Regulation No. 04/08 on Corporate Governance in Credit Institutions of the Central African Economic and Monetary Community

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REGULATION NO. 04/08 CEMAC/UMAC/COBAC ON CORPORATE GOVERNANCE IN CREDIT INSTITUTIONS OF THE CENTRAL AFRICAN ECONOMIC AND MONETARY COMMUNITY

THE MINISTERS' COMMITTEE, Having regard to the Treaty establishing the Central African Economic and Monetary Community (CEMAC) and its Addendum on the institutional and legal system of the Community;

Having regard to the Convention governing the Central African Monetary Union (UMAC);

Having regard to the Convention of 16 October 1990 establishing the Central African Banking Commission (COBAC);

Having regard to the Convention of 17 January 1992 on the harmonization of banking regulations in the Central African States;

Having regard to COBAC Regulation R-93/09 on changes in the status of credit institutions;

Having regard to COBAC Regulation R-2001/07 on internal control in credit institutions;

Having regard to COBAC Regulation R-2005/01 on the due diligence of subject establishments regarding anti-money laundering and counter-terrorist financing;

Having regard to Regulation No. 01/00/CEMAC/UMAC/COBAC establishing the Single Approval of Credit Institutions in CEMAC;

Having regard to the OHADA Uniform Act of 17 April 1997 on commercial companies and economic interest groups (GIE);

Considering the requirement to implement guiding principles for management, development, and efficient operation of enterprises in the banking sector;

Considering the role of good corporate governance in achieving economic performance and preserving the confidence of shareholders and savers;

Considering the importance of developing a truly efficient regulatory framework in corporate governance and the need to define transparent chains of responsibility within subject establishments, so that Boards of Directors or equivalent bodies and General Management have precise knowledge of their functions and assume responsibility for their actions;

Considering the imperative for corporate bodies to account for their actions, notably through improved transparency and information as a means to avoid or reduce potential sources of conflicts of interest;

Considering that corporate governance principles are currently scattered across various texts, notably the OHADA Uniform Act on commercial companies and GIEs, the Convention on Harmonization of Banking Regulations in Central African States, and COBAC regulations on internal control;

Whereas it is necessary to consolidate these principles into a single text and enrich them in light of internationally recognized rules adaptable to the CEMAC context, thereby providing a unified corpus aligned with international standards;

Considering the objective of the Basel Committee on Banking Supervision document published in September 1999 and revised in February 2006, which aims to strengthen corporate governance in institutions subject to banking supervision;

Considering the role assigned to the supervisory authority to provide supervised establishments with a high-quality regulatory framework that supports competitiveness, encourages the adoption of best practices, and ensures compliance with professional ethical rules;

Considering that banking crises, particularly those in the 1980s within CEMAC, were mostly caused by a complete lack of application of good corporate governance practices;

After the advisory opinion of the Board of Directors of the Bank of Central African States (BEAC) issued during its session on October 3, 2008, in Yaoundé;

On the proposal of the Central African Banking Commission (COBAC), first convened on May 3, 2007, in Libreville, and subsequently consulted by correspondence regarding the General Secretariat's consideration of observations from the BEAC Board of Directors on July 3, 2008, in Brazzaville;

At its session on October 6, 2008;

ADOPTS

The Regulation whose text follows:

Chapter I - Object Article 1 - This Regulation aims to establish and consolidate best practices in corporate governance within credit institutions.

Chapter II - Definitions Article 2 - For the purposes of this text, the following expressions denote:

• Executive Director: a director of the subject institution concurrently holding functions within the executive body of said institution, one of its affiliated companies, or the group to which it belongs;
• Non-Executive Director: a director of the subject institution not holding functions within the executive body of said institution;
• Independent Director: a director of the subject institution who maintains no other relationship, of any nature, with said institution, its group, or its management that could compromise the exercise of independent judgment;
• General Meeting: the meeting and decision-making body of holders or owners of a fraction or the entirety of the capital, social endowment, or equivalent element of social assets;
• Board of Directors: the body responsible for monitoring, on behalf of capital providers, the situation and management of the institution;
• General Management or Executive Body: the group of persons responsible for the day-to-day management of the subject institution in accordance with Article 18 of the Annex to the Convention of 17 January 1992.

Chapter III - Scope Article 3 - The provisions of this Regulation apply to credit institutions as defined in Article 4 of the Annex to the Convention on Harmonization of Banking Regulations in Central African States, operating in any form within one or more territories of the CEMAC member states.

Chapter IV - General Provisions Article 4 - Credit institutions must be constituted in a form allowing for the existence of Boards of Directors or equivalent bodies. The directors, designated by the General Meeting according to common law rules, are collectively responsible before said meeting. They must possess sufficient banking knowledge and demonstrate experience in corporate administration.

Article 5 - The effectiveness of the Board of Directors is reflected by the regularity of its meetings, which must be held according to a pre-established schedule within statutory provisions.

Article 6 - When designating responsible executives, the Board of Directors ensures compliance with provisions set forth notably in Articles 21, 22, and 27 of the Convention of 17 January 1992 on harmonization of banking regulations in Central African States. The Board of Directors monitors and evaluates the performance of General Management as well as its adherence to defined strategic directions.

Article 7 - Each credit institution must establish a corporate governance charter that codifies, among other things, the distribution of functions between General Meetings, the Board of Directors, General Management, and the institution's oversight.

Chapter V - Balance and Independence of Corporate Bodies Section I - Guiding Principles for the Appointment of Board Members Article 8 - The Board of Directors is a collegiate body that collectively represents all shareholders and is obligated to act in the interest of the institution under all circumstances.

Article 9 - In its pursuit of independence, professionalism, and effectiveness, the Board of Directors must include independent directors.

Article 10 - Unless incurring personal liability, each director must consider themselves a representative of all shareholders and act accordingly in the exercise of their functions.

Article 11 - Every subject institution must implement a formalized, rigorous, and transparent procedure for the selection and appointment of directors.

Article 12 - The designation of directors is subject to prior notification to the Central African Banking Commission (COBAC), at least fifteen (15) days before the date of the first meeting at which they will participate.

Section II - Composition of the Board of Directors Article 13 - The composition and organization of the Board of Directors' proceedings must be appropriate to the shareholding structure, the size and nature of each institution's activity, and specific circumstances it faces.

Section III - Independence of the Board of Directors and its Members Article 14 - The Board of Directors and its Chairman must preserve their independence vis-à-vis General Management.

Article 15 - Each director must possess the minimum required competence to understand the functioning of the subject institution and demonstrate sufficient integrity in exercising their mission.

Article 16 - Each director must be mindful of the interests of all shareholders, sufficiently involved in defining strategy and deliberations to effectively participate in Board decisions.

Article 17 - Each credit institution must take all necessary measures to balance the composition of its Board of Directors and specialized committees, adopting provisions ensuring shareholders that missions are carried out with the necessary independence and objectivity.

Article 18 - The Board of Directors examines on a case-by-case basis, upon the proposal of the Nomination Committee, the status of each member regarding defined independence criteria and communicates its findings to shareholders in the annual report and at the General Meeting during director elections.

Article 19 - No person holding high political, elected, or equivalent offices that could compromise independent judgment or confer legal or factual jurisdictional immunity may serve as a member of the Board of Directors of a credit institution. In publicly participated credit institutions, persons holding administrative functions may be designated as directors representing the State.

Article 20 - To prevent conflicts of interest, an independent director must not:

• be an employee or corporate officer of the subject institution, an employee, director, General Manager, or Deputy General Manager of its parent company or a consolidated company, and must not have held one of these functions in the preceding five years;
• be a corporate officer of a company in which the subject institution holds, directly or indirectly, a directorship, or in which an employee designated as such or a current/past corporate officer of the institution holds a directorship;
• be a client, supplier, investment banker, or financing bank of the subject institution, or must not be directly or indirectly linked to any of these persons;
• have a family tie with a corporate officer of the credit institution;
• have been an auditor of the subject institution during the last five years.

Chapter VI - Separation of Chairman and General Manager Functions Article 21 - Internal rules in force in each credit institution must clearly and unambiguously define the division of responsibilities at the head of the institution, guaranteeing a balance of power and authority to avoid concentrating decision-making power in a single person.

Article 22 - The functions of Chairman of the Board of Directors and General Manager of a credit institution must not be exercised by the same person.

Article 23 - Internal rules define the distribution of functions between the Chairman and General Manager.

Article 24 - The Chairman of the Board of Directors is responsible for the functioning of the Board, ensuring its effectiveness in all aspects of its missions.

Article 25 - The General Manager is responsible for the day-to-day management of the credit institution and adequate information to the Board of Directors.

Chapter VII - Functions of Directors Article 26 - The Board of Directors defines the strategy of the credit institution, designates corporate officers responsible for managing the company within this strategy, chooses the organizational model, controls management, and ensures the quality of information provided to shareholders and markets through accounts or during major operations.

Article 27 - Each director exercises their functions with objectivity, independence, and competence in the interest of the credit institution.

Article 28 - Each director must sign a charter specifying the boundaries of their relationship with the credit institution, particularly regarding rights and obligations.

Article 29 - The term of office for directors is as provided by common law provisions governing commercial companies.

Article 30 - General Management must make available to directors in a timely manner sufficient and quality information in an appropriate form to enable them to properly perform their tasks.

Article 31 - Directors benefit, according to specific needs, from ongoing updates of the knowledge necessary to fulfill their role on the Board and its specialized committees.

Article 32 - The Board of Directors meets regularly, at least three times per year. The number of meetings of the Board and its specialized committees, as well as individual director participation, must be clearly stated by shareholders in the annual report.

Chapter VIII - Establishment of Specialized Committees Article 33 - Without prejudice to specific provisions contained in the COBAC regulation on internal control in credit institutions, each institution must establish specialized committees tasked with assisting the Board of Directors as needed on specific matters.

Article 34 - The delegation by the Board of Directors of certain powers to specialized committees and General Management must in no way limit or discharge the missions or responsibilities of the Board and its directors.

Article 35 - Every credit institution must establish a Remuneration Committee, an Audit Committee, and a Corporate Governance Committee. It must also have a committee that conducts the nomination process for directors and their re-election at the end of their term following performance evaluation.

Article 36 - Each specialized committee must be subject to a formal written delegation procedure with clear terms of reference and precise reporting obligations for its work.

Chapter IX - Remuneration of Directors and General Managers Article 37 - Remuneration levels must be sufficient to attract, retain, and motivate directors of the required quality for optimal performance, consistent with the scope of respective tasks and responsibilities.

Article 38 - No remuneration constituting consideration for effective work or a special mandate may be paid to a director in that capacity.

Article 39 - The remuneration of non-executive directors must reflect their effective time and responsibility involvement in Board proceedings.

Article 40 - The Remuneration Committee must make recommendations to the Board of Directors regarding General Management's remuneration.

Article 41 - The General Manager and Chairman of the Board must not participate in decisions regarding their remuneration.

Chapter X - Management of Conflicts of Interest Article 42 - The Board of Directors must pay particular attention to preventing potential conflicts of interest, ensuring information transparency, and fairly considering all interests at stake.

Article 43 - The Corporate Governance Committee is responsible for making proposals to the Board of Directors regarding conflict management through the establishment, monitoring, and evaluation of a code of ethics and business conduct.

Article 44 - A specific procedure must enable directors and General Managers to avoid conflicts of interest by informing the Chairman of the Board of any situation involving potential conflicts with the credit institution.

Article 45 - A formal prohibition must be imposed on directors and General Managers from trading the institution's securities during determined sensitive periods, particularly those preceding the announcement of financial results.

Chapter XI - Evaluation of Corporate Bodies Article 46 - The evaluation of the Board of Directors, its specialized committees, and its members must be carried out according to a procedure ratified by the Board.

Article 47 - The evaluation of General Management members of the credit institution must be conducted annually according to a procedure validated by the Board of Directors.

Article 48 - The Chairman of the Board must ensure that the Corporate Governance Committee systematically performs these performance evaluations. The Board makes decisions based on evaluation results and implements appropriate adjustments. The report provided for in Article 47 of COBAC Regulation R-2001/07 on internal control in credit institutions must report, under the same conditions, on the execution of obligations prescribed in this Regulation.

Chapter XII - Shareholders' Right to Information Article 49 - Each credit institution, through its Board of Directors, must establish a permanent and constructive dialogue with major shareholders based on their commitments and mutual understanding of objectives.

Article 50 - The Board of Directors must ensure compliance with all legal, regulatory, statutory, and professional provisions regarding shareholder information on its own activities as well as those of the institution.

Article 51 - The Board of Directors must effectively use annual General Meetings to communicate with shareholders.

Article 52 - With a view to convening and holding General Meetings, the Board of Directors must, in accordance with programming requirements, solicit in a timely manner and by announcement to shareholders who wish it, to communicate their proposals.

Article 53 - The Board of Directors must ensure that each resolution project submitted to the General Meeting is accompanied by detailed explanations.

Article 54 - The Board of Directors must facilitate shareholder participation in General Meetings by setting meeting dates and making documentation available to them at least 15 working days before the Meeting.

Article 55 - The Board of Directors must ensure that the functions of the Chairman, General Meeting, scrutineers, and meeting secretary for director and shareholder meetings are codified in writing, either in the statutes or in the corporate governance charter established under Article 7 of this Regulation.

Chapter XIII - Evaluation of Corporate Governance Article 56 - Each credit institution must evaluate the implemented corporate governance system according to a predefined periodicity.

Article 57 - The Board of Directors must ensure the publication of the corporate governance structure: Board organization, specialized committees, nomination procedure, evaluation, management team composition, contact mechanisms with shareholders, and directors' service contract signatures.

Article 58 - Shareholders must pay particular attention to the evaluation of the Board's structure and composition, the relevance and application of the corporate governance charter and code of ethics and business conduct, as well as the evaluation of the Board's performance, its members, and specialized committees.

Chapter XIV - Consideration of Employee Interests Article 59 - The Board of Directors and General Management must create favorable conditions for the professional and social development of personnel and institute adequate policies and measures aimed at preserving employee interests in the credit institution.

Article 60 - Each credit institution must implement codes of ethics and business conduct, as well as mechanisms enabling personnel to alert General Management and the Board of Directors about observed deviations.

Article 61 - General Management must establish frank, transparent, and regular communication with personnel regarding the institution's financial operations and performance.

Article 62 - The Board of Directors and General Management must implement remuneration, benefit coverage, and employee motivation policies and practices in accordance with labor legislation or any other agreement, notably the collective agreement governing the sector or business branch.

Chapter XV - Final Provisions Article 63 - The implementation modalities of this Regulation will be specified as needed by Instruction from the Central African Banking Commission (COBAC).

Article 64 - The General Secretary of the Central African Banking Commission (COBAC) is responsible for executing this Regulation.

Article 65 - This Regulation, drafted in a single original in French, English, and Spanish, with the French text prevailing in case of divergence, enters into force upon signature and will be published in the Official Bulletin of the Central African Economic and Monetary Community.

06 OCT. 2008 The Chairman,