body or circumstances that do not sufficiently protect investors.
Once the prospectus has been approved by the relevant authorities it must be published in a legal journal and a brochure must be made available to any interested person at the registered office or the issuing company.

b. The Notice and Circulars

A notice must be prepared when the public offering is to be made either to establish an SA, to increase the capital of a company which already makes public offerings or to make a bond issue. This notice is published in legal journals in the Member States concerned. Circulars must also be prepared, which are more generally aimed at informing the public of the envisaged public offering.
c. Publication Obligations during the life of the company
Any listed company and, in certain circumstances, its unlisted subsidiaries, must publish its accounting and financial statements in a legal journal.


a. Procedure

Any company which increases its capital by means of a public offering must prepare a prospectus and a notice with a specific content as well as circulars to inform the public of the transaction.
If the company which increases its capital by means of a public offering must prepare a prospectus and a notice with a specific content as well as circulars to inform the public of the transaction.
If the company was created without any public offering, and if the public offering is made less than two years after the creation of the company, i.e. within two years of signature of its articles of association, any particular benefits granted at the time the company was created must be valued by an in-kind contributions appraiser, who must also audit the assets and liabilities of the company.
The payment of the paid-up fraction of the face value of the shares and of the whole of any share premium must occur not later than 35 days following the deadline for subscriptions.

b. Pre-emptive subscription right

In principle, shareholders have a pre-emptive right to subscribe for any new issue of shares. However, the extraordinary general meeting of shareholders may decide to cancel this pre-emptive subscription right in favour of one or more identified or unidentified persons. In such an event, the meeting decides upon the price at which the new shares will be issued, after hearing reports from the board of directors and the statutory auditor.
Certain conditions are laid down for such increases in capital where shares are issued to the public without the existing shareholders exercising their pre-emptive subscription right, as follows:

(i) if the new shares are to carry the same rights as the existing shares, the company must issue them within three years of the decision by the general meeting to issue them. If the company’s shares are already listed, the issuing price must be calculated by reference to the average quoted price of the shares over 20 consecutive days chosen within the 40-day period preceding the issuance. If the shares are not listed, the issuing price must be equal to the equity that each share represents in the latest balance sheet, or must be determined by a court-appointed expert.

(ii) If the new shares do not carry the same rights as the existing shares, they must be issued within two years of the decision by the general meeting to issue them. The issuing price will be determined by the extraordinary general meeting on the basis of a report by the board of directors and a special report by the statutory auditor. If the issuance has not been completed as of the date of the annual general meeting following that extraordinary general meeting, a further extraordinary meeting must be held to decide whether to maintain or adjust the price.

c. Penalties

Any person having an interest may apply for the winding-up of a listed company if the legal requirements regarding its minimum capital have not been complied with.
In addition, the management of a company which makes a public offering without complying with the publication procedures and/or publishing the information required under the Uniform Act may be subject to criminal penalties. In this regard the individual Member States are free to determine the applicable penalties.


The most recently enacted Uniform Act is the Uniform Act on Accounting Law which was adopted in Yaoundé on 24 March 2000. It lays down a harmonised accounting system for companies located in the Member States, setting out comprehensive provisions for accounting organisation, the obligation to present annual accounts, rules for the evaluation and determination of net income, auditing, publication of accounting information, consolidated accounts and criminal penalties.

The Uniform Act entered into force on the following dates:
• 1 January 2001 for companies’ individual accounts, i.e. those which are not consolidated or combined with the accounts of any other company, with regard to transactions and corporate accounts for the financial year open as of the date; and
• 1 January 2002 for consolidated and combined accounts, with regard to transactions and corporate accounts for the financial year open as of that date.


The Uniform Act provides that the following types of companies must keep financial accounts: companies governed by commercial law; public, para-public and semi-public companies; cooperatives; and more generally any entity manufacturing or producing marketable or non-marketable goods and services, if that entity habitually exercises an economic activity (whether for financial gain or otherwise, and whether the activity concerned is its main activity or merely accessory to its main activity). An express exception excludes from this list companies that are subject to public accounting rules applicable in the Member State concerned.


The general accounting principles laid down by the Uniform Act will be familiar to those who have some knowledge of modern accounting systems. Their fundamental aim is to ensure the reliability, clarity and comparability of financial information both within the company itself as supplied to the public.

In order to achieve this aim, companies are required to prepare their accounts in accordance with the terminology and guiding principles set out by the Uniform Act. In particular, they must comply with the obligations of regularity, accuracy and transparency. Article 6 of the Uniform Act requires further that:

• The principle of conservatism is to be complied with at all times, meaning that a realistic assessment must be made of the events and transactions to be entered into the accounts for each financial year;
• The company should comply in good faith with all applicable rules and procedures;
• The persons in charge of the accounts should establish and implement internal audit procedures, in order to be properly informed as to the reality and importance of all events, transactions and situations pertaining to the company’s activity;
• The information should be presented and circulated in a clear form without any attempt to conceal the reality of the situation

Annual financial statements must be prepared for each financial year, which must coincide with the calendar year unless it is the first year of the company’s existence or the company is in liquidation. These statements comprise a balance sheet, a statement of profit and loss, a financial table showing the sources and uses of funds, and an annexure indicating any facts that are not apparent in the other financial documents and that may have a significant bearing on the assets, the financial situation or the financial results of the company. In particular, further information or justification must be provided in this annexure in cases where application of an OHADA accounting rule is not sufficient or is inappropriate to give a truthful image of the situation and transactions of the company.

The annual financial statements are considered as an unseverable whole. They must describe properly and truthfully the events, transactions and situations pertaining to the financial year in question, in such a way as to give an accurate image of the company’s assets, financial situation and results, based on an appropriate, honest, clear, accurate and comprehensive description of such events, transactions and situations.

In order to enable a proper comparison of financial statements for one year with those for another, the same terminology and methods for describing the events, transactions and situations should always be used.

Detailed provisions for complying with these general principles are set out in Chapters II-V of the Uniform Act.


Two new sets of obligations created by the Uniform Act are noteworthy. First, the Act provides for three different tiers of accounting obligations depending on the size of the company. Second, it provides for the preparation of consolidated or combined accounts in respect of groups of companies.

a. The three-tier system of accounting obligations

The ordinary system for presenting financial statements and keeping accounts applies to all companies, unless the small size of a company allows a simplified system to be applied. In this context, a company’s size is assessed by reference to its turnover during the financial year in question.

A company may thus use the simplified system instead of the ordinary system it is turnover during the financial year in question does not exceed 100 million FCFA.

Very small businesses may use a third system instead of either of the above two systems. This is known as the minimum cash-based system, and constitutes an exception to the general provisions laid down by the Uniform Act. For a company to be allowed to use this system, the year’s income must not exceed a threshold of between 10 million and 30 million FCFA, depending upon the type of activity of the company.

Financial statements are to be prepared in accordance with models set out in the appendix to the Uniform Act, except in the case of banks and other financial establishments and insurance companies, which are subject to specific accounting models. The information contained in these statements is divided into several categories, which are in turn further sub-divided.

The models have been prepared for each of the three systems outlined above as follows:

• The ordinary system includes a balance sheet, a statement of profit and loss, a financial table of resources and uses of funds, a statistical annexure, and an annexure providing information additional to that given in the other financial statements;
• The simplified system includes a balance sheet, a statement of profit and loss, and the annexure providing additional information. All of these documents are simplified in accordance with the provisions of the Uniform Act.
• The minimum cash-based system consists of a statement summarising the income and expenditure of the financial year and showing the net profit or loss of that financial year. The statement is prepared on the basis of the cash-based accounting that all companies applying this system are required to use.

b. Consolidated accounts and combined accounts

The Uniform Act provides for an obligation to prepare consolidated accounts when a company having its registered office or main activity in one of the Member States controls, either alone or with others, one or more other companies or when it exerts a significant influence over them. Detailed procedures are laid down for the preparation of consolidated accounts.

Two or more companies must prepare combined accounts (i.e. as though they were a single company) if, in one region of the OHADA area, they form an economic whole with a single strategic decision-making centre situated outside that region, and on condition that there is no legal domination of any of the companies by another. These accounts are to be prepared in accordance with the detailed rules applicable to consolidated accounts, except where otherwise specified.


Specific accounting requirements have also been laid down by other regional organisations. For example, UEMOA has established an accounting system referred to as SYSCOA. Given the existence of SYSCOA, and also the current trend towards adopting international accounting standards, the utility of the Uniform Act might be questioned. The answer may simply lie in the fact that the Treaty, which dates from 1993 and thus pre-dates SYSCOA, specifically mentions accounting law as one of the areas of law to be harmonised by OHADA. In ay event, in order to avoid any potential conflict, the UEMOA authorities and the Permanent Secretary of OHADA will need to ensure that there is full consultation and cooperation in this and other subjects that involve both organisations.

Finally, specific accounting obligations may be established in relation to certain sectors such as insurance (under the auspices of CIMA) and banking (under the auspices of UEMOA and CEMAC).