- Payment behaviour is generally unsatisfactory, with payments being made within 60 days, despite a DSO of 30 days. Payment terms are generally at the discretion of the parties, to be agreed in their contract.
- Financial information cannot always be relied upon, so trading history is often a better indicator of a company’s viability.
- It is common to see companies of bad faith proceeding with insolvency in order to avoid paying their debts as they are able to easily remove goods from the company during audits to present a more difficult picture of their situation. With deep auditing and investigation, it is possible to prove that insolvency has been deliberately created and adequate legal measures can be taken to pursue such deceptive insolvents.
Collecting in Cameroon
Availability of financial information
Companies in Cameroon are obliged to submit their balance sheets in order to provide an overview of their taxes and they are also required to file their tax returns.
Limited Liability Companies (SARL) are required to submit their financial statements to the tax authorities, while Public Limited Companies (SA) must also have them published in the newspaper, The Nation. However, most SA companies do not adhere to this requirement and it is generally only the companies listed on the stock exchange – Bourse Régionale des Valeurs Mobilière (BRVM) – who publish their financial statements on the BRVM website.
The Bank of Central African States (Banque des États de l’Afrique Centrale, BEAC) collates financial data on companies in Cameroon, although this information is not available to the public.
As financial information cannot always be relied upon, trading history is often a better indicator of a company’s viability.
Main corporate structures
There are several types of companies in Cameroon, but the most widely used are the SARL and the SA entities:
- Limited Liability Companies (Sociétés à Responsabilité Limitée, SARL) have seen a lot of improvements in order to facilitate the creation of such company type. The minimum capital required for a SARL is CFA 100,000 (approx. EUR 150) and the company can consist of a single partner (owning 100% of the shares) or several partners. SARL companies are the most common type of entity due to the flexibility they offer.
- Public Limited Companies (Société Anonyme, SA) can consist of either a General Director or a Board of Directors. SA entities are often used by larger companies due to the rules and protection that they offer to the shareholders.
- Another type of company, known as Sole Proprietorship (Etablissement), is the registration of a natural person to do business. Normally there are limitations to the type of operations a Sole Proprietorship business can conduct, but these are generally not respected. For example, Sole Proprietors are not eligible for an importer card, though they often find ways to obtain one regardless.
The Civil Law in Cameroon is influenced by the French Law in the French part of the country and the English Law in the English part.
The judicial structure of Cameroon consists of:
- The Courts of First Instance (Tribunaux de Première Instance) which are based in subdivisions and are responsible for common law matters, including criminal (correctional and penal), civil, commercial and social law. They act in the first instance on cases, which can then be brought before the Court of Appeal if the decision is contested.
- The Courts of High Instance (Tribunaux de Grandes Instances) are based in divisions and responsible for the same matters as in first instances, but where the value of the case exceeds CFA 10,000 (approx. EUR 15).
- The Courts of Appeal (Cours d’Appel) can be considered as the court of second instance, ruling on disputes heard in a Court of First Instance where the outcome is appealed. They have a regional base. When seized, the Courts of Appeal start the case and render decisions afresh, as if the case did not pass through instance courts. To the Court of Appeal are added the Administrative Courts (Tribunal Administratif), that judge cases relating to the administrators.
- The Supreme Court (Cour Supreme) is at the capital level (national level) and handles matters that have been contested in the Courts of Appeal. The Supreme Court is competent in all other matters, with the exception of commercial.
- The Common Court of Justice and Arbitration (Cour Commune de Justice et d’Arbitrage, CCJA) is the last resort in terms of all commercial area countries who are signed to the OHADA Treaty.
Days Sales Outstanding (DSO)
Late payment interest
Late payment interest can be requested by the creditor based on the civil code, though a judge can impose a different rate following assessment of the damage suffered by the creditor.
Debt collection costs
Where the court awards collection costs to the creditor, there is no fixed rate. Instead, the court will assess the costs incurred by the lawyer and/or the creditor and award costs accordingly.
Checks can be used as a debt recognition title if they remain unpaid, as they demonstrate that a debt is certain and undisputed and can be used for fast-track proceedings or to lead to a criminal case, as the court can appose an execution title on the check.
Letters of Credit are primarily utilized within the maritime section and international trade.
Lodging an appeal
Enforcing court decisions
How long could legal action take?
In total, the time taken between ordinary proceedings is one month. In the case of Payment Order (injonction de payer), the hearings are regular (twice per month).
How much could this cost?
Alternatives to legal action
Alternative Dispute Resolution methods (ADR)
Alternatives to legal action are arbitration, conciliation and mediation, which all exist in Cameroon and can be applied easily if there is a paramount clause in the contract. When the clause is written before (clause compromissoire) it is simply applied. If not, parties can still have an agreement (compromis) afterwards.
- Conciliation can be used before legal procedures or after the proceedings are initiated. It can also be used during legal procedures in order to stop legal action.
- Arbitration is known but not regularly applied. A private arbitrator is nominated to whom the case is confided. They render a decision which the parties then accept.
- Mediation is the most common ADR method. In this situation, a private institute aims to obtain concession from both parties until an agreement is reached.
Enforcing foreign awards
Alternatives to legal action
Restructuring the debt
A creditor can request the bankruptcy of a debtor if they observe that the debtor is unable to pay the due debts (cessation de paiement). This is said to be the case when the assets cannot cover the debts. However, the creditor must first obtain a judgment for bankruptcy, which can be opposed by the debtor.
Bankruptcies are handled before the Court of High Instance (Tribunal de Grande Instance/ TGI). Creditors must address the judge of TGI, which will then appoint an expert to investigate whether the debtor is really unable to make the required payments. The court will look in to the possibilities of restructuring the insolvent party by giving it time to discuss a possible solution with all creditors involved. If it is impossible to restructure the company, the court will appoint a liquidator.
The specific law handling insolvency is ‘Droits des entreprises en difficultés/droits des affaires or Acte Uniforme OHADA sur les procédures collectives d’apurement du passif.’
Once a liquidator is nominated, they become the sole manager of the company. All pending legal procedures are suspended.
The liquidator’s tasks are as follows:
- recover the company’s claims from its (third-party) debtors
- invite all creditors to present and register their claims (creditors must present their titles of claim)
- organize creditors’ meetings
- evaluate the assets and the debts
- liquidate assets/sell assets
- close the liquidation and submit final report
Creditors must register their claims within three months after the liquidator is nominated.
In respect to the claims which are disputed by the debtor, the creditor who wants to protect their rights and claim must present proof of the debt.
An insolvent company can also voluntarily request its own bankruptcy.