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Accueil du site > N° 3 - Septembre 2013 > Etudes > The advent of OHADA Cooperatives companies - An Insight into management (...)

The advent of OHADA Cooperatives companies - An Insight into management control


par

Monkam Cyrille
Assistant Lecturer
Department of Law, Faculty of Social and Management Sciences (FSMS), University of Buea,
E-mail : cyrimo2009@yahoo.fr/monkamcyrille@gmail.com

Abstract

The stability of a cooperative society depends in part on the effectiveness of its leaders. To maintain this efficiency, management actions are always subjected to control by a number of people and structures that have been assigned by the legislature. They have a preventive control (consisting of an alert procedure and management expertise) and accounting control whose main goal remains the search for transparency in the management of social affairs.
The guarantee of this transparency is achieved by the various sanctions that threaten managerial leaders in both their personal property and their freedom. This threat will make the cooperative a viable economic entity and also protects the interests of its members.
Keywords : cooperatives leaders, management, control, sanctions, transparency, interest.

Résumé
La stabilité d’une société coopérative dépend en partie de l’efficacité de sa gestion par les dirigeants. Pour maintenir cette efficacité, les actes de gestion sont constamment passés au scanner par un certain nombre de personnes et de structures investies de cette mission par le législateur. Elles exercent un contrôle préventif (alerte et expertise de gestion) et un contrôle comptable dont le principal but demeure la recherche d’une transparence dans la gestion des affaires sociales.
La garantie de cette transparence est assurée par les différentes sanctions qui menacent les dirigeants sociaux tant dans leur patrimoine que dans leur liberté. Toute chose qui fera de la société coopérative une entité économique viable et protectrice des intérêts de ses membres.

Mots clés : dirigeants sociaux, gestion, contrôle, sanctions, transparence, intérêt.

Contents

I- Introduction
II- Who can exercise control over management in OHADA Cooperative Law ?
II.1- Cooperative members
II.2- Management inspectors
II.3- Auditors
II.4- Cooperative consortium

III- What are the consequences of controlling OHADA cooperative companies ?
III.1- The imposition of damages
III.2- The imprisonment sentence
III.3- The personal bankruptcy
III.4- The recovery of debts

IV- Conclusion

I- Introduction
The establishment of the OHADA Uniform Act on commercial companies and economic interest groups (UACC) promoted an economic boom marked by the emergence of companies, associations for economic purposes and especially the emergence of cooperative movements . This certainly supports the position of the OHADA legislator who wanted, through an independent uniform act , to devote an entire legislation to “special” or “new type” companies because of significant changes that have occurred in this area .

Cooperative societies are in principle open to all persons belonging to the category to which they are addressed. Indeed, Article 4 of AUSCOOP defines cooperative as “an autonomous association of persons united voluntarily to meet their common economic, social and cultural needs, through a jointly owned and managed group and where power is exercised democratically and according to cooperative principles”. Simplistically, a cooperative or a cooperative group is a company whose members voluntarily contribute equally in rights and obligations. It is organized and managed according to the universally recognized cooperative principles mentioned in Article 6 of the AUSCOOP . In furtherance of the general rules applicable to cooperative societies, the OHADA legislature has provided specific rules relating to two variants of cooperatives, the Simplified Cooperative Society (SCOOPS) and the Cooperative Company with Board of Directors (SCOOP-CA) . Whatever the form of cooperative, cooperatives operate through two bodies : the executive managers and assemblies of cooperators. Each of these bodies has powers, which when exercised, can be a source of liability. This liability can only be activated subject to the intervention of a separate control unit, which is the subject of this study.

There are many regimes applicable in the means of control of the OHADA cooperative companies. However, the plurality of regime contributes to a common goal : to ensure management transparency on behalf of the interests of members of the cooperatives . Management control is for these cooperative partners a tool of transparency that should ensure a constant and normal functioning of the cooperative society. It is therefore of great interest to examine how the law dictates this control. It appears that the management control of the cooperative society differs from that of corporations through the introduction of some special organs aimed at strengthening the control.

The purpose of this article is to identify bodies and control mechanisms established by the OHADA legislator to ensure transparency. For better understanding, it is necessary to determine firstly the people entrusted with this mission, and secondly to dwell on the possible consequences of such control.

II- Who can exercise control over management in OHADA Cooperative Law ?

If membership in the cooperative is open to anyone in the domain to which it applies, the exercise of management control is vested in the restricted persons or institutions authorized under the Uniform Act relating to cooperatives law. In its inventory , the Uniform Act provides an exhaustive list of persons and institutions attributed with the authority to perform such control including cooperative members, management inspectors, auditors, if any, and cooperative consortium.

II.1- Cooperative members

In general, cooperative members are individuals or legal entities , provided they meet the regime of legal capacity . It should be noted that aspects such trader quality, marital status or nationality of members are no longer required for membership into a cooperative . The number of members depends on the type of society . The members of the cooperative constitute the key organ in the management of the cooperative . Membership into and resignation from the cooperative are free. However, in the case of indebtedness incurred during the membership, the members will be jointly and severally liable. The exclusion of members is also possible under the conditions and means of defenses set by the Uniform Act . As such, these partners have rights , dependent on their shares and obligations in conformity with the latinism affectio cooperatis - intention to belong to a cooperative.

In addition to participation in the management of the cooperative, the cooperative members are entitled to intervene prior to the difficulties that can disrupt the normal functioning of the cooperative society. As such, the cooperative members representing at least twenty-five percent of the members of the cooperative may request the President of the competent court at the headquarters of the cooperative, to designate one or more experts to report on one or more management operations. In order for the court to designate an expert, the request for control must be made on a specific fact and not on the overall management of the cooperative.

If this development is welcomed, the systematic and regular recourse to it could compromise the serenity in the management structure. To limit the recourse to this process, either the legislator or company itself may devise methods to reduce the reliance on this procedure.

II.2- Management inspectors

Depending on the form of the cooperative society, an autonomous control organ with specific missions can collectively achieve the management control. Though ensuring the same tasks, the appellation of these organs differ depending on whether it is the simplified cooperative society (supervisory committee) or the cooperative company with a board of directors (supervisory board).

The supervisory committee acting in the sole interest of the simplified cooperative members is composed of three to five individuals elected by the general meeting, if the number of members so permit. Similarly, for purposes of clarity and independence of the control by the committee, the legislator restrictively lists certain prohibitions related to access to the commission.

Contrary to the cooperative with a Board of directors, the management control of the company is guaranteed by the Supervisory Board , which is composed of three to five members elected by the General Assembly among the members, and for a term of three years. The legislature has made a number of prohibitions to ensure that the supervisory committee has full reliability.

In sum, the originality of these supervisory bodies lies in their functions. These purely internal organs play a role in strategic thinking by exercising quality control over the management of the cooperative. Given the nature of their missions, despite the silence of the legislature, it can be assumed that the members of the control organ should be subject to confidentiality especially with respect to information received from executives, which may be of confidential nature for the company.

These bodies have a tremendous power in the management control to the extent that they can check at any time either personally or through a third party the management of company executives. The purpose is to trigger the alert procedure. This procedure enables the committee or the supervisory board to ask for clarification in writing or orally to the social body, which is required to meet on any fact likely to endanger the continuity of the cooperative society. The refusal to answer or the discovery of facts that are compromising to the continuity of the management of the cooperative would either lead to the organ convening a special report to be submitted to the general meeting, or alternatively, in the event of an emergency, a special meeting of the General Assembly would be convened for that purpose. In reality, the right of communication attributed to these bodies is discretionary and permanent insofar as the controls and inspections permitted are deemed necessary.

Despite the silence of the legislature, and because of the separation of the management bodies of cooperatives companies, it is possible for OHADA to incorporate the French solution that allows the continuity of the exercise of control in the event of reorganization and even liquidation.

II.3- Auditors

Involved in the management of cooperative societies, the auditors provide preventive control in case of difficulties in the structure. In reality, auditors are responsible for the accounting aspects of the management of the cooperative society. Their main mission is the certification of the summary of financial statements. As such, they must approve the accuracy and regularity and certify to the truthfulness of the figures relating to operations for the year and the financial position and assets of the company. Their mission is to report to members and managers any wrongful act discovered in management and also to provide advice. They play an important role to this effect in the process of management control of the cooperative as independent guardians of management integrity .

However, it should be noted that the audit by the auditor is not effective in all forms of cooperatives. Indeed, in the case of cooperative companies with board of directors, the legislature requires auditors whereas in simplified cooperative companies auditors are not obligatory. Does this mean that it is less important in this type of company ? The answer is negative because only members to set a gauge in the management control of their structure.

II.4- Cooperative consortium

The OHADA legislature has provided situations where cooperative societies could have links between them. Thus, for the management of their common interests, cooperative societies can be grouped into “Unions” when they share the same object ; into “Federations” when they do not have the same object ; or into “Confederations” when their objects are different. Cooperative societies, their unions, federations and confederations, without a common link, can be grouped into cooperative consortium. Their sole purpose is to implement in a fixed-term, all the means to facilitate or develop the activities of their members. Further, they are mandated to improve or increase the results of this activity in order to achieve goals for the promotion of cooperative principles.

These cooperative consortiums may be fully involved in the control of the members of the cooperative company. Indeed, Article 144 of AUSCOOP revealed that : “The federation’s mission is ... 1) to act as a control organ of unions and affiliated cooperatives ; 2) to activate, the alert procedure on behalf of its members, or seize the general meeting of unions and cooperative societies when there are irregularities”.
The evocation of the power to initiate the alert procedure by the cooperative consortium prescribed in Article 19 presume that the exercising conditions of that action by these consortiums will be the same as those used for the alert triggered by the committee and the supervisory board.

Whenever one of these individuals or institutions set in motion its supervisory powers, it is not without consequences for social managers, especially when the control leads to criminal acts and financial indecency.

II- What are the consequences of controlling OHADA cooperative companies ?

In general, the exercise of management control may result, as required by the Uniform Act relating to cooperative societies , in the involvement of a multifaceted responsibility of corporate bodies. Thus, subject to the responsibility of members and promoters , the legislature holds corporate bodies to civil and criminal liabilities. They could also be prosecuted for the repayment of liabilities owed by the company or be subject to personal bankruptcy. In addition, an order to pay fines is not excluded.

It shows that the sanctions are of a proprietary and personal basis. Therefore, we will examine the impact of individual actions and that of company actions. We will also look at possible criminal actions including the imposition of damages, possible imprisonment, personal bankruptcy liability and the recovery of company debts.

III.1- The imposition of damages

Members of the management committee or boards of directors of the cooperative society are responsible for their management. This tort liability is based on mismanagement that causes harm to members, to third parties and to the company.

Indeed, executive managers can be subject to a civil action for damages suffered by those individuals due to their negligence or reckless management. The imposition of damages comes after an individual action or a company action.

Individual action is the action that is exercised against the company or the manager by a member or a third party who personally suffered an injury distinct from that suffered by the company. Company action is an action for damages suffered by the company due to mismanagement. In both actions, the liability is shared when several managers are responsible in the wrong doing. In this scenario, the competent court shall determine the contribution of each to the payment of the damage. The action is statute-barred : it shall be limited to within three years from the occurrence of the damage or injury and in the case where the damage or irregularity is undiscovered, it shall start counting as soon as it is revealed. If the act is a crime, this limitation is increased to ten years. Contrary to the individual action where the plaintiff is a member or a third party who suffered the damage, in company actions, managers are the lead plaintiffs. However, in case of apathy of these leaders, one or more members can sue after providing notice to the corporate bodies after thirty days in the case of inactivity. Any decision affecting that right is void.

In all cases, the occurrence of an injury due to mismanagement opens the door to compensation. Thus, in case of conviction, the damages representing the compensation will be paid to cooperative or a third party or to the cooperative company considering the nature of the action.

III.2- The imprisonment sentence

The legislator under the Uniform Act on Cooperatives maintains the logic of allowing States Parties to determine the penalties irrespective of any implications for the economy. In addition, the legislator did not accept the liability of legal persons , but opted for the principle of personal criminal liability. He has also endorsed all non-contradictory offenses under Sections 886 to 905 of the Uniform Act on the Commercial Companies and Economic Interest Groups.

Therefore company managers are subjected to punishment should they distribute fraudulent dividends between members, conceal the true situation of the cooperative society, manage with bad faith the assets or credit of the company and even those who have not complied with the formalities relating to the increase or reduction of share capital. Company executives who have not inventoried for each financial year the stocktaking and have not prepared the report and the social balance sheet would also be subjected to punishment. Further, those who broke the rule on equality between members, operate on loss without disclosing it to members or conclude disadvantageous contracts, present the untruth financial situation of the company etc are also subjected to sanctions.

So far, only Cameroon and Senegal have passed laws punishing companies’ offenses defined under OHADA. Indeed, following the example of Senegal , Cameroon enacted Law No. 2003/08 of 10 July 2003 on the repression of offenses contained in the OHADA Uniform Acts. The Law in its Articles 7 to 9 punishes offenses relating to the management and administration of companies. The laws in both countries provide different punishments for the same kinds of offenses. This trend of development is likely to create forum shopping (criminal paradise) where prospective businessmen would prefer to set up businesses in jurisdictions that offer less punitive punishments. For example, the offense of managing with bad faith assets or credit of the company in Cameroon is punishable by imprisonment of one to five years and a fine of 2 million to 20 million francs CFA while in Senegal the same offense is punishable by a fine of 100 000 to 5 million CFA francs. The harshness of the sanction could well obstruct the attractiveness of investors in some countries. More than ever, the OHADA legislature should return to the principle that in private law the penalty is always treated in the same time as the offense.

Apart from offenses relating to management of cooperative companies, it may be noted that other offenses are amenable to control and can be attributed to managers, persons, or institutions in charge of monitoring.

Thus, with regard to social leaders, the acts constituting an obstacle to the appointment or convening of auditors and those concerning verifications or controls by auditors are punished.
With regards to the auditor, the non-observance of ethics and the failure to comply with his obligation to truthfully disclose information and failure to report criminal acts to the State Counsel may result to his criminal liability.

Although not specifically mentioned, we can agree on the fact that the mission entrusted to audit institutions (Commission and Supervisory board) can be a source of liability, especially tortuous liability.

III.3- The personal bankruptcy

If requested by a judge following a management control, punishment may be enforced against a cooperative company with a board of directors. The legal basis of this sanction is Article 194 of the Uniform Act of collective proceeding for the recovery of debts known in its French acronym, AUPCAP.

Indeed, individuals permanent representatives of corporate leaders invested ex officio or de facto, remunerated or not, apparent or hidden can, by the competent court, when they have committed any of the acts referred to Articles 196, 197 and 198 AUPCAP be sanctioned by personal bankruptcy. This penalty can be of a civic nature or may result in personal disqualifications vis-à-vis the offending manager.

III.4- The recovery of debts

In the case of proprietary sanctions for cooperative with Board of directors, a possible action contained in the Uniform Act on collective proceeding for the recovery of debts can be successfully invoked against managing corporation. It is an action for the recovery of the debts.

This action is likely to lead to the extension of social liability of manager or even the extension of collective proceedings. In reality, these are situations in which the acts of the President of the Board, representing a corporate body have contributed to the insufficiency of the assets of the cooperative company, thereby leading to its liquidation.

In this case, the administrator, a legal person, may be declared insolvent or simply called to repay the liabilities of the failed cooperative. This penalty, which may be regarded as exceptional, may only be applied in a situation where the administrator is solely responsible. The sanction would be less in the case of joint responsibility of the Board of Directors.

IV- Conclusion

The law on Cooperative Societies is a breakthrough for the development of rural Africa. Many people use the tool of cooperative to engage in different businesses including the breeding of animals, agriculture, craft industry, fishing, etc ... However, the adoption of the text must be followed by an awareness so that the said text serve the main actors and plays its role as a development tool.

As for the control of the cooperative company, the OHADA legislator brings out from his text on commercial companies a new innovation by expanding the authorities of management control. Further, there is some reduction in the powers of members who are deprived, in principle, of the right to carry out the alert procedure against corporate leaders. The regime of liability arising from the exercise of such control is closer to that used in corporate law. In sum, the normal operation of the measures and supervisory organs should ensure transparency and better profitability of cooperative companies.


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Pour citer l'article :

Monkam Cyrille, « The advent of OHADA Cooperatives companies - An Insight into management control », Revue de l’ERSUMA :: Droit des affaires - Pratique Professionnelle, N° 3 - Septembre 2013, Etudes.

URL: http://revue.ersuma.org/no-3-septembre-2013/etudes-27/article/the-advent-of-ohada-cooperatives


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