Circular Letter LC-COB-04 on the Powers of Board Presidents and General Managers of Credit Institutions

COMMISSION BANCAIRE DE L'AFRIQUE CENTRALE
II-1-9
Yaoundé, April 1, 2003

The President

To the General Managers of Credit Institutions in the CEMAC Region

LC-COB/04

Subject: Powers of the Board Presidents and General Managers of Credit Institutions.

Dear General Manager,

The attention of the Banking Commission has been repeatedly drawn to operational issues affecting the management of certain credit institutions, due to confusion regarding the respective powers of the Board President and the General Manager.

Indeed, jurisdictional conflicts increasingly arise in credit institutions between the General Manager and the Board President or an emanation of the Deliberative Body (as defined in Article 2 of COBAC Regulation R-2001/07 on internal control of credit institutions). An examination of these situations reveals that these disputes are generated by the intervention, in the day-to-day management of the institution, either of the Board President or of an entity mandated to assume a fraction of the Deliberative Body's prerogatives.

Furthermore, to justify management acts that constitute violations of current laws and regulations, both in banking matters and under general commercial company law, certain approved responsible executives cite instructions received from the Board President or his approval of the acts in question.

In light of this situation, I wish to emphasize that the powers of the Board of Directors and its President, on the one hand, and those of the General Manager, on the other, are clearly established by the OHADA Uniform Act on commercial company law and economic interest groups.

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The organization and functioning of the Board of Directors are governed by Articles 416 to 461 of the aforementioned OHADA Act. In accordance with Article 435, the Board of Directors holds the following powers:

1) it defines the company's objectives and the strategic direction to be given to its management;
2) it exercises permanent oversight of the management, according to the chosen management model, by the Managing Director or the General Manager;
3) it approves the accounts for each fiscal year.

Any mandate granted by the Board of Directors to one or more of its members, pursuant to Article 437, must not exceed these powers.

The prerogatives of the Board President are detailed in Article 480, which stipulates: "The president of the board of directors presides over meetings of the board of directors and general assemblies. He must ensure that the board of directors exercises oversight over management entrusted to the general manager. At any time during the year, the board president conducts verifications he deems appropriate and may request all documents he considers useful for fulfilling his mission."

Regarding the powers of the General Manager, Article 487 states: "The general manager ensures the overall management of the company. He represents it in its relations with third parties. For the exercise of his functions, he is vested with the broadest powers, which he exercises within the limits of the company's objects and subject to those expressly reserved for the board of directors by legal or statutory provisions."

In this context, any Board President wishing to personally oversee the overall management of his institution or intervene in day-to-day management should obtain, on the one hand, his appointment by the Board of Directors to the functions of Managing Director and, on the other, the approval prescribed by Article 21 of the Convention of January 17, 1992 on the harmonization of banking regulation in the States of Central Africa, in order to benefit from the provisions of Article 465 of the Uniform Act.

In light of these provisions, it is the responsibility of approved executives in accordance with the Convention of January 16, 1992, to ensure, under their own responsibility, strict compliance with current laws and regulations and, in particular, the following prescriptions:

• COBAC Regulation R-93/13, amended by COBAC Regulation R-2001/05 regarding the commitments of credit institutions towards their shareholders or partners, directors, executives, and staff;
• Article 37 of COBAC Regulation R-2001/07 on internal control of credit institutions;

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• Article 438 of the aforementioned OHADA Uniform Act, according to which: "Any agreement between a public limited company and one of its directors, general managers, or deputy general managers must be submitted to the prior authorization of the board of directors. The same applies to agreements in which a director, general manager, or deputy general manager of the company is directly interested or in which he deals with the company through an intermediary. Agreements concluded between a company and a business or legal entity are also subject to the prior authorization of the board of directors, if one of the directors or a general manager or deputy general manager of the company is the owner of the business or an indefinitely liable partner, managing director, director, general director, assistant general director, general manager, or deputy general manager of the contracting legal entity."

To put an end to the identified operational issues, the Banking Commission will ensure, particularly through its verification missions, strict compliance by the various corporate bodies with their respective prerogatives. It will not hesitate to initiate, when necessary, disciplinary proceedings following which it may impose the sanctions provided for in Article 15 (formerly Article 13) of the annex to the Convention of October 16, 1990 establishing a Banking Commission in Central Africa.

Please ensure this letter is brought to the attention of your institution's Board of Directors.

Please accept, Mr. General Manager, the assurance of my distinguished consideration.

[Signature]
Jean-Félix MAMALEPOT