Law No. 2003-036 on Commercial Companies

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REPUBLIC OF MADAGASCAR Homeland-Freedom-Progress ————— MINISTRY OF JUSTICE ————— LAW NO. 2003-036 On Commercial Companies

The National Assembly and the Senate have adopted, in their respective sessions dated October 29, 2003, and December 10, 2003, the Law whose text follows:

PART ONE GENERAL PROVISIONS ON THE COMMERCIAL COMPANY

BOOK ONE CONSTITUTION OF THE COMMERCIAL COMPANY

TITLE ONE DEFINITION OF THE COMPANY

Article 1. A commercial company is established by two or more persons who agree, through a contract, to allocate to a common enterprise assets in cash, in kind, or in industry, with the aim of sharing profits or benefiting from the resulting savings. The partners undertake to contribute to losses under the conditions set forth in this law. A commercial company must be created for the common interest of its partners.

Article 2. A commercial company may also be established, in the cases provided for by this law, by a single person, whether natural or legal, referred to as the “sole partner”, through a written instrument.

Article 3. The commercial character of a company is determined by its form or by its object. Companies are commercial by virtue of their form, regardless of their object: general partnerships, simple limited partnerships, limited partnerships by shares, limited liability companies, and public limited companies.

TITLE TWO QUALITY OF PARTNERS

Article 4. Any natural or legal person may be a partner in a commercial company, provided they are not subject to any prohibition, incapacity, or incompatibility.

Article 5. Minors, unless emancipated, and incapacitated persons may not be partners in a company for which they would be liable for social debts beyond their contributions.

Article 6. Two spouses may not be partners in a company for which they bear unlimited or joint liability.

TITLE THREE BYLAWS

CHAPTER ONE FORM OF THE BYLAWS

Article 7. The bylaws are established by notarial deed or by private instrument.

Article 8. When the bylaws are drafted by private instrument, as many originals as necessary shall be prepared for depositing one copy at the registered office and for executing the various required formalities. A copy of the bylaws on plain paper must be delivered to each partner. However, for general partnerships and simple limited partnerships, an original copy must be delivered to each partner.

Article 9. The bylaws constitute either the company contract, in the case of multiple partners, or the unilateral act of a single person, in the case of a sole partner.

CHAPTER TWO CONTENT OF THE BYLAWS - MANDATORY STATEMENTS

Article 10. The bylaws state: 1° the form of the company; 2° its name, followed, where applicable, by its acronym; 3° the nature and scope of its activity, which constitute its corporate object; 4° its registered office; 5° its duration; 6° the identity of cash contributors, with for each of them the amount of contributions, and the number and value of social securities issued in exchange for each contribution; 7° the identity of in-kind contributors, the nature and valuation of the contribution made by each of them, and the number and value of social securities issued in exchange for each contribution; 8° the identity of beneficiaries of special benefits and the nature thereof; 9° the amount of social capital; 10° the number and value of issued social securities, distinguishing, where applicable, the different categories of created securities; 11° provisions regarding profit distribution, reserve allocation, and liquidation bonus distribution; 12° its operational procedures.

CHAPTER THREE COMPANY NAME

Article 11. Every company is designated by a corporate name, which is stated in its bylaws.

Article 12. Except regarding limited partners (commanditaires), the name of one or more current or former partners may be included in the corporate name.

Article 13. A company cannot adopt the name of another company already registered in the commercial and corporate register.

Article 14. The corporate name must appear on all acts and documents emanating from the company and intended for third parties, notably letters, invoices, advertisements, and various publications. It must be immediately preceded or followed in legible characters by the indication of the company’s form, its social capital amount, its registered office address, and the mention of its registration in the commercial and corporate register.

CHAPTER FOUR CORPORATE OBJECT

Article 15. Every company has an object constituted by the activity it undertakes, which must be determined and described in its bylaws.

Article 16. Every company must have a lawful object.

Article 17. When the activity exercised by the company is regulated, the company must comply with the specific rules to which said activity is subject.

Article 18. The corporate object may be modified for each form of company under the conditions provided by this law for the modification of bylaws.

CHAPTER FIVE REGISTERED OFFICE

Article 19. Every company has a registered office, which must be stated in its bylaws.

Article 20. The office shall be fixed, at the partners’ choice, either at the location of the company’s principal establishment or at its administrative and financial management center. It cannot consist solely of a post office box address and must be located by an address or sufficiently precise geographic indication.

Article 21. Third parties may rely on the statutory registered office, but the company cannot assert it against them if the actual office is located elsewhere.

Article 22. The registered office may be modified for each form of company, under the conditions provided by this law for statutory modification. However, it may be transferred to another location within the same city by a simple decision of the management or administration organs.

CHAPTER SIX DURATION - EXTENSION

SECTION ONE Duration

Article 23. Every company has a duration, which must be stated in its bylaws. The company’s duration may not exceed ninety-nine years.

Article 24. The starting point of the company’s duration is the date of its registration in the commercial and corporate register, unless otherwise provided by this law.

Article 25. The arrival of the term triggers the automatic dissolution of the company, unless its extension has been decided under the conditions provided in Articles 26 and following. The company’s duration may be modified for each form of company, under the conditions provided by this law for statutory modification.

SECTION TWO Extension

Article 26. The company may be extended once or multiple times under the form and procedure conditions specific to each category of company.

Article 27. The extension of the company does not create a new legal entity.

Article 28. At least one year before the company’s expiration date, partners must be consulted to decide whether the company should be extended. Failing this, any partner may petition the president of the commercial court ruling on application within whose jurisdiction the registered office is located, to appoint a judicial officer tasked with triggering the consultation provided by this article. The petitioning partner may be entrusted with this role by the court president.

CHAPTER SEVEN CONTRIBUTIONS

SECTION ONE General Provisions

Article 29. Each partner must make a contribution to the company. Each partner is indebted to the company for everything they have committed to contribute in cash, in kind, or in industry.

Article 30. In exchange for their contributions, partners receive securities issued by the company, as defined in Article 43.

Article 31. The provisions of this chapter apply to contributions made during the company’s life, notably upon a capital increase.

SECTION TWO Different Types of Contributions

Article 32. Each partner may contribute to the company: 1° money, by cash contribution; 2° rights relating to assets in kind, movable or immovable, corporeal or incorporeal, by in-kind contribution; 3° in personal companies, their industry, whether services useful to the company, labor, skills, or any other personal performance.

SECTION THREE Realization of Cash Contributions

Article 33. Cash contributions are realized by the transfer to the company of ownership of the monetary sums that the partner has committed to contribute. Subject to the application of Article 411, cash contributions are fully paid up upon the company’s constitution.

Article 34. Only cash contributions corresponding to sums of which the company has become owner and that it has fully and definitively collected are considered paid.

Article 35. In case of delay in payment, the remaining sums due to the company bear by operation of law interest at the legal rate from the day the payment was due, without prejudice to damages, if applicable.

Article 36. Unless the bylaws prohibit it, cash contributions made upon a capital increase may be realized through set-off with a certain, liquid, and due claim against the company.

SECTION FOUR Realization of In-Kind Contributions

Article 37. In-kind contributions are realized by the transfer of corresponding real or personal rights and by the effective availability to the company of the assets subject to these rights. In-kind contributions are fully paid up upon the company’s constitution.

Article 38. When the contribution is in ownership, the contributor guarantees to the company as a seller does to their buyer.

Article 39. When the contribution is in usufruct/lease, the contributor guarantees to the company as a lessor does to their tenant. However, when the contribution concerns goods of genre or other assets normally subject to renewal during the company’s duration, the contract transfers ownership of the contributed assets to the company, subject to returning an equivalent quantity, quality, and value. In this case, the contributor guarantees to the company under the conditions set forth in the preceding article.

Article 40. The contribution of an asset or right subject to publicity for opposability against third parties may be published before the company’s registration. However, the formality produces retroactive effects to the date of its accomplishment only from the company’s registration.

Article 41. Partners evaluate in-kind contributions. In the cases provided by this law, this evaluation is controlled by a statutory auditor (commissaire aux apports).

Article 42. The bylaws contain the evaluation of in-kind contributions, under the conditions provided by this law.

CHAPTER EIGHT SOCIAL SECURITIES

SECTION ONE Principle

Article 43. The company issues social securities in exchange for contributions made by partners. They represent the partners’ rights and are called shares (actions) in companies by shares, and partnership interests (parts sociales) in other companies.

SECTION TWO Nature

Article 44. Social securities are movable property.

SECTION THREE Rights and Obligations Attached to Securities

Article 45. Social securities confer upon their holder: 1° a right to profits realized by the company when their distribution has been decided; 2° a right to net assets upon distribution, at dissolution or during a capital reduction; 3° the obligation to contribute to social losses under the conditions provided for each form of company; 4° the right to participate and vote in collective decisions of partners, except in the case of the company’s repurchase of its own securities and non-voting securities; 5° a right to information on corporate affairs under the conditions provided for each form of company.

Article 46. Unless otherwise stipulated in the bylaws, the rights and obligations of each partner referred to in Article 45 are proportional to the amount of their contributions, whether made at constitution or during the company’s life. However, the bylaws may grant either founders, specific partners, or even third parties special benefits or specific profits regarding profits or social assets, such as a special right to profits or exceptional remuneration, which must be verified according to the procedures provided by this law. In all cases, provisions attributing to a partner the entirety of the profit generated by the company or exempting them from the entirety of losses, as well as those excluding a partner entirely from profit or charging them with all losses, are deemed unwritten.

Article 47. The rights mentioned in Article 45 must be exercised under the conditions provided for each form of company. These rights may not be suspended or suppressed except by express provisions of this text.

SECTION FOUR Nominal Value

Article 48. Securities issued by a company must have the same nominal value.

SECTION FIVE Negotiability, Transferability

Article 49. Partnership interests are transferable. Shares are transferable or negotiable.

Article 50. Public limited companies (sociétés anonymes) issue negotiable securities. The issuance of these securities is prohibited for companies other than those referred to in the first paragraph of this article, under penalty of nullity of concluded contracts or issued securities. They are also prohibited from guaranteeing the issuance of negotiable securities, under penalty of nullity of the guarantee.

Article 51. In all cases where the transfer of a partner’s social rights or their repurchase by the company is provided, the value of these rights is determined, failing amicable agreement between the parties, by an expert appointed either by the parties or, failing agreement, by order of the president of the commercial court ruling in summary proceedings.

SECTION SIX Holding of Social Securities by a Single Partner

Article 52. In the case of companies whose unipersonal form is not authorized by this law, the holding by a single partner of all social securities does not trigger automatic dissolution of the company. Any interested party may petition the competent president of the commercial court ruling in summary proceedings for this dissolution, if the situation has not been regularized within one year. The court may grant the company a maximum period of six months to regularize the situation. In any case, it cannot pronounce dissolution if, by the time it rules on the merits, this regularization has occurred.

CHAPTER NINE SOCIAL CAPITAL

SECTION ONE General Provisions

Article 53. Every company must have a social capital, which is indicated in its bylaws, in accordance with the provisions of this text.

Article 54. Social capital represents the amount of capital contributions made by partners to the company and increased, where applicable, by incorporations of reserves, profits, or issuance premiums.

Article 55. In exchange for contributions, the company remunerates the contributor with social securities, at a value equal to that of the contributions. In exchange for incorporations of reserves, profits, or issuance premiums, the company issues social securities or increases the nominal amount of existing social securities. These two methods may be combined.

Article 56. Social capital is divided into partnership interests or shares, depending on the form of the company.

SECTION TWO Amount of Social Capital

Article 57. Subject to compliance with the minimum capital required for each type of company, the amount of social capital is freely determined by the partners.

Article 58. If, after its constitution, a company’s capital is reduced to an amount lower than the minimum fixed by this law for that form of company, the company must be dissolved, unless the capital is raised to at least the minimum amount, under the conditions fixed by this law.

SECTION THREE Modification of Capital

Article 59. Social capital is fixed. However, it may be increased or reduced for each form of company, under the conditions provided by this law for statutory modification and, for variable capital companies, under the conditions set forth in Section IV of this chapter.

Article 60. Social capital may be increased upon new contributions made to the company or through incorporations of reserves, profits, or issuance premiums.

Article 61. Social capital may be reduced, under the conditions provided by this law, by refunding partners with part of their contributions or by imputing the company’s losses.

Article 62. When this law authorizes capital reduction by refunding partners with part of their contributions, it may be carried out either by cash refund or by asset allocation.

SECTION FOUR Variable Capital Companies

Article 63. It may be stipulated in the bylaws of any company not soliciting public savings that social capital will be subject to increase through successive payments made by partners or the admission of new partners, and to decrease through total or partial withdrawal of contributions. Companies whose bylaws contain the above stipulation shall be subject, in addition to the general rules specific to them according to their special form, to the provisions of the following articles.

Article 64. Shares or share coupons shall be nominal, even after their full payment. They may not be lower than an amount determined by decree taken in the Council of Government. They shall be negotiable only after the definitive constitution of the company. Negotiation may occur only by transfer on the company’s registers, and the bylaws may grant either the board of directors or the general assembly the right to oppose transfer.

Article 65. The bylaws will determine the upper limit, called authorized social capital, that the subscribed capital may reach without requiring modification of the bylaws. The bylaws will also determine a sum, called minimum social capital, below which the subscribed capital may not be reduced by withdrawals authorized by Article 63. The minimum social capital may not be lower than one-tenth of the authorized social capital and, in any case, at the amount of the statutory minimum capital fixed for limited liability companies or public limited companies, as applicable. The company will be definitively constituted only after the payment of one-tenth of the minimum social capital.

Article 66. Each partner may withdraw from the company at any time, unless contrary agreements subordinate withdrawal to certain substantive or formal conditions and subject to the application of paragraph 2 of the preceding article. No clause may prohibit a partner’s withdrawal.

Article 67. In the event that the withdrawal requested by one or more partners results in a reduction of social capital below the statutory minimum, the company may choose between: 1° modifying the bylaws; 2° reconstructing capital within six months of withdrawal, failing which the company must be dissolved under the conditions provided by this law; 3° converting a public limited company into a limited liability company to comply with minimum capital requirements. Failing this, any interested party may petition the commercial court to pronounce the dissolution of the company.

Article 68. It may be stipulated that the general assembly has the right to decide, by the majority fixed for statutory modification, for serious reasons and subject to compliance with the minimum capital rule, that one or more partners shall be excluded from the company.

Article 69. In the event of withdrawal or exclusion, the partner has the right to recover their contributions minus their share in social losses. The bylaws determine to what extent the partner has a right to reserves. A partner who ceases to be part of the company remains liable, for five years, to partners and third parties, for all obligations existing at the time of their withdrawal or exclusion up to the amount of the recovery made.

Article 70. A company adopting the variable capital clause must declare its legal form to the commercial and corporate register, followed by the notation “variable capital”. This indication must appear at the head of invoices, purchase orders, tariffs, and advertising documents, as well as on correspondence, receipts, and procedural acts concerning the activity and established in the name of the company. When a company’s capital has varied during a fiscal year, the company is required, within one month of the close of the fiscal year, to publish in the commercial and corporate register the amount of new capital subscribed at the close of that fiscal year.

CHAPTER TEN MODIFICATION OF BYLAWS

Article 71. Bylaws may be modified, under the conditions provided by this law, for each form of company. In no case may a partner’s commitments be increased without their consent.

CHAPTER ELEVEN NON-COMPLIANCE WITH FORMALITIES, LIABILITIES

Article 72. If the bylaws do not contain all statements required by this law or if a formality prescribed by it for the company’s constitution has been omitted or irregularly accomplished, any interested party may petition the commercial court within whose jurisdiction the registered office is located to order, under penalty of a fine, the regularization of the constitution.

Article 73. The action for regularization is prescribed in three years from the company’s registration or the publication of the act modifying the bylaws.

Article 74. Founders, as well as the first members of management, direction, or administration organs, are jointly liable for damages caused either by a missing mandatory statement in the bylaws or by the omission or irregular accomplishment of a formality prescribed for the company’s constitution.

Article 75. In case of bylaw modification, members of management, direction, or administration organs then in office incur the same liabilities as those fixed in the preceding article.

Article 76. The liability action provided for in Articles 74 and 75 is prescribed in five years from, as applicable, the day of the company’s registration or the publication of the act modifying the bylaws.

TITLE FOUR PUBLIC CALL TO SAVINGS

CHAPTER ONE SCOPE OF THE PUBLIC CALL TO SAVINGS

Article 77. Companies are deemed to make public...