COMMISSION BANCAIRE OF CENTRAL AFRICA

COBAC REGULATION R-2016/02 ON CHANGES IN THE STATUS OF CREDIT INSTITUTIONS

The Central African Monetary Commission;

Having regard to the Convention of 16 October 1990 establishing the Central African Monetary Commission and its Annex;

Having regard to the Convention of 17 January 1992 harmonizing banking regulation in the Central African States, its Annex as well as subsequent and relevant texts, notably:

• Regulation No. 02/15/CEMAC/UMAC/COBAC of 27 March 2015 amending and supplementing certain conditions relating to the exercise of the banking profession in the Economic and Monetary Community of Central Africa;
• CEMAC Regulation No. 04/08/CEMAC/UMAC/COBAC of 6 October 2008 on corporate governance in CEMAC credit institutions;
• Regulation No. 02/08/CEMAC/UMAC/COBAC of 6 October 2008 conferring competence on COBAC for determining the categories of credit institutions, their minimum share capital, legal form and authorized activities;

Having regard to the Treaty on the Harmonization of Business Law in Africa (OHADA) and its relevant Uniform Acts;

Meeting on 16 September 2016 in Yaoundé;

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DECIDES:

TITLE I – GENERAL PROVISIONS

Chapter I: Object

Article 1. This regulation, adopted in application of the provisions of Regulation No. 02/15/CEMAC/UMAC/COBAC amending and supplementing certain conditions relating to the exercise of the banking profession in the Economic and Monetary Community of Central Africa, determines the procedures for processing and the composition of authorization application files submitted to the monetary authority for changes in the status of credit institutions.

Chapter II: Definitions

Article 2. For the purposes of this regulation, the following terms mean:

• change of control: any transaction by which a natural or legal person, or a group of persons acting together, acquires or disposes of a share of capital that grants or causes the loss of effective control power over the management of the institution;
• merger: any transaction by which two or more credit institutions decide to merge into a single institution. The merger may result in either the creation of a new entity or the absorption by one institution of all other entities;
• significant participation: holding shares representing at least 5% of the share capital or voting rights of the credit institution;
• effective control power: holding by a shareholder or group of shareholders voting rights sufficiently significant to be in a position to impose its will or power at general meetings and, thereby, exercise exclusive control, joint control, or significant influence over the management of the credit institution within the meaning of Article 62 of COBAC Regulation R-2003/01 of 15 January 2003 on the organization of accounting for credit institutions. Control is presumed effective when the voting rights held directly or indirectly are at least one-fifth of the total voting rights;
• demerger/split: any transaction by which the assets of a credit institution are divided into several fractions, each forming the assets of a new entity.

Article 3. Voting rights held by a person are deemed to include voting rights held by:

• other persons on behalf of that person;
• companies under the effective control of that person;
• a third party with whom that person is bound by a shareholders' agreement;
• ascendants, descendants, spouses, brothers, sisters and other relatives up to the 4th degree.

Voting rights are also deemed to include those that the person or any of the aforementioned persons has the right to acquire at its sole initiative pursuant to an express, tacit, public or secret agreement.

Article 4. Persons are considered to be acting together if they have concluded an express, tacit, public or secret agreement aimed at acquiring or disposing of voting rights or exercising rights to implement a common policy vis-à-vis the institution. Such an agreement is presumed to exist:

• between a company, its Board of Directors President and its General Managers or members of its Management Board or managers/executives;
• between a company and companies over which it directly or indirectly holds effective control power;
• between companies under the effective control of the same person(s).

Article 5. Modifications that significantly affect the status of a credit institution and require prior authorization from COBAC are those changes to its legal status concerning one of the elements on which it was approved. These modifications notably concern:

• change, extension or restriction of authorized activities;
• merger or demerger of the institution;
• transfer of the business assets;
• partial transfer of assets representing at least 25% of the total balance sheet of the institution;
• increase in the share capital of the institution;
• change of control;
• acquisition or transfer of significant participations in the institution's capital;
• opening of subsidiaries or branches outside CEMAC;
• opening of representation, information or liaison offices in a CEMAC State or outside CEMAC;
• holding participations in an entity outside CEMAC.

TITLE II – PROCEDURE FOR HANDLING AND COMPOSITION OF THE FILE FOR PRIOR AUTHORIZATION APPLICATIONS

Chapter III: Procedure for handling prior authorization applications of credit institutions

Article 6. Modifications significantly affecting the status of a credit institution may only be authorized if COBAC is assured that such operations do not jeopardize the sustainability of the institution.

Article 7. COBAC may reject any prior authorization application concerning a modification likely to induce a change of control when it considers that the exercise of its supervisory mission may be hindered by the existence of a right or de facto jurisdictional immunity benefiting the future shareholder(s).

Article 8. The opening of subsidiaries or branches outside CEMAC by a credit institution subject to regulation, as well as the holding of participations in an entity headquartered outside CEMAC, may only be authorized to the extent that they do not affect the financial equilibrium of its status and do not result in insufficient own funds relative to its risk profile.

Article 9. The opening within a CEMAC State or outside CEMAC of representation, information or liaison offices by an approved credit institution may only be authorized for the exercise of activities other than banking operations. The operations conducted on behalf of the institution are limited to:

• collection of economic, financial and sectoral data relevant to the credit institution;
• development of relations with economic operators in the host country to promote the institution's activities;
• participation in events and exhibitions relevant to the institution.

Chapter IV: Composition of the prior authorization file

Article 10. The prior authorization application file for changing, extending or restricting the activities of a requesting credit institution must include:

• the minutes of the extraordinary general meeting deciding on this operation;
• the Board of Directors' report on the operation;
• the statutory auditor's report on the operation;
• the draft amended articles of association;
• all information elements enabling COBAC to assess the adequacy of the governance system, risk management framework and own funds level against current prudential standards for the envisaged activity type.

Article 11. The prior authorization application file for a merger operation must notably include:

• the name of the absorbing institution or the new merged entity;
• the articles of association of the companies involved in the merger and, where applicable, draft articles for the new entity to be created;
• certified annual financial statements including balance sheets and income statements for the last three fiscal years of each company;
• the minutes of the extraordinary general meeting of each company authorizing the merger;
• the Board of Directors' report from each company addressed to shareholders regarding the operation;
• statutory auditors' reports on the merger for each company;
• the merger agreement concluded between these companies;
• the draft merger specifying the method chosen for determining the exchange ratio and asset valuation;
• the staff redeployment plan.

The above list may be supplemented or amended by a COBAC directive.

Article 12. The prior authorization application file for a demerger/split operation must notably include:

• the minutes of the extraordinary general meeting of the credit institution authorizing the demerger;
• the draft demerger plan;
• the statutory auditor's report on the demerger operation;
• the staff redeployment plan.

Article 13. Notwithstanding conditions provided by current regulations, the prior authorization application file for total transfer of business assets or partial transfer of assets must notably include:

• the articles of association of the transferring entity;
• certified annual financial statements including balance sheets and income statements for the last three fiscal years of the transferring credit institution and the acquiring entity;
• the minutes of the general meeting of the transferring credit institution or the deliberative body of the acquiring entity, authorizing the transfer;
• the Board of Directors' report from the transferring credit institution and, where applicable, the acquiring entity, addressed to shareholders.

Article 14. The prior authorization application file for increasing share capital must notably include:

• the minutes of the extraordinary general meeting deciding on the capital increase;
• the statutory auditor's report on the capital increase;
• the share subscription form;
• where applicable, deeds of waiver of pre-emptive subscription rights;
• the notarized declaration of subscription and payment if it is a cash contribution;
• the extract from the deposit account statement attesting to effective payment;
• the report of the capital contribution auditor if it is a non-cash contribution;
• the certificate of share payment confirmed by the notary in case of compensation of certain, liquid and due claims. This certificate is established based on audited accounts;
• the capital distribution table before and after the operation.

Article 15. The prior authorization application file for reducing share capital of a credit institution must notably include:

• the minutes of the extraordinary general meeting deciding on the capital reduction;
• the statutory auditor's valuation report on the causes and conditions of the capital reduction;
• the capital distribution table before and after the operation.

Article 16. The prior authorization application file for acquiring, transferring or assigning participations that induce a change in the control power of the requesting credit institution must include:

• a certified copy of the legal document setting out the conditions and procedures of the operation between stakeholders;
• where applicable, the shareholders' agreement;
• notarized declarations of subscription and payment;
• the capital distribution table of the credit institution before and after the operation;
• a study detailing the objectives of the operation, its financing methods and its impact on the control of the target institution, notably regarding governance, commercial strategy, projected activities, outsourcing, prudential status, risk profile and exposure to new risks;
• a three-year activity plan;
• prior approval or no-objection opinion from the home country's banking supervisory authority, when the acquirer is a credit institution, group or financial holding headquartered outside CEMAC.

Article 17. The prior authorization application file for acquiring or transferring participations that induce a change in the control power of the requesting credit institution must also contain information elements enabling COBAC to assess the quality and honorability of future acquirers, evaluate their financial solidity and ensure they are not subject to any prohibitions or incompatibilities provided by current regulations.

The following must be submitted:
1) For a natural person acquirer:

• a French-language curriculum vitae, duly dated and signed;
• a certified copy of an official identity document (national ID card or passport) currently valid;
• a criminal record extract less than three months old, issued by the competent authorities of the country of nationality and residence;
• a notarized certificate of financial status. This certificate must be certified by the consular authority if the potential acquirer is of a nationality other than that of the country where the institution is located;
• a copy of the share subscription form or transfer deed;
• a declaration of participations held in other credit institutions headquartered in or outside CEMAC;
• a sworn declaration by which the future shareholder indicates the origin of invested funds and attests that they do not originate from illicit activities.
  2) For a private legal person acquirer:
• the notarized articles of association of the company;
• certified annual financial statements including balance sheets and income statements for the last three fiscal years;
• the shareholding structure and, where applicable, that of the parent company, banking group or financial holding to which the acquirer belongs, detailing by shareholder the number of shares held, corresponding capital fraction and voting rights equivalence;
• a declaration of participations held in other credit institutions headquartered in or outside CEMAC;
• the minutes of the competent deliberative body approving the operation;
• a copy of the share subscription form or transfer deed;
• a sworn declaration by which the acquirer indicates the origin of funds to be invested and attests that they do not originate from illicit activities;
• the group organizational chart after the operation.
  3) For a public legal person acquirer:
• the act establishing the legal person;
• the act authorizing the legal person to hold participations in the institution's capital;
• a document by which the public legal person, when it is the majority shareholder, commits to supporting the development of the credit institution;
• a copy of the share subscription form or transfer deed.

Article 18. The prior authorization application file for acquiring, transferring or assigning significant participations not inducing a change in the control power of the requesting credit institution must include the following information elements for each future acquirer:
1) Natural person acquirer:

• a French-language curriculum vitae, duly dated and signed;
• a certified copy of an official identity document (national ID card or passport) currently valid;
• a criminal record extract less than three months old, issued by the competent authorities of the country of nationality and residence;
• a notarized certificate of financial status. This certificate must be certified by the consular authority if the potential acquirer is of a nationality other than that of the country where the institution is located;
• a copy of the share subscription form or transfer deed;
• a declaration of participations held in other credit institutions headquartered in or outside CEMAC;
• a sworn declaration by which the future shareholder indicates the origin of funds to be invested and attests that they do not originate from illicit activities.
  2) Private legal person acquirer:
• the notarized articles of association of the company;
• certified annual financial statements including balance sheets and income statements for the last three fiscal years;
• the shareholding structure detailing by shareholder the number of shares held, corresponding capital fraction and voting rights equivalence;
• the minutes of the competent deliberative body approving the operation;
• a copy of the share subscription form or transfer deed;
• a declaration of participations held in other credit institutions headquartered in or outside CEMAC;
• a sworn declaration by which the acquirer indicates the origin of funds to be invested and attests that they do not originate from illicit activities;
• the capital distribution table of the credit institution before and after the operation.
  3) Public legal person acquirer:
• the act establishing the legal person;
• the act authorizing the legal person to hold participations in the institution's capital;
• a document by which the public legal person, when it is the majority shareholder, commits to supporting the development of the credit institution;
• a copy of the share subscription form or transfer deed.

Article 19. The prior authorization application file for opening an information, representation or liaison office must include the following information elements:

• the minutes of the deliberative body deciding on the operation;
• where applicable, the name chosen for the office;
• a note highlighting the objectives sought through creating the representation office, the expected number of employees and a description of functions to be assumed by each;
• the curriculum vitae of the office's main manager;
• a document attesting that no office staff member is subject to any prohibitions or incompatibilities provided by current regulations.

Article 20. The prior authorization application file for holding a participation in an entity outside CEMAC must include the articles of association and certified annual financial statements including balance sheets and income statements for the last three fiscal years of the concerned entity.

Chapter V: Provisions relating to prior authorization applications for the appointment of statutory auditors of credit institutions

Article 21. Prior authorization from COBAC is required whenever a statutory auditor, already approved by the monetary authority, is appointed to certify the accounts of a credit institution.

Article 22. COBAC ensures that the statutory auditor presents all guarantees of independence regarding the credit institution within which it is called to exercise its mission and all related persons.

It also assesses the honorability of the statutory auditor and ensures the absence of incompatibilities with exercising this function.

Article 23. COBAC is seized by a request from the credit institution clearly specifying their rank, namely first statutory auditor (permanent or alternate) and second statutory auditor (permanent or alternate). Attached to the request are, notably:

• a certified copy of the approval decree in the capacity of statutory auditor for credit institutions;
• the list of CEMAC credit institutions for which it acts as statutory auditor;
• a copy of the minutes of the ordinary general meeting of shareholders appointing the interested party as statutory auditor;
• for natural persons:
  a. a criminal record extract less than three months old, issued by the judicial authorities of the country of nationality and residence; b. a sworn declaration by which the statutory auditor attests not being subject to any prohibitions or incompatibilities provided by current regulations;
  c. a sworn declaration by which the statutory auditor indicates direct or indirect social, financial or business links with the credit institution it is called to control or any linked or related company, and family ties with executives or shareholders holding at least 5% of the institution's capital.
• for legal persons:
  a. a sworn declaration by which the statutory auditor attests that none of its partners are subject to any prohibitions or incompatibilities provided by current regulations; b. a sworn declaration by which the statutory auditor indicates direct or indirect social, financial or business links that the legal person or its partners maintain with the credit institution it is called to control or any linked or related company, and family ties with executives or shareholders holding at least 5% of the institution's capital.

Article 24. The modification of the board of directors' structure of a credit institution is subject to prior notification to the Banking Commission. The appointment of directors and renewal of their mandates are subject to prior notification to the Banking Commission within the timeframe set by