Do you need to draft a resolution minutes for your company in Madagascar? Are you looking to understand the necessary formalities and legal implications? MDG Services is here to help you prepare your resolution minutes in Madagascar in compliance with commercial law.
The Resolution Minutes in Madagascar According to Commercial Law
Drafting a resolution minutes is an essential step in the process of distributing dividends by shareholders. According to Article 303 and subsequent articles of the Commercial Companies Act in Madagascar, specific provisions govern the periodicity of the Annual General Meeting (AGM) and the purpose of the shareholders’ resolution in the resolution minutes.
Steps to Draft a Resolution Minutes
To properly draft a resolution minutes, it is crucial to respect the quorum required by law to form the general assembly. You must also respect the shareholders’ right to communication and decide on the allocation of results.
Important Definitions
To better understand the process, here are some important definitions.
Retained earnings
Consists of not distributing the profit as a dividend but deferring its allocation to a future general assembly decision.
Legal Reserve:
A reserve intended to strengthen the financial position of the company by requiring it to allocate a portion of its profits (minimum 5%) until a certain threshold (10% of the share capital) is reached.
Dividend:
A portion of profit allocated to each share or equity share.
Necessary Formalities in a Resolution Minutes in Madagascar
The Annual General Meeting (AGM) must be held within six months following the end of the fiscal year. It is chaired by a shareholder or their proxy representing the largest number of shares.
The Annual General Meeting (AGM)
The AGM is convened by the management, which communicates the agenda to the shareholders in advance. It can only be constituted if the quorum of shareholders is reached according to the company’s statutory provisions. At the end of the AGM, the shareholders must sign the resolution minutes, formalizing the unanimously adopted resolutions.
The Right to Communication
The right to communication differs from the right to communication in terms of taxation. It is a right to inform shareholders about corporate affairs. Shareholders must receive, within 15 days preceding the AGM, the financial statements of the fiscal year, the manager’s management report, the proposed resolutions, and, if applicable, the auditors’ general and special reports.
Resolutions on the Allocation of Results and Dividend Distribution
After reviewing the management reports and financial statements, the shareholders vote on the approval of the accounts presented by the manager and grant discharge. They then decide on the allocation of the results: carried forward, increasing the legal reserve, or distributing dividends.
Scenarios for Equity
Equity can be presented in three scenarios:
Positive Equity and Profitable Results:
The distributable profit is recorded, and shareholders can distribute dividends according to their share distribution. The dividend must be paid within a maximum of one year from the end of the fiscal year.
Negative Equity and More Than Half of the Share Capital:
The profit is classified as carried forward to restore the equity.
Negative Equity and Less Than Half of the Share Capital:
In this case, the Commercial Companies Act requires convening an Extraordinary General Meeting (EGM) to decide whether to dissolve the company early. Otherwise, equity restoration is necessary. The predefined deadlines are mentioned in Articles 685 and 686 of the Commercial Companies Act.
Article 685 If, due to losses recorded in the financial statements, the company’s equity becomes less than half of the share capital, the board of directors or the general administrator, as the case may be, is required, within four months following the approval of the accounts showing this loss, to convene an extraordinary general meeting to decide whether to dissolve the company early.
Article 686 If dissolution is not pronounced, the company is required, by the end of the second fiscal year following the one during which the losses were recorded, to reduce its capital by an amount at least equal to the losses that could not be charged to the reserves if, within this period, the equity has not been restored to at least half of the share capital.
Assistance for Drafting the Resolution Minutes
MDG Services assists you in drafting your resolution minutes in Madagascar, including filing the acts with the Commercial Court, an obligation for all commercial companies. We can also assist you in drafting a dividend distribution minutes.
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