Law No. 95-030 of February 22, 1996 on the Activity and Supervision of Credit Institutions

LAW NO. 95-030 OF FEBRUARY 22, 1996
ON THE ACTIVITY AND SUPERVISION OF CREDIT INSTITUTIONS (J.O. No. 2350 of 04/03/96 Special Edition, p. 292)

TITLE I
PRELIMINARY PROVISIONS

CHAPTER I
SCOPE AND DEFINITIONS

Article 1 - The provisions of this law apply to all credit institutions operating within the territory of the Republic of Madagascar, regardless of their legal status.

Art. 2 - The following are not subject to this law:

• the Public Treasury, the Central Bank of Madagascar, and the financial services of the Post Office;
• multilateral financial organizations and foreign public aid and cooperation institutions whose intervention within the territory of the Republic of Madagascar is authorized by treaties, agreements, or conventions to which the Republic of Madagascar has acceded.

Art. 3 - Credit institutions are entities that:

• carry out banking operations as a regular activity;
• manage securities portfolios on behalf of third parties by receiving funds for this purpose under a management mandate; or
• assist in the placement of securities by acting as guarantors (ducroire).

Banking operations include receiving funds from the public, granting credit, and making payment instruments available to or managing them for the public.

Art. 4 - Funds received from the public are defined as funds collected by a natural or legal person from a third party, notably in the form of deposits, with the right to dispose of them for their own account, subject to the obligation to repay them. However, the following are not considered funds received from the public:

1. Funds received or left in account by general partners (associés en nom) or limited partners (commanditaires) of a partnership, shareholders or members holding at least 5 percent of the share capital, directors, members of the management board and supervisory board, or managers, as well as funds from participatory loans;
2. Funds received by a company from its employees, provided that their amount does not exceed 10 percent of the company's equity. For calculating this threshold, funds received from employees under specific legislative provisions are not taken into account.

Art. 5 - For the purposes of this law, a credit operation is any act by which a natural or legal person acting for consideration provides or promises to provide funds to another person, or assumes, in that person's interest, a signed commitment such as an aval, guarantee, or surety. Credit leasing and, generally, any rental operation accompanied by a purchase option are assimilated to credit operations, regardless of the currency in which the credit operation is denominated.

Art. 6 - Payment instruments are all instruments, regardless of the medium or technical process used, that enable any person to transfer funds.

Art. 7 - Credit institutions may carry out ancillary operations related to their activities, such as:

1. foreign exchange operations and gold, precious metals, and coin transactions, subject to prevailing legislative and regulatory provisions;
2. safe deposit box rentals;
3. placement, subscription, purchase, management, custody, and sale of securities and all financial products;
4. advisory and assistance services in wealth or financial management, financial engineering, and, generally, all services designed to facilitate the creation or development of businesses, subject to legislative provisions regarding the illegal exercise of certain professions;
5. simple rental operations for movable or immovable property by institutions authorized to perform credit leasing operations.

Art. 8 - Credit institutions may not:

• acquire or hold participations in existing or newly created companies,
• regularly exercise an activity other than those referred to in Articles 3 to 7,
  except under the conditions defined by instructions of the Banking and Financial Supervision Commission, established in Chapter I of Title III of this law, which will define in particular the maximum authorized level for these operations.

Art. 9 - Credit institutions with their registered office abroad are authorized to open offices in Madagascar that perform information, liaison, or representation activities.
The opening of these offices is subject to approval by the Banking and Financial Supervision Commission.

CHAPTER II
PROHIBITIONS

Art. 10 - It is prohibited for any natural or legal person, other than a credit institution, to carry out banking operations as a regular activity.
Furthermore, it is prohibited for any company other than a credit institution to receive funds from the public on demand or with a term of less than two years.

Art. 11 - Without prejudice to specific provisions applicable to them, the prohibition stipulated in Article 10 does not cover the persons and services listed in Article 2, nor, for operations provided by the laws governing their activities:

• insurance, reinsurance, and social security institutions;
• organizations collecting employer contributions to housing construction.

The prohibition regarding credit operations does not apply:

1. To non-profit organizations that, within the framework of their mission and for social reasons, grant preferential loans from their own resources to certain of their members;
2. To organizations that, exclusively as an ancillary activity to their construction or service provider business, grant individuals acquiring property deferred payment for housing purchased or subscribed by them;
3. To companies that grant their employees, for social reasons, salary advances or exceptional loans.

Art. 12 - The prohibitions defined in Article 10 above do not prevent a company, regardless of its nature, from:

1. granting payment terms or advances to its contractors in the course of its professional activity;
2. concluding housing rental contracts with a purchase option;
3. conducting treasury operations with companies that have, directly or indirectly, capital links conferring effective control power on one of the linked enterprises over the others;
4. issuing securities as well as short-term negotiable bonds or notes on a regulated market;
5. issuing vouchers and cards issued for the purchase from it of a specific good or service.

Art. 13 - It is prohibited for any company other than a credit institution to use a trade name, denomination, advertising, or generally expressions that lead people to believe it is approved as a credit institution, or to create confusion on this point. It is prohibited for a credit institution to carry out operations not authorized for the category under which it obtained its approval, or to create confusion on this point.

Art. 14 - No person may be a member of the Board of Directors of a credit institution, nor directly or indirectly administer, direct, or manage a credit institution in any capacity, nor have the power to sign on behalf of such an institution:

1. If they have been convicted:
   a) For a felony; b) For violation of the provisions of Articles 177 to 179, 418 to 420 of the Penal Code; c) For theft, fraud, breach of trust, forgery or use of forged documents in private, commercial, or banking matters; d) For misappropriation of public funds, embezzlement by public depositors, extortion of funds and valuables, bankruptcy, impairment of State credit, or violation of foreign exchange legislation; e) For violation of drug laws and money laundering of criminal origin; f) For handling goods obtained as a result of the offenses referred to in paragraphs c, d, and e above; g) Under the provisions of Articles 82 to 85 of this law; h) For attempt or complicity in all the above offenses;
2. If they have been sentenced to imprisonment of more than two months for issuing checks without sufficient funds;
3. If they have been declared bankrupt, unless rehabilitated in their favor;
4. If they have been convicted as administrators or de jure/de facto managers of a company, under bankruptcy or commercial court legislation, unless rehabilitated in their favor;
5. If they have been subject to a measure of dismissal from their status as a ministerial officer by a judicial decision;
6. If the Malagasy banking system holds doubtful or contentious claims, within the meaning of the banking accounting plan, on their signature, or at the discretion of the Banking and Financial Supervision Commission, on those of companies under their control or direction.

Art. 15 - The above prohibitions apply automatically in cases of bankruptcy, restitution, or conviction for an offense constituting one of the crimes and misdemeanors mentioned in Article 14, pronounced by a foreign court and becoming final. If applicable, upon petition by the public prosecutor or the interested party, the criminal court of the interested party's domicile is seized to assess the regularity and legality of this foreign decision; the court rules in chambers, with the interested party duly summoned. The prohibition resulting from the provisions of this article or Article 14 ceases automatically when the decision motivating it is revoked or overturned by a new decision that has acquired the authority of res judicata.

TITLE II
APPROVAL OF CREDIT INSTITUTIONS

CHAPTER I
APPROVAL / LICENSING

Art. 16 - The exercise of the activity of a credit institution, as defined in Article 3 of this law, is subject to approval by the Banking and Financial Supervision Commission established in Chapter I of Title III of this law.

Art. 17 - Credit institutions are approved as territorial banks, extraterritorial banks, financial institutions, mutual financial institutions under Ordinance No. 93-026 of May 13, 1993 and subsequent texts, or specialized financial institutions.

1. Only banks and mutual financial institutions are generally authorized to receive funds from the public on demand or with a term of less than two years.
   Extraterritorial banks may only receive foreign currency deposits from non-residents as defined by prevailing foreign exchange regulations.
   Financial institutions and specialized financial institutions may only receive funds from the public on an ancillary basis, under conditions defined by the Banking and Financial Supervision Commission.
   This activity must, in any case, be a direct corollary of the institution's main activities and remain marginal compared to them.
   Development banks may not receive funds from the public on demand or with a term of less than two years.
2. Territorial banks may carry out all banking operations. Extraterritorial banks exercise their activities under conditions fixed by decree, issued after consultation with the Banking and Financial Supervision Commission.
   Under the conditions and limits set by Ordinance No. 93-026 mentioned above, mutual financial institutions are authorized to receive deposits, grant credit, and act as guarantors for their members.
3. Financial institutions are specialized credit institutions whose activity consists regularly in:
   • performing one or more banking operations as defined in Article 3 of this law, with the exception (except on an ancillary basis as stated above) of receiving on-demand or short-term deposits from the public;
   • managing third-party securities portfolios by receiving funds under a management mandate; or
   • assisting in the placement of securities by acting as guarantors.
     Financial institutions may only carry out the operations specified in their approval decision.
4. Specialized financial institutions are credit institutions vested by the State with a permanent public interest mission. They may only carry out banking operations related to this mission. Development banks notably fall into this category.
   The operations authorized for each category of institutions and the conditions for exercising their activities will be specified as necessary by decree issued upon advice from the Banking and Financial Supervision Commission.

Art. 18 - Applications for approval in one of the categories of credit institutions defined in Article 17 are submitted to the General Secretariat of the Banking and Financial Supervision Commission.
The file, deposited in duplicate against a receipt, must notably include the draft statutes, the list of shareholders and directors accompanied by the elements required under Article 25, activity, location, and organization forecasts, details of technical, human, and financial resources to be deployed, as well as any other elements likely to clarify the authorities' decision. The required supporting documents will be specified by an instruction from the Banking and Financial Supervision Commission.

Art. 19 - Upon receipt of the file, the Commission verifies in particular whether the applicant meets the obligations stipulated by Articles 14, 21, 23, and 24 of this law. It is authorized to collect all information deemed useful for processing the application. To rule, it assesses the company's ability to achieve its development objectives under conditions required for the proper functioning of the banking system and depositor security. The applicant is notified of the closure of the file processing. From this date, the Commission has a one-month period to rule on the application.

Art. 20 - Approval is granted by decision of the Banking and Financial Supervision Commission. The decision specifies the category in which the institution is approved, under Article 17 provisions, and lists as necessary the banking operations authorized for it. It is published in the Official Journal and in at least one of the main national press organs at the beneficiary's expense. The Commission draws up and maintains an updated list of approved credit institutions, each assigned a registration number. This list and its updates are published in the Official Journal. Credit institutions must include their registration number on all correspondence or publications.

Art. 21 - Subject to specific legislative provisions targeting certain categories of institutions, credit institutions must be constituted as legal persons.
They must have a fully paid-up capital at the time of their constitution, with the minimum amount fixed for each category defined in Article 17 by decree issued upon advice from the Banking and Financial Supervision Commission. This minimum may vary according to categories of institutions and the number of public counters opened. The form of shares or partnership interests in credit institutions must allow the identification at all times of the shareholders or members of these institutions.

Art. 22 - Every credit institution must be able to justify at all times that its assets effectively exceed by an amount at least equal to the minimum capital assigned to it by the liabilities owed to third parties.
The implementation details of this provision are defined by an instruction from the Banking and Financial Supervision Commission.

Art. 23 - The general management of any credit institution, namely the effective determination of its activity orientation, must be ensured by at least two persons.
The persons referred to in the preceding paragraph must reside in Madagascar.

Art. 24 - The operations of credit institutions are audited by at least two statutory auditors (commissaires aux comptes). Under the conditions fixed by the laws governing the profession, they certify annual accounts, ensure and attest to the accuracy and fairness of information intended for authorities and the public. When the total balance sheet is below a threshold fixed by the Banking and Financial Supervision Commission, the intervention of a single statutory auditor is required. The Commission may request information from the statutory auditors of credit institutions on their activity and financial situation. In this case, the statutory auditors are released from professional secrecy regarding the Commission. The Commission may also transmit written observations to the statutory auditors, who are then required to respond in writing.

Art. 25 - The appointment of the persons referred to in Article 23 and statutory auditors under Article 24 is notified to the Banking and Financial Supervision Commission at least one month before it takes effect. This notification is accompanied by all elements allowing assessment of the person's honorability and experience. The implementation details of these provisions will be specified by an instruction from the Banking and Financial Supervision Commission. The Commission may oppose the intended appointment by a reasoned decision. The credit institution, which cannot override it, then proceeds to a new appointment in the same forms.

CHAPTER II
WITHDRAWAL OF APPROVAL

SECTION I
Withdrawal of Approval

Art. 26 - The withdrawal of approval is pronounced by the Banking and Financial Supervision Commission, either at the request of the credit institution or ex officio when the institution no longer meets the conditions to which approval is subject, has not used its approval within twelve months, or has ceased its activity for at least six months, either as a disciplinary sanction in accordance with Article 49 of this law. Subject to the provisions of Article 50, the withdrawal of approval is notified to the concerned institution. It is published in the Official Journal and in at least one of the main national press organs. A copy of the decision is posted in all operating premises of the institution open to the public.

SECTION II
Liquidation Procedure

Art. 27 - Any credit institution whose approval has been withdrawn immediately enters liquidation. In the case where withdrawal is pronounced at the company's request, the withdrawal decision grants the company a period to close its operations. During liquidation, the company may only carry out operations strictly necessary for settling its affairs. It may only claim its status as a credit institution by specifying that it is in liquidation.

Art. 28 - Without prejudice to bankruptcy and judicial settlement rules, in the event of liquidation and upon petition by the President of the Banking and Financial Supervision Commission, a judicial manager is appointed by order of the President of the commercial court at the registered office location. During liquidation, the company remains subject to the control of the Banking and Financial Supervision Commission. The Commission may request information and justifications from the liquidator at any time regarding its operations and order on-site verifications. The Commission may communicate to the President of the commercial court any information it deems necessary; the President may, if necessary, replace the liquidator by order.

Art. 29 - The liquidator acts under full responsibility and possesses all powers of administration, direction, and representation of the legal entity.
No movable or immovable action may be pursued or brought except by or against the liquidator.
From the commencement of liquidation, individual creditor proceedings are suspended, except for privileged creditors. However, the liquidator may formally demand that privileged creditors initiate proceedings to realize their security interests within one month of the formal demand. If they fail to do so within this period, the liquidator will be authorized by the President of the commercial court to act in place of the privileged creditors, if such realization preserves the interests of unsecured creditors.

Art. 30 - Within twenty days of his appointment, the liquidator inserts an announcement in at least two of the main national press organs inviting creditors to submit their claims.
Known creditors who, within one month of this publication, have not submitted to the liquidator, against a receipt, their claims with a schedule of attached documents and claimed amounts, must be notified of the withdrawal of approval by registered letter from the liquidator and invited to submit their claims in the same forms.

Art. 31 - The liquidator automatically registers certain claims on the liabilities side. With the approval of the President of the commercial court, he registers contested claims under reservation, if the interested creditors have already seized the competent jurisdiction, or if they do so within fifteen days of receiving the registered letter with acknowledgment of receipt informing them that their claims have not been automatically admitted.

Art. 32 - The liquidator prepares as soon as possible, and no later than six months after his appointment, a summary statement of assets and liabilities of the liquidated company and submits it to the President of the commercial court and the Banking and Financial Supervision Commission.

Art. 33 - The liquidator proceeds with distributions under the authorization of the President of the commercial court. He takes into account creditors' privileges; among creditors equal in right and among unsecured creditors, distributions are made pro rata. If creditors fail to validly seize the competent jurisdiction within the prescribed period, contested claims o