DETERMINING THE APPROPRIATE SHARE CAPITAL FOR COMPANY INCORPORATION IN CAMEROON – MANDATORY SHARE CAPITAL VERSUS START UP CAPITAL
Share capital constitutes the permanent equity funds raised through the issuance of company shares to owners and investors, thereby defining both legal ownership and the overall capital structure of the entity. Start-up capital otherwise known as seed capital represents, by contrast, the total financial resources required to launch a new business, encompassing initial operating expenditures such as inventory, equipment, and rental costs.
A share in the law of corporations and joint-stock companies, a share is a definite portion of the capital of a company.
The determination of share capital for a company incorporated in Cameroon is governed by the regulations of OHADA (Organisation pour l'Harmonisation en Afrique du Droit des Affaires), which prescribe minimum thresholds contingent upon the legal structure selected. Share capital represents the initial funds or assets contributed by partners for the purpose of establishing and launching the business.
KEY CONSIDERATION TO SELECT YOUR COMPANY SHARE CAPITAL IN CAMEROON
1. Identify the Company Type and Minimum Capital
The minimum share capital is determined by the legal form of your business or Company in Cameroon.
Private Limited Company By Notarial Act (SARL - Société à Responsabilité Limitée):
Minimum Capital: 1,000,000 FCFA.
Private Limited Company by Private Treaty (Seing Prive)
Minimum Capital: 100,000 FCFA.
Public Limited Company (SA - Société Anonyme):
Minimum Capital: 10,000,000 FCFA (ten million FCFA).
2. Assess Business Financial Needs
It is inadvisable to default automatically to the minimum prescribed amount. The share capital should be determined at a level sufficient to meet initial operational costs, including but not limited to:
Rental of premises.
Purchase of equipment, materials, or initial inventory.
Administrative fees for registration.
Initial marketing expenses.
3. Consider Capital Structure (Cash vs. Kind)
Contributions to share capital may be made in one of two recognized forms:
Cash (Numéraire): Money deposited into an accredited bank account.
Requirement: In the case of an SA, a minimum of 25% of cash contributions must be paid up at the time of incorporation. For a SARL, whilst applicable regulations permit a degree of flexibility, it is generally advisable for contributions to be paid in full upon incorporation.
In Kind (Nature): Includes Property, vehicles, or intellectual property.
Requirement: Where such contributions are of significant value, they must be assessed by a specialized auditor (Commissaire aux apports), though this requirement may be waived in certain circumstances for smaller SARLs.
4. Determine Share Value and Distribution
SARL: Share capital is apportioned into shares, each typically bearing a nominal value of 5,000 FCFA or 10,000 FCFA.
SA: Shares in an SA or PLC carry a minimum nominal value of 10,000 FCFA.
Distribution: The shareholding ratio is calculated by apportioning the total capital among partners in accordance with their respective agreed contributions.
5. Legal Requirements and Procedures
Deposit into a Bank or Notary Office: The requisite funds must be deposited into a bank account or commissioned Notary pending the completion of the incorporation process.
Notary Requirement: The notarization of the Articles of Association is, as a general rule, a mandatory requirement. However, in the case of a SARL with a share capital not exceeding 1,000,000 FCFA, notarization is rendered optional by 2016 Law and 2017 Decree.
Registration: The amount of share capital selected must be expressly stipulated in the Articles of Association (Statuts) and formally declared before the Centre for Enterprise Creation (CFCE). Added to the Company Articles of Association is the statement of subscription of shares and the declaration of conformity with the relevant provisions of OHADA.
Key Differences Between Share Capital and Start Up Capital for a Cameroon Company
Definition & Source: Share capital represents ownership equity in the form of cash or in-kind assets, while start-up capital denotes the total funds required to launch the business, sourced from share capital, loans, or personal savings.
Purpose: Share capital provides the long-term, non-debt financial foundation for growth, while start-up capital is deployed specifically to fund initial operations until the business becomes self-sustaining.
Legal Standing: Share capital is formally recorded and regulated, often defining the limits of shareholder liability, while start-up capital is a functional term referring to the expenses involved in launching the business.
Repayment: Share capital requires no repayment, whereas debt-based start-up capital is subject to repayment obligations.
Difference Between Contributions & Securities in a Cameroon Company
Contribution (Apport)
Security
Purpose
For the formation or increase of company capital.
Issued as a guarantee for Contributions.
Parties Involved
Partners, Shareholders, and the Company.
Partners, Shareholders and the Company.
Legal Framework
Uniform Act on Commercial Companies.
Uniform Act on Commercial Companies.
Outcome
Becomes equity; risk of losing investment.
Right to profits and company assets.
Repayment
No automatic repayment; profit-sharing.
No automatic repayment; right to profit sharing.