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Cameroon’s Lending Landscape: Understanding Fees, Taxes, and Securities
In a bid to attract foreign investors and boost economic growth, the Cameroonian government has put in place various laws and regulations governing lending in the country. From registration duties to stamp duty, and from guarantees to securities, understanding these requirements is crucial for lenders and borrowers alike.
Registration Duties and Stamp Duty
When it comes to formalizing financing agreements, lenders may need to pay registration duties, which can range from 1-5% of the loan amount. Additionally, stamp duty is levied on legal instruments such as promissory notes or loan contracts.
Mitigating Risks for Foreign Lenders and Non-Money Centre Bank Lenders
For foreign lenders and non-traditional banks operating in Cameroon, navigating tax and regulatory issues can be challenging. However, there are ways to mitigate these risks:
- Double taxation treaties can help reduce withholding tax.
- Structuring loans or leveraging tax treaties can address transfer pricing concerns.
- Regulatory compliance can be ensured through consultation with local legal experts and strong compliance procedures.
Guarantees and Security
When it comes to securing loans in Cameroon, lenders have a range of options available. Under OHADA law, assets can be categorized as:
- Personal security
- Movable property security
- Mortgages
The AUS outlines formalities for these collaterals, making it essential for lenders to ensure compliance.
Floating Charges and Similar Security Interests
OHADA law allows for universal security interests over a company’s current and future assets, similar to the “floating charge” in other jurisdictions. However, implementation specifics may vary, and certain conditions must be met.
Downstream, Upstream, and Cross-Stream Guarantees
In Cameroon, entities can offer downstream, upstream, and cross-stream guarantees involving both parent companies and their subsidiaries. These guarantees can take various forms, including:
- Mortgages
- Pledges
- Suretyship
Restrictions on the Target Company
Under OHADA law, target companies are prohibited from granting security for the subscription or purchase of its own shares by a third party. This restriction is aimed at preventing fraudulent activities and ensuring that company assets are protected.
Release of Typical Forms of Security
Security is typically released when the underlying obligation is met. Under OHADA law, security can be released through:
- Payment of the obligation
- Enforcement of the security
Priority of Competing Security Interests
In Cameroon, the priority of competing security interests is governed by OHADA’s AUS Articles 225 and 226. Creditors with earlier registration dates have priority over those with later registration dates.
As the Cameroonian economy continues to evolve, understanding these regulations and requirements is essential for lenders and borrowers alike. By navigating the complexities of Cameroon’s lending landscape, investors can unlock new opportunities and drive economic growth in the region.