THE DEMATERIALISATION OF SHARES IN CAMEROON: A COMPREHENSIVE GUIDE TO THE LEGAL FRAMEWORK AND NOTARIAL OBLIGATIONS
1. INTRODUCTION AND CONTEXTUAL OVERVIEW
The Cameroonian securities landscape has undergone a paradigm shift with the mandatory dematerialisation of all shares and securities. This reform, which replaces physical certificates with electronic book-entry registration, represents a fundamental modernisation of our capital markets, enhancing security, transparency, and efficiency in securities transactions.
This memorandum serves as a definitive guide to the legal framework governing dematerialisation in Cameroon, with particular emphasis on the statutory obligations and professional duties incumbent upon Notaries. As gatekeepers of legal certainty and authenticity, Notaries occupy a pivotal position in this ecosystem, bearing specific reporting responsibilities under Article 22 of Decree No. 2014/3763/PM. The purpose of this communication is to equip legal practitioners with a clear understanding of their obligations, to highlight potential pitfalls, and to offer practical guidance for seamless compliance.
2. THE REGULATORY ARCHITECTURE
The dematerialisation regime in Cameroon is built upon a robust and multi-layered regulatory foundation that spans supranational directives, national legislation, and administrative instructions.
2.1 Supranational and Regional Instruments
The OHADA Uniform Act on Commercial Companies and Economic Interest Groups (AUSCGIE), particularly Article 744-1 as revised on 30 January 2014, establishes the foundational principle that all securities must be registered in the name of their owner and transferred exclusively between accounts. This provision, which took effect on 5 May 2014, sets the tone for the entire dematerialisation framework, though it wisely leaves the specific implementation modalities to national legislators.
Additionally, the International Organization of Securities Commissions (IOSCO) Recommendation No. 6 mandates that securities be either immobilised or fully dematerialised at a Central Depository to ensure optimal security and operational efficiency.
2.2 National Legislative Framework
The domestic legal architecture is anchored by Law No. 2014/007 of 23 April 2014, which establishes the comprehensive terms and conditions for dematerialisation in Cameroon. This landmark legislation provides that physical certificates are replaced by electronic registration in a securities account and defines the key operational concepts, including securities accounts, the Central Depository, issuers, and account holders. Critically, the law mandates that all securities transactions be executed exclusively through account-to-account transfers, with the Central Depository assuming responsibility for custody, coordination, control, and supervision of all dematerialisation operations.
The transitional provisions of the law deserve particular attention, as they establish a four-year compliance period for existing securities holders. Upon expiry of this period, rights attached to non-compliant securities are suspended. An additional one-year grace period follows before the rights may be sold, with the proceeds held for a thirty-year claim period. These provisions underscore the legislature’s determination to achieve full dematerialisation and the serious consequences of non-compliance.
2.3 Implementing Decrees and Regulatory Guidance
Decree No. 2014/3763/PM of 17 November 2014 provides the detailed operational framework, setting out the conditions for application of the parent law. This decree is of particular significance to Notaries, as it establishes in Article 22 the specific reporting obligations that form the cornerstone of notarial duties in this domain. The decree also prescribes the mandatory content of securities accounts and governs the roles of custodians and the Central Depository.
The 2019 Finance Law introduced additional compliance requirements, with Article 30 mandating that public limited companies attach a dematerialisation certificate issued by the Caisse Autonome d’Amortissement (CAA) to their Statistical and Tax Returns. This requirement effectively links tax compliance with securities regulation, creating an additional layer of accountability.
Further operational guidance is provided by CAA Instruction No. 5 on the collection and dematerialisation procedure for physical securities, and Instruction No. 19 on issuers’ securities accounting. These administrative instruments provide the practical detail necessary for effective implementation.
3. UNDERSTANDING THE DEMATERIALISATION PROCESS
3.1 Scope and Application
Dematerialisation applies comprehensively to all securities—whether listed or unlisted, equity or debt—issued by public or private entities in Cameroon or subject to Cameroonian law. Equity securities, comprising shares in public limited companies and simplified joint-stock companies, are fully dematerialised. Debt securities, including bonds, are similarly subject to the regime regardless of the issuer’s nature.
New issues are now directly registered in dematerialised form without the issuance of any physical certificates. Existing physical securities must be collected, converted, and the original certificates destroyed, marking a definitive break from the paper-based era.
3.2 The Two-Tier Architecture
The dematerialisation system operates through a sophisticated two-tier securities accounting structure. At the first level, account keepers and issuers maintain individual shareholder accounts, including standard accounts, pledge accounts, and movement processing records. At the second level, the Central Securities Depository consolidates positions by issue and participant, reconciling against instructions received from account keepers. This dual structure ensures both decentralisedaccess and centralised oversight, striking an optimal balance between efficiency and security.
3.3 Key Participants and Their Roles
The successful operation of the dematerialisation system depends on the coordinated efforts of several key participants. Issuers bear the primary responsibility for implementing dematerialisation, codifying their issues, and maintaining accurate registered securities records. The Central Securities Depository, operated by the Caisse Autonome d’Amortissement, serves as the custodian and supervisor of all dematerialisationoperations. Approved intermediaries known as account holders-custodians manage dematerialised securities accounts. The Financial Markets Commission provides regulatory oversight, while Notaries, as we shall explore in detail, carry statutory reporting obligations that are essential to the system’s integrity.
4. THE NOTARY’S STATUTORY OBLIGATIONS UNDER ARTICLE 22
4.1 The Three Distinct Reporting Duties
Article 22 of Decree No. 2014/3763/PM expressly designates Notaries as obligated persons and establishes three distinct reporting obligations, each with its own scope and timeline.
The First Obligation: Existing Securities, Instruments, and Proceedings
Under Article 22(1), Notaries were required to provide the Central Depository with all information relating to securities entered in their registers, all deeds encumbering such securities with charges or restrictions, and all legal proceedings and decisions to which they were subject. This obligation was to be fulfilled within one year of the decree’s signing on 17 November 2014, meaning the deadline expired on 17 November 2015. While the deadline for this initial disclosure has passed, the obligation serves as a reminder of the comprehensive nature of the reporting regime and the legislature’s intent that the Central Depository maintain a complete and accurate record of all securities and encumbrances.
The Second Obligation: Capital Increase and Reduction Transactions
Article 22(2) imposes a continuing obligation on Notaries to transmit to the Central Depository all information relating to capital increase and reduction transactions. This information must be sent within thirty days of registration with the Trade and Personal Property Credit Register (RCCM). This provision ensures that changes in share capital are promptly and accurately reflected in the centralised records, maintaining the integrity of the dematerialisation system.
The Third Obligation: Transactions Encumbering Securities
Article 22(3) establishes the most time-sensitive obligation, requiring Notaries to forward to the Central Depository, without any delay, all information relating to any transaction encumbering a security with any form of charge. The broad wording of this provision—encompassing “any form of encumbrance”—covers pledges, seizures, sequestrations, and all other restrictions. The immediacy of this obligation reflects the critical importance of ensuring that all encumbrances are promptly recorded centrally, thereby protecting the rights of all parties and maintaining the integrity of the securities register.
4.2 The Notary’s Role in Securities Transactions
Beyond the statutory reporting obligations, Notaries play an indispensable role in ensuring the legal certainty and enforceability of securities transactions. Prior to executing any instrument, Notaries should, as a matter of best practice, request the certificate specifying the characteristics and number of securities as provided for under Article 3(2) of Law No. 2014/007. They should consult the Central Securities Depository regarding any encumbrances recorded centrally, and state the securities’ International Securities Identification Number (ISIN) when available—this twelve-character code uniquely identifies each securities issue internationally and constitutes good identification practice.
For public limited companies covered by Article 30 of the 2019 Finance Law, Notaries should verify the existence of a valid dematerialisation certificate. This verification serves both as a compliance check and as a protection against potential tax liabilities.
After execution, Notaries should transmit all required information to the Central Securities Depository through a traceable channel, retaining evidence of the transmission and its date. Maintaining an internal register of all transmissions made pursuant to Article 22 is strongly recommended, as is establishing a designated contact point within the Central Securities Depository for consultation in case of doubt.
4.3 The Notary and the Pledge of Shares
When a Notary records a deed of pledge over dematerialisedshares, a specific procedure must be followed to ensure the valid creation of the security interest. The creation of the pledge requires a dated declaration, signed by the account holder, identifying the creditor, debtor, pledgor, securities, secured claim, and pledged account. This declaration must be received by the account-keeping entity, which then identifies and immediately blocks the pledged assets. A certificate confirming the pledge over the financial securities account is issued to the pledgee.
The Notary’s obligation in this context is clear: the pledge declaration must be transmitted without delay to the Central Securities Depository under Article 22(3). Failure to do so carries serious consequences. If the Notary fails to transmit the pledge declaration and the account keeper does not identify and block the securities, the security interest may not be validly created or may be unenforceable against third parties. Such an omission may engage the professional liability of the Notary responsible for transmitting the information. This is not merely an administrative formality but a substantive requirement that goes to the heart of the security interest’s validity.
4.4 The Notary and Succession of Securities
The handling of succession matters involving dematerialisedsecurities requires particular care and adherence to established procedures. The Notary must first contact the account keeper or issuer to obtain a complete inventory of the deceased’s securities, including ISIN codes, quantities, account keepers, and any encumbrances such as pledges or attachments.
Upon notification, the account keeper or issuer must freeze the accounts until the succession documentation is produced. This precautionary measure prevents any unauthorised transfers during the succession process. The Notary must then submit the notarial deed of liquidation and distribution, together with the certificate of inheritance, to the account keeper or issuer. At the same time, the Notary must provide the Central Securities Depository with the information required to process the transaction.
The final step involves the actual transfer of securities to the heirs, each of whom must hold a securities account. The account keeper or issuer executes the individual transfers according to the form of the securities, and the deceased’s account is then closed. Throughout this process, the Notary’s role is to ensure that all documentation is complete and accurate, and that all required information is transmitted to the Central Securities Depository.
4.5 Consequences of Non-Compliance
The dematerialisation regime is enforced through a graduated system of sanctions that target shareholders, issuing companies, and Notaries alike.
For shareholders who fail to comply with the dematerialisationrequirements, the consequences are severe. Upon expiry of the four-year compliance period, all rights attached to the securities—including voting rights, dividend entitlements, and pre-emption rights—are suspended. After an additional one-year period, the rights may be sold, with the proceeds deposited in the name of the holders and subject to a thirty-year claim period. These provisions are designed to create a powerful incentive for compliance and to ensure that the dematerialisation process achieves its objectives.
Issuing companies that fail to comply face their own set of consequences, including the non-delivery of the annual dematerialisation certificate and the potential forced sale of physical securities still held by shareholders.
For Notaries, the consequences of non-compliance can be particularly severe, extending beyond administrative penalties to engage professional liability. Failure to transmit information to the Central Depository within prescribed deadlines, or failure to verify the regularity of transactions as required by Article 11(5) of Decree No. 2014/3763/PM, may result in civil liability and potential disciplinary sanctions. The professional reputation and practice of any Notary who fails to meet these obligations are at stake, underscoring the importance of full and timely compliance.
5. NOTARY’S GUIDING CHECKLIST FOR DAILY PRACTICE
Given the complexity of the dematerialisation regime and the seriousness of the obligations imposed, the following recommendations are offered as a practical guide for Notaries in their daily practice.
Verify Compliance Before Execution
Before drafting any instrument relating to shares in a public limited company or simplified joint-stock company, verify that the company has completed the dematerialisation process and, where applicable, holds a valid dematerialisation certificate from the Central Depository. This verification serves as a preliminary check that protects both the Notary and the parties to the transaction.
Ensure Systematic Transmission
All information relating to encumbering transactions must be transmitted to the Central Depository without delay through a traceable channel. The Notary should retain proof of transmission, including the date and method of transmission, as evidence of compliance.
Include ISIN in All Deeds
Where the ISIN code is available, it should be included in all deeds relating to securities. This constitutes good identification practice and facilitates accurate record-keeping by the Central Depository.
Maintain an Internal Register
An internal register of all transmissions made pursuant to Article 22 of Decree No. 2014/3763/PM should be maintained. This register serves both as a management tool and as evidence of compliance should any questions arise.
Request the Ownership Certificate
Systematically request the certificate of ownership from the issuer or account keeper before finalising any transaction. This certificate provides evidence of ownership and assists in identifying any encumbrances.
Verify Encumbrances
Consult the Central Depository regarding any encumbrances recorded centrally before drafting instruments affecting securities. This consultation helps identify any existing charges or restrictions that may affect the transaction.
Consider Appropriate Disclaimers
Consider including appropriate disclaimers in deeds, clearly stating that the Notary’s role is limited to authenticating signatures and collecting taxes, and that the Notary does not guarantee the accuracy of the company’s internal securities register. Such disclaimers, while not relieving the Notary of their statutory obligations, provide clarity regarding the scope of the Notary’s role.
Stay Updated on Regulatory Developments
Monitor Central Depository notices and regulatory updates. The regulatory landscape is constantly evolving, and the Central Depository has announced stricter conditions for the issuance of dematerialisation certificates for the current fiscal year. Staying informed is essential for maintaining compliance.
6. CONCLUSION
The dematerialisation of securities in Cameroon represents a fundamental and irreversible reform of our capital markets. By replacing physical certificates with electronic book-entry registration, this regime has modernised and safeguarded securities transactions while imposing stringent obligations on all market participants. Notaries, as key legal practitioners entrusted with the authentication of instruments and the protection of legal certainty, bear statutory reporting obligations under Article 22 of Decree No. 2014/3763/PM that are critical to the proper functioning of the system.
The three reporting obligations—the disclosure of existing securities and encumbrances, the notification of capital transactions within thirty days of RCCM registration, and the immediate transmission of information relating to encumbering transactions—are not mere administrative formalities. They are substantive requirements that ensure the legal certainty, transparency, and enforceability of securities transactions. Failure to comply may engage the professional liability of the Notary and render security interests unenforceable against third parties.
In the dematerialisation system, legal certainty rests on a fundamental principle: the legal documentation creates the right, but it is the proper entry into the account that ensures proof, enforceability, and traceability. Notaries occupy a unique position at the intersection of legal documentation and account entry, and their compliance with the reporting obligations is essential to the integrity of the entire system.
As we navigate this new landscape, it is incumbent upon all legal practitioners to master the regulatory framework, to comply fully with their obligations, and to contribute to the development of a robust and transparent securities market in Cameroon. The dematerialisation regime is not merely a regulatory imposition; it is an opportunity to enhance the rule of law, to protect the rights of all parties, and to build a modern and efficient capital market that serves the needs of our economy.
Banyong Fonyam Jonie Jr.
Managing Partner
Fonyam and Partners Law Firm
Advocates, Notaries, and Legal Consultants