LEGAL ASPECTS OF DOING BUSINESS IN MOZAMBIQUE By
LEGAL ASPECTS OF DOING BUSINESS IN MOZAMBIQUE By: Gisela Manhiça Sitoe
OPTIONS FOR A SPECIAL PURPOSE VEHICLE Two types of legal entities can be considered: a) Commercial companies; and b) Foreign commercial representation – also commonly referred to as a “branch office”, Commercial companies created by the Commercial Code approved by Decree Law 2/2005, of 27 December, as amended by Decree Law 2/2009, of 24 April and Decree Law of 1/2018 of 4 May There are various types of commercial companies but the most commonly used in Mozambique are: a) Limited liability quota company – also known as the Limitada /Lda. company; and b) Limited liability share company – also known as the Sociedade Anónima / S. A. company. These two types will be the focus of our discussion.
DIFFERENCE BETWEEN A LDA. AND S. A. Main differences between a Lda. and a S. A. General LDA. S. A. • Can be managed by their members • Quotas are not embodied in certificates • Evidence of ownership depends on the public record as attested by the commercial registration certificate and published in the Official Gazette. • Can be managed by shareholders, but they are typically structured so as to separate ownership and management. • Evidence of ownership by means of share certificates • Must have a fiscal council or statutory auditor
DIFFERENCE BETWEEN LDA. AND S. A. (cont. ) Number members of LDA. S. A. At least one (if the sole member is a natural person) or two (if at least one member is a legal person) and up to 30. At least three, unless one of the shareholders is the State or a subordinate body thereof, in which case the S. A. may have a single shareholder. Shares may be registered on the stock exchange subject to fulfilment of certain conditions established by law Listing on the stock Not applicable exchange
DIFFERENCE BETWEEN LDA. AND S. A. (cont. ) LDA. Transfer of quotas / shares • • Pledge of quotas / shares • S. A. Done by public deed (required when the equity capital includes immovable property) or by private instrument Change in quotaholders is subject to commercial registration and publication of the partial amendment of the articles of association in the Official Gazette • Subject to commercial registration • • • Bearer shares are transferred upon transfer of possession Nominative shares must be endorsed and the respective entry must be made in the share registry book No public record update required Not subject to commercial registration Pledge must be endorsed on the share certificate and share registry book Share certificate may be delivered to the creditor
STEPS FOR INCORPORATION OF A COMPANY STEP TIME FRAME OBS. Obtain a name reservation certificate from the Legal Entities Registry 1 business day Is not sufficient for intellectual property protection Draft the partnership agreement which shall contain the Articles of Association 3 business days Can be a private instrument or a public deed Obtain sworn translations of incorporation certificates and corporate deliberations of the shareholders authorizing the incorporation 5 business days Powers of attorney for natural persons can be issued in the event the shareholder is not resident in Mozambique. Signatures on powers of attorney and corporate
STEPS FOR INCORPORATION OF A COMPANY (cont. ) STEP TIME FRAME OBS. Notarize the signatures on the partnership agreement, if done by a private instrument 1 business day Register the company with the Legal Entities Registry 1 business day Publish the Articles of Association in the Official Gazette 30 to 45 business days Can be shorter depending on demand Apply for a Unique Tax Payer Identification Number - NUIT 7 business days The tax representative should also have a power of attorney and NUIT. For foreigners, in order to apply you will require a work
STEPS FOR INCORPORATION OF A COMPANY (cont. ) NB: For a share company, you will also need to issue share certificates and make the necessary entries in the share registry book. Start-up obligations to be considered: a) Obtain a concession to operate in the oil & gas or energy sector or apply for licenses for provision of services, as the case may be b) Open a bank account c) Register the company and its non-resident shareholders with the Central Bank d) Declare commencement of activities for tax purposes e) Conduct start-up labour obligations with the National Social Security Institute and the Ministry of Labour
ESTABLISHMENT OF A BRANCH OFFICE Foreign commercial representations – branch offices • A branch office is not considered as a new or separate legal entity but rather an extension of the mother company. • The corporate bodies such as the board of directors, General Assembly, fiscal council etc. , are held in the mother company. • Locally, the branch office is represented by a legal representative. • The establishment of a branch office is regulated by Decree 34/2013, of 2 August 2013, which approves the Regulation for the Licensing of Commercial Activity.
ESTABLISHMENT OF A BRANCH OFFICE (cont. ) STEP TIME FRAME Obtain sworn translations of incorporation certificate, Articles of Association, corporate deliberation of the mother company authorizing the establishment of a branch office as well as power of attorney issued in favour of the branch legal representative 10 business days Obtain a favourable opinion from the authority supervising the sector of activity 30 to 45 business days Submit an application to the Ministry of Industry and Commerce to establish the branch office and issue a license 15 business days OBS. • • Po. A is for the process as well as the business of the branch Branch representative must have a passport with a business visa Maximum validity period is 5 years
ESTABLISHMENT OF A BRANCH OFFICE (cont. ) STEP TIME FRAME Register the branch office with the Legal Entities Registry 1 business day Apply for a Unique Tax Payer Identification Number - NUIT 7 business days Comply with start-up obligations described further above OBS. The tax representative should also have a NUIT. For foreigners, in order to apply you will require a work permit or residence permit.
OFFICIAL FEES • Commercial companies • (On the assumption that the company will be incorporated by a private instrument and has a share capital of 20. 000, 00 MT – USD 310, 99) • Using an average exchange rate published by the Central Bank on 13 February 2020 of USD 1 – 64, 31 MT • Up to and including commercial registration – approximately 1. 530, 00 MT – USD 23, 79 • Publication of the articles of association – 113, 00 MT – USD 1, 75 per line • Foreign commercial representations – branch offices • Each year of validity on the branch license costs 8. 936, 00 MT – USD 138, 95 • Commercial registration of the branch costs 2. 850, 00 MT – USD 44, 31 • Note also that for both process there are symbolic fees for notarial acts such as notarization of signatures and certification of copies, which will depend on the quantity
ADDITIONAL ASPECTS OF INTEREST • Reform on the Commercial Code • Decree-Law 1/2018, of 4 May brought some protections for minority shareholders and more flexibility in certain processes: i. Creation of special rights of quotaholders, both patrimonial and non-patrimonial in nature ii. Notarization of signatures on incorporation agreement by presenting identification document iii. Removal of the obligation to notarize signatures on minutes of the General Assembly iv. Simplification of appointment of representative for General Assembly meeting • More comprehensive reform of the Code is in course and public consultations have taken place to obtain inputs from the general public • Acquisition of land rights (DUAT) • In Mozambique, land is the property of the State and may not be sold, alienated, hypothecated or pledged • The use and appropriation of land requires the acquisition of a DUAT title by means of an authorization process conducted by the State • Foreigners may acquire a DUAT, provided that they have an approved investment project and are: (a) natural persons or individuals who have resided in Mozambique for at least 5 years; or (b) legal persons registered in Mozambique • DUAT title is valid for 50 years and renewable for another 50 years, after that a new request must be submitted • Apart from a DUAT, access to land may be obtained through special licenses, an assignment of exploitation or lease agreement if there is infrastructure of economical
Thank you! Contacts: emanhica@salcaldeira. com Av. Marginal 4985 – PO Box 2830 - Maputo - Mozambique T: +258 -21241400 - F: +258 -21494710 - www. salcaldeira. com
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