Harmonisation of company law: The West African experience

By Alec Werner, head of the Africa Practice Group at Sonnenberg Hoffmann Galombik (SHG), and Mzi Mgudlwa, partner who heads SHG’s Johannesburg office.

While the common perception is that Africa can greatly benefit from outside knowledge, expertise and technical assistance, the knowledge flow should not be one-way. In the context of moves towards deeper harmonisation of company law within the European Union and the associated challenges of amalgamating civil law and common law national systems, it is worth analysing the company law harmonisation efforts and experience of sixteen West and Central African countries.

In 1993, fourteen West and Central African countries signed the OHADA treaty, with two countries subsequently adhering to the treaty and a third (the Democratic Republic of Congo) due to adhere shortly. OHADA is the French acronym for the Organisation for Harmonisation of Business Law in Africa. All OHADA countries apart from Cameroon have a civil law tradition (Cameroon has a dual civil law/common law tradition due to its split colonial heritage). The need to accommodate Cameroon’s common law tradition, therefore, offers an interesting perspective on current attempts at deeper harmonisation of company law within the EU.

The first laws passed under the Treaty came into force in 1998, so there is now a reasonable period of experience with which to judge their effectiveness. To date, eight laws (Uniform Acts) have been passed, including the Uniform Act relating to Companies and Economic Interest Groups (Companies Act), on which the rest of this article will focus.

Unlike comparable EU legislation, the Companies Act prescribes the types of companies available and governance structures of such companies, not allowing national variations. The types of companies are based on the French model. Another feature of the Act (and all other Uniform Acts) is that it is automatically binding and applicable in all member states without the need for national enabling legislation and automatically overrides conflicting national legislation. A supra-national court, the Common Court of Justice and Arbitration, has been established, whose judgments are automatically enforceable in member states without the need for scrutiny by national courts. The CCJA constitutes the ultimate court of appeal on OHADA matters in all member states and so replaces national supreme courts in its sphere of jurisdiction.

One practical matter affecting the integration of common law jurisdictions into the OHADA system is the translation of OHADA laws into English. The official translations are less than adequate and the French text is the only legally binding version. The translations do not use traditional and accepted common law terminology and consequently common law judges in Cameroon need to apply the law by approximation. (Readers will be familiar with similar issues arising in connection with English translations of EU legislation.)

Turning to specific issues connected with the Companies Act and corporate law in general, the OHADA founders needed to balance the traditional common law concept of shareholder primacy in determining what actions are in the best interests of a company and the civil law, in particular French law, concept of ‘intérêt social’ (corporate interest) whereby the company has interests separate from those of its shareholders and the interests of other stakeholders need to be taken into account. OHADA appears to have adopted the stakeholder concept of corporate interest, but has not codified it and has left it to courts to interpret the concept such that it may be interpreted narrowly in certain circumstances with the result that its interpretation approximates to the shareholder primacy concept, or its interpretation may evolve over time.

As regards corporate governance structures, the Companies Act does not allow for the management board/supervisory board structure possible in France for ‘sociétés anonymes’ (public companies). The Act also permits the appointment of a single managing director without the need for a board of directors for companies with three shareholders or fewer.

In conclusion, OHADA offers an interesting example of harmonisation, indeed unification, of corporate law across civil and common law systems which, although taking place in a developing country context, may offer lessons to those seeking further to harmonise corporate law in the European Union. In particular, OHADA has incorporated some common law flexibility (such as relying on judicial discretion rather than strict codification) into its civil law heritage and has simplified corporate governance structures from its French commercial code heritage. While still a work in progress, the success of the initiative is borne out by the fact that it operates successfully in one common law jurisdiction (Cameroon) and others, notably Ghana and Nigeria, are seriously considering adhering to it.

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