REGISTERING YOUR NEW COMPANY AS A FOREIGN, SUBSIDIARY OR DOMESTIC COMPANY IN RWANDA – THE LEGAL ADVANTAGES

_{^{A BRIEF OVERVIEW ON THE ADVANTAGES ASSOCIATED WITH THE TYPE OF COMPANY YOU REGISTER IN RWANDA}}

Company registration in Rwanda is done in the Office of the Registrar General (ORG) and a registered company can take the form of a subsidiary, foreign or branch of a foreign company, domestic company, unlimited company, protected cell company or community benefit company. This article is therefore intended to particularly outline the legal advantages associated with registering your new company in Rwanda either as a foreign company, subsidiary of a foreign company, or as a domestic company. 

Business registration operates as a single-point integrated service. Once you complete your business registration, you have also completed tax registration with the Rwanda Revenue Authority, employer registration with the Social Security Fund of Rwanda and notification of business activities to the National Institute of Statistics of Rwanda. This integrated registration is achieved through the filling of a consolidated application form covering all the information required for registration and notification with the relevant agencies.

Business Registration is concluded by the issuance of a business registration certificate which has a unique enterprise code that acts as a unique identifier of the business in relation to any public agency. The Enterprise/Company code is also the tax identification number (TIN).

According to the provisions of Article 2 of the Law N°007/2021 of 05/02/2021 governing companies, a foreign company is defined as:

“A company incorporated outside Rwanda but which is carrying on business in Rwanda.”

Under Article 247 of the company law, a foreign company can establish a place of business in Rwanda as a branch or through a country representative and is obliged to apply for registration within ten (10) working days of establishing a place of business.

As per the provisions of Article 12 of the same law, a company is on the other hand considered to be a subsidiary of another company if;

“(a) the holding company:

    (i) controls the composition of its Board of Directors;

    (ii) is entitled to receive more than a half of every dividend paid by the company;

    (iii) controls more than a half of the number of votes at a meeting of the company;

    (iv) is entitled to receive more than a half of the surplus assets of the company;

   (v) holds more than a half of the issued shares of the company other than shares that entitle it to receive a specific amount in the distribution of profits or capital;

(b) the company is a subsidiary of any company which is that other company’s subsidiary.”

A local/domestic company although not defined under the law can be referred to as a company that is duly registered within the country and conducting its affairs locally.

It is prudent to note that although the law gives different definitions for a foreign company and a subsidiary as indicated above, however in practice both types of companies operate more or less in a similar way since they can all be wholly owned and controlled by a holding company registered in a foreign country.  

^{Advantages of incorporating a company as a foreign company}

The advantages associated with incorporating a company as a foreign company include the following;

• The parent company/foreign company has a much greater role in the decision-making process since a branch office or country representative reports to the parent organization and receives all its instructions from it.
•  According to the provisions of Article 12 of the investment code (Law N°006/2021 of 05/02/2021 on investment promotion and facilitation) upon fulfilling all tax obligations in Rwanda, a foreign company is allowed to repatriate its capital; profits derived from business activities; debt and interest on foreign loans; proceeds from the liquidation of investment; and any other assets.  
•  A branch office of a foreign company is mostly governed by the laws and regulations of the country where its parent company’s head office is located.
•  There is shared tax liability between the foreign company and its branch office.

Advantages of incorporating a company as a subsidiary

The advantages associated with incorporating a company as a subsidiary include the following;

• Subsidiaries are independent of their parent organizations since they have separate legal personality and thus this makes it easier for them to conduct business, to form partnerships, and to explore new markets.
• A subsidiary enjoys a greater degree of flexibility because it can issue or transfer shares to third parties like investors, partners, employees, or venture capitalists.
•  A subsidiary can explore more economic opportunities in a foreign country compared to a branch which basically conducts business similar to its parent organization.
• Since a subsidiary has a separate legal personality, it offers greater legal protection for shareholders of the parent organization who will have no liability if the subsidiary falls into debt or suffers legal problems.

It suffices to conclude that registration of a company as a domestic company carries the same advantages as a subsidiary company since they all have separate legal personality from that of the owners or parent company and in most circumstances a subsidiary can be registered as a domestic company.

The content of this Article is intended to provide a general guide on the subject matter. Specialized legal advice should be sought about your specific circumstances and legal issues.

Read more here https://panacealc.com/2021/04/22/registering-your-new-company-as-a-foreign-subsidiary-or-domestic-company-in-rwanda-the-legal-advantages/

1. https://rdb.rw/neworg1/business-registration/
2. https://www.visitrwanda.com/investment/how-to-invest/starting-a-business/