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Client Protection: Safeguarding Personal and Financial Information

In a bid to strengthen client protection, judicial authorities, tax experts, and anti-corruption agencies are working together to ensure that lenders and financial institutions adhere to strict regulations. The law aims to safeguard clients’ personal and financial information by implementing robust measures.

Tax Regulations for Lenders in Cameroon

For lenders operating in Cameroon, specific tax regulations apply to payments made to borrowers:

  • A Value-Added Tax (VAT) of 19.25% is applicable to banking services based on the borrower’s location, with exemptions for overseas borrowers.
  • A capital gains tax of 16.5% applies to interest income among financial institutions within the same corporate group.

Other Taxes, Duties, Charges or Tax Considerations

When lending to entities in Cameroon, two main charges are typically relevant:

  • Registration duties (1-5% fees)
  • Stamp duty, which is levied on legal instruments like promissory notes or loan contracts

Foreign lenders and non-money centre bank lenders face additional tax and regulatory issues, including:

  • Double taxation
  • Withholding tax
  • Transfer pricing
  • Exchange rate risk

Guarantees and Security

Under OHADA law, assets available as collateral to lenders fall into three categories:

  • Personal security
  • Movable property security
  • Mortgages

The AUS outlines formalities for these collaterals, modernizing credit guarantees and procedures.

In bankruptcy, new security against old debt is unenforceable if taken 18 months before insolvency.

Floating Charges and Similar Security Interests

OHADA law allows for a universal security interest over a company’s current and future assets, akin to the “floating charge” in other jurisdictions. Under the AUS, assets can be assigned to secure obligations, covering both present and future assets.

However, implementation specifics may vary and certain conditions must be met.

Downstream, Upstream, and Cross-Stream Guarantees

Entities in Cameroon can offer downstream, upstream, and cross-stream guarantees involving parent companies and their subsidiaries, provided that formalities are followed according to OHADA law. Various security interests can be employed in such contexts, including:

  • Mortgages
  • Pledges
  • Assignments of receivables

Restrictions on the Target

The target company is prohibited from granting security for the subscription or purchase of its own shares by a third party under Article 639 of the OHADA Uniform Act on Commercial Companies and Economic Interest Group Law.

This means that in the context of an acquisition, the target company may not grant guarantees or securities to facilitate the acquisition of its own shares.

Release of Typical Forms of Security

Security is typically released when the underlying obligation is met under OHADA law. The main way to release security is by meeting the obligation it was designed to cover. Once met, the creditor’s claim on the security ceases.

Rules Governing the Priority of Competing Security Interests

Under OHADA’s AUS Articles 225 and 226, the priority of competing security interests in Cameroon is as follows:

  • Creditors for judicial costs
  • Credit institutions
  • Secured creditors

This ensures that creditors are protected and can enforce their claims on security interests.

Conclusion

In conclusion, the law aims to safeguard clients’ personal and financial information by implementing robust measures. Judicial authorities, tax experts, and anti-corruption agencies must work together to ensure that lenders and financial institutions adhere to strict regulations, protecting clients’ interests in Cameroon.