CHAPTER ONE GENERAL INTRODUCTION

The development of corporate securities has been tied up with the development of the corporate form and corporate finance itself. Corporate finance for the pre-industrial world began to emerge in the Italian City-States^[1] and the low countries^[2] of Europe from the 15th century. Corporate dividends as a consequence of subscription to securities date back at least to the early sixteenth century in Holland and Great Britain, when the captains of sixteenth-century sailing ships started selling financial claims to investors, which entitled them to share in the proceeds, if any, of the voyages.[3]

At the end of each voyage, the profits and the capital were distributed to investors, liquidating and ending the venture’s life. By the end of the sixteenth century, these financial claims began to be traded on open markets in Amsterdam and were gradually replaced by shares of ownership.[4] It is worth mentioning that even then many investors would buy shares from more than one captain to diversify the risk associated with this type of business. At the end of each voyage, the enterprise liquidation of the venture ensured the distribution of the profits to owners and helped to reduce the possibility of fraudulent practice by captains.[5] However, as the profitability of these ventures was established and became more regular, the process of liquidation of the assets after each voyage became increasingly inconvenient and costly. The successes of the ventures increased their credibility and shareholders became more confident in their management (captains) and this was accomplished by, among other things, the payment of “generous dividends”.[6] As a result, these companies began trading as going concern entities and distributing only the profits rather than the entire invested capital. The emergence of firms as a “going concern”[7] initiated the fundamental practice of firms to decide what proportion of the firms’ income (rather than assets) to return to investors and produced the first dividend payment regulations.[8]

Gradually, the ownership structure of shipping firms evolved into a joint stock company form of business.[9] But it was chartered trading firms more generally that adopted the joint stock form. In 1613, the British East India Company issued its first joint stock shares with a nominal value. “No distinction was made, however, between capital and profit”.[10] In the seventeenth century, the success of this type of trading company seemed poised to allow the spread of this form of business organization to include other activities such as mining, banking, clothing, and utilities. The Dutch East India Company (also known by the abbreviation “VOC”[11] in Dutch) was the first publicly listed company ever to pay regular dividends as a consequence of the subscription of shares. The VOC was also the first recorded joint-stock company to get a fixed capital stock. Public markets for investment securities developed in the Dutch Republic[12] during the 17th century. Shares in the company could be bought by any resident of the United Provinces and then subsequently bought and sold in open-air secondary markets (one of which became the Amsterdam Stock Exchange).

By the early 1800s, London acted as a center of corporate finance for companies around the world, which innovated new forms of lending and investment. The twentieth century brought the rise of common stock finance, with share capital raised through listings[13], in preference to other sources of capital[14]

Modern corporate finance, alongside investment management[15], developed in the second half of the 20th century, particularly driven by innovations in theory and practice in the United States and Britain.

The received common law and civil law operated parallel to each other in the Anglophone and Francophone regions. The constitution of 4th March 1996 of the Federal Republic of Cameroon, in its article 46, maintained in force all existing laws in both Federated states which were not in contradiction with the Constitution itself.  Article 68 of Law No. 96-6 of 18 January 1996 to amend the constitution of 2 June 1972 preserves all legislation passed before 2 June 1972, which has not been amended or repealed by subsequent enactments.  The colonial experience laid the foundation for the development of Cameroonian law into a mixed legal system.

The harmonization of business law in Cameroon was done through OHADA. It is worth noting that, before the adoption of OHADA by Cameroon, the area of company law since independence, Cameroon was governed by the statutes in force during the trusteeship period. Thus, firms have the option of incorporating under the legal systems operating in the former British West and French East Cameroon. The Nigerian Companies Ordinance the French Commercial Code and other related statutes were the operative commercial enactments at unification.^[16]

Cameroon, being a founding member of the Organization for the Harmonization of Business Laws in Africa (OHADA) is a signatory to the OHADA treaty, and therefore, is bound to observe the tenets of the Treaty.[17]

OHADA is an international organization that was created by a treaty signed in Port-Louis (Mauritius) on 17 October 1993 (as amended in Quebec on 17 October 2008) by 14 African States. The acronym “OHADA” stands for “Organization pour l’Harmonisation en Afrique du Droit des Affaires” (Organization for the Harmonization of Business Law in Africa, occasionally referred to in English as “OHBLA”). The idea behind the creation of OHADA sprang from a political will to strengthen the African legal system by enacting a secure legal framework for the conduct of business in Africa, which is viewed as essential to the development of the continent.^[18] The project took shape over the course of several summit meetings of Heads of State and Government from French-speaking Africa. At a summit held in April 1991 in Ouagadougou (Burkina Faso), the Finance Ministers of the Franc Zone entrusted a group of jurists, led by H.E. the late Mr. Kéba Mbaye,^[19] with the task of assessing the political and technical feasibility of the project. This group prepared a report, which was approved in October 1992 at a summit in Libreville (Gabon). At the same summit, a steering committee of three jurists was charged with drafting an international treaty and identifying areas so flaw to be harmonized. One year later, the treaty was presented for signature. It entered into force on 18 September 1995 after the requisite number of ratifications had been obtained.

At present, OHADA has 16 members: Benin, Burkina Faso, Cameroon, the Central African Republic, Chad, the Federal Islamic Republic of the Comoros, Congo, Ivory Coast, Equatorial Guinea, Gabon, Guinea, Guinea Bissau, Mali, Niger, Senegal and Togo. Although in a less formal manner to date, other States such as Angola, Ghana, and Liberia have also expressed a certain interest in OHADA. Except Guinea, all the current members of OHADA are also members of the Franc Zone, although this is not the case for the DRC or the other States that have expressed some interest. Broadly speaking, the present membership of OHADA reflects a common background. Except for Equatorial Guinea and Guinea-Bissau, where Spanish and Portuguese are spoken, respectively, and the English-speaking regions of Cameroon, all the OHADA Member States are French-speaking. In addition, all the Member States have a civil law tradition except for the English-speaking regions of Cameroon, which follow the common law tradition. As a public international organization, OHADA is a legal entity with its rights and obligations, distinct from those of its Member States. The treaty provides that it can in its own right be a party to contracts and agreements, purchase or sell movable or immovable property, and appear before the domestic courts.^[20]

The principal aims of OHADA, as identified in its founding treaty, are to unify business law throughout the Member States and to promote arbitration as a means of settling contractual disputes.^[21] In pursuance of these aims, OHADA issues unified legislation in the form of Uniform Acts^[22] on particular areas of the law such as the Uniform Acts on General Commercial Law[23], Law of Securities[24], Insolvency Law[25], Arbitration Law[26], Rules of Procedure of the Common Court of Justice and Arbitration[27], Commercial Companies and Economic Interest Groups[28], Simplified Recovery Procedure and Measures of Execution[29], CCJA Rules of Arbitration[30], Accounting Law[31], Contracts for the Carriage of Goods by Road[32], Cooperatives[33] and Mediation Law[34].  These Acts are directly applicable in all the Member States and supersede the previous national legislation on the same topic in each country.^[35] However, they do not prevent the Member States from enacting specific legislation that does not conflict with the Uniform Acts. The Uniform Acts provide an overall legal framework that is in general based on civil law and has to a certain extent borrowed from modern French business law. They are far from being a simple transposition of French law, however, and there are several substantial differences.

OHADA aims to reach beyond its original members and to embrace other countries in Africa that are not necessarily French-speaking countries or do not necessarily operate legal systems based on civil law traditions. For this reason, the OHADA Treaty provides that any of the Member States of the Organization for African Unity (OAU) and also non-members of the OAU, if so invited unanimously by the OHADA Member States may join OHADA by acceding to the treaty.^[36]

The application of the OHADA law in Cameroon finds its legal backing in Article 45 Cameroon Constitution[37] which provides for the application of duly ratified treaties that override national laws. 

1.4 RESEARCH OBJECTIVES

The objectives are divided into main research objective and specific research objectives.

1.4.1 Main Objective.

The main objective of this research is to examine the regulation of corporate securities under OHADA law.

1.4.2        Specific Objectives

Specifically, the thesis seeks to answer the following questions:

• To analyze the concept of corporate securities.
• To examine the legal nature of the issuance and transferability of corporate securities under OHADA.
• To examine the diversification of corporate securities under OHADA Law.
• To propose policy recommendations.