Social Enterprise Law Surveys |
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Congo, The Democratic Republic of the |
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| (Africa) Firm Liedekerke | |
| What jurisdiction(s) do you practice in? | The Democratic Republic of Congo |
| What are the most commonly used types of for-profit corporate organizational forms in your jurisdiction (e.g., corporation, limited liability company, benefit corporation, social purpose corporation, etc.) used by Enterprises operating a trade ... | The most common for-profit organizational forms utilized in the Democratic Republic of Congo are the private limited liability company (société à responsabilité limitée, “SARL”); the simplified joint-stock company (société par actions simplifiée “SAS”); and the public limited liability company (société anonyme “SA”), which are well understood and traditional in nature. In all three aforementioned company forms, the shareholders’ liability is limited by the shares. All DRC commercial companies are governed by the OHADA Revised Uniform Act on Commercial Companies and Economic Interest Groups of 30 January 2014 (the “Uniform Act”)
a. The SA and the SAS are the most common for-profit organizational forms and will have multiple owners. The SA will be the company of choice for investors that require close control of the decision-making process through a collegial decision-making process (every management decision must be debated and voted by the board of directors); while the SAS will be the form of choice for more flexible decision-making processes (one chairman makes the decisions according to the principles set out in the articles of association and/or the shareholders’ agreement). b. For-profit organizational forms are not used as Social Enterprises under DRC laws. |
| Do any of your jurisdiction’s traditional organizational forms require or permit the board or managers to consider, balance or prioritize interests other than shareholder value in decision making? What other interests, if any, are they required... | The Uniform Act does not require or permit the board or managers to consider, balance or prioritize interests other than shareholder value in decision making. However, several sectoral laws (e.g. the mining regulation, the telecom regulation, etc.) have local content requirements such as the obligation to reserve (A) a percentage of the shareholding (up to 30%) for Congolese nationals and/or (B) (i) 5% of total shareholding in mining companies and (ii)5% of the total local shareholding requirement (i.e. 5% of 30% required) in the telecom sector, must be reserved to employees of the Enterprise. Also, sectorial laws regulating activities that are intrinsically polluting (such as the mining sector), require mining enterprises to consider environmental factors. In order to obtain a mining license, mining companies must, amongst others, conduct environmental studies and commit to rehabilitating the mining sites at the expiration of their activities. Additionally, in the event of a transfer of a mining title, the transferor remains liable for any environmental damages incurred prior to the transfer of the mining title, unless they receive a clearance certificate issued by the Congolese Agency for the Environment as a result of an environmental audit conducted jointly by the Congolese Agency for the Environment and the General Directorate in charge of the protection of the environment. In summary, general corporate law does not require organizational forms. However, such requirements are regularly encountered in specific laws that require actors operating in those sectors to consider stakeholders such as employees or the environment. |
| Does your jurisdiction have organizational forms specifically designed for Social Enterprises? If so:a. What type(s) of organizational forms are they?b. How do they materially differ from the most closely analogous traditional organizational ... | (a) Yes. Not-for-profit association (association sans but lucratif, “ASBL”), non-governmental organization (organisation non-gouvernementale, “ONG”), Public utility establishment (établissement d’utilité publique, “EUP”), and cooperatives. ASBL, ONG and EUP (b) Materially differ from the SARL, SAS, SA, and other commercial organizational forms because their purpose must be of a cultural, social, educational or economic or religious nature. More specifically, the ONG’s object must participate in the social, cultural and economic development of local communities. The EUP may aim solely at the realization of activities of a philanthropic, scientific or cultural nature. Such a special mission must be clearly identified in the articles of association agreed upon by the members. The ASBL, ONG and EUP acquire the legal personality by way of a decree signed by the Minister of Justice, upon the positive advice of the minister in charge of the projected activity. Foreign non-profit organizations (i.e. registered outside of the DRC) that wish to conduct activities in the DRC must be recognized by way of a Presidential decree upon the positive advice of the minister of Justice. Furthermore, the ONG materially differs from traditional organizational forms and other nonprofits in that the government is required to include them in the conception and the realization of its development policies at the local, provincial as well as at the national level. Reciprocally, ONGs are expected to limit their activities to sectors that fit within the national economic, social and cultural policies set out by the State. ONGs also benefit, de facto from various tax and import duties exemptions, State assistance in obtaining resident permits for their workers and their respective families, the right to use radio equipment and frequencies and simplified procedures at the Congolese office of control. (c) The main benefit for founders is that, (A)in their capacity as members, they incur no liability whatsoever and (B) if they are part of the management, their liability is strictly limited to personal errors directly related to the performance of their mandate and management errors. (d) Such forms are restricted to activities of cultural, social, educational or economic or religious nature (e) Given the formalities required to obtain the legal personality for the ASBL, ONG, etc., (i.e. positive advice of the competent ministry and ministerial decree of the minister of justice), the timing is substantially extended as compared to the incorporation time of a commercial company. In order to mitigate the delay caused by such burdensome formalities, the law considers that the positive advice of the competent minister is equivalent to a provisional approval to start activities. This provisional authorization is valid for 6 months. The difference in cost is material but not consequential given that the cost of incorporating a commercial company is very low (a few USD for the Social Enterprise vs. up to USD 200 for the incorporation of a commercial company). (f) The ASBL and ONG are very well known in the DRC. Given the nature of their missions, their relationship with the State and more importantly the proximity of the ONGs to small towns and rural areas populations and the employment of Congolese nationals at local levels, the ONG is widely known by the average and underprivileged Congolese nationals. Cooperative (b) Cooperatives primarily differ from corporations in that cooperators are required to actively participate in the activities of the cooperative company. In addition to their contribution (in cash, kind or labor/Know-How), members are approved by the management board on the basis of a motivation letter. The management board decision to approve a new member is subsequently validated by a vote of the general meeting of the members. When a member of a cooperative withdraws from the cooperative, they remain jointly liable for the debts of the cooperative incurred before the effective date of their withdrawal. (c) The main benefit for founders and members is the pooling of labor, know-how, the benefit of an organized structure and the possibility to reach markets that would have otherwise not been accessible to each of the members operating separately. (d) There are no such restrictions. (e) No timing or cost differences. (f) This form is well known and has been available for quite some time. |
| Are Social Enterprises permitted to be formed and operated as Nonprofits? If so: a. Are Nonprofits that are Social Enterprises treated differently under the law as compared to Nonprofits that are not Social Enterprises, whether from a corporat... | Commercial companies cannot be Social Enterprises as their purpose is “to share profits or to benefit from savings incurring therefrom”– Therefore, in the DRC, Social Enterprises always take the form of nonprofit enterprises mentioned above. Social Enterprises that do organize as Nonprofits enjoy the same tax benefits as other Nonprofits and have the same burdens and restrictions, and there is no lesser reporting or faster incorporation process for Social Enterprise Nonprofits as compared to other Nonprofits |
| Does your jurisdiction allow for worker-owned Enterprises, such as cooperatives? If so, please describe any material benefits of, and/or restrictions on, using such forms. | Yes, see discussion of the Cooperative above. |
| Are there unique reporting requirements for Social Enterprises? If there are, please describe them. Please also discuss what government bodies Social Enterprises are required to report to. | ASBL and EUP are subject to reporting requirements that are more burdensome than those of the commercial companies:
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| In your jurisdiction, has case law and jurisprudence evolved to address Social Enterprises? If there is meaningful jurisprudence around Social Enterprises, please provide some brief examples. | There is not much case law in the area of ASBL, ONG and EUP. The main issue is that, because of lack of funds, most of the court decisions are not published. |
| Does your jurisdiction have any ESG requirements for Enterprises generally? If it does, please describe. | Yes. In some sectors, there are strict ESG rules. E.g. failure to comply with environmental law can cause a party to an asset transfer agreement to remain liable for environmental damages long after such transfer. Several laws require enterprises to hire Congolese nationals and to promote their accession to management positions. The very wide in scope subcontracting law requires that any subcontractor in the private sector be a Congolese company that (A) is held by, (B)is managed by and (C) employs a majority of Congolese nationals. |
| Does your jurisdiction have any ESG requirements specifically for Social Enterprises? If it does, please describe. | No. |
| Does your jurisdiction have any ESG requirements for investors? If it does, please describe. | No. The ESG requirements apply to the operational entities and not directly to investors. |
| Are any major investor classes (e.g., pension funds, mutual funds, etc.) required to look at ESG issues when making investment decisions in your jurisdiction? a. If they are, please describe the requirements.b. If they are not, are they permi... | No. |
| What kinds of philanthropic funding do Social Enterprises in your jurisdiction commonly receive (e.g., grants, charitable investment, traditional investment)? | Social Enterprises commonly receives grants from international organizations (UN, World Bank, IMF), foreign entities (hospital twin programs), or private philanthropists (the best known being successful Congolese athletes ). |
| How prevalent, if at all, are new for-profit impact investments in your jurisdiction (e.g. traditional instruments with impact terms, new investment instruments, aggregation with philanthropic capital, community based funding, etc.)? | N/A |
| What are the types of government funding and support available to Social Enterprises, if any, available in your jurisdiction (e.g., grants, investments, bonds, and guarantees)? a. How difficult is it for Social Enterprises to obtain government... | There aren’t any – Funding is mostly foreign as indicated above in point II.2. |
| Are there any companies that are formed as a Social Enterprise listed on your jurisdiction’s leading securities exchange(s)? | N/A. There is no securities exchange in the DRC. |
| To what extent are publicly traded Enterprises required to disclose ESG related factors in annual reports/public filings in your jurisdiction. | N/A |
| How prevalent, if at all, are impact bonds in your jurisdiction? | N/A |
| In your jurisdiction, are there any restrictions on foreign investments or donations that are unique to Social Enterprises (whether incorporated as for profit entities or as Nonprofits)? | No. |
| Is “crowdfunding” legal in your jurisdiction? Are there rules under applicable securities laws that make it easier for smaller businesses or Social Enterprises to take money from investors that are not sophisticated/accredited/qualified under a... | Crowdfunding is not a legal concept in the DRC but it’s not prohibited. Allowing small businesses and Social Enterprises to solicit investment from the general public is therefore possible. |
| Are there any tax exemptions that are uniquely available for Social Enterprises? a. Please describe any tax exemptions that are available and whether they are partial or full.b. Are they dependent on the Social Enterprise utilized using a spe... | There are tax exemptions available for Nonprofits generally, but there are no tax exemptions that are uniquely available for Social Enterprises. |
| Are individuals or other organizations able to provide tax deductible donations to for-profit Social Enterprises? If they are, please describe any restrictions applicable to tax deductible donations? | No. |
| Are there any other tax benefits uniquely available for Social Enterprises? (e.g. deferrals, favorable tax rates, business deductions, etc.) | No. |
| Does your jurisdiction provide for reciprocal recognition of tax-exempt status that has been granted under the law of any other jurisdictions? | No. |
| Does your jurisdiction have Regulatory Sandboxes or similar policy frameworks for Social Enterprises? If it does, please describe. | No. |
| What government operational support, resources, training or services, are available for small businesses or Social Enterprises? | There are generally not any. |
| Are there different compliance requirements for different types of Social Enterprises than for traditional Enterprises? Please provide examples if there are. | No. |
| Is there a dedicated government agency or department that oversees Social Enterprises? If there is, please describe its mandate and effectiveness. | The Ministry of Justice oversees the ASBL, ONG and EUP |
| Is there a different bankruptcy system available for Social Enterprises? | Yes. ASBL, ONG and PUE cannot be declared bankrupt. They can either be dissolved by a decision of their members (or management for the PUE), or by court decision (if they are in breach of their obligations) at the request of any interested party. |
| What are the average time and filing fees to form an Enterprise in your jurisdiction? | 1 to 3 weeks |
| What government or third-party certifications or accreditations, if any, are available for Social Enterprises that allow for access to benefits e.g. funding, beneficial tax status, etc.? Please provide examples and briefly describe them as well... | N/A |
| Please describe whether, in your opinion, startups and other entrepreneurial Enterprises generally can easily form and flourish in your jurisdiction. | Yes, startups and other entrepreneurial enterprises can easily form and flourish in the DRC. Although there is no legal framework for startups, entrepreneurship represents the way for Congolese citizens to pull out of poverty and/or achieve success (the small DRC middle class is composed of entrepreneurs and public servants). However, startups and small enterprises mostly remain informal and small in scale. |
| Please describe whether, in your opinion, Social Enterprises, in particular, can easily form and flourish in your jurisdiction. | Social Enterprises (in the form of Nonprofits) do exist and flourish in the DRC, especially in a context where, so far, the State has not been in a position to help its most vulnerable citizens. |
| Please describe whether in your opinion there are any laws that are obstructive to the formation of Social Enterprises (i.e. that actively disfavor or penalize, or otherwise discourage their formation) in your jurisdiction (for example, are Soc... | The legal framework is not obstructive to the creation of social enterprises but can definitely be widened and be improved. |
| In your jurisdiction, are there any major fraud concerns or defects due to corruption or fraud that should be addressed? If there are, please briefly discuss the concerns or defects. | Yes. Fraud and corruption are rampant in the DRC. |
| What changes to the law do you think would be most beneficial to enabling Social Enterprises to flourish in your jurisdiction? |
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| What changes to the law do you think would be most beneficial to enhancing the social and environmental responsibility of Enterprises generally (whether or not Social Enterprises)? | N/A |
| Is there anything else you would like to add or guidance you would like to provide? Are there any questions we should have asked but did not? | N/A |
Social Enterprise Law Surveys
The Democratic Republic of Congo
The most common for-profit organizational forms utilized in the Democratic Republic of Congo are the private limited liability company (société à responsabilité limitée, “SARL”); the simplified joint-stock company (société par actions simplifiée “SAS”); and the public limited liability company (société anonyme “SA”), which are well understood and traditional in nature. In all three aforementioned company forms, the shareholders’ liability is limited by the shares. All DRC commercial companies are governed by the OHADA Revised Uniform Act on Commercial Companies and Economic Interest Groups of 30 January 2014 (the “Uniform Act”)
- The SARL is typically used for small to medium-sized companies and family businesses. Although there are no limits to the number of managers that can be appointed by the shareholders (who, depending on the articles of association can act individually or jointly), the SARL is usually managed by a single manager called “gérant”. Share transferability is very restricted in comparison with the SAS and the SA.
- Due to its inherently flexible model, the SAS is used for any size company (small, medium or large) and is the most common form used for the setting up of joint ventures. It can be managed by a chairman (alone) or by a chairman and a board of directors.
- The SA is usually reserved for large enterprises, listed companies (this is theoretical as there is no securities exchange in the DRC) and enterprises that are active in certain regulated sectors such as the insurance and banking sectors and the telecommunication sector. The SA is always managed by a board of directors with a minimum of three (3) members (i.e. collegial management).
- In many ways, the SAS and the SA are similar in that the Uniform Act provides that a series of the provisions with respect to the basic functioning of the SA are applicable, mutatis mutandis, to the SAS.
- Finally, the Cooperative is the organizational form that is typically used for agriculture cooperatives, medical centers, sports clubs, etc. The DRC Cooperative is governed by the OHADA Uniform Act on Cooperatives of 15 December 2010.
a. The SA and the SAS are the most common for-profit organizational forms and will have multiple owners. The SA will be the company of choice for investors that require close control of the decision-making process through a collegial decision-making process (every management decision must be debated and voted by the board of directors); while the SAS will be the form of choice for more flexible decision-making processes (one chairman makes the decisions according to the principles set out in the articles of association and/or the shareholders’ agreement).
b. For-profit organizational forms are not used as Social Enterprises under DRC laws.
The Uniform Act does not require or permit the board or managers to consider, balance or prioritize interests other than shareholder value in decision making. However, several sectoral laws (e.g. the mining regulation, the telecom regulation, etc.) have local content requirements such as the obligation to reserve (A) a percentage of the shareholding (up to 30%) for Congolese nationals and/or (B) (i) 5% of total shareholding in mining companies and (ii)5% of the total local shareholding requirement (i.e. 5% of 30% required) in the telecom sector, must be reserved to employees of the Enterprise.
Also, sectorial laws regulating activities that are intrinsically polluting (such as the mining sector), require mining enterprises to consider environmental factors. In order to obtain a mining license, mining companies must, amongst others, conduct environmental studies and commit to rehabilitating the mining sites at the expiration of their activities. Additionally, in the event of a transfer of a mining title, the transferor remains liable for any environmental damages incurred prior to the transfer of the mining title, unless they receive a clearance certificate issued by the Congolese Agency for the Environment as a result of an environmental audit conducted jointly by the Congolese Agency for the Environment and the General Directorate in charge of the protection of the environment.
In summary, general corporate law does not require organizational forms. However, such requirements are regularly encountered in specific laws that require actors operating in those sectors to consider stakeholders such as employees or the environment.
(a) Yes. Not-for-profit association (association sans but lucratif, “ASBL”), non-governmental organization (organisation non-gouvernementale, “ONG”), Public utility establishment (établissement d’utilité publique, “EUP”), and cooperatives.
ASBL, ONG and EUP
(b) Materially differ from the SARL, SAS, SA, and other commercial organizational forms because their purpose must be of a cultural, social, educational or economic or religious nature.
More specifically, the ONG’s object must participate in the social, cultural and economic development of local communities.
The EUP may aim solely at the realization of activities of a philanthropic, scientific or cultural nature. Such a special mission must be clearly identified in the articles of association agreed upon by the members.
The ASBL, ONG and EUP acquire the legal personality by way of a decree signed by the Minister of Justice, upon the positive advice of the minister in charge of the projected activity. Foreign non-profit organizations (i.e. registered outside of the DRC) that wish to conduct activities in the DRC must be recognized by way of a Presidential decree upon the positive advice of the minister of Justice.
Furthermore, the ONG materially differs from traditional organizational forms and other nonprofits in that the government is required to include them in the conception and the realization of its development policies at the local, provincial as well as at the national level. Reciprocally, ONGs are expected to limit their activities to sectors that fit within the national economic, social and cultural policies set out by the State.
ONGs also benefit, de facto from various tax and import duties exemptions, State assistance in obtaining resident permits for their workers and their respective families, the right to use radio equipment and frequencies and simplified procedures at the Congolese office of control.
(c) The main benefit for founders is that, (A)in their capacity as members, they incur no liability whatsoever and (B) if they are part of the management, their liability is strictly limited to personal errors directly related to the performance of their mandate and management errors.
(d) Such forms are restricted to activities of cultural, social, educational or economic or religious nature
(e) Given the formalities required to obtain the legal personality for the ASBL, ONG, etc., (i.e. positive advice of the competent ministry and ministerial decree of the minister of justice), the timing is substantially extended as compared to the incorporation time of a commercial company. In order to mitigate the delay caused by such burdensome formalities, the law considers that the positive advice of the competent minister is equivalent to a provisional approval to start activities. This provisional authorization is valid for 6 months. The difference in cost is material but not consequential given that the cost of incorporating a commercial company is very low (a few USD for the Social Enterprise vs. up to USD 200 for the incorporation of a commercial company).
(f) The ASBL and ONG are very well known in the DRC. Given the nature of their missions, their relationship with the State and more importantly the proximity of the ONGs to small towns and rural areas populations and the employment of Congolese nationals at local levels, the ONG is widely known by the average and underprivileged Congolese nationals.
Cooperative
(b) Cooperatives primarily differ from corporations in that cooperators are required to actively participate in the activities of the cooperative company. In addition to their contribution (in cash, kind or labor/Know-How), members are approved by the management board on the basis of a motivation letter. The management board decision to approve a new member is subsequently validated by a vote of the general meeting of the members.
When a member of a cooperative withdraws from the cooperative, they remain jointly liable for the debts of the cooperative incurred before the effective date of their withdrawal.
(c) The main benefit for founders and members is the pooling of labor, know-how, the benefit of an organized structure and the possibility to reach markets that would have otherwise not been accessible to each of the members operating separately.
(d) There are no such restrictions.
(e) No timing or cost differences.
(f) This form is well known and has been available for quite some time.
Commercial companies cannot be Social Enterprises as their purpose is “to share profits or to benefit from savings incurring therefrom”– Therefore, in the DRC, Social Enterprises always take the form of nonprofit enterprises mentioned above.
Social Enterprises that do organize as Nonprofits enjoy the same tax benefits as other Nonprofits and have the same burdens and restrictions, and there is no lesser reporting or faster incorporation process for Social Enterprise Nonprofits as compared to other Nonprofits
Yes, see discussion of the Cooperative above.
ASBL and EUP are subject to reporting requirements that are more burdensome than those of the commercial companies:
- notification of changes in management to and filing of changes in the articles of association with the Ministry of Justice and/or the Ministry in charge of their respective activities instead of a simple filing with the One-Stop-Counter for the creation of Enterprises for the same changes in commercial companies:
- ASBL must communicate any change to its management to the Minister of Justice and the Minister in charge of its activities within a month of such change having taken place.
- Changes to articles of association of the ASBL must be notified to the Minister in charge of its activities.
- Any sale or acquisition of real property must be notified to the Minister of Justice and the Minister in charge of its activities.
- EUPs are required to notify their budged and file their financial statements to the Minister in charge of their activities.
There is not much case law in the area of ASBL, ONG and EUP. The main issue is that, because of lack of funds, most of the court decisions are not published.
Yes. In some sectors, there are strict ESG rules. E.g. failure to comply with environmental law can cause a party to an asset transfer agreement to remain liable for environmental damages long after such transfer.
Several laws require enterprises to hire Congolese nationals and to promote their accession to management positions.
The very wide in scope subcontracting law requires that any subcontractor in the private sector be a Congolese company that (A) is held by, (B)is managed by and (C) employs a majority of Congolese nationals.
No.
No. The ESG requirements apply to the operational entities and not directly to investors.
No.
Social Enterprises commonly receives grants from international organizations (UN, World Bank, IMF), foreign entities (hospital twin programs), or private philanthropists (the best known being successful Congolese athletes ).
N/A
There aren’t any – Funding is mostly foreign as indicated above in point II.2.
N/A. There is no securities exchange in the DRC.
N/A
N/A
No.
Crowdfunding is not a legal concept in the DRC but it’s not prohibited. Allowing small businesses and Social Enterprises to solicit investment from the general public is therefore possible.
There are tax exemptions available for Nonprofits generally, but there are no tax exemptions that are uniquely available for Social Enterprises.
No.
No.
No.
No.
There are generally not any.
No.
The Ministry of Justice oversees the ASBL, ONG and EUP
Yes. ASBL, ONG and PUE cannot be declared bankrupt. They can either be dissolved by a decision of their members (or management for the PUE), or by court decision (if they are in breach of their obligations) at the request of any interested party.
1 to 3 weeks
N/A
Yes, startups and other entrepreneurial enterprises can easily form and flourish in the DRC. Although there is no legal framework for startups, entrepreneurship represents the way for Congolese citizens to pull out of poverty and/or achieve success (the small DRC middle class is composed of entrepreneurs and public servants). However, startups and small enterprises mostly remain informal and small in scale.
Social Enterprises (in the form of Nonprofits) do exist and flourish in the DRC, especially in a context where, so far, the State has not been in a position to help its most vulnerable citizens.
The legal framework is not obstructive to the creation of social enterprises but can definitely be widened and be improved.
Yes. Fraud and corruption are rampant in the DRC.
- Allowing SARL, SAS and SA the possibility to be established as Social Enterprises and providing tax benefits to Social Enterprises.
- Expanding the scope of permitted activity for Nonprofits regardless of activity (even if the Nonprofits for certain activities did not have all tax benefits of other Nonprofits).
- Establishing tight audit and reporting rules to avoid the embezzlement of funds if the Social Enterprise are allowed to take the form of SARL, SAS or SA.
N/A
N/A