Law No. 2007-036 of January 14, 2008 on Investments in Madagascar

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LOI N° 2007-036 DU 14 JANVIER 2008 on Investments in Madagascar EXPOSE DES MOTIFS (STATEMENT OF REASONS) The Republic of Madagascar seeks to attract investors and make the private sector the main engine of its development. Relying on key reference documents, namely the "Naturally Madagascar" Vision and the Madagascar Action Plan (MAP), the Government has defined among its central priorities the pursuit of strong economic growth based on the development of a robust and competitive private sector. The objective of this framework law is to provide a practical, transparent, and cutting-edge incentive environment for all investment activities in Madagascar. The aim is to quickly adapt and revitalize the local economic fabric so that it aligns with a particularly competitive international economic context, ensuring Madagascar remains in step with major global trends to effectively attract the capital needed to create jobs and enable the country to become an emerging economy. Through this framework law, the State's role becomes that of a facilitator for the private sector, which is the nation's primary wealth creator and main driver of economic growth, through job creation, increased productivity, and improved living standards, while contributing to generating a broad and sustained tax base in the medium and long term. The mechanism established for implementing this framework law is the Economic Development Board of Madagascar (EDBM), an autonomous body acting on behalf of the Malagasy State and attached to the Presidency of the Republic. The EDBM is responsible for facilitating the approval of investment projects, as well as promoting and developing investments in Madagascar. The principles underpinning this law are as follows: • The establishment of an incentive framework for private investments in Madagascar without favoring any particular category of investors, whether national or foreign, already established in Madagascar or wishing to establish themselves there; • The simplification of numerous administrative procedures to transform the business climate in Madagascar; • The strengthening of the competitiveness of companies established in Madagascar; • Access to corporate real estate for Malagasy law companies, whether or not controlled by foreign interests; On these bases, this law is divided into 7 chapters: Chapter I: General Provisions Chapter II: Roles and Prerogatives of the Economic Development Board of Madagascar Chapter III: Company Registrations and Deeds Chapter IV: Visas and Employment Authorizations Chapter V: Access to Corporate Real Estate Chapter VI: Dispute Resolution Chapter VII: Final Provisions To face international competition and build its effective competitive advantage, Madagascar needs to make its business climate highly attractive and must consequently adopt a framework law applicable to all local and foreign investments, the drafting of which is the result of broad consultation with stakeholders in both the public and private sectors. Substantially transforming Madagascar's investment climate, fostering entrepreneurship, and providing private initiatives with the necessary guarantees for their realization will enable the improvement of all Malagasy people's living standards through job creation, skill acquisition, and steadily increasing productivity. This is the purpose of this law. LOI N° 2007-036 DU 14 JANVIER 2008 on Investments in Madagascar The Senate and the National Assembly have adopted it at their respective sessions on December 4, 2007 and December 19, 2007, The President of the Republic, Having regard to the Constitution; Having regard to Decision No. 02-HCC/D3 of January 9, 2008 by the Constitutional Court; Promulgates the law whose text follows: CHAPITRE I GENERAL PROVISIONS Article 1. - Definitions For the purposes of this law, the following terms are understood as: 1° "Investment": The totality of financial resources, including among others capital contributions, current account advances, and loans allocated to the realization of an economic project, whether infrastructure, commercial, artisanal, service-oriented, agricultural, tourist, or industrial, as well as the products realized through the investment of these resources and allocated to the realization of an economic project. 2° "Investors": Any natural or legal person who contributes in whole or in part to the investment as defined above. Art. 2. - Freedom of Investment Any natural or legal person, Malagasy or foreign, is free to invest and establish themselves on national territory, in compliance with existing laws and regulations, subject to provisions applicable to certain sectors of activity that are subject to specific regulation. This notably includes banking, insurance, mining, petroleum, medical, paramedical, or pharmaceutical activities. Art. 3. - Equal Treatment Foreign investors receive the same treatment as Malagasy national investors. They may freely hold up to 100% of the shares or stock in the company in which they exercise their activities, subject to provisions applicable to sectors of activity that are subject to specific regulation as listed in Article 2 above. The provisions of this article, as well as those of Article 2 above, do not prejudice the rights and broader advantages to which an investor may be entitled under agreements or treaties concluded between the Republic of Madagascar and other partner countries. Art. 4. - Protection of Property Rights The State guarantees respect for individual or collective property rights. Investors are notably guaranteed against any measures of nationalization, expropriation, or requisition, except for legally established public utility purposes. Where applicable, investors will benefit from fair and prior compensation in accordance with the applicable laws and regulations. Art. 5. - Freedom of Transfer Foreign investors are authorized to freely transfer abroad, without prior authorization, all payments related to current operations, including among others post-tax profits, dividends, salaried income, allowances, and savings of expatriate employees. Capital transactions and financial operations such as the transfer of shares, company interests, business assets or property, liquidation bonus shares, and expropriation indemnities are free but must be declared to the Ministry responsible for Finance. These transfers may only be effected through authorized intermediaries. Art. 6. - Stability The State commits to establishing and maintaining a favorable investment environment, through the maintenance of a simple, equitable, and growth-promoting fiscal system for investors within the framework of implementing investment projects covered by this law. Investors benefiting from the advantages provided by this law will benefit from any new legislative or regulatory measure that is more advantageous and adopted subsequent to the publication of this law. Investors benefiting from the advantages provided by this law will continue to benefit from these advantages, notwithstanding any new legislative or regulatory measure aimed at abolishing or reducing these advantages, which is adopted subsequent to the publication of this law. Art. 7. - Fight against HIV/AIDS In compliance with the principles established by Law No. 2005-040 of February 20, 2006 on the fight against HIV/AIDS and the protection of the rights of persons living with HIV/AIDS, all companies must implement an awareness/education program for their employees and facilitate access to voluntary disease screening. CHAPITRE II ECONOMIC DEVELOPMENT BOARD OF MADAGASCAR Art. 8. - Generalities For the effective implementation of this law and to ensure the establishment and maintenance of a favorable investment environment in Madagascar, an entity named Economic Development Board of Madagascar (EDBM) has been established. The EDBM is responsible for promoting, facilitating, and accelerating the approval of all investment projects. It receives, processes, and issues the various administrative documents required for investments. To this end, it assists investors in their procedures, catalogs and studies the administrative procedures to which companies are subject, and proposes any modifications aimed at abolishing, simplifying, and/or rationalizing these procedures. The EDBM may be assigned various missions and activities designed to support investments. The EDBM is a Public Industrial and Commercial Establishment (EPIC) subject to the rules of the General Accounting Plan (PCG) in force. Within the EDBM, various ministries and public authorities called upon to grant visas, permits, licenses, and authorizations mentioned in Article 9 are represented according to a "single window" logic. These visas, permits, licenses, and authorizations remain granted and signed by the concerned Ministers or their delegates, or by any other competent administrative authority. Art. 9. – Attributions: 1- Facilitation and acceleration of administrative procedures necessary for investment realization and company creation: The EDBM, with the exception of any other State service or public authority, receives requests related to investment projects and ensures that representatives of the various administrations it groups process them and provide appropriate follow-up under the best conditions of time and transparency. Requests related to the following must notably be received and processed within the EDBM:

• The issuance of renewable and transformable entry and stay visas, in accordance with the provisions of Article 15 of this law;
• The issuance of Professional Visas, in accordance with the provisions of Article 15 of this law;
• The issuance of Certificates for Companies under the Free Zone regime, in accordance with the provisions of the law on free zones and enterprises in Madagascar;
• The issuance of "Land Acquisition Authorizations", in accordance with the provisions of Article 19 of this law;
• The registration, modifying entries, and deregistration of companies in the Trade and Companies Register;
• The attribution of tax and statistical identifiers;
• The issuance of licenses, permits, and authorizations required by regulations governing tourist activities;
• The issuance of building permits and establishment opening authorizations when required by specific regulation;
• The EDBM receives declarations of cessation of activity by companies. It also receives decisions to withdraw authorization, visa, or permit and proceeds to notify them to the concerned companies and investors, with all resulting legal consequences. By exception to the provisions of this paragraph, the creation of civil or commercial companies, when it requires no other formality than registration and the issuance of tax and statistical identifiers, may be carried out at territorially competent services based on the registered office. 2- Improvement of the legal and fiscal framework for investments. Furthermore, the EDBM may issue a prior opinion on any legislative or regulatory project likely to modify Madagascar's investment climate, including fiscal and/or customs provisions as well as the provisions of this law or its implementing texts. The EDBM may also take the initiative to propose new legislative or regulatory provisions to competent authorities. The EDBM will also participate in negotiating new treaties concerning investment protection, free trade agreements, as well as conventions aimed at avoiding double taxation, in close coordination with the concerned ministries. 3- Dispute Resolution The EDBM may intervene as a mediator in resolving disputes between companies or between companies and the administration, according to a mediation procedure it establishes. Art. 10. – Deadline: Unless a specific deadline is mentioned in this law and without prejudice to shorter deadlines provided, where applicable, by special texts, the EDBM ensures that authorizations, visas, permits, and certificates falling within its competence are issued within twenty (20) calendar days from the receipt of complete application files, or that a negative response is notified within the same deadline. Failing this, the authorization, visa, permit, or certificate is deemed granted, without prejudice to sanctions incurred by the responsible issuing officer. In this case, the initial applicant may petition the EDBM to issue a document attesting to the deposit of the initial request and the absence of a response within the 20-day period, recalling the provisions of this article, from which it follows that the requested decision is deemed granted. The EDBM is, within ten (10) days following the request made to it, required to issue this document, which will be enforceable against all public administrations as well as third parties and shall serve as the title issued by the competent authority, as long as the latter has not yet issued the requested authorization, visa, permit, or certificate. Art. 11. - Strengthening of Corporate Transparency The EDBM supports corporate transparency as organized by the Trade and Companies Register in application of Articles 5.1 to 6.3 of the Commercial Code. To this end, the EDBM is responsible for receiving the portion of resources generated by declarations submitted by registered companies or by the publication of rights held by third parties on company assets, such as pledges, liens, credit lease contracts, and retention of title clauses, and collected by local registries as fees to be allocated to operating means and necessary amortizations. The EDBM also receives fees from the individual consultation of the national Trade and Companies Register database, as well as from the commercialization of sets or subsets of national data. The EDBM, in concert with the competent services of the Ministry of Justice, is responsible for deciding on the allocation of these resources to system maintenance and evolution, as well as to equipment replacement and the supply of consumables for computerized sites. The EDBM may, for its own needs and those of investors, directly consult the national Trade and Companies Register database. The clerk attached to the EDBM is authorized to issue certificates, copies, or extracts of entries recorded in the register, in accordance with current regulations and regardless of the location where the concerned company was registered. The EDBM may make any proposals regarding improvements to be made to the system, as well as modifications to the amount of fees due to the trade and companies register. A decree issued by the Council of Ministers will specify the implementation modalities of this article. CHAPITRE III COMPANY REGISTRATIONS AND DEEDS Art. 12. - Company Registration Companies are registered in the Trade and Companies Register without it being necessary for a corporate officer to be resident in Madagascar or of Malagasy nationality. However, within three months from the company's registration, at least one of its corporate officers must be resident in Madagascar, whether Malagasy or foreign holding a residence visa or receipt of a residence visa application. Failing this, the company may face its benefits being challenged, notably regarding free zone enterprise status or access to land ownership. Its dissolution may also be requested by any interested party, in accordance with common law rules governing irregularities in the formation of commercial companies. Art. 13. - Registration of Company Deeds With the exception of deeds confirming the formation, extension, transformation, or dissolution of a company, as well as capital increases, amortizations, or reductions, company deeds are not obligatorily subject to the registration formality. These deeds are receivable as-is by all administrative services and notably by the Trade and Companies Register. The statements of produced deeds, including their dated stamp, serve as proof, according to the case, until proven otherwise or until forgery is registered. No publication in the written press is required prior to the company's registration. Art. 14. - Removal of Signature Legalization Obligation Contracts, deeds, minutes, or documents requiring an administrative formality of registration, transcription, publication, deposit, or other are not subject to any legalization or signature recognition procedure of the parties. The authenticity of the signatures bearing them serves as proof until proven otherwise. This provision does not apply to agreements confirming the transfer of real estate by sale or the establishment of emphyteutic leases. CHAPITRE IV VISAS AND EMPLOYMENT AUTHORIZATIONS Art. 15. - Prolongation and Transformation of Entry and Stay Visas for Investors The prolongation of entry and stay visas issued at the border by services of the Ministry responsible for the Interior, as well as the transformation of these visas into professional visas, are carried out at the EDBM level. Art. 16. - Professional Category Residence Visa An immigrant visa known as the "Professional Visa" is created, granted to all foreign investors, whether linked to a Malagasy company by an employment contract or exercising a corporate mandate within this company such as manager, general director, deputy general director, general administrator, board chairman, or managing director. This visa is issued at the EDBM level on behalf of the Ministry of the Interior. This Professional Visa automatically authorizes its holder to legally reside and work throughout Malagasy territory without the need to obtain an employment authorization, which this visa replaces. The professional visa is valid for three (3) years from the date of the application receipt. Once granted, this visa serves as a residence permit. Furthermore, a resident card is issued in accordance with current legislation. The renewal application must be made within one (1) month before the expiration date. The spouse and dependent children of the holder automatically receive the same rights for an identical duration. Art. 17. - Freedom to Recruit and Dismiss Expatriate Employees Any company is free to recruit and dismiss specialized expatriate employees it needs for the proper functioning of the business. The employment contracts of expatriate employees may validly derogate from certain provisions of the Labor Code and social regulations regarding:
• Affiliation to an accredited social security organization in Madagascar;
• Affiliation to a SMIE (Social Security for Expatriate Workers);
• The duration and grounds for recourse to a fixed-term contract;
• The rules applicable regarding hiring. The practical modalities of the derogations mentioned above will be fixed by regulatory means. These derogations cannot have the effect of undermining the fundamental rights of employees as recognized by International Conventions and Agreements to which Madagascar is a party. These specialized expatriate employees automatically benefit from a professional residence visa. CHAPITRE V ACCESS TO CORPORATE REAL ESTATE Art. 18. - Access of Foreign Investors to Real Estate Ownership a. Malagasy law companies whose management is placed under the control of foreigners or organisms dependent on foreigners within the meaning of Art 22 modified by Ordinance No. 62-041 of September 19, 1962 on general provisions of internal law and private international law are authorized to acquire real estate, subject to fulfilling the following two cumulative conditions:
• The companies must have obtained from the EDBM, prior to the final conclusion of any real estate transfer deed, an authorization known as "Land Acquisition Authorization", which will be issued under the conditions set forth in Article 19 below;
• The real estate must be exclusively and continuously allocated to the exercise of a commercial activity, notably industrial, tourist, or service-oriented, or an agricultural or fisheries activity. The commercial activity cannot consist in acquiring the building for resale, as-is or after carrying out improvements or constructions. b. Foreign natural or legal persons cannot directly access land ownership. However, they may freely and without prior authorization enter into an emphyteutic lease, with a maximum duration of ninety-nine (99) years, renewable. Art. 19. - Land Acquisition Authorization

1. The land acquisition authorization is issued at the EDBM level, acting on behalf of the Ministry responsible for Land/Domaines, upon request by the investor, who, for this purpose, submits a file to the EDBM containing the following documents:

• Written request presented on a printed form provided by the EDBM;
• Presentation of the projected activity and reasons justifying the acquisition of the building intended for its exercise;
• Certificate of legal status of the real estate whose acquisition is envisaged, if the building is already registered or cadastral;
• And all other required documents, as applicable, by the administration in charge of Land, to support a request for acquiring real estate. The EDBM issues the applicant a receipt of file deposit.

2. Said authorization does not constitute...

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