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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/

RESPONDING TO THE BUSINESS IMPACTS OF CORONAVIRUS (COVID-19)

Overview

The World Health Organization declared COVID-19 a pandemic on March 11, 20201, causing huge impact on people’s lives, families and communities. In addition to the serious implications for people’s health and the healthcare services, coronavirus (COVID-19) is having a significant impact on businesses and the economy.

As the international response continues to develop, we know that organizations are facing significant challenges and need to respond rapidly. COVID-19 therefore presents significant challenges to people and organizations around the globe and the disruption continues to evolve. We know that your business is facing several potentially significant challenges to which you need to respond rapidly. 

In this bulletin, our legal team has collaborated to offer some of our latest insights on the coronavirus pandemic and to create a resource for you on how you can stay abreast of the changes that are likely to impact your business during this difficult time.

Below is an illustration of how organizations, including those without direct exposure, can focus their efforts in responding to the impacts of COVID-19.

COVID-19 AND ITS IMPACT ON YOUR BUSINESS

How your organization can create a pandemic rapid response

Amid the global coronavirus pandemic, businesses are acting fast to survive these critical challenges. Companies are organizing and identifying gaps in their plans, taking immediate actions across the business, and figuring out how to stay responsive to situations as new information about COVID-19 comes out daily. In order to achieve this, executive teams must therefore demonstrate leadership to ensure the safety and health of every employee while also focusing on business continuity.

This therefore implies that businesses will need to put in place a rapid response framework to sustain their operations during the pandemic and set it on solid footing for what comes after. The following measures can be taken to mitigate the impacts of COVID-19. 

  1. Establish a COVID-19 command centre

Set up your command centre immediately. A command centre is the central body for decision making, coordination, and communication. It should be run by a senior leader empowered to make decisions and direct work for all crisis management activities. This person should be accountable to the CEO and executive leadership.

The command centre should take a quick and clear approach to operations, using digital tools to enable rapid updates and collaboration across functions. The goal is to create and execute a robust communication plan with one voice to employees, customers, suppliers, shareholders, and other stakeholders. The key messages should raise awareness, support business continuity, encourage calm, demonstrate readiness, and provide clear direction.

  1. Build a comprehensive plan for COVID-19 impacts

Now is also the time to accelerate efforts to gauge the financial impact of COVID-19 on your business to minimize impact to the bottom line. A full rapid response considers all the functions of an enterprise as illustrated below:

Commercial

Your team should understand whether there will be an immediate shift in consumer behaviors because of COVID-19. They should determine whether customer policies and priorities require revision, how to improve consumer communications, and the steps needed to protect the brand and improve long-term relationships.

Financial

Financial forecasts should be modified to consider realistic and worst-case scenarios. The team should develop profit-improvement initiatives to cover anticipated revenue gaps, such as near-term procurement efforts and supply chain cost reductions.

Human capital

The HR team needs to confirm the safety and support of all employees and have a clear employee communication strategy with two-way feedback. HR policies may need to be adjusted to provide the flexibility your workers need in a time of crisis.

Operations

Operations should understand changes to customer demand and make sure the sales team can adapt to rapid changes. They should have plans in place to protect the safety of manufacturing employees and avoid shutdowns if possible. That may mean updating the environment, health, and safety conditions for workers.

Technology

The tech team should make sure your network can handle sizable work-from-home efforts and that workers are maximizing their use of virtual meeting spaces and other communication platforms.

  1. Protect your value chain from COVID-19 disruptions

COVID-19 will ultimately impact every step of the value chain. However, companies can protect their supply chains by tracing back needs from customers to suppliers. Your suppliers require real-time monitoring of inputs, and you’ll need daily updates to manufacturers on stock levels, inventory, deliveries, and priorities. Manufacturers are responding to shifting demand and labor shortages, while retailers face increased demand for many products and supply shortages. Your customers’ purchasing behaviors may be erratic as they sort out what the COVID-19 pandemic means for them.

Over time, companies should prepare for a return to a post-COVID-19 world. Your rapid response should evolve into creating plans to restart operations and retrain your workforce if necessary. Lessons learned during the crisis should be codified to inform future work as you grow your business.

GUIDELINES FOR BUSINESS CONTINUITY AMIDST THE COVID-19 PANDEMIC

In this uniquely challenging environment, how can you make your business more resilient? The rapidly-changing COVID-19 picture means one false move can seriously impact corporate performance and value.

Below are a number of considerations that can be undertaken to ensure business continuity and in particular putting focus on achieving a rapid turnaround of things, overcoming financial difficulties and coping with distressed situations.

  1. How to rapidly turn things around

Your first priority is to quickly stabilize cash and liquidity and take a realistic view of current options.

This means identifying and acting on opportunities for strategic, operational, organizational and financial change. Establish solid ground for a turnaround by assessing your liquidity position and creating a stakeholder management plan.

Five key steps to turning things around: 

  • Identify options: Quickly and effectively assess your options.
  • Stabilization: Steady the business and assess its financial position.
  • Turnaround strategy: Calculate financial paybacks of various options.
  • Execution: Ensure full delivery of the turnaround plan.
  • Value realization: Understand risks and costs of each option, including contingency plans.
  1. How to overcome financial difficulties

COVID-19 is likely to produce distressed situations, where stakeholders often seek additional information or resources to help rebuild their confidence. By understanding the needs of borrowers, lenders and shareholders, and managing stakeholder communications, you can stay on top of issues and make informed decisions. You should assess short-term liquidity requirements and find ways to quickly preserve value and address potential risks to stability.

To help achieve sustainable operational and financial change, the following six aspects must be put into consideration.

  • Appraisal and stabilization: Do I have enough liquidity to keep operating?
  • Options assessment: Do I know what has gone wrong and how to fix it?
  • Intra-stakeholder negotiations: How do I keep everyone engaged in negotiations?
  • Development of options: What sustainable capital structure offers the best prospect of success?
  • Implementation: How can I reconcile all stakeholder positions to implement the new capital structure?
  • Ongoing monitoring: How do I ensure that the business is supported through its recovery?
  1. Managing distressed situations

If your business has become distressed due to COVID-19, your first step should be to assess the situation and develop a practical insolvency plan. Working with your advisors and stakeholders, identify the path to maximize available value. Assess the impact and risks of various options, identify the right filing jurisdiction and prepare a detailed insolvency plan that optimizes stakeholder positions.

Below are five key recovery scenarios to be considered:

  • Distressed corporates: Understand the extent of the problem.
  • Insolvency planning: Identify your options.
  • Commencing insolvency: Understand what happens in a formal protection process.
  • Implementation: Find ways to maximize value.
  • Exiting a formal process: Plot a path back to normal. 

CONCLUSION

Businesses should plan for continuity in the event that Human Resource is not able to attend the employer’s premises to work, or in the case that operations are significantly reduced or halted. Employers and employees alike should realize that the crisis requires peculiar adjustments to their conventional practices. Such adjustments should be compliant with the labor law and collective bargaining agreements. The primacy of public health in the circumstances should underlie any decision taken in the circumstances.  

Whilst we seek to provide a general oversight in this bulletin, we encourage employers and businesses to seek legal advice with respect to specific issues facing their business and their proposed response to those issues. 

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/2021/03/29/responding-to-the-business-impacts-of-coronavirus-covid-19/

You can find more info on Covid-19 on the links below:

  1. https://www.pwc.com/ng/en/covid-19.html
  2. https://www.who.int/emergencies/diseases/novel-coronavirus-2019