Regulation No. 001/2024 of 12 April 2024 on Entities Operating in Burundi Providing Financing and/or Guarantee Services

BANK OF THE REPUBLIC OF BURUNDI

REGULATION NO. 001/2024 OF 12 APRIL 2024 ON ENTITIES OPERATING IN BURUNDI PROVIDING FINANCING AND/OR GUARANTEE SERVICES

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REGULATION ON ENTITIES OPERATING IN BURUNDI PROVIDING FINANCING AND/OR GUARANTEE SERVICES

Having regard to Law No. 1/07 of 15 March 2006 on bankruptcy;

Having regard to Law No. 1/02 of 04 February 2008 on the fight against money laundering and the financing of terrorism;

Having regard to Law No. 1/34 of 02 December 2008 on the statutes of the Banque de la République du Burundi;

Having regard to Law No. 1/09 of 30 May 2011 on the Private and Publicly Participated Companies Code;

Having regard to Law No. 1/02 of 7 January 2014 on the Insurance Code in Burundi;

Having regard to Law No. 1/01 of 16 January 2015 revising Law No. 1/07 of 26 April 2010 on the Commercial Code;

Having regard to Law No. 1/10 of 12 August 2016 governing conventional movable securities in Burundi;

Having regard to Law No. 1/17 of 22 August 2017 governing banking activities;

Having regard to Law No. 1/27 of 29 December 2017 revising the Penal Code;

Having regard to Law No. 1/07 of 11 May 2018 on the national payment system;

Having regard to Law No. 1/19 of 17 June 2021 modifying Law No. 1/24 of 10 September 2008 on the Burundi Investment Code;

The Banque de la République du Burundi, hereinafter referred to as "BRB", hereby issues this Regulation.

CHAPTER I: GENERAL PROVISIONS

Article 1: Purpose and Scope

This Regulation establishes the rules regarding the approval of entities operating in Burundi providing financing and/or guarantee services to credit institutions, microfinance institutions, the National Post Office, or any other entity authorized by the Central Bank to conduct credit operations, as well as the exercise and supervision of their activities by the Central Bank, pursuant to the final paragraph of Article 4 of Law No. 1/17 of 22 August 2017 governing banking activities.

Article 2: Definitions

For the purposes of this Regulation, the following terms shall mean:

Central Bank: Banque de la République du Burundi.

Bank: A legal entity approved by the Central Bank to carry out, as a regular profession, operations mainly related to receiving public funds, credit operations, making payment instruments available to clients and managing them, as well as foreign exchange operations.

Guarantee Institution: Any institution whose purpose is to take, for consideration, in the interest of a natural or legal person, a commitment by signature such as a guarantee or endorsement for loans granted by credit institutions, microfinance institutions, or any other entity authorized by the Central Bank to conduct credit operations;

Financing Institution: Any institution whose purpose is the refinancing of loans granted by credit institutions and microfinance institutions, or any other entity authorized by the Central Bank to conduct credit operations, to their clients by mobilizing long-term resources on financial markets or from development partners;

Credit Institution: Commercial banks and financial institutions;

Microfinance Institution: An entity approved and/or registered by the Central Bank to conduct microfinance activities in Burundi;

Regulated Institution: Credit institutions and microfinance institutions;

Management Body: Board of Directors, Management, or General Management.

CHAPTER II: AUTHORIZED OPERATIONS AND PROHIBITIONS

Article 3: Authorized Operations

1. Strengthening the equity of project promoters

Entities operating in Burundi providing financing and/or guarantee services to regulated institutions are authorized to grant subordinated loans, through financial institutions, as a complement to the promoter's own funds, in order to improve the borrowing base with a credit institution.

2. Establishment of a guarantee fund

Entities operating in Burundi providing financing and/or guarantee services to regulated institutions are authorized to cover the risks of the latter to improve access to financing for project promoters;

3. Establishment of support mechanisms

Entities operating in Burundi providing financing and/or guarantee services to regulated institutions are authorized to provide support and assistance to identified project promoters, particularly in the preparation of their financing files and in the monitoring of their activities.

Article 4: Prohibitions

No person may conduct financing and/or guarantee services to regulated institutions without having previously been approved for this purpose by the Central Bank.

CHAPTER III: GRANTING, WITHDRAWAL, AND CHANGE OF INITIAL APPROVAL CONDITIONS FOR A FINANCING AND/OR GUARANTEE INSTITUTION

Article 5: Obtaining Approval

Obtaining approval is subject to submitting a written application to the Central Bank, accompanied by the information and documents listed below:

1. a letter of approval request addressed to the Governor of the Central Bank;
2. a resolution of the General Meeting constituting the institution and the decision of the competent body for corporate shareholders authorizing them to participate in the capital of said institution;
3. a tax identification number and commercial register extract for the requesting institution;
4. the original notarized articles of association of the requesting institution;
5. proof of release of the minimum regulatory capital by shareholders via a deposit certificate, in a local bank, of the amount of said capital;
6. a list of shareholders and their holdings;
7. a list of Managers and Directors;
8. a copy of the notarized articles of association for corporate shareholders;
9. a copy of a valid national identity card or passport, a detailed curriculum vitae, and a criminal record extract for natural persons;
10. a business plan describing, in particular, the contribution to satisfying a local or general economic need, the type and volume of envisaged operations, and including forecasts supported by projected balance sheets and income statements over a three (3) year period;
11. a detailed organizational chart clearly indicating the entity's structure;
12. Internal Rules and Procedures;
13. the registered office address (physical address, e-mail, P.O. Box, Website, telephone number, etc.).

Article 6: Receipt, Duration of Approval Process, and Notification of Decision

Upon receipt of the approval application file, the Central Bank verifies that it conforms to the required information and documents and notifies its decision of approval or rejection.

If not, the Central Bank notifies the applicant of the non-conformity of the provided documents and information within a period not exceeding one month from the date of receipt of the application.

The Central Bank may request the applicant for any additional information necessary for its application.

The Central Bank notifies its decision to the applicant within a period not exceeding three (03) months from the receipt of the last requested information.

Article 7: Issuance of Approval Act

The approval decision is notified in writing to the applicant. The financing and/or guarantee institution may only offer the types of services recorded in its approval act.

The approval act must be published in the Official Bulletin of Burundi and displayed at its registered office, and the related costs are borne by the concerned institution.

Article 8: Modifications of Approval Conditions

Any modification of the situation of the financing and/or guarantee institution approved by the Central Bank concerning the following elements is subject to prior authorization from the Central Bank:

1. the legal form of the institution;
2. the change in shareholding structure and/or the identity or partners of the institution;
3. the types of services for which the institution was approved;
4. any operation of acquisition, extension, or transfer of participation, direct or indirect, by the institution;

Any modification of the conditions to which the approval was subject, other than that provided for in paragraph 1 above, which may affect the accuracy of the information and supporting documents provided for obtaining approval, must be declared.

Authorization requests or declarations as provided for in paragraphs 1 and 2 above must include all elements of assessment likely to clarify to the Central Bank the causes, objectives, and impacts of the concerned modification.

The Central Bank rules on the matter within a period not exceeding two (02) months from the receipt of the authorization request or declaration.

CHAPTER IV: APPROVAL OF MEMBERS OF MANAGEMENT BODIES

Article 9: Conditions and Required Documents for Director Approval

Before taking office, Directors must be approved by the Central Bank. Financing and/or guarantee institutions must submit, for each person whose approval is requested, a file comprising the following elements:

1. a letter of approval request addressed to the Governor of the Central Bank;
2. a detailed curriculum vitae;
3. an original criminal record extract dated less than three (03) months;
4. a certificate of non-bankruptcy issued by the competent authority dated less than three (03) months;
5. the minutes of the General Meeting session appointing the candidate for approval;
6. certified true copies of diplomas of at least a bachelor's degree or high school diploma minimum for the Chairman of the Board of Directors and of at least A1 level for other Directors;
7. an equivalence certificate for diplomas obtained in a foreign country;
8. experience of at least three (03) years in financial and/or banking, legal, or corporate governance matters for the Chairman of the Board of Directors;
9. a copy of the National Identity Card or passport;
10. any other information and details deemed useful by the Central Bank.

In addition to the above-mentioned conditions and documents, Directors must comply with the provisions of Article 11 of this Regulation regarding the disqualifications of Managers and Directors.

Article 10: Conditions and Required Documents for Manager Approval

Before taking office, Managers must be approved by the Central Bank. Financing and/or guarantee institutions must submit, for each of their Managers, a file comprising the following elements:

1. a letter of approval request addressed to the Governor of the Central Bank;
2. a detailed curriculum vitae indicating relevant experience of at least three (03) years in financial and/or banking matters;
3. an original criminal record extract dated less than three (03) months;
4. a certificate of non-bankruptcy issued by the competent authority dated less than three (03) months;
5. certified true copies of diplomas of at least a bachelor's degree or high school diploma in finance, law, economics, or similar sciences;
6. an equivalence certificate for diplomas obtained in a foreign country;
7. the minutes of the General Meeting and Board of Directors sessions appointing the candidate for approval;
8. a copy of the National Identity Card or passport;
9. any other information and details deemed useful by the Central Bank.

In addition to the above-mentioned conditions and documents, Managers must comply with the provisions of Article 11 of this Regulation regarding the disqualifications of Managers and Directors.

Article 11: Disqualifications of Managers and Directors

No person may be a Manager or Director of a financing and/or guarantee institution in any capacity if:

1. they have not been approved by the Central Bank;
2. they have been declared personally bankrupt in Burundi and/or abroad and have not been rehabilitated;
3. they played a leading role in a company that, under their leadership, was declared bankrupt and has not been rehabilitated;
4. they are being prosecuted or have been convicted, in Burundi and/or abroad, as a principal or accomplice and have not been rehabilitated for the following offenses:
   a. counterfeiting; b. counterfeiting or falsification of public securities or commercial instruments, shares, bonds, interest coupons, or banknotes;
   c. counterfeiting or falsification of seals, stamps, punches, or marks;
   d. forgery and use of forgery; e. violation of exchange and foreign trade rules; f. corruption and related offenses; g. theft, extortion, embezzlement, breach of trust, fraud, or handling stolen goods; h. issuing checks without sufficient funds;
   i. bankruptcy or assimilated offenses;
   j. money laundering, financing of terrorism, or any other economic and financial crime.
5. They have violated the provisions of this Regulation.

Article 12: Prohibition of Cumulation of Functions for Managers and Management Body Members

No person may simultaneously:

1. manage two financing and/or guarantee institutions;
2. manage a financing and/or guarantee institution and another company;
3. manage a financing and/or guarantee institution and be a member of the management body of another financing and/or guarantee institution;
4. be a member of the management body in two financing and/or guarantee institutions.

CHAPTER V: CONDITIONS OF EXERCISE

Article 13: Minimum Share Capital

The financing and/or guarantee institution must have a share capital whose minimum amount is fixed by the Central Bank in a related circular. This capital must be fully subscribed and entirely paid in cash before approval is granted.

Article 14: Suspension or Cessation of Service Provision

The financing and/or guarantee institution is required to submit the reasons for suspension or cessation to the Central Bank for approval and to inform its service beneficiaries at least three (03) months before the suspension or cessation of its activities after obtaining Central Bank approval.

Prior to the suspension or cessation of its activities, the financing and/or guarantee institution is required to honor its commitments towards credit institutions and microfinance institutions or any other entity authorized by the Central Bank to conduct credit operations. Suspension may not exceed six (06) months under penalty of withdrawal of approval.

Article 15: Resumption of Activity

To resume activity, the financing and/or guarantee institution that obtained authorization to suspend its activities must inform the Central Bank at least one (01) month before the resumption date.

For institutions whose activity was suspended on the initiative of the Central Bank, resumption is subject to the lifting of the conditions that motivated this suspension.

Article 16: Acquisition of Participations

Financing and/or guarantee institutions are not authorized to acquire or hold participations in existing or newly created companies in Burundi.

Nevertheless, they are authorized to acquire or hold participations in other financing and/or guarantee institutions with the approval of the Central Bank.

CHAPTER VI: SUPERVISION OF FINANCING AND/OR GUARANTEE INSTITUTIONS

Article 17: Periodicity and Transmission of Information to the Central Bank

The Central Bank determines the list, format, and periodicity for the transmission of documents and information submitted to it by financing and/or guarantee institutions regarding their activities.

Financing and/or guarantee institutions are required to transmit to the Central Bank annual financial statements certified by a statutory auditor duly approved by the Central Bank within three (03) months after the close of the fiscal year.

Article 18: Document and On-Site Controls

The Central Bank conducts document and on-site controls of approved financing and/or guarantee institutions to ensure compliance with the provisions of this Regulation.

The Central Bank may, whenever necessary, request approved financing and/or guarantee institutions for all information, clarifications, or justifications necessary for the exercise of its mission, and professional secrecy may not be invoked against it.

The Central Bank is authorized to take all technical measures intended to facilitate document and on-site controls.

Article 19: Accounting and Prudential Management Standards

Any financing and/or guarantee institution is required to comply with accounting and prudential management standards using the banking chart of accounts.

Article 20: Supervision Fees and Other Fees

Financing and/or guarantee institutions must pay annual supervision fees and fees related to services rendered by the Central Bank according to the terms and amounts specified in a related circular.

CHAPTER VII: MANAGEMENT BODIES

Article 21: Management Bodies

In addition to the General Meeting, the financing and/or guarantee institution must have at minimum a Board of Directors and a General Management.

Furthermore, the financing and/or guarantee institution must establish specialized committees, notably a Credit Committee and an Audit Committee.

Article 22: General Meeting

The General Meeting is the supreme body of the financing and/or guarantee institution and is composed of all shareholders.

The General Meeting may hold ordinary or extraordinary sessions.

The Ordinary General Meeting meets at least once a year, upon convocation by the Chairman of the Board of Directors or, if applicable, their Vice-Chairman, within three (03) months following the close of each financial year.

The General Meeting is notably competent to:

1. ensure proper administration and functioning of the institution;
2. elect and dismiss members of management bodies;
3. appoint the Statutory Auditor and/or external auditor;
4. approve the financial statements of the year and rule on the allocation of annual results;
5. adopt the activity report for the past year;
6. grant discharge to members of management bodies and Statutory Auditors;
7. set the remuneration of Directors via sitting fees or emoluments;
8. address any other question related to the organization and functioning of the institution.

The Extraordinary General Meeting meets whenever necessary at the request of the majority of Directors as defined in the institution's articles of association. It may also meet at the request of shareholders or institution members according to procedures set by the articles of association.

It is notably convened to:

1. amend the articles of association and, if applicable, the Internal Rules and Procedures;
2. address any other question provided for by the institution's articles of association.

Only questions listed in the convocation notice are subject to deliberation by the General Meeting. A copy of the annual financial statements and the minutes of deliberations of this General Meeting must be communicated to the Central Bank during the month following the date of the meeting.

The Central Bank may require the holding of an Extraordinary General Meeting whenever it deems appropriate.

Article 23: Board of Directors

The Board of Directors is composed of at least five (05) persons elected by the General Meeting, including at least one Independent Director.

The term of office of Directors runs from the date of their approval by the Central Bank.

The Board of Directors exercises the powers delegated to it by the General Meeting. It oversees the functioning and proper conduct of the institution without interfering in its day-to-day management.

To this end, it must notably:

1. ensure compliance with legal, regulatory, and statutory provisions;
2. define the rules and areas of intervention of the institution in line with the directions of the General Meeting;
3. approve the types of products the institution makes available to its clients;
4. define the institution's resource management policy and periodically report on its mandate to the General Meeting under conditions set by the articles of association and Internal Rules and Procedures;
5. recruit and supervise a General Manager or Manager who is responsible for operations within the limits of powers conferred upon them;
6. implement the decisions of the General Meeting;
7. adopt the business plan, activity plan, and annual budget;
8. appoint within its ranks the members of specialized committees;

Article 24: General Management or Manager

The General Manager or Manager does not possess inherent powers, but only those delegated in writing by the Board of Directors. They also ensure the secretariat of Board of Directors meetings.

The General Manager or Manager represents the institution towards third parties within the limits of powers conferred upon them.

The Board of Directors refrains from exercising its powers to the extent that it has delegated them to the Manager or General Manager.

In the event of a vacancy in the position of General Manager or Manager, for any reason whatsoever, the Board of Directors must, within three (03) months, proceed to recruit a replacement.

Article 25: Responsibilities of Management Body Members

Members of management bodies are responsible, individually or jointly, as the case may be, for faults committed in the exercise of their functions.

A member of a management body may be suspended or dismissed for serious misconduct, notably for violation of legal, regulatory, or statutory provisions by the competent body or, if applicable, by the Central Bank.

CHAPTER VIII: ACCOUNTING REGULATION

Article 26: Accounting Standards and Financial Statements

Financing and/or guarantee institutions maintain their accounts according to the standards issued by the Central Bank.

Financial statements, presented on a comparative basis for