SENEGAL
GENI & KEBE
Boubacar Diakité
Partner [email protected]
Cécilia G Ahouadi Associate [email protected]
Ruth L Balounga Associate [email protected]
A. General
1. What is the main legal framework applicable to companies in your jurisdiction?
In Senegal, companies are mainly governed by the following legal texts:
- The Organization for the Harmonization of Business Law in Africa (“OHADA”) Company Act (“The Company Act”),
- The OHADA Uniform Act on General Commercial Law,
- The OHADA Insolvency Act,
- The Penal Code of Senegal,
- The Tax Code,
- The annual Finance Act.
In addition, depending on the sector of activity of the company, other specific laws and regulations may apply, including sector-specific legislation, regulatory frameworks, and licensing requirements applicable to regulated industries (such as banking and finance, telecommunications, energy, mining and pharmaceuticals).
2. What are the most common types of corporate entities (e.g., joint stock companies, limited liability companies, etc.) used in your jurisdiction? What are the main
differences between them (including but not limited to with regard to the shareholders’ liability)?
The common types of corporate entities used in Senegal are Joint stock companies (“JSC”) and Limited liability companies (“LLC”).
The main differences between them are as follows:
Global Mergers & Acquisitions Guide 2024
Joint stock companies Limited Liability Companies
Minimum Share capital - 10,000,000 XOF if the
Company does not launch public offering.
- 100,000,000 XOF if the
Company launches public offering The law does not provide for a minimum share capital
But the usual LLC share capital is 1,000,000 XOF
Shareholders’ liability Liable for the debts of the company only up to the number of their contributions and whose rights are represented by shares. Liable for the debts of the company only up to the number of their contributions and whose rights are represented by shares.
Minimum share paid capital XOF 10,000,000 circa Euro 15,244. At least ¼ of the capital must be released at the time of the incorporation.
XOF 100,000 circa Euro 152
Management Board of Directors, General Director General Manager
Auditors Mandatory Not mandatory
* The appointment of at least one auditor is required if the company meets at least two of the following conditions: if the total balance sheet
exceeds XOF 125,000,000, if the annual turnover exceeds XOF 250,000,000.
B. Foreign Investment
3. Are there any restrictions on foreign investors incorporating or acquiring the shares of a company in your jurisdiction?
Generally, incorporating or acquiring the shares of a local company by foreigners is free of restrictions.
However, in some specific sectors such as oil & gas and mining, the law requires a minimum of local ownership.
4. Are there any foreign exchange restrictions or conditions applicable to companies such as restrictions to foreign currency shareholder loans?
There are no specific restrictions for currency issues, especially for currency issues regarding shareholder loans.
As for foreign exchanges in general, the Change legislation provides that foreign exchange transactions, capital flows (issuance of transfers and/or receipt
of funds), and settlements of any kind
between a West African Economic and Monetary Union (“WAEMU”) Member State and a foreign country or between a resident (individuals who have their main center of interest in a WAEMU Member State, public servants assigned abroad, and foreign
legal entities established in a WAEMU member state) and a non-resident may only be carried out through the Central Bank of West African States, national post office, authorized intermediary (any credit institution (including banks) established on
the territory of a WAEMU Member State and having received the status of an authorized intermediary, by approval of the Minister in charge of Finance) or an authorized manual exchange agent (Article 4 of Rule No. 06/2024/CM/UEMOA relating to the external financial relations of the member states of the WAEMU).
However, such legislation also provides that the transfer of the portion of the investment not financed by a foreign loan is carried out by the approved intermediary, under its responsibility, upon presentation of supporting documents, the nature and list of which are specified by the Central Bank.
The liquidation of investments referred to in the first paragraph, made by a resident outside the WAEMU, must be declared, for information and statistical purposes, to the Ministry of Finance and the Central Bank, within a period set by the Central Bank.
The reinvestment abroad of the proceeds from the liquidation of the investments referred to in the first paragraph is subject to the prior authorization of the Minister of Finance. If reinvestment outside the WAEMU has not been authorized, the proceeds of the liquidation must be repatriated in full to the Union, through an approved intermediary, within a period set by the Central Bank.
(Article 12 of Rule No. 06/2024/CM/UEMOA relating to the external financial relations of the member states of the WAEMU).
5. Are there any specific considerations for employment of foreign employees in companies incorporated in your jurisdiction?
It is required for the expatriate worker to hold a work permit. However, nationals of ECOWAS member countries are exempt from this procedure.
The expatriate contract must necessarily be a fixed-term contract and must be submitted to the Director General of Labor and Social Security for approval prior to its execution.
C. Corporate Governance
6. What are the standard management structures (e.g., general assembly, board of directors, etc.) in a corporate entity governed in your jurisdiction and the key liability issues relating
to these (e.g., liability of the board members and managers)?
There is no standard management structure under our jurisdiction, the Corporate Governance depends on the type of corporate entities.
The types of management of a JSC are:
- Board of Directors with a Chairman and a General Manager
- Board of Directors with a CEO and a Deputy General Manager
- General Administrator with or without a deputy
LLCs are managed by one or more Managers.
MANAGEMENT SHAREHOLDERS
Joint stock companies CIVIL LIABILITIES
Any damage suffered by a third party as a result of the cancellation of the constitutive General Assembly.
- Any damage caused either by the failure to mention a mandatory provision in the articles or by the omission or irregular performance of a formality prescribed for the incorporation of the company.
PENAL LIABILITIES
Issuance of shares before registration or at any time when registration is obtained by fraud, or the company is irregularly incorporated.
Distribution of fictitious dividends.
Publication or presentation of financial statements that do not give a true and fair view of the transactions, financial position, and assets and liabilities.
Abuse of Company assets.
Failure to file financial statements with Trade Register within one month of approval. Obstruction of participation in an assembly.
Offence of issuing shares or cutting off shares.
Failure to draw up the minutes of general meetings in the form required by the Uniform Act.
- Failure to appoint auditors or to convene them to the AGMs. Obstruction to the exercise of the functions of the auditors.
Issue of securities without prior publicity.
Submission to the notary or the depositary of a list of shareholders or subscription and payment forms mentioning fictitious subscriptions or payments of funds which have not been definitively placed at the disposal of the company.
Failure to convene the meeting within 4 months or to file and publish the dissolution of the company, when the equity falls below half of the capital. CIVIL LIABILITIES
- Any damage caused either by the failure to mention a mandatory provision in the articles or by the omission or irregular performance
of a formality prescribed for the incorporation of the company.
PENAL LIABILITIES
- Obstruction of participation in an assembly
MANAGEMENT SHAREHOLDERS
CIVIL LIABILITIES
- Any infringements of the legislative or regulatory provisions applicable to limited liability companies, breaches of the articles of association or misconduct in their management.
PENAL LIABILITIES
- Distribution of fictitious dividends.
- Publication or presentation of financial statements that do not give a true and fair view of the transactions, financial position, and assets and liabilities.
- Failure to file financial statements with Trade Register within one month of approval.
- Obstruction of participation in an assembly.
- Failure to draw up the minutes of general meetings in the form required by the Uniform Act.
- Failure to convene the meeting within 4 months or to file and publish the dissolution of the company when the equity falls below half of the capital. CIVIL LIABILITIES
Limited Liability Companies Any damage caused either by the failure to mention a mandatory provision in the articles or by the omission or irregular performance of a formality prescribed for the
incorporation of the company. PENAL LIABILITIES
- Obstruction of participation in an assembly
7. What are the audit requirements in corporate entities?
Public Limited Companies that do not make public offerings are required to appoint
at least 2 auditors (one auditor and an alternate auditor).
For those making public offerings, they should appoint at least 4 auditors (2 auditors and 2 alternate auditors).
When auditors are appointed in the Articles of Association or by the constitutive general meeting the duration of their mandate shall be two (2) financial years.
When auditors are appointed by the ordinary general meeting, the duration is six (6) financial years.
For LLCs, only those that meet 2 of the 3 following conditions are required to
appoint an auditor at the end of their fiscal year:
- Balance sheet total of more than 125 million CFA Franq;
- Annual turnover of more than 250 million CFA Franq;
- Permanent workforce of more than 50 people.
Auditors may be appointed and or replaced during a general assembly, with the votes of shareholders holding shares corresponding to more than half of the share capital.
D. Shareholder Rights
8. What are the privileges that can be granted to shareholders? In particular, is it possible to grant
voting privileges to shareholders for appointment of board members?
The Company Act provides for the creation of preferential shares, with special rights
of any kind, on a temporary or permanent basis. Such preferential shares do not grant
voting privileges for the appointment of board members, especially by they can inter alia grant double voting rights, in accordance with Article 778-1 of the Company Act.
9. Are there any specific statutory rights available to minority shareholders available in your jurisdiction?
The Company grant to minority shareholders the following rights:
- The right of information: They must be informed about the life course of the company and be provided with corporate documents such as minutes, regulated agreements concluded by the company, financial statements, and any other document provided for by the articles of association;
- The right to vote: They must participate in General Meetings and vote;
- The right to alert: As per Article 157 of the Company Act, they are allowed to trigger an alert procedure by asking written questions to the company’s directors about any fact that could jeopardize the company’s continuity.
The violation of these minority shareholders’ rights can give rise to a litigation action for abuse of the majority.
10. Is it possible to impose restrictions on share transfers under the corporate documents (e.g., articles of association or its equivalent in your jurisdiction) of a company incorporated in your jurisdiction?
Yes, Article 319 of the Company Act provides that the Article of Association may freely organize the terms of shares and
the transfer conditions either between the shareholders or to the third parties.
Also, pursuant to Article 2-1 of the Company Act, the shareholders of a
Company may enter into agreements aside from the Article of Association i.e.,
shareholders agreement, to organize access to the share capital.
11. Are there any specific concerns or other considerations regarding the composition, technical bankruptcy, and other insolvency cases in your jurisdiction?
Under OHADA law, pursuant to Article 57 of the OHADA Insolvency Act, when a company in bankruptcy is subject to a
winding-up or liquidation of assets, it may only transfer its shares, equity securities, or securities giving access to the capital with the authorization of the bankruptcy judge and under the conditions fixed by
the bankruptcy judge. Any transfer made in violation of such provisions incurs nullity.
E. Acquisition
12. Which methods are commonly used to acquire a company, e.g., share transfer, asset transfer, etc.?
The common methods to acquire a company in Senegal are share transfer and mergers.
13. What are the advantages and disadvantages of a share purchase as opposed to other methods?
Compared to other acquisition methods, such as asset purchase and merger, share purchase is a straightforward process that involves the transfer of ownership from one shareholder to another, thus a less- time consuming and cost-effective way of acquiring, limiting the buyer’s involvement in the company’s liabilities.
However, in contrast to mergers or sales of assets which take place after the decision of the control bodies of the target companies, the transfer of shares only comes from the will of the owner whose right to transfer the shares can be restricted by the restrictions
provided by the articles of association or the shareholders’ agreements i.e., approval or pre-emption clauses.
14. What are the approvals and consents typically required (e.g., corporate, regulatory, sector- based and third-party approvals) for private acquisitions in your jurisdiction?
Corporate perspective
- Capital companies: The shares are in principle freely transferable. However, the articles of association or other corporate documents of the company may provide for limitations, under Articles 318 and 764 of the Company Act.
- Partnerships: Transfer requires the unanimous consent of the shareholders in accordance with Articles 274 and 296 of the Company Act.
Regulatory or sector-based approvals: In principle, share transfer does not require approvals. However, certain sector rules such as insurance and mining provide for authorization by the relevant ministries.
15. What are the regulatory competition law requirements applicable to private acquisitions in your jurisdiction?
As per Article 4.1 of Rule No. 2/2002/ CM/WAEMU relating to anti-competitive practices within the WAEMU, in the WAEMU zone, mergers that create or strengthen
a dominant position, held by one or more firms, as a result of which effective
competition is significantly impeded within the Common Market, are prohibited.
This includes, in particular
- The merger between two or more previously independent undertakings;
- Any operation by which, one or more persons (legal entities or individuals), who already control one or more companies, acquire direct or indirect control of all or part of, whether by way of equity participation or purchase of assets, contract or otherwise, as per Article 4.3 of Rule No. 2/2002/CM/ WAEMU relating to anti-competitive practices within the WAEMU.
16. Are there any specific rules applicable for acquisition of public companies in your jurisdiction?
Under Senegalese law, there are two types of public companies, which are national companies and companies with a public majority shareholding.
National companies are private capital companies where the capital is fully subscribed by the State or other public law entities. Pursuant to Article 9 of Act No. 2022-08 of April 19, 2022, relating to the para-public sector, the management of the State’s portfolio and the control of legal entities governed by private law and supported by the public authorities, the private sector does not have access to the ownership of these companies.
As for the acquisition of Companies with a public majority shareholding, the law provides especially that they must have more than 50% of direct or indirect participation of the State or other public entities. The minimum participation of
private persons is not explicitly provided but we can assume that the private shareholding cannot exceed 49%, in accordance with Article 10 of Act No.2022-08 of April 19, 2022, relating to the para-public sector, the management of the State’s portfolio and the control of legal entities governed by private law and supported by the public authorities.
There are no specific rules relating to the process of acquisition of Companies with a public majority shareholding thus it is governed by the provisions of the Company Act as common private companies.
However, each public company is created by a law which may provide for specific rules regarding the ownership of the company to be incorporated.
17. Is there a requirement to disclose a deal, for instance to regulatory authorities? Is it possible to keep a deal confidential?
In general, it is possible to keep a transaction confidential. However, in sectors where the law requires a declaration or authorization of acquisition operations, it will be required to disclose the deal.
Also, pursuant to Article 57 of the Finance Act of July 05, 2021 / Article 633.1 of the Tax Code, it is mandatory for all the companies in our jurisdiction to file an Ultimate Beneficial Owner (UBO) Register. Such register must be updated in case of a share transfer. Such requirement may limit the confidentiality of a deal.
18. Can sellers be restricted from shopping around during a negotiation process? Is it possible to include break fee or other penalty clauses in acquisition documents to procure deal exclusivity?
Nothing prevents parties to agree on such restrictions or break fees. They can freely enter into an agreement that procures the exclusivity of the deal to one or another and provides for penalties in case of a breach.
19. What are the conditions precedent in a typical acquisition document? Is it common to have conditions to closing such as no material adverse change?
In general, the condition precedent is the satisfaction of the Due Diligence made on the target company.
20. What are the typical warranties and limitations in acquisition documents? Is it common to obtain warranty insurance?
General protection mechanisms in acquisition documents are:
- Indemnity clauses in the event of default after closing;
- Insurance to cover risks;
- The buyer depositing the purchase price in an escrow account for a certain time to ensure a proper closing;
- Termination clause in the acquisition document, in the event of default after the closing.
However, the parties may freely agree on other warranties as the above list is not exhaustive.
21. Is there a requirement to set a minimum pricing for shares of a target company in an acquisition?
The Company Act provides for minimum pricing for shares in certain companies such as LLCs.
22. What types of acquisition financing are available for potential buyers in your jurisdiction? Can a company provide financial assistance to a potential buyer of shares in the target company?
Potential buyers looking to acquire a company can typically obtain acquisition financing through a combination of debt and equity financing.
23. What are the formalities and procedures for share transfers and how is a share transfer perfected?
The transfer of shares must be recorded in writing.
It is effective with regard to the company when one of the following formalities are completed
- Notice of the transfer to the company by a bailiff or by any means allowing the recipient to acknowledge receipt;
- Approval of the transfer by the company in a notarized document;
- Filling of an original copy of the transfer deed at the registered office in return for a certificate of such deposit issued by the manager.
As per Articles 275, 297, 317, 763-1 of the Company Act, a share transfer is effective with regard to third parties when one of the above formalities is completed and the Articles of Association have been amended and published in the Trade Register.
24. Are there any incentives (such as tax exemptions) available for
acquisitions in your jurisdiction?
Capital gains (except those realized on goods) resulting from the allocation of shares or shares following the merger of JSCs and LLCs are exempt from corporate income tax, in accordance with Article 20 of the Tax Code.
F. Enforceability
25. Can acquisition documents be executed in a foreign language?
Acquisition documents cannot be executed in a foreign language. In practice, drafts
in foreign languages are translated by a certified translator for their execution.
26. Can acquisition documents be governed by a foreign law?
In principle, acquisition documents that are to be executed and registered in Senegal are governed by OHADA Law and the local tax legislation.
27. Are arbitration clauses legally permissible or generally included in acquisition documents?
Yes, arbitration clauses are permissible and often included in acquisition documents.
28. Are there any specific formalities for the execution of acquisition documents? Is it possible to remotely/digitally sign documents?
Here are the key formalities that must be done for the execution of the acquisition:
- Registration of the share transfer agreement to the Tax Authorities;
- Notification of the transfer of shares to the target company;
- Mention the share transfer in the company’s register of registered shares if any.
Yes, it is possible to digitally sign documents under our legislation.
G. Trends and Projections
29. What are the main current trends in M&A in your jurisdiction?
Based on our experience as well as insight into our clients’ current deals, mergers tend to slow. As for straightforward acquisitions, they are more commonly performed in the mining and energy sectors.
30. Are any significant development or change expected in the near future in relation to M&A in your jurisdiction?
We are not aware of any such intentions.