The challenges of the securities dematerialization process for companies in Cameroon

The dematerialization of securities, including shares, is a concept which was introduced into the Cameroonian legal environment in 2014 with the aim of revitalizing the financial market. The legal texts that establish its legal framework are the OHADA Uniform Act on Commercial Companies and Economic Interest Groups ("AUSCGIE") dated 30^th January 2014 and Law n°2014/007 of 23^rd April 2014 which sets the modalities for the dematerialization of securities.

Eleven years after the entry into force of these texts, the results are diverse: many issuing companies have not yet initiated the process of dematerializing their shares, and few have been able to complete it. In light of this disappointing finding, it is important to examine the reasons that justify the slow implementation of the process of dematerializing the shares of companies in Cameroon.

It is true that to date, the Autonomous Sinking Fund (CAA), which oversees the process of dematerializing the securities of joint-stock companies in Cameroon as the central securities depository for unlisted securities, has tried to streamline the dematerialization process. In this regard, while it previously required the systematic production of updated articles of association in accordance with the provisions of the AUSCGIE relating to the dematerialization of securities, in recent years, files with unupdated articles of association are no longer rejected. Instead, the CAA invites the concerned companies to update their articles of association.

However, after analyzing the facts and legal provisions, it appears that the difficulties encountered by issuing companies in the process of dematerializing their shares differ depending on whether they are in the first or second phase of the procedure.

Practical difficulties encountered during the coding and registration phase of securities

During the first phase of the dematerialization process, which concerns the coding and registration of securities with the CAA, the difficulties faced by issuing companies mainly relate to:

• Acquiring a shareholder register that complies with the provisions of the AUSCGIE;
• Properly filling out the shareholder register;
• Reconstructing the historical evolution of the capital structure for companies wishing to reflect changes in shareholder ownership in the shareholder register, as the CAA allows issuing companies to populate the shareholder register with information on the most recent ownership structure;
• Collecting previously issued physical securities from shareholders for companies established before 2014;
• Obtaining the activity code of the issuing company according to the NACAM classification, which can be obtained from the National Institute of Statistics upon request, along with the financial statements and a tax compliance certificate. This means that companies not in compliance with their tax obligations are unable to obtain their activity code according to the NACAM classification.

Given these difficulties, many companies are unable to complete the coding and registration phase of securities with the CAA. To overcome these challenges, companies often seek the assistance of legal counsels, whose expertise is often required to gather the necessary documents and information for the coding and registration of securities.

Practical difficulties in the phase of opening shareholders' securities accounts

Companies which succeed in the coding and registration of their securities with the CAA often struggle to complete the process of dematerializing their securities, especially when it comes to opening securities accounts for their shareholders. This is due to two main reasons:

• The cost of securities account management software, which some issuing companies find expensive. Many companies are reluctant to purchase software for managing securities accounts, the cost of which depends on the amount of the share capital and can therefore be relatively high. Companies therefore often turn to custodians whose services they believe are less expensive. However, in the long run, acquiring securities account management software often proves to be a more cost-effective option, which could be more advantageous for issuing companies, provided they have qualified resources to ensure the ongoing management of securities accounts in accordance with the regulations in force.
• The collection of the necessary documentation for opening securities accounts and conducting securities transactions. This difficulty is heightened in companies with a large number of shareholders, where there are conflicts between shareholders, or in companies that have undergone numerous capital transactions before the dematerialization of their shares. In fact, the shareholders' identification documents or documents proving their existence, when they are legal entities, are required to open securities accounts. It can be difficult for the management of these companies to collect the necessary documents, especially in cases of shareholder disputes or when there are a large number of shareholders, particularly when some of them are domiciled abroad. Additionally, when the issuing company has undergone many capital transactions and these are recorded in the shareholder register, the company must provide proof of each transaction before recording it in the securities account management software. This process can be challenging, particularly when corporate records are unavailable.

Given these difficulties, which sometimes indefinitely suspend the dematerialization process within issuing companies, it is worth questioning the stringency of the securities accounting system in a context where the process of dematerializing the securities of issuing companies has barely emerged from its embryonic stage. It may therefore be useful to consider easing the applicable accounting requirements to these securities to allow issuing companies to proceed more smoothly with the dematerialization of their securities.

ECA Conseils has a team of experts with strong experience in assisting companies as part of their securities dematerialization process as required by the regulations in force.