Investment law :  the transfer of share capital in kind to Algeria

Investment law : the transfer of share capital in kind to Algeria

Being the first step to establish any form of company, the foreign shareholders must pay real attention to the procedures of transfer of their contribution in the capital to Algeria.

The transfer of capital as well as the increase of capital can be in cash as it can be in kind.

Contributions “in kind” consist of the contribution of movable or immovable, tangible or intangible assets: vehicles, premises, patents, trademarks, et cetera.

It can take place in several ways, such as the transfer of ownership, by usufruct or by user license. Moreover, the” in kind” contributions can also be part of the capital increase in an existing company.

Then, it is of essence to assess its process in order to avoid issues in its performance, keeping in account that its performance locally or from abroad implies different peculiarities.

What about the transfer of contribution “in kind” locally?

The transfer of in-kind contribution may be performed in Algeria and it is subject to a complex evaluation process.

Firstly, the shareholders autonomously have to determine the value of the contributions in kind. Secondly, a qualified expert is appointed by the shareholders within the framework of the establishment of a company or the increase of share capital.

What will happen in the absence of an agreement on the expert? In this case, the judge will proceed with the said appointment, upon request filed in two original copies by the legal representative.

Moreover, the qualified expert will perform an assessment of the asset to be transferred. At the end of its mission, the expert will submit the assessment report to the company.

What about intellectual property contributions? the registration certificate of the patent, trademark or any other asset is required.

Thus, the in-kind contribution must follow all the previous procedures to be accepted as a part of the share capital or a capital increase.

startup algerie

Investment law : the transfer of share capital in kind to Algeria

How is the transfer of in-kind contribution done from abroad?

The transfer of the in-kind contribution to Algeria from abroad is possible and it is subject to formal procedures. Firstly, what are the procedures for the movable assets? the shareholder must enjoy an authorisation for the entry of the assets to Algeria.

In addition, a declaration with the required commercial and customs documents must be filed before the Central Bank. Following that, the same evaluation process that the local in-kind contribution will be due.

Secondly, what about the immovable assets? the assessment will be performed in the foreign country where the asset is located, by a qualified property expert appointed according to the law of the foreign country.

In addition, the assessment report performed will be certified by the Algerian consulate in the foreign country.

Thus, how can the in-kind contribution be recognised and accepted in Algeria? the movable assets must enter Algeria in a legal way and must be declared to the Central Bank.

Furthermore, the foreign assessment report of the immovable assets must be certified in the Algerian consulate abroad.

It is important to underline that all shareholders will be jointly and severally liable, on the totality of their assets, against the value attributed to the in-kind contributions, for a period of 5 years.

This is to guarantee the cash flow of the capital when there are in-kind contributions.

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Investment law : the transfer of share capital in cash to Algeria

Investment law : the transfer of share capital in cash to Algeria

Being the first step to establish any form of company, the foreign shareholders must pay real attention to the procedures of transfer of their contribution in the share capital to Algeria.

The transfer of share capital as well as the increase of share capital can be in cash as it can be in kind. In the first case, it must be performed compulsorily through a bank channel.

The procedures of the transfer of the share capital contribution and the share capital increase to Algeria are accomplished through the opening of the temporary bank account called share capital account “compte capital”, strictly regulated by the Regulation n° 90-03 of the Central Bank.

Therefore, the foreign shareholders must proceed accordingly to avoid any risk, and in particularly the blockage of the transfer, which might hinder and jeopardise the establishment of the company.

Thus, how can the foreign shareholders ensure the safety and the compliance of the procedures of the transfer?

What are the procedures of the transfer of share capital in cash?

Before any transfer, the foreign shareholders must choose a bank for the domiciliation of the sums transferred from abroad.

What are the steps in order to make the transfer of the share capital in cash for the establishment of a company? a temporary bank account called share capital account “compte capital” is required in which the transfer will take place.

Firstly, the foreign shareholders will have to get a written certificate and the project of the statute of the company from the notary.

Secondly, a request will be filled to the Algerian bank attached with a file of translated and certified documents allowing the identification of the foreign shareholders. After that, the bank will send the request to the Currency and Credit Board (Conseil de la Monnaie et du Crédit) to obtain a certificate for the opening of the share capital account.

Finally, the appointed Algerian bank will proceed with the creation of the share capital account, within 48 hours.

Therefore, the major step for the foreign shareholders is to designate a reliable bank, with expertise in such kind of cross-borders transfers.

startup algerie

Investment law : the transfer of share capital in cash to Algeria.

What about the increase of share capital ?

The share capital increase is implemented either by the issue of new shares or by an increase in the nominal amount of the existing shares.

What about the increase of the share capital through funding coming from abroad? In this case, a new special bank account will be required.

Here, the applicant must file a request to the appointed Algerian bank, attaching the translated and certified documents.

What about the increase in the existing shares? it is implemented through the incorporation of profits or reserves to the share capital and it is resolved with the unanimous consent of the shareholders.

Finally, the transfer of share capital will be done through an ad hoc Swift message respecting several formal requirements.

In particular, it should mention the exchange rate between the foreign currency and the Algerian Dinar, so that the foreign shareholders will receive the exact required amount in local currency.

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Would it be still possible to open a Rep Office in Algeria?

Would it be still possible to open a Rep Office in Algeria?

During the last few years, we assisted to a process where Algeria is progressively limiting the scope of the representative office.

This is a road followed by several Countries in and outside the North Africa Area, mainly because this device is considered to be used by several foreign operators for concealed commercial purposes, even if this possibility is explicitly set aside by the law. 

Now, with the foreigners being granted to own up to 100% of a local company, due to the Budget Law 2020 and Complementary Budget Law 2020, it is likely that the scrutinization on the request of opening or renewing of the representative offices will be even more strict and lead potentially to rejection, unless in very special cases.

Here it is worth to note that the Ministry of Trade has the right to assess discretionary whether to approve or not the request of renewal or establishment of a representative office, based also on the requirements of the Country and the presence on the market of other companies active in the same filed.

Therefore, we highly suggest to promptly proceed with the request of renewal for the company that are interested in having a representative office, before the new policy will be enforced.

What are the conditions for renewing a representative office?

These offices are temporary representative structures, allowed to perform scouting, marketing, collecting information and promoting products for the benefit of foreign commercial companies. 

More so, it is mentioned that the representative offices do not have legal personality and cannot carry out any business or economic activities. However, how is the renewal of such Office done?

The renewal of representative office follows the same procedures as the opening which is subject to the issuance of the Authorization by the Ministry of Trade whose duration is 2 years, renewable. But, what are the fees to be paid?

A deposit bond equal to 30,000.00 USD is opened and 5,000.00 USD is deposited on a “CEDAC” bank account. Registration taxes amount to 1, 5 Million DZD. So, are there other conditions?

The legal representative of the foreign commercial company must undertake in written to respect the laws and regulations in force in Algeria, in particular not to carry out direct or indirect economic activities. Thus, the foreign company must respect the deadlines and conditions of the renewal of its representative office otherwise it will be held liable.

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Would it be still possible to open a Rep Office in Algeria?

Which entities are prevented from registering a representative office?

The Order of October 2015 regarding representative offices excludes some activities while some corporate forms are set aside. On one hand, which activities are not permitted?

Article 9 of the Order stipulates that the exercise of commercial activities by the representative office for and on behalf of the foreign commercial company is strictly forbidden. On the other hand, which corporate forms are excluded?

The order specifies the categories that cannot claim the opening of a representative office. These are natural persons, agencies, branches, commercial representations or any other establishment belonging to a company established abroad.

 Also, companies engaged in consulting activities, customs declarants, as well as legal entities engaged in activities not subject to registration in the commercial register are expressly excluded.

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Which company is considered as a Start-up in Algeria?

Which company is considered as a Start-up in Algeria?

Both the finance law 2020 and its complementary law have provided for new incentives for start-ups in the form of tax reliefs and new sources of financing.

However, the regulatory framework remains unclear as no legal definition of start-ups has been fixed in Algeria.

Nevertheless, the decree N° 20-254 of September 15th, 2020 clarified the criteria and conditions for a company to enjoy the status of start-up. Indeed, the new decree sets the conditions of the eligibility criteria and resolves to establish a committee whose purpose is to assess each project.

Which are the conditions to enjoy the status a Start-up ?

The aforementioned decree provides for several concurring eligibility criteria in order to obtain the status of start-up.

First of all, the operator must justify that its business model is innovative. In other words, the aim is to promote young companies with strong technological and digital potential. In addition, according to article 11 of the same decree, the company must have been registered in the commercial register for less than 8 years and employ less than 250 employees. 

Therefore, any already existing company with an innovative business model and whose eligibility criteria are met, is entitled to benefit from the incentives provided by the law.

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Which company is considered as a Start-up in Algeria?

What is the procedure in order to be considered as a start-up ? 

The eligibility criteria are assessed by a national committee.

This committee is chaired by the minister in charge of start-ups or its representative, but also by the representatives of each sectorial ministry.

In addition, the committee has the role of assessing the innovative extent of the projects.  The procedure consists of the submission of documents and other evidences via a web platform to be created later.

In addition, the committee has 30 days to grant the start-up status for a period of four (4) years, renewable once.

In conclusion, the new system provides for eligibility criteria that will be assessed on a case-by-case basis by a national committee with broad discretionary powers and for the moment it is possible to set up the file that will be submitted once the ad hoc web platform will be launched.

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The issuance of the new Automotive Guideline in Algeria

The issuance of the new Automotive Guideline in Algeria

Indeed, the decree is designed mainly to regulate the Automotive industry and to prevent the backdoor importation through two main levels.

On the one hand, the increase of the integration rate to 30% instead of the 15% rate that was initially set by decree No. 17-344, now repealed.

On the other hand, the lifting of customs advantages relating to assembly kits. As a result, assemblers can continue their activity but without being able to benefit from custom advantages. 

Thus, the new specifications are more restrictive but do not prevent 100% foreign investment in the sector even if the automotive assembly and distribution activity is subject to compliance with certain criteria and conditions and subject to the control of the Ministry of the industry.

What are the eligibility criteria for exercising the automobile assembly and distribution activity?

The exercise of the automobile assembly activity is subject to financial and technical criteria laid down by the new decree. Regarding financial criteria, a minimum financial contribution of 30% is required for local investors as well as foreigners.

As for the technical criteria, the local investors have to prove an experience of 5 years in the field of the production, while foreign investors must prepare the detailed technical status of the project and provide the project with their know-how. 

On the other hand, they are no longer required to associate with local partners and they may benefit from tax advantages and reliefs for a period up to 10 years.

 In addition, they are exempted from both customs duties for imported goods entering directly into the implementation of the project and from the VAT for goods and services imported or acquired locally, entering directly into the realization of the investment.

 Thus, these specifications provided in the guideline open a door to foreign investors.

The issuance of the new Automotive Guideline in Algeria

The issuance of the new Automotive Guideline in Algeria

What are the conditions and clauses required for the conclusion of the concession contract?

In order to conclude the Concession Contract, the dealer is subject to certain conditions. 

First of all, it can only claim a single license allowing it to exercise the activity and represent up to two (02) vehicle brands in the national territory.

 In addition, the dealer will not be able to import the vehicle without first having an order from a customer. 

As for the terms of conclusion of the Contract binding the dealer to the grantor, it must be concluded for a fixed period of 05 years minimum and must not be exclusive. 

In fact, Algerian law prohibits any exclusivity and considers it as a practice aimed at limiting the competition, unlike European Competition Law, which adopts a much more nuanced position by authorizing exclusivity. 

Thus, in Algeria, the freedom of the contracting parties is framed by texts governing the activity of automobile assembly and distribution and the conformity of the Contract is checked by experts. 

However, unlike the repealed decree, the dealer is no longer required to invest in an industrial or semi-industrial activity in order to maintain its license.

Which are the procedures to follow in order to carry out the automobile assembly and distribution business?

Regarding the procedures for carrying out the automobile assembly and distribution activity, no significant change has been made compared to the repealed decree.

 Indeed, the investor willing to operate such an activity is subject to the obtaining of a provisional authorization of 36 months, renewable one year, issued by the Ministry of Industry and certain documents will be required. 

It is worth to note that the authorization makes it possible to take the necessary steps to carry out the project without authorizing the exercise of the activity. 

In fact, article 09 of Decree 20-226 requires the award of a final approval for the effective exercise of the activity of assembly and distribution of automobiles. Thus, this approval is considered as the key to launch the project.

Finally, the main objective of the Automotive Guideline is the establishment and boost of a mechanical industry based on an industrial approach in line with international standards in Algeria.

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