A number of legal forms of enterprises are available in order to conduct economic activity in Côte d’Ivoire, derived from the Uniform Act on Commercial Companies and Economic Interest Groups.
Economic activity may be carried out directly by a natural person; the economic agent is then referred to as an individual entrepreneur, of which the status of entrepreneur is a variant, resulting from the Organisation for the Harmonisation of Business Law in Africa (OHADA) 2014 reform on general commercial law. Economic activity can sometimes take the path of creating a legal person separate from its partners. Among the most commonly used forms of commercial companies, economic operators have the choice between the société anonyme (public limited liability company), the société par actions simplifiée (simplified joint-stock company) and the société à responsabilité limitée (private limited liability company). These forms of commercial companies may have only one partner.
Economic operators may decide to set up a private limited liability company without a ceiling on the number of partners. Therefore, there is freedom of choice as to the number of shareholders. Article 311 of the Uniform Act fixes the amount of the registered capital of such a company at a minimum of CFA1m ($1719). The text gave the member states the ability to fix a lower amount. Côte d’Ivoire chose to give private limited liability companies the freedom to fix the amount of their social capital by imposing a minimum value of the social shares at CFA5000 ($8.60).
Article 5 of Order No. 2014-161 of April 2, 2014 relating to the form of the statutes and the share capital of private limited liability companies constitutes the legal basis. It is up to the manager to commit the private limited liability companies vis-à-vis third parties. Managers present reports at general meetings, during which associates make collective decisions.
Economic operators may also choose to conduct activity through a simplified jointstock company. This corporate form was introduced under the OHADA reform of May 5, 2014 and is relatively new in Ivorian law. As with private limited liability companies, the number of shareholders is not limited. Article 853-5 of the Uniform Act on Commercial Companies and Economic Interest Groups specifies that both the amount of share capital and the nominal value of the shares of simplified jointstock companies are sovereignly determined by the shareholders in the articles of association. Moreover, these articles of association may freely determine the governance of the simplified joint stock companies. The shareholders can thus choose corporate bodies that operate in a sufficiently flexible manner. The one legal constraint imposed on shareholders in this type of company is the appointment of a chairman who represents the company vis-à-vis third parties with the most extensive powers.
The public limited liability company is the third most common corporate form used by economic operators in Côte d’Ivoire. It is generally used to establish large companies which in some cases may make a public offering. Unlike private limited liability companies and simplified joint-stock companies, there is a minimum amount for the share capital of a public limited liability company. According to the provisions under Article 387 of the Uniform Act on Commercial Companies and Economic Interest Groups, this is fixed at the sum of CFA10m ($17,190). However, the nominal value of each share is freely fixed.
For its governance, the public limited liability company may set up a board of directors, which shall comprise a minimum of three members and a maximum of 12 members. The members may choose from among their number a chairman who must be a natural person and not a representative of a legal entity. When the chairman of the board of directors assumes the day-to-day management of the company, that person takes the title of chairman and CEO. When the partners decide to avoid this arrangement, the CEO assumes the daily management of the company with the widest powers. It may happen that the shareholders of the public limited liability company reject the option of the board of directors, in which case the management and administration of the company is the responsibility of a managing director.
Other Company Structures
In addition to private limited liability companies, simplified jointstock companies and public limited liability companies, company law in Côte d’Ivoire allows economic operators to have recourse to other company structures, though this is not common. There is société en commandite simple (limited partnership), which is characterised by unlimited liability for the general partners as well as a delimitation of the same liability with respect to the limited partners. There is also the société en nom collectif (general partnership company), in which all partners have the status of traders and are indefinitely liable for the company’s debts.
Labour & Social Security Law
Salaried employment is governed by the provisions of the Labour Code under Law No. 2015-532, adopted on July 20, 2015, and its implementing decrees.
Better qualification of the national workforce was a matter of concern for the government in 2019. Thus, with regard to apprenticeship, Decree No. 2019-118 dated February 6, 2019 reformed the previous system by strengthening the status of apprentices and coordinating the actions of the respective players in apprenticeship training.
Together with civil servants and other public officials, employees were the main target of the new rules for the collective assumption of risks in society. The year 2019 saw the extension of this political will to self-employed workers, with the adoption of Ordinance No. 2019-636 dated July 17, 2019. This law is the founding act of the social security scheme for self-employed workers. Self-employed workers are understood to be natural persons who carry out an income-generating activity independently or are recognised as ministers of religion or religious persons. The National Social Security Fund is responsible for managing this new scheme.
Foreign Investment Law
The Ivorian authorities are paying particular attention to foreign direct investment and are endeavouring to offer advantageous conditions for investment in Côte d’Ivoire. Most of the measures to attract foreign private capital are contained in the Investment Code. Recent years have seen the adoption of two investment codes. The first was implemented in 2012, through Order No. 2012-487 of June 7, 2012, and was amended three years later under Order No. 2015-714 of November 4, 2015. The second code was adopted under Order No. 2018-646 of August 1, 2018, and amended shortly thereafter under Order No. 2019-1088 of December 18, 2019.
The tax incentives under the code are grouped into two separate regimes: the reporting regime and the registration regime. Whatever the scheme, the extent of the tax advantage to which the economic operators are entitled depends on the area in which they carry out their investments in the national territory, which is structured for this purpose into zones A, B and C.
Article 10 of the Investment Code specifies that the declaration regime applies to investments made for the creation of activities. The text specifies that the benefits to which this regime gives rights are limited to the exploitation phase only. The duration of the tax benefits, which most often consist of tax exemptions for category one companies, ranges from five to 15 years depending on whether the investment takes place in zone A, B or C. When the investment is made by a category 2 company, the tax advantage takes the form of a tax credit of 25%, 35% or 50% depending on the zone of the investment.
The investment approval system is defined by Article 13 of the Investment Code. It is understood as the regime applicable to investments in the creation and development of activities. Under the system, the code provides for incentives during the investment realisation phase and the operation phase. Incentives take the form of tax exemptions, for periods ranging from 5 to 15 years, depending on whether the investment takes place in zone A, B or C, where the firm is a category 1 company. If the company belongs to category 2, it is entitled to tax credits of 25%, 35% or 50% depending on the area in which the investment is made. These tax benefits are specific to large companies. Where companies are classified as small and medium-sized enterprises the content of the tax incentives is different.
It should be noted that one of the new features of the current Investment Code is the use of the tax credit technique. Whereas in the old codes tax benefits were granted in the form of tax exemption or reduction of the applicable tax, the Investment Code of 2018 adds a tax credit as a means of attracting foreign capital to Côte d’Ivoire. This credit can range from 25% to 75% depending on the investments concerned and their location throughout the country. These credits are used to offset the tax on industrial and commercial profits; the contribution of patents and licences; the tax on land assets; value-added tax; and the tax on banking transactions due by companies eligible for the provisions of the Investment Code.
From the point of view of foreign companies, the Investment Code increases the incentives to which they are entitled on the condition that they promote Ivorian workers and companies, and that their share capital is open to nationals. Article 21 of the Investment Code, as it appears under the Ordinance of December 18, 2019, states that large companies which have majority foreign-owned capital and which are eligible for benefits must apply a policy of local content relating to job creation, subcontracting and the opening up of share capital to Ivorian nationals.
While the 2018 version of Article 21 of the Investment Code limited the opening of the share capital of these companies to Ivorian nationals to a minimum of 15%, in order to benefit from this additional tax advantage, the Ordinance of December 18, 2019 has tightened this condition. The text now requires that the percentage of the opening of the share capital to Ivorian nationals is at least 34%, which represents a blocking minority for collective decision-making in these companies. In addition, in order to retain the additional tax credit, this distribution of share capital must remain unchanged for at least 10 years unless it is revised upwards for the benefit of shareholders.
The construction sector also saw significant developments in 2019. Law No. 2019-576 of June 26, 2019, which established the Building and Housing Code, repealed three main laws and two decrees specific to Ivorian real estate law. Thus, in terms of building permits, the previously applicable regime, resulting from Law No. 65-248 of August 4, 1965, amended and supplemented by Law No. 97-523 of September 4, 1997, has disappeared.
With regard to construction contracts, the new code repealed Act 99-478 of August 2, 1999 on the organisation of the sale of buildings and property development, and Act 2018-575 of June 13, 2018 on residential leases. With regard to co-ownership, the Building and Housing Code repealed Decree No. 2013-225 of March 22, 2013, which regulated the status of co-ownership. Lastly, with regard to construction professionals, Decree No. 79-718 of October 2, 1979 regulating the profession of real estate agent, property administrator and agent in the sale or rental of businesses disappears due to the adoption of the new Building and Housing Code.
One of the main innovations of this new code, namely a paradigm shift and the affirmation of a principle with attractive economic consequences for investors, is mentioned in Article 4, which states that “access to decent housing is a fundamental right of the citizen guaranteed by the state”.
The implementation of this provision, which requires major investments, should help to stimulate the growth of this segment of the Ivorian economy. However, this presupposes the prior appropriation of this fundamental right by its addressees, in particular through the action of consumer associations, which could educate their members and thus enable them to demand access to decent housing from the Ivorian state. Legal professionals, in particular lawyers and notaries, should also find in this new fundamental right an opportunity to support their clients, whether they are applicants for decent housing, property builders, financiers or public authorities. In view of the anticipated increased demand for decent housing, the construction sector needs to be better organised and more foreign capital should be solicited to cover the needs of the population.
With the adoption of this new code, we note that the rules and standards of construction are modernised, in particular with the classification of buildings according to two criteria: the complexity of the work and the use for which they are intended.
According to the first criterion, buildings are classified in 12 classes ranging from A to L. The first class covers buildings that are subject to social considerations and for which a building permit is not required. Due to the lack of complexity in their construction, standard plans are made available by the Ministry of Construction, Housing, Sanitation and Urban Planning. The last class covers more complex construction projects that are implemented as part of real estate programmes.
According to the second criterion, which relates to the use of buildings, structures are placed in 14 categories: the first category covers the construction of administrative buildings, banks and offices; the fifth covers factories and industries; the 12th covers military and paramilitary installations; and the 14th covers real estate programmes.
The new code also determines construction standards, which oblige builders to take into account accessibility for people with disabilities or those with reduced mobility. The same applies to compliance with energy and environmental performance issues, for which section 280 of the new code stipulates that the construction and use of buildings must comply with the technical standards in force or enacted pursuant to the environmental code and the electrical code. In addition, particular emphasis is placed on the issue of the materials used in the construction of the works, which must be of high quality.
Collective Access to Property
Construction players are subject to more appropriate regulations under the 2019 system. The Building and Housing Code provides for collective access to property through two types of construction companies: civil companies set up for the purpose of allocating buildings to their members, and cooperative building societies. The first type, civil construction companies, are governed by the provisions of Article 1832 of the Ivorian Civil Code. Their corporate purpose includes the management and maintenance of constructed property as long as co-ownership management bodies have not yet been implemented. Civil construction companies do not bear the burden of building immovable property that constitutes their corporate purpose by themselves. Article 87 of the Building and Housing Code requires the latter to conclude property development contracts with one or more other companies for construction operations.
However, it remains possible to entrust this task to the legal or statutory representative of the civil construction company. From a practical point of view, this amounts to authorising the real estate investor – which may be a foreign company wishing to expand in Côte d’Ivoire – to set up such a corporate form to serve as a vehicle for bringing together clients interested in the realisation of the real estate project.
Cooperative societies are the second form of collective access to property. Under Article 90 of the Building and Housing Code, their purpose is the construction of one or more buildings with the aim of dividing them into lots or a group of single-family houses. The specific features of cooperative building societies are the fact that they have variable capital and variable operators. Moreover, unlike civil construction companies, which are governed by Ivorian domestic law, cooperative societies – in addition to being subject to the new construction code – are placed under the OHADA Uniform Act on Cooperatives.
It should also be noted that with the advent of the Building and Housing Code in 2019, economic operators interested in Côte d’Ivoire’s construction sector are better informed of the different types of contracts they can use to manage and secure their business relationships, first among themselves and then with their customers. There are a number of such contracts, several of which existed previously in scattered texts. The contract for the construction of a detached house, however, appears to be newly created by the most recent Building and Housing Code.
Among the special contracts authorised by the Ivorian legislator in the field of construction, the contract for sale of immovable property to be built is the first to be retained. It is a solemn act that is legal if it is signed before a notary.
According to Article 110 of the Building and Housing Code, this contract is understood as the legal act by which a natural or legal person, called the seller, undertakes to transfer to another natural or legal person, called the buyer, all or part of a building to be built within a fixed period of time. The contract may be concluded with the future completion of the property or may be signed at a later date.
In the forward sale contract, the transfer to the purchaser of the seller’s rights over the land and buildings is made when the completion of the building is recorded by a notary and has retroactive effect. In the contract of sale in the future state of completion, the transfer of the seller’s rights on the land is immediate and the transfer of ownership of the buildings takes place when they are completed by the seller.
It should be noted that Article 109 of the Building and Housing Code makes the seller of a building to be constructed a trader within the meaning of the OHADA Uniform Act on General Commercial Law. In that capacity, the seller is obliged to register in the Trade and Personal Property Credit Register and to keep the obligatory accounting books required by OHADA law. With this obligation, the foreign investor who intends to enter the Ivorian real estate construction market must do so through a local company.
A preliminary reservation contract is required prior to a contract of sale for immovable property under construction. This preliminary reservation contract excludes, under penalty of absolute nullity, promises of purchase or sale relating to the immovable property to be built. Contrary to the contract of sale it anticipates, the preliminary reservation contract is a written document that does not necessarily take the form of a notarial deed.
The particularity of the preliminary reservation contract results from the fact that the seller of a building to be constructed is entitled to claim from the future purchaser a security deposit, which may not exceed 10% of the estimated selling price. This security deposit has another characteristic in that, according to the provisions of Article 113 of the Building and Housing Code, it is unavailable and unseizable until the contract of sale is concluded between the seller and the buyer.
This specification is intended to better secure home ownership, which has become a fundamental right for citizens of Côte d’Ivoire under the new Building and Housing Code.
Property Development Contracts
Another of the main special construction contracts governed by Ivorian law is the property development contract. This type of contract falls under Article 146 of the Building and Housing Code. The property development contract is a mandate of common interest. It is the act by which, in return for remuneration, a developer undertakes construct a building and carries out – either alone or through a third party – all or part of the legal, administrative, financial and technical operations related to a project.
Under the property development contract, the developer is legally entitled to enter into certain commitments in the name of on behalf of the project owner. In particular, this is the case for contracts that are essential for the construction of the building, the acceptance of the work or the settlement of contracts. With this legal structuring, the foreign investor can preserve its expertise and have control over negotiations with the partners involved in the construction projects.
Once construction is complete the property development contract gives the developer the right to proceed with the sale of the constructed property on behalf of the client. It should be noted that the outcome of this contract is shown by the delivery of the work, and by the closing of any construction accounts opened between the promoter and the contracting authority.
As a special construction contract, the single-family house construction contract is newly introduced by the Building and Housing Code, although practice was already familiar with this technique. Its legal regime is distinguished by its public policy character. In the contract for the construction of a single-family house, the builder can provide a plan. Parties can also opt for a contract without providing a plan.
The Building and Housing Code also regulates construction and emphyteutic leases. The first type of contract is open to both public and private persons, by which the lessee undertakes as the lessee’s main obligation to construct buildings on the lessor’s land and to keep them in a good state of maintenance throughout the term of the lease.
The duration of the contract is for a maximum of 25 years and cannot be extended. During the term of the contract tax charges on the land and buildings shall be borne by the lessee. At the end of a construction lease contract, the lessor becomes the owner of the buildings constructed on the lessor’s land unless otherwise agreed by the parties. This is a contract whose use is dynamic in the Ivorian economic context, but is nevertheless marked by a tension in the land question.
The emphyteutic lease is a long-term agreement, between 18 and 99 years, which gives the lessee a real right in real property that can be mortgaged. This type of construction contract may be concluded by persons governed by public law. Under the provisions of Article 175 of the Building and Housing Code, it is the responsibility of the Ministry of Construction, Housing, Sanitation and Urban Planning to sign emphyteutic leases on behalf of the Ivorian state when this contract concerns plots of land belonging to the private urban land domain.
Taxation of Innovation
In terms of legal incentives for the economic development of Côte d’Ivoire, Law No. 2019-1080 of December 18, 2019 on the 2020 state budget for management has established an advantageous tax regime for research and development (R&D), and innovation activities. Article 5 of the tax schedule for this law established Article 114 in the General Tax Code, which instituted a tax credit of 50% of the sums invested in eligible R&D activities; exemption from patent and property tax; deductibility of donations to scientific research organisations; exemption from taxes on banking transactions; and exemption from tax on income from receivables.