The purpose of preventive settlement according to the OHADA Law shall be to avoid the insolvency or cessation of activity of a company and to enable the debtor company clear its debts through a preventive composition agreement.

Preventive settlement shall apply to any natural or corporate person doing business and to any non-trading private corporate person, to any public corporation having the form of a private corporate person, facing a difficult but not irremediable economic and financial situation no matter the nature of the debts.

The debtor company shall commence proceedings before the competent court by a process outlining the economic and financial situation of the company, the prospects for its recovery and clearing its debts.

The following documents shall be attached to the process;

  1. An extract of the registration in the Trade and Personal Property Rights Register,
  2. Summary financial statements comprising specifically the balance sheet, profit and loss account and statement of income and expenditure,
  3. Available funds
  4. A statement in figures of claims and debts containing the names and addresses of the creditors and debtors,
  5. Detailed statement of collateral securities and secured debts granted or received by the company and its managers,
  6. An inventory of the debtor’s property showing the movable property subject to claim by their owners and the property affected by an ownership reserve clause etc.

The debtor shall at the time of filing the documents above, and no later than thirty days following such filing, under penalty of inadmissibility of his process, also file a proposal of a preventive composition agreement specifying the measures and conditions envisaged for the recovery of the company particularly;

  • The modalities for continuing the operation of the company such as the application for time limits and debt remissions, partial transfer of assets specifying the property to be transferred; transfer or management lease of a branch of an activity which is part of the business; the transfer or management lease of the entire company. Such modalities shall not be restrictive or exclusive of each other.
  • The persons who will execute the composition agreement and all the engagements undertaken by them for the recovery of the company etc.

As soon as the proposal for preventive composition agreement is filed, it shall be forwarded to the competent court for the necessary orders to be granted in view to suspend individual suits and engage the preventive composition proposals.

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