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Company Incorporation in the Democratic Republic of CongoAuthor: Dr. Joseph Yav Katshung, Attorney at Law and Professor of Law Posted 23 Mar 2012 Post Comment
A foreign company wishing to establish a business in the Democratic Republic of Congo has an option between registering as an external company and forming a subsidiary in Congo. The choice between the one and the other hinges mainly on issues of convenience, privacy and tax. Sometimes, the issue of risk, or rather the limitation of risk, also comes into play. The decision at the end of the day is really a commercial one.
I. Establishing a Business in the D.R. of Congo
From experience, most foreign firms choose to form a private company rather than registering as an external company.
In fact, a foreign company may establish a permanent business in Congo by essentially two means:
a. by registering here as an external company; or
b. by creating or acquiring a subsidiary in Congo.
1. External Company
Firstly, a foreign company or entity may choose to register as an external company in Congo. Such a registration even becomes an obligation if the foreign company establishes a “place of business” in Congo, without at the same time forming a subsidiary.
2. Company Subsidiary
Rather then registering as an external company, a foreign firm may decide to form a new company in Congo or to acquire an existing company, which would then become its subsidiary in Congo.
Such a company may be a private company or a public company. In practice, a subsidiary in Congo of a foreign entity is almost invariably a private company. If this scenario is followed we will have two separate legal entities or companies, namely the holding company abroad and the subsidiary in Congo.
II. Registration as an External Company or Formation of a Subsidiary in Congo?
The question of course is to determine which of the external company or subsidiary in Congo should be chosen by a foreign firm wishing to establish a business in Congo.
The answer to this question depends largely on two factors: convenience and tax. Sometimes a third factor, namely risk or rather the limitation of risk, also comes into play. Broadly speaking concerning the Convenience Factor, registering and operating as an external company is somewhat of a cumbersome administrative process.
Firstly, when registering, the foreign firm needs to submit a number of documents to the Registrar, including:
- a notarially certified copy of its memorandum and articles; and
- if that document is not in French, a sworn translation into French of the memorandum and articles.
Secondly, and more importantly, once registered the company needs to file every year a copy of its own financial statements, as well as those relating to its branch in Congo (exceptions may be granted). The financial documents of the company will therefore become public, which is not necessarily desirable from the foreign firm’s perspective.
In contrast, the formation or acquisition of a Subsidiary is a much simpler process, especially when such subsidiary is to be a private company. The subsidiary is incorporated and registered like any other Congo’s company. No need to file notarially certified copies or sworn translations of foreign documents.
To conclude, as far as the convenience factor is concerned, we would generally recommend to our clients to opt for the formation or acquisition of a private company, rather than registering as an external company. It is a simpler process and the company’s financial affairs in Congo then remain private.
III. Procedures and Documents
Requirements for a branch or subsidiary can include:
1. Draft and notarize the articles of association with the public notary
2. Obtain extracts of criminal record of the company manager.
3. Register articles of association with the commercial registrar at the Clerk’s Office of the Court. To register the articles of association with the Commercial Registrar, the following documents are required: - Identification of managers; - Criminal record of the managers; Lease (copy); Notarized articles of association.
4. Open a bank account.
5. Register with the tax authorities
6. Publish the notice of company formation in a legal journal.
7. Notify the Ministry of Labor of the start of operations. Employee contracts must be certified by the labor authorities.
8. Register with the Social Security Authorities.
Despite the process looking demanding, it is possible to get all the above documents in a week’s time minimum and 2 weeks maximum and easily commence business.
ABOUT THE AUTHOR: Prof. Dr. Joseph Yav Katshung
Professor of Law and Attorney at Law. Founder and Manager of Yav & Associates Law Firm based in Congo with offices in Lubumbashi, Kolwezi and Kinshasa.
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