Advanced Company Law

INTRODUCTION

The old law of July 24, 1864 governed companies in Madagascar. The new
the law is law 2003-036 of September 9, 2003, on commercial companies. However,
It should be noted that another law 2014-010 amends and complements certain provisions.
from Law No. 2003-036 of January 30, 2004, on commercial companies.

er
Article 1 of this law defines the company: "the commercial company is established by
2 or more persons who agree by a contract to assign to a company
share the assets in cash, in kind or in industry for the purpose of sharing the
benefits or to take advantage of the economy that may result. The partners commit
to contribute to the losses under the conditions provided for by this law. In practice, this
contract is named status...

In law, there is no legal definition of a company, consequently it

cannot be a subject of law. The concept of enterprise is purely an economic concept.
It is actually an entrepreneur who can be either a natural person (artisan,
merchant, agricultural operator, industrialist, liberal profession…) or a person
moral (EPIC, civil or commercial society, association...) and who will implement
an economic activity, that is to say to produce, sell or provide a service
service.

Page1|49
Working tool: Far◦2003-036 of January 30, 2004, on commercial companies in M/scar

TITLE 1

Categories types

Partnership: Company by
"interest, hence the intuitu personae" which is
very important, which means that we
take into account the person.
By consequent: TITLES Classic type company STC
SOCIAL says PARTS made up of at least two
er there is PUT IN
SOCIAL, WHO ARE NOT persons art.1 where
FREELY ACCESSIBLE COMMON CAPITAL AND
AMONG THE LIVING, only they are OF EFFORT
under certain very conditions
strict, according to Article 285 of the said law
•Example: the SNC, company in
Collective noun

Capital company: joint-stock company

Here, we don’t attach much.
interest in the person of Single-person company SUP does not
shareholders containing only one
But on the contrary, we emphasize person called: partner
the INTUITU PECUNAE unique according to art. 2
Therefore, the TITLES
SOCIAL so-called ACTIONS ARE
FREELY NEGOTIABLE
Example: The SA

Note: there is another form of company: MIXED (hybrid). In this sense, it presents to
the nature of partnerships on one hand, the nature of a company on
capital, on the other hand such as the LLC under article 325.

Page 2 | 49
 Chapter I Conditions for the formation of a partnership

A–Concerning the partners

They must enter into a contract subject to substantive conditions and

forms

•Substantial condition:

→ er
Consent under Article 264 and 1 "the court
appreciates the vice of consent in case
dispute/challenge
→
While this consent must be FREE,
SINCERE and INTEGRITY;

For example: Case of the relationship between the parties, governed by

the secret act but third parties can benefit from the act
apparent or of the secret act, if these acts have been submitted to
their knowledge.

→
The capacity of the partners legally depends on the
society

Partnership: the partners must have the quality

of the merchant and must not be struck
of inability to exercise/incompatibility,

•Company of capital: Civil incapacity is sufficient,

Partnership limited by shares: the limited partnerships

must have the quality of a merchant.

The quality of merchant is required when the partner is indefinitely liable.

solidarily.
→
The purpose of the company: it is the activity it must carry out.

Page3|49
 → Cause: sometimes gets confused with the object but
Legally, these two concepts are distinct:

Object of the contract = activity

•Cause of the contract = reason for which the contracting parties have
agreed to associate

•Form condition:

Statute must be in writing (either notarial deed or private agreement)

VALIDATE MY SOLEMNITY

For the establishment of a company, certain formalities must be carried out, namely:

Existence of a project and a promise of society;

Establishment of a project status

Subscription and release

Adoption of the project to convert it into a permanent status either in a General Assembly or a General Assembly of shareholders.

the SA either by the signing of the articles of association in the case of a SARL, the company is established at

accounting for the AGC or the signing of the statutes.

Company advertising: through registration with the RCS (deadline: 1 month from the
constitution); by insertion in the JAL (deadline: 15 days from
the registration with the RCS

Here the term 'society' can have two different meanings:

On one hand, it refers to a contract by which two or more people

decide to allocate to a joint venture, assets (in ANU/ANA) or
their industry, (skills, know-how, quality...) with a view to sharing some
benefits and obviously in order to support together the losses that
could result. (Ex: STC)

Page 4 | 49
 On the other hand, society is an "institution"; There are well-defined rules.
for all companies and for each type of company.

I - The contributions

It is an obligation required of each partner that translates into

the allocation of an asset to a joint venture:

The contribution of each partner allows them to acquire shares.

The sum, the total contributions of the partners (only in

ANU/ANA) constitutes the share capital, i.e. the initial assets of the
society.

There are 3 types of contributions: ANU, ANA, ANI

• The ANU: Cash contribution

Release confirmed by the transfer of the promised amount into an account in

bank / at a notary.

But the shareholders' agreement and the statutory provisions can provide for this.
otherwise.

Note: Cash contributions to be distinguished from current account deposits.

Current account deposit: loan granted by a shareholder to the company;

accounted for among long-term debts.

•The ANA: contribution of movable and immovable properties,

These are rights concerning tangible and intangible movable or immovable property.

Goods can be brought in ownership, in enjoyment, or in

usufruct.

Page5|49
 The contribution in property

It is carried out by transferring the ownership of the contributed asset to the company and by putting in place

disposition to the company. In other words, the partner transfers to the company, the full
ownership of the contributed assets. The partner, like the seller, then loses everything.
right over the thing, while remaining a guarantor and will no longer be able to take it back at the

dissolution of the company, unless otherwise stipulated in the statutes or

opposite decision made in the general assembly. This resumption implies
generally the payment of a balance.

The contribution in property assumes in principle that the contributor is liable towards the
company (the contributor guarantees the company against hidden defects and eviction.)

But the contributor does not have the right of retention.

The contribution in enjoyment

The partner grants the company only the use. He consequently has the right to recover.
the good at the disposal of the company. Here the company, unlike what exists
in the first case, has only a personal right over the property brought into enjoyment. It
It should be noted that the risks of a loss are generally borne by the contributor.
when it comes to certain bodies and by society in the case of a thing of a genre.

It is carried out by providing the company with an asset.

No transfer of ownership

Guarantor towards the company as the landlord towards their tenant, i.e.
that the company has the right to enjoyment and is insured by the contributor against the
disputes of law or fact.

The interest of the contributor in enjoyment: that the property is returned to the contributor.
case of dissolution, bankruptcy of the company (liquidation operation; sale of all
the assets of the company.

Page 6|49
 The contribution in usufruct

It is accomplished by transferring the usufruct to the company

It is subject to the same rank as the contribution in property.

But the company does not have the right to dispose of the asset, that is to say, the company does not have

the abuse.

The ANI

It involves providing the company with services/work/

skill.

The contribution to industry only valid in companies of

person. Because here, the partner commits to dedicating all or part
of its activity to the affairs of the company by putting it to the
the arrangement of this last experience, its
technological or professional knowledge, its strength of
work, his commitment, his commercial credit or his reputation.

But in practice, the contribution in industry can be encountered.

in limited liability companies

Presence explained by the hybrid nature of the SARL

It borrows both L’INTUITU PERSONAE and L’INTUITU

MONEY

But we must first provide two terminological precisions:

The subscription is the act by a person (individual/legal entity) of promising

the realization of the contribution, i.e., to participate in the formation of the capital

social (ANA and ANU). But whatever the legal form adopted,

Page7|49
 the subscription must be TOTAL, for an LLC before the
constitution and for a SA before the AGC or before registration
at the RCS.

The release is the actual disbursement of funds into the cash register.
of the company, as well as the actual handover of the asset in kind to the
disposition of the company or the execution of the agreed service.

II–The research/sharing of profit/contribution to losses

The term "benefit" means any monetary or material gain that adds to
the fortune of the partners. These profits result exclusively from
theSTC
normally determined at the end of each exercise.

It should be noted that profits can be used in two ways:

On one hand, the reserves, a portion not distributed and which serves to
the self-financing of the company or to face a difficult future (legal,
statutory or free.

On the other hand, dividends are a portion that is actually shared.

between the partners. Indeed, this sharing must be carried out
proportionally to each one's contribution.

Regarding losses, the contribution depends on the nature.

legal of the company:

The liability of SNCL is JOINT and UNLIMITED

The obligation for losses is JOINT and LIMITED for the SA and SARL.

Page 8 | 49
 The search and sharing of profit are an element that distinguishes the
more about the company compared to other legal entities, particularly the
NGOs or associations.

NB: Prohibition of applying the leonine clause which is a clause included in the statute.
according to which all profits will go to a single partner or to a group of partners
or according to which the losses will be borne entirely by a single partner. Such a
the clause exists but is deemed unwritten and cannot be applied.

III - The affectio societatis

It is a psychological element that must exist in each of the partners. It is

a more specific will (to associate, to work together on the same level
of equality).

Will of all associates to collaborate on an equal footing

for the common work,

• Notion of affectio societatis: necessary to qualify the

contracts in uncertain situations,

It is a desire to associate: the consequence of this desire

Is the company legally different from joint ownership?

Willingness to work together,

Willingness to work on an equal footing: between

partners, it is necessary to specify its implementation well.
in relation to the one who brought 99% of the capital, no link of
subordination cannot exist. But a partner can be
however, an employee (therefore subordinate) of the company,

A convergence of interest: all partners aim for the good

market of the company

Her absence could lead to the dissolution or nullity of the company.

Page9|49
In case of disagreement, the affectio societatis disappears, which is a cause of
dissolution. To avoid it, one can decide that the people who are not
Alright, those who can leave the company, the others stay and the company survives.

It is a blockage of the functioning of the company.

Affectio societatis allows for the detection of fictitious companies.

Difference between a fictitious company and a shell company.

• Shell companies = the affectio societatis exists

Fictitious companies do not fulfill their corporate purpose.

IV - The Shareholders' Agreement

It is an agreement made between the partners.

The interests:

• Maintenance of a unit whose purpose is focused on management and direction

the company

In the matter of a corporation, or intuitu personae minimizes the pact, allows to

maintaining the cohesion of the partners through approval clauses and

preemption.

•Objective of the pact: Strengthen and sustain the group's control.

of signing partners on the management of the company.

The clauses of the pact are various and binding on all signatories.

Its effects can impose themselves on society except in exceptional cases: according to the principle of

the relative effect of the contract.

Page 10|49
Penalty clause of the pact:

To make it effective, the pact must contain penalty clauses.

sanctioning the failures of signatories on their own commitments.

These penalty clauses are mainly aimed at deterring the indecisive.

• The covenant clause may even provide for the exclusion of the defaulting party through

the buyback clause

For the pact and the sanctions to be effective,

PARTNERSHIP AGREEMENT

Compliance with the conditions Respect for specific rules of

partnership agreement
validity of contracts
Article 1832 of the Civil Code
Article 1108 of the Civil Code

Consent

Number of partners

+ +
Capacity
Contributions

+ +
Subject Participation in
benefits and losses

+ +
Affection of society
Cause

Page 11|49
 •Form condition

The required conditions for the formation of the contract

The contract must be written

The writing must reflect the spirit in which the partners intended to contract.

Must allow for tracing the history of negotiations/dialogues between

the parties.

Translate the voluntarist nature of the company contract

It is required for both validity 'ad validatem' and for proof 'ad
probation of the contract.

At the formation of the contract, the parties can choose between two forms.
described.

ASSP :

Article 8: "When the statutes are revised by private document, it is

drawn as many originals as necessary for the deposit of a
copy at the head office and for the execution of various formalities
Requirements; a copy of the statutes drawn up on plain paper must be submitted.
to each partner." In practice, 3 copies.

A private deed is valid until proven otherwise.

It is an act established without the intervention of ministerial/public officers and

under the sole signature of both parties.

The signature of both parties cannot be replaced by a sign.

fingerprints/witness signatures.

Page12|49
 Notarial acts

The two parties instruct the notary to draw up the partnership agreement.

This contract then becomes an authentic act.

Authentic act is valid until proven false

The contract must include the mandatory mentions prescribed by law.

Article 10: "Mandatory information must be included in the contract: such as the requirement
translate the institutional aspect of contracts; reduces the areas of the parties' will
The absence of these mandatory mentions risks nullifying the company contract.

The articles must also contain provisions related to the distribution of

result, to the establishment of reserves (legal statutory optional or buyback of
companies by employees) and the liquidation bonus.

Page13|49
Chapter 2 The conditions required after the conclusion of the contract

The statutes

Among the following nominees Among the shareholders

• Names Names
• ……..
• …….. • …….
• ……..
• Etc.. • …….
The commercial company is created hereA commercial company is created here
after after
Article 1: Corporate purpose
Art 2 : Dénomination et siège social
Art. 3: Divided share capital and nominal value
Article 4: Legal regime of actions
Article 5: Organization:
General Assembly
Administration and management
• General Direction
Article 6: Distribution of profit, surplus or deficit of liquidation
Article 7: Dissolution
Art. 8: Transformation
…….

Designation of social bodies

SOCIAL BODIES PROVIDED FOR IN THE STATUTES

Orientation and Direction Bodies

Legally representing the company

They are usually designated by the Constituent General Assembly (CGA).

which brings together all the initial subscribers or partners.

Advertising of acts

BEFORE PRESENTATION OF THE STATUTES, MINUTES OF THE GENERAL ASSEMBLY....

Page 14|49
All signatures in these deeds must be notarized, in real property form.
either at a town hall or with a notary.

Formalities of publicity, i.e., tax registration of acts

Tax and statistical registration

Company advertising, which consists of announcing publicly and legally the

formation of the company, announcement made in the JAL

Registration with the RCS

Chapter 3 - FINANCIAL ASPECTS

THE SHARE CAPITAL

It is the company’s allocated ASSETS, the capital, that is constituted.

normally at the beginning (when the company is formed) and is equal to the assets
social.

This heritage of the company is different from that of each of the partners.

KLSI = ANA + ANU

Nominal Value NV = Kl / Number of shares

Page 15|49
 (This VN is unchangeable unless decided otherwise by the AGE)

The share capital is divided into several social shares, called social parts for
a limited liability company and shares for a public limited company.

There is a legal minimum for the KlSl, namely 10 million ariary (SARLTC) and
["1 million Ariary (SARLUP); 20 million Ariary (SATC) and 2 million (SAUP)"]

• Exceptionally, the GENERAL ASSEMBLY may decide to modify the KLSI either:

A decrease: the only condition is not to go below the

legal minimum

An increase: for a corporation, this is possible if all the shares

ancient ones are fully released; in this hypothesis:

A preferential subscription right is granted to the current partners. Therefore

payment of an emission premium (a kind of entry fee and to compensate
the difference between VN and VV, several techniques are possible:

THE TRUE INCREASES: by this process, it is put

at the disposal of the company cash or goods
furniture and/or real estate coming from outside (to the company)

• The increase of share capital by new cash contributions.

new partners must pay the issuance premium. But it is also
required from any former subscribing partner.

The increase in capital in relation to new contributions in kind, with evaluation

mandatory.

Page16|49
 AUGMENTATION WITHOUT NEW RESOURCES COMING
FROM THE OUTSIDE. We have 3 examples:

•By incorporating the reserves: the total amount of reserves obtained since
several exercises can be injected into the share capital; this increases the
credit of the company in relation to third parties; and the partners receive free of charge
new social titles (depending on capital participation)

•By incorporating dividends: normally, the share of dividends is received

in cash (the rule); exceptionally, in the form of new social titles
(if the General Meeting authorizes it and the statutes provide for it)

•By converting social debts into shares: this is possible regardless of...
so is the debt; and this technique is carried out according to the will of the social creditor

SOCIAL ACCOUNTS

At the end of each fiscal year, established by the leaders. They consist of 2 points:

• Accounting documents: At the end of each fiscal year (calendar year) it is about
of an inventory and the annual accounts (balance sheet, income statement, etc.). All
these documents must be brought to the attention of the partners. That is why,
in an SNC and SARL, these documents are made available to the
shareholders at the company's headquarters.

•Depreciation and provisions, 2 forms:

Financial depreciation: here, the need for depreciation is to...

disappear the shares and stocks of certain partners by reimbursing them
holders

Industrial depreciation: here, depreciation is to anticipate replacement.

materials that depreciate over time, due to wear or because of
technical and technological progress.

Page 17 | 49
 RESERVES, DISTRIBUTABLE PROFIT AND DIVIDENDS

• Reserves: made for the purpose of foresight or business expansion, 3

throws :

Legal reserve: it is mandatory for public limited companies (SA) and private limited companies (SARL) but optional in

the SNC, with a minimum rate of 5% of net profit and is no longer imposed
when the total amount reaches one-tenth of the share capital,

• Statutory reserve: it is still mandatory and provided for by the statutes with a
very precise rate,

Optional reserve or free reserve: decided by the partners during the AGM and
in the case where there is a comic book:

• Distributable profit BD = (net income + retained earnings)-

(previous losses + RL + RS)

Dividends: these are a portion of profits allocated to each share.

THE TERM OF THE COMPANY

It is the end of the existence of a company. The consequence of this is

disappearance of the legal personality and thus of the holder of the social assets. This which
requires the liquidation of the company (its assets).

The dissolution:

• The expiration of the statutory term: causes the dissolution of the company unless
unanimous decision contrary to the partners or decision contrary taken by the majority
provided for in the statutes and this, at least one year before the term.

The achievement or extinction of the social purpose: either because the purpose is achieved
(normal end), either because the activity has been made illegal by law (accidental end)

Page18|49
The cessation of activity: it is a definitive cessation since it is
temporary, there is only a SUSPENSION of activity

The cancellation of the company: this cancellation is pronounced by the judge when it
establishes a cause of nullity:

For an LLC and a corporation, there is no nullity for a vice of consent or for
incapacity of a partner.

For a SNC and a SCS, nullity exists when the publicity formalities are not fulfilled.
have not been made.

The action for nullity can be time-barred after three years, starting from the registration of
the company.

Third-party opposition is accepted within a period of six months from the

publication of the judgment.

The joint liability of directors and partners may be upheld if the

the cause of nullity is attributable to them and the action for liability is subject to a five-year statute of limitations

Answer from the day when the cancellation decision became final.

It should be noted that for the protection of good faith third parties, the effects of this
annulments do not occur retroactively; in other words, nullity is not applicable to them.
not enforceable except in cases of nullity due to lack of consent or for
Incapacity: it is the application of the theory of the de facto merchant.

Voluntary dissolution

Page19|49
TITLE II The different types of companies

Chapter 1 THE JOINT-STOCK COMPANY

It is a company with capital or shares.

The law has set the number of shareholders to two to form a SATP and only one
shareholder for SAUP. The minimum capital is 20,000,000 Ar if SATC and
2,000,000 Ar for SAUP with a nominal value of 20,000 Ar/share. The SA is still
commercial vehicle whose purpose is possible and then lawful.

Another form of hybrid company, namely the Limited Partnership with Shares
composed according to article 876: of one or more limited partners having the quality of

trader (and jointly and indefinitely liable for social debts) and to
less than three sponsors having the status of shareholder.

To establish a corporation,

In the first case, we are talking about simultaneous founding, that is to say, the founders

they themselves manage to subscribe to the entire projected capital while the
different phases take place in a relatively short time.

We talk about successive foundations when the different phases are

carried out over a relatively long time. This situation exists in cases where the
founders were unable to subscribe to all the capital and they are forced to resort to
an APE

Note: If constituted without APE, we speak of closed circuit.

If constitution with APE, we are talking about open circuit.

Page20|49
I–Constitution without APE

Release of subscribed contributions,

Case of the ANU

During the subscription/at least a quarter of the VN

Deposit of received funds (notary, bank account opened in the company 8 days of
the reception; list of subscribers containing the amounts paid
by each of them) ...

Case of the ANA

During the constitution and in its entirety

Appointment of an administrator responsible for withdrawing the released and deposited funds

with a notary for their distribution (It is a right of every subscriber)

Signature of the statutes by all shareholders

Completion of advertising and administrative formalities

II–Constitution with APE

• Definition: in accordance with Article 77 (Registration of securities on the stock exchange;

public offering of securities through a credit institution...

It should be noted that APE is prohibited for a public limited company without a CEO.

Minimum capital 1.109 MGA (200,000,000 Ar)

Subscription by signing the subscription form indicating the number of

subscribed title

• Release upon subscription (at least ¼ if of the VN if ANU) during the

constitution and in full if ANA

Page21|49
 Convocation and holding of an AGM

Completion of formalities

advertisements For its operation

I–General Assembly of Shareholders

It should be noted that it is the decision-making and deliberative body that has competence.
considerable and who makes all the serious decisions concerning the life of the company.

AGO: convened at least once a year and within six months of the closing of
each exercise;

Elle a une compétence bien précise à savoir prendre toutesles délibérations

which do not entail any modification of the statutes (approval of the accounts)
social, appointment of the Board of Directors and removal of directors...)

Access to the AGM is denied to any shareholder who does not own the number
minimum number of shares (more than 10) provided for in the bylaws

Quorum = at least ¼ of the KLSL at the first meeting and no more

requirement for the second summons

•AGE: She has the ability to take all deliberations resulting in a

AMENDMENT OF THE STATUTES. (e.g., in the case of an increase or decrease of
capital social ; dissolution anticipée ou prorogation de la société ; autorisation
of a merger, division or transformation or partial contributions of assets, etc...

No limitation is admitted regarding the right of each shareholder to participate

at this EGM

However, there is a declining quorum, which is half of the share capital at the first.
convocation and the quarter for the 2ndeand 3rd
e

Decisions are made by a two-thirds majority of the votes cast.

Page22|49
Note that there is the case of a single-person public limited company where all the
Deliberations during an Ordinary General Meeting or Extraordinary General Meeting are made by the sole shareholder.

It is a unilateral decision. In this case, the sole shareholder has not

not allowed to delegate one's powers to a third party

THE SA WITH IT (Board of Directors)

The Board: composed of 3 to 12 administrators

Who can be an administrator?

A natural or legal person

• A shareholder or a non-shareholder

Not being subject to prohibition, disqualification, or incompatibility

(civil servant, military, lawyer...)

An employee of the s/te is in actual employment

What is his name?

By the status

In AGC, AGO

By the administrators themselves through the technique of

Co-optation that must be submitted for ratification by the General Assembly

When does the function cease?

Upon the expiration of his term of office

Following his dismissal by the AGO more specifically

the administrator is "revocable at will" that is to say at any time
and even without just cause

Following the decision of an administrator

Page 23 | 49
 Following his resignation

The refusal of the AGM to endorse the co-optation of the administrator

Following his death

What are the financial rights of directors?

We talk about 'attendance tokens' according to Article 457. This is about a

total amount allocated annually to the CA by the AGO and which is
charged to the company's overhead expenses (operating expense) which
is freely distributed by CA among its members

The board can also allocate compensation to the administrator.

exceptional for missions or mandates entrusted to him and who
exceed the normal framework of their function

The administrator does not have the status of a trader.

What are the rights and obligations?

•Obligations: according to the principle, they are not agents of

the company; therefore they have no power to
individual representation

They cannot occupy a salaried position within the corporation.

They are bound to the secrecy of the deliberations and to discretion regarding
the confidential information obtained during the Board meeting

They must attend the board meetings;

•2 types of sanctions:

•Civilians: the individual or joint liability for debts

social in case of serious faults committed in the management of

Page 24|49
 society, as the act of distributing or allowing distribution
without opposition from fictitious dividends….

• The obligation to repair any damage resulting from their fault

management

• Penal: the administrators can be sentenced either to

a fine or a fine and/or
imprisonment

• The Chairman of the Board and the Chief Executive Officer

LePCA ensures an Administration function and the CEO a function of

direction

The PCA: generally speaking, it ensures a function

of the administration, he chairs the board meetings and the general meetings; ensure that

what the board takes control of the management of the company this
In fact, he can request communication of all the documents he
very useful estimates. It is prohibited to be simultaneously PCA of
more than five (5) corporations having their headquarters in Madagascar. As

PCA receives a salary and benefits in kind, including

the amount and the form are fixed by the CA, then as
As an administrator, he is entitled to attendance tokens.

•The General Director: he is appointed by the Board of Directors on the proposal of the

PCA, he must be a natural person, if he is an employee of the

company, his employment contract is suspended. Here, he ensures the
management of the company and represents the company in its relationships
with third parties. To this end, he has the broadest powers.
Finally, he is entitled to a salary and in-kind benefits.
to the function and whose amount and form are fixed by the board of directors

Page 25|49
 THE SA WITHOUT THAT

This is the mode of management imposed on any joint stock company composed of a minimum of three shareholders.

But it can be adopted in the event that the number of shareholders is greater than three.
The functions of administration and management are assumed by a natural person,
called General Administrator (ADG) who may or may not be a shareholder

He is appointed in the statutes/by the AGC/the AGO/by the sole shareholder

Its function ends with the arrival of the term of its mandate fixed at two years.
maximum (if statuses or AGC) and a maximum of 6 years (if by AGO) or
still in the event of death, resignation, or revocation <<ad nutum>>

He represents the company in its relations with third parties. To this end, he is
invest ultimate powers. Finally, he summons and presides
the shareholders' AG

In terms of remuneration; he receives a function allowance of which the

the amount is set annually by the AGM, with in-kind benefits,
as well as the reimbursement of travel expenses and incurred costs
in the interest of society

Chapter 2 THE LIMITED LIABILITY COMPANY (LLC)

It is a hybrid company because it is both a partnership and a corporation.

(the personae is very important, the shares are not
freely transferable...) and aspects of a corporation (the
the liability of each partner is limited to their contribution)

It is a legal form very well suited for SMEs/SMIs.

It can be of a classic type (SARLTC) or single-person (SARLUP)

Note: A limited liability company (SARL) is not dissolved in case of prohibition, liquidation of assets, bankruptcies.

personal, incapacity or death of a partner.

Page 26|49
I- Constitution

On the substance:

CASE OF THE ASSOCIATES

It is composed of at least 2 partners and at most 50 partners.

The LLC has only one partner; in this case, the exceeding
the number of 50 partners requires the transformation of the LLC into a joint-stock company

The meeting of all the social shares of an LLC in the hands

The withdrawal of a single partner does not automatically lead to its dissolution.

However, it must be transformed into a SARLUP.

A SARLUP can always be transformed into a SARLTC.

The subscription to the capital of a limited liability company (SARL) is a civil act.

consequently, a MNE can be associated; and two spouses can be

partners, or even the only partners, of a single and same LLC

THE SHARE CAPITAL

Who is at least 10 million ariary (SARLTC) and 1 million ariary

(SARLUP) with a nominal value of 20,000 Ariary per share
social

The LLC does not have the right to resort to the APE.

SOCIAL CAPITAL = ANU+ANA

In the case of ANA, an evaluation procedure is required and must be carried out.
by a CCA (When the value of the contribution is greater than 10 million
of funds; or also carried out by the partners themselves in cases
where the partners are indefinitely and jointly liable for
the given assessment

Page27|49
 The SUBSCRIPTION freely completed by each future partner and made
completely on a subscription form

THE LIBERATION

ANU: in full upon subscription and the funds received are to be deposited
with a notary or in an account opened in the name of the future company
with a bank

Unavailability of deposited funds until registration with the RCS

Withdrawal of funds for reimbursement if registered with the RCS no

done within 6 months from the first deposit of funds

Withdrawal by the manager after the registration formalities

ANA: fully

If one of the spouses contributes a common asset, he must first

obtain permission from the other or the contribution is null.

ANI It is exceptionally accepted since in the matter of LLC LA

LIBERATION MUST be total. Now, the liberation of an ANI is done in a manner
successive and over time; it is accepted in the case of partnerships between
spouse or one of them brings a business asset (ANA) and the other an
ANI or one of them brings both a FDC and an ANI and the other one a
ANU or an ANA.

Note: the main activity of the contributor in ANI must be related to the achievement of
The purpose of the company and the rights of the partners are represented by shares.

On the form: No Constitutive General Assembly for the SARLTC or

SARLUP

Page28|49
 Adoption of the statutes

Formalities of

advertising II - operation

Rules on partners

•Rights: they have a certain number of rights:

Right to benefits in proportion to their participation in the share capital

in other words the dividends received cannot be fictitious, otherwise there is
obligation for each partner, even in good faith, to return; the action
restitution is prescribed for 3 years from the date of distribution of the
dividend.

Right to ongoing information

Right to communication

Right to ask the manager, twice a year, written questions.

relatives to facts that may compromise social life within the framework
of an alert procedure

Obligations:

Release the subscribed contributions

Cover losses up to the amount contributed

The general meetings of the partners:

It is the sovereign body of the society and to allow the partners

to exercise their powers, there are rules:

•Authors of the convocation: the manager, the CC, a representative designated by the
President of the commercial tribunal at the request of an associate

Page29|49
 The notice of convocation: is issued at least 15 days before the meeting of the AGM
it contains the agenda defined by the author of the notice, is made in the form of
a registered letter addressed individually to the partners and
containing the OJ

All partners without exception have the right to participate.

• The ordinary general assembly: AGO

In general, it takes all deliberations that do not result in

no amendment of the statutes: the approval of the annual accounts of the
company, the dismissal and appointment of the manager, the granting of an authorization

of the manager for the completion of a certain number of operations

The general meeting is held within six months of the end of the financial year.

The deliberations are taken by one or more partners representing more than
the half (absolute majority) of the share capital at the first General Meeting or
from the first written consultation

• Specific case of the approval of the annual accounts: a general shareholders' meeting is

mandatory if the number of partners is greater than 20, it

it is optional otherwise.

• The Extraordinary General Assembly: EGA

• For competence whenever it comes to making a decision that involves

for effect a modification of the statutes (increase or decrease of
share capital, transformation of the legal form of the company,
change of nationality, extension and dissolution of the company
approval of new associates

About the necessary majority: decision of at least two partners

and representing at least three quarters of the share capital

Page 30|49
 er
Note: a double majority is possible, meaning the majority of the partners (1);
majority representing social shares (2nd)

Chapter 3 THE GENERAL PARTNERSHIP

It is a company in which the partners all have the quality of

merchant and are jointly and indefinitely liable for social debts.

This implies that a creditor of the company can request one

any of the partners to pay the entire debt of the company.
Not everyone can therefore become a partner in a company. Thus,
people who do not meet the required criteria 'to be
"merchant", are excluded from SNC.
It is managed by one or more managers chosen from among the partners or in
outside of them in accordance with the statutory rules (A PP/a PM).
The SNC is subject to simpler and less expensive rules than those
regarding the limited liability company. However, all transfers of shares
must be authorized unanimously by the partners.

I- CONSTITUTION

➢
Substantive conditions

The partners must have the required capacity to conduct the business.
Cette exigence revient à exclure certaines personnes de la SNC. Ainsi, ne
cannot be associated in a SNC, all private individuals
of legal capacity: (major under guardianship, under curatorship,
minors who are not emancipated and have not obtained legal capacity
commercial; persons affected by incompatibility (experts-
accountants, notary, civil servant, minister, doctors, architects…) and
finally, civil societies.

Page 31 | 49
Note: Let us remind that since 2011, the ME (emancipated) can obtain the
commercial capacity by way of judicial authorization.

If they make their requests during their emancipation, it is the judge of the
guardians who decide whether to grant commercial capacity.

If the capacity request is made after the judgment of emancipation, it is the

president of the competent tribunal.

Two spouses can be partners in a SNC because of Law 85-1372 of 23

December 1985 allows two spouses, alone or with third parties, to be partners.
in the same company. (article 1832-1 of the civil code);

The minimum number of partners is 2 (individual or company). None

maximum is required by law;
That the law does not set any minimum capital;
-Que tous les apports sont permis ;
That the law does not require any minimum nominal value for the social shares and
that it does not impose any immediate release or within a certain time frame of
these shares.

As in all civil or commercial companies, all partners have

related both to the sharing of profits and to the contribution to losses
(Civil Code 1832)

Certain activities are prohibited for SNCs (insurance, laboratory)

of medical analysis) while others are subject to regulation
specific (pharmacy)

Page32|49
 ➢
Form conditions
-Statuts:

▪ Must be established by an authentic act (notary) or by a private deed (between the parties)
2 parties or between private individuals). In some cases, resorting to an act
authentication is strongly recommended if not mandatory.
▪ The absence of a written document can lead to the nullity of the company because it renders
impossible to fulfill the advertising formalities.
▪ It is necessary to add the identity of the partners (name, first name, profession, residence,
civil status, etc...) as well as the details of the contributions made.

▪
Moreover, it is important to provide for other statutory clauses intended to
specify the applicable legal regime for the company. Indeed, certain rules
provided by law do not have an imperative character and apply only in
the absence of provisions contrary to the statutes, as it is such as the
choice of one or more managers, determining their powers with
possible limitations of the required majority for decision adoption
collectives; on the modality of the liquidations of the company and finally, of the rule
according to which the company ends upon the death of a partner.

Advertisement:
In order to proceed with the registration formalities with the public treasury, it is necessary to

certainly obligatory to proceed with the publicity formalities in the cases that
following (insertion in the JAL of the location of the registered office; registration of the company with

RCS; filing with the Commercial Court of 2 copies of the statutes and of
the act of appointing the manager(s).

Note: The failure to register with the Trade and Companies Register prevents the company from acquiring

the enjoyment of legal personality; and thus to become a subject of law.

Moreover, the failure to fulfill publicity formalities

nullity of the company.

Page 33|49
 II- FONCTIONNEMENT

➢
Management, its appointment:
Freedom of choice, that is, the partners enjoy a very great freedom to
choose the manager. To this end, they can:
Designate the manager(s) either in the statutes as 'statutory manager'
either by a subsequent act (private deed / notarized / or decision made in
general assembly) "non-statutory manager"
Designate one or more managers.
Choose the manager among the partners or not.

Note: In the silence of the statutes, all partners are managers; each has the authority.
So, from the social signature, it can engage the company.

Capacity: the manager, if he is a partner, must have the capacity to do so.

commerce (major and capable). The manager not associated, on the other hand, does not have

not to meet this capacity, as he is not a merchant. At this stage, he

It is important to understand that it is the partners who are the merchants.

not the manager; therefore, if the manager is not a partner, he is not

not a trader; thus an emancipated minor who has not obtained
Judicially, the commercial capacity can be of a managing non-partner.
of a partnership, while he cannot be a partner in a partnership.

Page34|49
 Regarding the number of mandates for the manager: no text prohibiting it,
in other words, the same person can in principle take on
successively manage several roles. Moreover, the same person can
cumuler en même temps, un nombre illimité de gérance de SNC. Il faut
however, refer either to the statutes or to the act of appointment that
both can restrict this freedom.

Case of accumulation of the manager's position with an employment contract: the manager

A company is not, by this quality, an employee of the company. Therefore, it is not

not linked to the company by an employment contract, but by a contract of
mandat. A ce stade, on le qualifie souvent de « mandataire social ».
However, the manager may wish to exercise in addition to his functions of
direction, functions of employees within this company. In
in this case, he would be led to conclude an employment contract with the company.

➢
Termination of manager's functions:
Upon revocation:
❖
He is revoked by decision of the partners, more precisely when the
the managing partner is revoked or not.
This revocation, if decided without just cause, may lead to
damages and interests.
The wrongfully dismissed manager must file a lawsuit.
before the commercial court of the location of the registered office, in order to claim

damages and compensation.

However, the court can only require the payment of damages.
and interest by the company to the manager; he will not be able to cancel the decision of
revocation.

Page35|49
 It seems that the partners can decide to revoke the manager.
even in the absence of just cause, they must then expect to have to
will he pay damages?

If a managing partner is revoked, the revocation only applies to

as a manager, he will remain a partner.

Here are some conditions to meet in order to revoke a manager:

er
1 case: All partners are managers the revocation of
one of them can only result from a unanimous decision of the others
associates. This decision of revocation leads to, if the bylaws have not provided
a contrary clause if the partners do not all agree on the scope
unanimously, the early dissolution of the company. In the absence of this
dissolution, the revoked manager can withdraw from the company by requesting the
other associates of reimbursing their shares.

2ème The management is exercised by a partner designated in the

er
statutes. The rules resulting from 1 are still applicable, while
noting that the decision to dismiss a manager must be made by everyone
the other partners.

3 eme The management is carried out by a non-designated partner in

the statutes meaning that the manager or managers can be revoked in the
conditions provided for by the statutes (simple majority) or, failing that, by a
decision of the other managing partners or not taken unanimously.

This revocation does not lead to the dissolution of the company, nor the
possibility for the revoked manager to withdraw from the company.

Page 36|49
 4 th Case: Non-associated managers can be revoked in the
conditions set forth in the statutes. In the absence of a statutory clause, it is sufficient to have a

decision made by the partners based on a majority calculated by head.

❖
Revocation by judicial decision: it can be requested in
justice by any of the partners provided that they justify
from a legitimate cause, e.g.: abandonment of duties, manager who no longer attends
at the assemblies, adult placed under guardianship.

His resignation

Consequences of the manager's termination of function: All

revocations by the partners or judicially, like all resignations
must be published under the following conditions (inserted in the JAL,
filing with the Commercial Court Registry, modification registration in the Trade and Companies Register, etc…)

❖
Powers: The partners freely determine the content of the
bylaws, the powers of the managers. If the bylaws do not contain any
statutory provision, the manager can perform all management acts in
the interest of the company.

❖
Remuneration: No legislative or regulatory provision
determines the terms for setting the remuneration of the managers. By
consequently, it is up to the statutes, or the act of appointment to determine
freely the remuneration of the manager. If no remuneration has been set and
that it was not stated that the manager's functions would be free.
In fact, the courts can determine its remuneration if necessary, afterwards
ordered an expertise (CA Paris 17.02.1965 Gaz Pal 1965 1.305).

Page 37 of 49
Attention: The remuneration of the manager is not a salary in the legal sense of the term.
As a result, the manager cannot invoke the privilege of employees when he
is revoked, he cannot claim any severance pay. However, his
remuneration can be combined with that which pertains to their status as a partner (the
dividends).

The manager is not an employee. He is considered a trader.

as a consequence, the tax regime and the social regime are similar to that of entrepreneurs
Individuals, it is therefore subject to income tax.

❖
Civil liability of managers: they are responsible.
individually or jointly in relation to the partners and in relation to the
company responsible for the faults they commit in the exercise of their functions.

❖
Criminal liability: The manager of a general partnership
is criminally responsible either under common law (penal code) or
of some specific provisions stemming from company law.

III - PARTNERS OF SNC

1-Partners' rights:
Right of intervention in social life (Consultation of all
documents),
Right to ask written questions (at least twice a year),
Right to vote,
Right to participate in AG,
Financial rights (right to social benefits, payment processing)
dividends).

Page 38|49
2-Obligations:
Obligations for social debts (the partner who withdraws from the company
is liable to third parties for all social debts incurred
before the announcement of his departure to the RCS,

Contribution to social losses.

3-Parts socials:

Right to the shares:

→ Usufruct = use + fruit (here, the usufructuary has the right to the fruits of the
social share i.e. to the dividends provided by the social share,
→ The bare owner is entitled to the reimbursement of contributions, to
distribution of reserves and the liquidation bonus. Having the quality
as a partner, he is intended to participate in social life but his
effective participation is limited by statutory rights
recognized to the usufructuary.

Community between spouses: Under the community regime

legally, the shares that constitute acquired assets fall into
the community. However, the spouse who made a contribution is alone
able to exercise the rights attached to these shares and him
only to the quality of associate. But in any case, the spouse
can claim the status of partner on half of the shares
subscribed or acquired through common property (article 1832-2)
civil code)
Transfer of shares:
→ Transfer between living persons: As with any sales contract, the transfer
social shares imply free and informed consent, the
capacity of the seller and the buyer, an object, a lawful cause and
the existence of a determined price. It should be noted that this price can be
validly set by a third party (an expert). The transfer of shares
social must be established by a written act, and for this to be

Page39|49
 to be enforceable against the company, it must be notified to it
officially; to be enforceable against third parties, it is essential in
more of the official notification made to the company to ensure it
advertising to the RCS; This transfer results in the transfer of the

ownership of shares.

→
Approval of the transfer: The SNC being based on the intuitu
therefore all transfers of shares even between
associates must be authorized by the associates, deciding at
unanimity. Some transfers may be subject to
the authorization granted by a person outside the SNC (e.g.:
donation, exchanges, liquidation of joint property between
spouse).
→ Transmission by death: According to the principle, the death of a partner
ends the company unless otherwise stipulated in the articles of association providing for its

continuation. Only a clause in the statutes allows to avoid the

dissolution of the company upon the death of a partner. It is
the case for example:
Continuation of the company among the only surviving partners,
Continuation of the company with the heirs or third parties,
Continuation of the company with minor heirs……

IV- DISSOLUTION

-Death of one of the partners,

Revocation of one of the managers,
Judgment of judicial liquidation,
Measure of prohibition to exercise a commercial profession or measure
of incapacity pronounced against a partner.

Page 40|49
 Chapter 4 THE SIMPLE PARTNERSHIP

Having practically become nonexistent these days, it will simply be recalled.

the definition whose essential characteristic is to understand 2 categories
of partners:

One or more partners whose situation is similar to that

associates of a SNC (trader, indefinitely and jointly liable)
responsible),
One or more sponsors, who are not liable for the losses.
social issues that to the extent of their contributions to society and that have not

not the quality of merchants,

The SCS is based on the intuitu personae, meaning that the personality of
each general or limited partner plays a role
determining in the constitution,
• Le décès d’un associé commandité met fin en principe à la société sauf
statutory clause contrary, as well as the failure to transform
the company or the absence of a new partner within a year to
counting the death of the sole general partner. On the other hand, the
The death of a partner does not end the company. Moreover, the
the statutes may provide for the admission of the deceased's heirs into the
same conditions as in the event of the death of a partner

in collective name.
The limited partnership is based on the intuitu personae, meaning that the
The personality of each limited partner or general partner plays a role.
determining in the constitution (IT IS A PARTNERSHIP). The manager
A limited partnership cannot have a limited partner. It can therefore only be a
partnership or a third party,

Page 41|49
The majority of SCS comes from the transformation of an SNC following the death of the
partners in name whose heirs have not been able or have not wanted to acquire the quality of
trader and bear unlimited and joint liability
The shares of SCS cannot be represented by negotiable securities.

Page 42|49
 TITLE III THE RELATIONSHIP BETWEEN THE PARTNERS AND THE COMPANY

➢
Article 45 states: "The partners have rights over the company through the
social titles.
➢
In return, they also have obligations.

A- Shareholder Rights
Droit des actionnaires dans une société commerciale classes en deux grandes
categories :
FINANCIAL RIGHTS
Non-financial rights
In principle: the rights of partners are equal in a company.
commercial
But this equality applies only to actions of the same category.

So there are three categories of actions:

▪
Common stocks
▪
Priority shares without voting rights
▪
Priority actions

1- Ordinary shares can be:

Rights of intervention in social life
Monetary rights

❖
The right to participate and the right to the general assembly
→
The partner can participate in all general meetings themselves.
This participation can take place within the framework of a
representation/mandate.
But the statutes may restrict the exercise of his rights.
Access to the assembly may be subject to possession of a
a certain number of actions,

Page 43|49
 But the minimum number of shares required must not exceed 10 shares
The owner of less than 10 shares can still ...
gather in what is called a union.

❖
Right to information
Here, the partner has the right to receive information about the social life of the company:
He can request documents on the management of social affairs.
He can make oral or written questions.

Then, when the social leaders fail to respond to them,

They can ask the court to issue a judicial order to

communication of the said information.

❖
Right to apply for social positions
Chaque actionnaire est éligible à toutes les fonctions sociales quand il remplit les
required conditions.

❖
Right to take legal action for the protection of personal rights
This is an action to be distinguished from social action (the action of the company against
of social leaders in the exercise of their functions)
It is an individual action of the partner taken for the defense of the
personal interests of the one who acted.

❖
Dividend rights
A partner has the right to the profits made by the company.
The profits that are decided to be distributed can be classified into two:
The first dividends that correspond to the value
nominal non-amortized value of the share.

The super dividends that are distributed to the shares themselves

amortized.

Page 44|49
 ❖
Right to reimbursement of contributions
Here, the company has the right to enjoy its rights in the event of the occurrence of one of the

following events:
•In the event of the company's dissolution
In the event of a reduction of the company

There will be reimbursement to be made, with the net assets of the company or surplus of
liquidation.

However, there will be no refund when the action is completely annihilated.

❖
Preferential subscription right
It is a privilege granted to all shareholders who become purchasers in the
case of securities issuance by the company.
Such is the case of the issuance of new shares in the event of an increase in
capital through new contributions; or the issuance of certificates
investment.

→
Note: It is somewhat of a right of preemption, which is a natural right.

❖
Right to transfer shares
A partner can transfer their shares free of charge or for a fee.
This transfer of shares can be made between the partners or with third parties.
However, the exercise of this right may be restricted either by statutes or
by law. In this case, we speak of the approval procedure.

For example: Stocks in bank companies because of the commissions.

banking institutions are regulated and one cannot be a shareholder if one has been
convicted.

Page 45|49
 But the restrictions cannot prevent the shareholder from transferring their shares.

▪
In application of the principle of 'NO ONE CAN BE OBLIGED TO'
STAY IN THE CONTRACTUAL LINK
▪
Thus, even if the licensee is not approved, the company is in
the obligation to acquire the transferred shares
▪ And in case of disagreement on the price, it will be 'FIXED AT THE SAY OF AN EXPERT'.

❖
The rights attached to priority shares
Certain actions may have an extraordinary general meeting and may
to benefit from a particular advantage.
Before these benefits become effective, they are subject to procedures.
specific.

1- Bonus or increase in the right to annual benefits

▪ Profits referred to as distributable profits.
▪
In the application of these particular benefits, the company
has a variety of panel:
An allocation of priority shares of profits to those
claiming common shares = A bonus coefficient will be applied
to these priority actions
An institution of cumulative preferred shares, that is, a preferred stock is
prioritized in dividend payments. In this case, shareholders
owners are paid as soon as the company's cash flow allows it. As long as
that they are not fully paid, the other actions must wait.

2- Increase in liquidation rights of the company

▪
Priority shares enjoying such a right are reimbursed.
by preference to other actions when the company is dissolved.
▪
But their payments can only occur after settlement.
definitive of social debts (liabilities)

Page 46|49
 3- Particular advantages may be removed
▪
By the buyback of these priority shares by the company
▪
By their conversion into ordinary shares.

▪
These competencies always fall under the general assembly.
extraordinary.

B- The obligations of shareholders

Three main obligations weigh on shareholders.

1- Obligation to release contributions

Violation of this obligation may lead to a sanction of up to exclusion.
and to the sale of their unregistered shares

2- Obligation in social liabilities

Shareholders are liable for the company's debts to the extent of their
contributions.
But the partner who acted as a de facto leader may be held accountable for the
totality or part of the social debts.

3- Shareholders are required to return the received fictitious dividends.

Page 47|49
 PRACTICAL EXERCISE

Exercise 1:

1- Where is the definition of society?

2- Which companies have legal personality?
3- How can a minor be emancipated?

Exercise 2: Case study

Mr. Mathieu and Ms. HOLY, partners, wish to establish their company. Their project is
the following:

the company will be a general partnership.

the capital will be 2,000,000 ariary

Mr. Mathieu is a doctor.

Miss Holy is a nurse in guardianship.

The purpose of the company is the operation of a medical office.

In reality, Mr. Mathieu wishes to promote practice through this structure.

surgical abortion and get paid for its services,

M. Mathieu brings to the company a mortgaged property for a value greater than
à sa VALEUR MARCHANDE.

Miss Holy is exempt from any participation in losses.

the climate between the two future partners is deteriorating day by day,
collaboration becomes nonexistent, the signing of the contract must take place in a few
days.

TAF: What do you think of this constitutional project? What are your observations on it?
present to the partners?

Page 48|49
Exercise 3: Underline the correct answer

1- The SNC is:

A de facto company.
A holding company
A capital company
A partnership

2- Can the partner-manager be bound to the SNC by an employment contract?

Yes
No

3- The partners set the powers of the managers of SNC in the statutes:
Yes
No
4-The Article 43 of law n.2003-036 states that. 'The company issues securities
social in return for the contributions made by the partners. They represent
the rights of partners and are called shares in companies by
shares and social parts in other companies.
Give your opinion on this article. (100 words)

Page 49|49