Law on the Regulation of Financial Cooperatives

REPUBLIC OF DJIBOUTI
UNITE-EQUALITY-PEACE
PRESIDENCY OF THE REPUBLIC
Law n'117lAN/11/64*.
Concerning the regulation of financial cooperatives.
THE NATIONAL ASSEMBLY HAS ADOPTED
THE PRESIDENT OF THE REPUBLIC PROMULGATES
THE LAW WHICH FOLLOWS
CONSIDERING The Constitution of September 15, 1992; CONSIDERING Law n'118/AN / 11th Legislature of January 16, 2017 repealing Law n'91/AN/05/5th Legislature of January 16, 2005 on the Statutes of the Central Bank; CONSIDERING Law n'119/AN/11/6th Legislature of January 16, 2017 on the constitution and supervision of credit institutions and financial auxiliaries, repealing Law n'92/AN/05/5th Legislature of January 16, 2005 on the opening, activity and control of credit institutions; CONSIDERING Law n'179/AN/07/5th Legislature of May 16, 2007 on the regulation of microfinance activities; CONSIDERING Law n" 191/AN/86 1st Legislature of February 03, 1986 on the regulation of commercial companies; CONSIDERING Decree n"2008-0083/PRE of March 26, 2008 appointing the Prime Minister; CONSIDERING Decree n"2008-0084/PRE of March 27, 2008 appointing the members of the Government; CONSIDERING Decree n"94-0147/PRE of November 05, 1994 appointing the Governor of the Central Bank of Djibouti; The Council of Ministers heard in its session of December 14, 2010.

Chapter I: General Provisions
Article 1: Object of the law
This law defines the rules relating to the management, organization, operation, control, and supervision of financial cooperatives, commonly called caisses or Savings and Credit Cooperatives. This law applies to financial cooperatives operating within the Djiboutian territory, as well as to their unions and federations.
Article 2: Definition
For the purposes of this law, a "Financial Cooperative" is considered a group of natural or legal persons, having legal personality, non-profit, and with variable capital, founded on the principles of union, solidarity, and mutual aid, and whose primary purpose is to carry out financial activities for the benefit of its members (collection of savings, credit granting, fund transfer, exchange, micro-insurance, etc.). A financial cooperative aims to:
a) receive the savings of its members and make them grow; b) grant credit to its members; c) foster cooperation among its members, between itself and its members, and between itself and other cooperative organizations; d) promote economic, social, and cooperative education. A financial cooperative has all the powers necessary to establish the services required to achieve its objectives. A financial cooperative can be a primary financial cooperative or a union of primary financial cooperatives. The activities of a financial cooperative, being essentially cooperative, are reserved for its members. These activities are not considered the operation of a business or a profit-making venture.
Article 3: Cooperative Values
Financial cooperatives subject to the provisions of this law are associations of natural or legal persons working for the promotion of their members, respecting the principles of self-help, well-being, democracy, and equality. Financial cooperatives shall, in the exercise of all their activities, respect the principles of integrity, openness to all, and common interest of the members. The activities of financial cooperatives must be compatible with the cooperative values set out in paragraphs 1 and 2 of this article.

Article 4: Cooperative Principles
Financial cooperatives are governed by the principles of mutuality or cooperation. They are required to respect the rules of mutual or cooperative action, including the following:

1. Membership is free and voluntary;
2. The number of members is not limited;
3. Operation is democratic, manifested notably in the institutions of the principle whereby each member has only one vote, regardless of the number of shares held;
4. [Illegible]
5. [Illegible]
6. Remuneration is authorized only in exceptional cases and within the limits provided by the regulations;
7. Remuneration of shares is limited;
8. The constitution of a legal reserve is mandatory. The sums thus reserved cannot be shared among members;
9. Actions aimed at the economic and social education of the institution's members are prioritized.
   Article 5: Structure of the Cooperative Movement
   Financial cooperatives may form unions and a federation among themselves for better management and defense of their common interests.
   A financial cooperative may maintain relations with another cooperative both nationally and internationally.
   Article 6: Specific Requirements for Financial Cooperatives
   A financial cooperative must, in all cases, comply with the financial requirements and prudential rules set by the Central Bank of Djibouti, which is the supervisory authority for financial cooperatives.
   Chapter II: ON THE CREATION AND ORGANIZATION OF COOPERATIVES
   Section One: On the Creation of Primary Financial Cooperatives
   Article 7: A primary financial cooperative is created by a decision of the constitutive general assembly of members, the number of which cannot be less than seven (07) persons.
   Article 8: Only adults who enjoy their civil rights and non-bankrupt legal persons may join a financial cooperative.
   Minors may join a cooperative only if they have been emancipated.

Section 2: Umbrella Organizations of Financial Cooperatives
Subsection One: On Unions of Financial Cooperatives
Article 9: Union of Financial Cooperatives
Three (3) or more primary financial cooperatives may group together to form a union called a Financial Cooperative Union. Primary financial cooperatives may be members of a union. A primary financial cooperative cannot be a member of two (2) unions simultaneously.
Article 10: Representation of Financial Cooperatives in Cooperative Unions
The statutes of a financial cooperative union shall determine the modalities of representation of primary financial cooperatives within a financial cooperative union, as well as the method of appointing delegates to the meetings of a union's general assembly.
Article 11: Activities of a Financial Cooperative Union
A financial cooperative union may conduct economic activities and provide services complementary to those carried out by its member primary financial cooperatives. Subsection 2: On Federations of Financial Cooperatives
Article 12: Federation of Financial Cooperatives
Two (2) or more financial cooperative unions may join together to form a national federation of financial cooperatives. This federation is called the Federation of Financial Cooperatives.
Article 13: Activities of a Federation
A financial cooperative federation shall conduct economic activities and provide services solely for the purpose of supporting the initiatives of the member financial cooperative unions, defending their members' interests, and representing them professionally and financially.

Subsection 3: On the Role of Unions and Federations of Financial Cooperatives
Article 14: Role of Unions and Federations
Unions and federations are responsible for protecting and managing the interests of their affiliated base institutions, including administrative, professional, and financial support, to help them achieve their objectives. They act as supervisory and control bodies for the base institutions affiliated with them.

1. to receive the savings of its members to make them grow;
2. to grant credit to its members;
3. to foster cooperation among the members of the federation, between the federation and other cooperative organizations;
4. to promote economic, social, and cooperative education;
5. to provide technical assistance to its members and, where applicable, to the financial body, particularly in terms of organization, operation, accounting, training, and education;
6. to exercise administrative, technical, and financial control over its members, institutions affiliated with these members, and, where applicable, financial bodies;
7. to inspect its members, the institutions affiliated with these members, and, where applicable, the financial bodies;
8. to ensure the coherence and promote the development of the network, by encouraging the creation of unions and institutions;
9. to represent its members at national and international levels;
10. to define, for the use of its members and, where applicable, the financial body, the broad guidelines of a code of ethics.
    A Federation/Union has all the powers required to establish the services necessary for the realization of its objectives.
    Section 3: On the Approval to Conduct Financial Activities
    Article 15: A financial cooperative may not conduct its activities in Djibouti without first being approved by the Central Bank of Djibouti, in accordance with the provisions of Law No. 119/AN/11/6th Legislature on the constitution and supervision of credit institutions and financial auxiliaries, and Law No. 179/AN/07/5th Legislature on the regulation of microfinance activities.
    The application for approval must be submitted within three (3) months following the creation of the cooperative.
    Upon holding the constitutive General Assembly, a letter must be sent to the Central Bank of Djibouti for information.
    Approval is granted by decision of the Governor of the Central Bank of Djibouti. It is deemed to have been granted if a reasoned refusal is not notified within three months from the date of receipt of the application. The financial cooperative is approved as: i) a credit institution, ii) a financial auxiliary, iii) a microfinance institution. The approval must be displayed in the premises operated by the financial cooperative in an accessible and visible place for users.
    Article 16: The conditions for obtaining and withdrawing approval are defined by Law No. 119/AN/11/6th Legislature on the constitution and supervision of credit institutions and financial auxiliaries, and Law No. 179/AN/07/5th Legislature on the regulation of microfinance activities, as well as by the instructions of the Central Bank.
    Article 17: Financial cooperatives are constituted in the form of cooperative or mutual societies with variable capital.
    They are required to register with the commercial register after obtaining their approval from the Central Bank.
    They acquire legal personality.
    Article 18: Statutes of a Financial Cooperative
    The statutes of a financial cooperative must comply with the model provided by the instructions of the Central Bank of Djibouti.
    The statutes of a financial cooperative are applicable to its members.
    CHAPTER III: ON MEMBERS
    Section One: Conditions for Joining or Withdrawing from a Financial Cooperative
    Article 19: Conditions Required to Become a Member of a Financial Cooperative
    To become a member of a financial cooperative, a person must:

1. Be at least eighteen (18) years old or be an emancipated minor;
2. Enjoy their civil rights;
3. Not engage directly or indirectly in activities competing with those of the financial cooperative one wishes to join;
4. Have subscribed and paid up the number of shares provided for by the statutes of the financial cooperative;
5. Agree to collaborate with the financial cooperative for all or part of the operations as provided by the statutes;
6. Apply and be admitted by the Board of Directors of the institution.
   Article 20: Financial Liability of Members
   Unless the statutes of the institution decide otherwise, the members of a financial cooperative are financially liable for the commitments of the financial cooperative only up to the amount of their shares.
   Article 21: End of Membership in a Financial Cooperative
   Membership in a primary financial cooperative ends in case of death, resignation, or exclusion of the member, or liquidation or dissolution of the financial cooperative. In unions or federations of financial cooperatives, membership ends with the withdrawal, dissolution, or liquidation of the member financial cooperative.
   Article 22: Right of Withdrawal from a Financial Cooperative
   Any member of a financial cooperative has the right to withdraw from the cooperative at any time by sending written notification to the board of directors.
   Article 23: Exclusion of a Member from a Financial Cooperative
   At the request of one of the governing bodies or the manager of a financial cooperative, a member may be excluded from a financial cooperative:
7. If they do not honor their commitments to the financial cooperative;
8. If they do not respect the statutes and regulations of the financial cooperative;
9. If they commit or adopt behaviors whose gravity is such as to harm the reputation of the financial cooperative.

[Illegible] is taken by the Board of Directors, the exclusion of board members must, however, be ratified by the General Assembly of the financial cooperative. The Board of Directors may suspend a member of a financial cooperative. The suspended member does not have the right to participate in the meetings of the General Assembly. The minutes of the meeting during which a member is suspended or excluded from their financial cooperative must include all the facts motivating this decision. Notification of the decision of suspension or exclusion is transmitted to the concerned member.
Section 2: On the Share Capital of a Financial Cooperative and Shares
Article 24: Share Capital of a Financial Cooperative
The share capital of a financial cooperative is constituted by subscribed and paid-up shares.
The share capital of a financial cooperative is variable. It depends on the admissions and resignations of members, as well as the increase or decrease in the number of shares held by each member. However, the financial cooperative must have the minimum capital required according to the category of financial institution, as defined in paragraph 5 of Article 15.
Article 25: Characteristics of a Share
In a financial cooperative, shares are equal for each member. The value of a share is determined by the General Assembly.
A member's share is indivisible and non-negotiable.
The statutes of a financial cooperative determine the nominal value of each share, as well as the conditions for its subscription and payment, which are approved by the Board of Directors. It is recorded in the appropriate register kept at the headquarters of the financial cooperative. Each member has the right to consult this register at the headquarters of the financial cooperative.
Article 26: Conditions for Reimbursement of Shares and Funds Deposited with a Financial Cooperative
The reimbursement of shares or funds deposited by a member who resigns or is excluded from a financial cooperative are determined in the statutes of the cooperative. The reimbursement of shares or deposited funds cannot exceed twelve (12) months from the date of resignation or exclusion, and the value of each share.
Article 27: Relationship Between Members' Votes and Shares
Each member of a primary financial cooperative has one vote, regardless of the number of shares they hold. Members of financial cooperatives do not have more than one vote. Members of a union or federation of financial cooperatives may have more than one vote depending on the number of shares that the primary financial cooperative holds in that union or federation.
Article 28: Remuneration of Shares
The remuneration of shares is defined and specified in the statutes. The strengthening of own funds must be prioritized.

Section 3: On the Obligations of a Financial Cooperative
Article 29: Register of Shares
Every financial cooperative must keep a register of shares, which must be kept up to date. This register must provide the following information:

• The identification of the member;
• The date on which the member was registered;
• The date on which the member ceased to be a member;
• The number of shares subscribed by the member;
• The complete and accurate address of the member.
  Article 30: Documents Kept by the Financial Cooperative
  Every financial cooperative must keep the following documents at its headquarters:

1. The statutes and internal regulations approved by the Central Bank of Djibouti;
2. The approval document issued by the Central Bank of Djibouti;
3. A copy of its approval by the Central Bank of Djibouti;
4. A copy of its statutes and internal regulations;
5. A register of members;
6. The list of shares;
7. The minutes of the meetings of the General Assembly, the Board of Directors, the Supervisory Board, and the Credit Committee;
8. The annual accounts and reports;
9. The minutes of the constitutive General Assembly and any subsequent extraordinary General Assemblies;
10. A list of the members of the Board of Directors, the Supervisory Board, the Credit Committee, and any other management body, indicating the start and end dates of their functions, as applicable;
11. A list mentioning the names of the members of the cooperative;
12. Details of the subscription of each share, as well as their reimbursement or transfer, if applicable;
13. The accounting documents and records required by the Central Bank of Djibouti;
14. For each depositor, the operations they carry out with the cooperative, including the credit or debit balance;
15. Account statements indicating daily, for each depositor, the operations they carry out with the cooperative, including the credit or debit balance;
16. Supporting documents for all transactions carried out for the cooperative's operations;
17. The accounting records must be kept at the headquarters of the financial cooperative and made available for inspection by the supervisory authorities.
    Failure to comply with the provisions of the first paragraph constitutes an offense for which it shall be punished in accordance with the law.
    Article 31: Accounting Records
    Every financial cooperative must keep appropriate accounting records that allow it to generate information providing a true and fair view of its financial situation and results, and that allow for the preparation of the financial statements prescribed by the Central Bank of Djibouti.

Section 4: On the Rights and Obligations of a Member of a Financial Cooperative
Article 32: Rights of a Member of a Financial Cooperative
Subject to the provisions of Article 31 of this law, a member of a financial cooperative has the following rights:

1. Attend General Assembly meetings, vote, and participate in decision-making;
2. Elect and be elected to the bodies of the cooperative society in accordance with the provisions of this law and the statutes of the financial cooperative;
3. Be informed of the economic and financial situation of their financial cooperative;
4. Benefit from the services offered by the financial cooperative;
5. Participate in the activities of the financial cooperative;
6. Cease to be a member of a financial cooperative;
7. Designate a representative;
8. Suggest any other activity that may enable the financial cooperative to achieve its objectives.
   Article 33: Obligations of a Member of a Financial Cooperative
   A member of a financial cooperative has the obligation to observe and comply with the statutes of the financial cooperative and the decisions made by the competent bodies of the financial cooperative in application of this law and other regulations.
   CHAPTER IV: ON THE BODIES OF FINANCIAL COOPERATIVES AND THEIR POWERS
   Article 34: Bodies of a Financial Cooperative
   The main bodies of a financial cooperative are the following:
9. The General Assembly;
10. The Board of Directors;
11. The Supervisory Board;
12. The Credit Committee.
    Article 35: Directors of a Financial Cooperative
    The directors of a financial cooperative are the members of the board of directors, the credit committee, the supervisory board, as well as any other person holding a management position within the financial cooperative. The directors of a financial cooperative are presumed to be its agents. A director must, in the exercise of their functions, act within the limits of the powers conferred upon them. They must act with care, prudence, and diligence as a prudent person would in similar circumstances. They must act with honesty and loyalty in the interest of the financial cooperative and respect its objectives. To this end, they must take into account the interest of the members and avoid placing themselves in a situation of conflict between their personal interest and their obligations. Members of these bodies of a financial cooperative must not have any kinship ties up to the third degree, nor be business partners. Furthermore, the accumulation of positions is prohibited.
    Article 36: Remuneration of Members of Bodies of a Financial Cooperative
    The members of the board of directors, the supervisory board, and the credit committee of a financial cooperative work on a voluntary basis and receive no remuneration. However, the internal regulations of the financial cooperative shall provide for the modalities of reimbursement of expenses incurred by the members of these three bodies in the exercise of their functions.
    Section One: On the General Assembly and its Powers
    Article 37: Powers of the General Assembly
    Subject to the provisions of this law, the General Assembly of members is the supreme body of a financial cooperative. Each member has the right to participate in all meetings or to be represented. The powers of the General Assembly are extensive. It has, among other things, the competence to:

• ensure the sound administration and proper functioning of the cooperative;
• amend the statutes and internal regulations;
• elect and revoke members of the governing bodies;
• create voluntary reserves or any specific funds, particularly a guarantee or insurance fund;
• approve the accounts and decide on the allocation of results for each fiscal year;
• appoint the auditor, if applicable;
• determine the remuneration of shares and voluntary or forced savings;
• create any structure it deems useful;
• deal with any other matters relating to the administration and functioning of the cooperative.
  Article 38: Meetings of the General Assembly
  The General Assembly may hold ordinary and extraordinary meetings.
  The General Assembly meets at least once a year upon convocation by the President of the Board of Directors or the V