By his Order of June 13, 2011 (hereinafter the "Order"), the Minister of Commerce has set a validity period for commercial register extracts issued to traders in respect of certain business activities(1).
The principle of a limited validity period was introduced through an amendment to Article 2 of Law 04-08, made by Article 58 of the Complementary Finance Law for 2010 (hereinafter, "CFL 2010").
The preamble to CFL 2010 explained this change on the basis of the proliferation of fraudulent transactions involving misuse of commercial register extracts of unlimited validity.
While the general rule is still that such extracts are valid indefinitely, the Order has now set a validity period of two (2) years for commercial register extracts issued to traders for the purposes of the following business activities:
- Importation of raw materials, products and goods for resale within Algeria, with the exception of transactions carried out by an economic operator on its own behalf as part of its manufacturing, processing and/or production operations, provided that these do not surpass its own needs;
- Retail operations of foreign traders, irrespective of whether they are natural or legal persons.
Thus there would seem to be two rationales underlying the provision: protecting national production on the one hand, and encouraging investment in the means of production on the other.
Although the provision specifically envisages that the “trader” may proceed with the renewal formalities fifteen days before the validity period expires, entries will cease to have effect upon expiry of that period, and either the trader concerned (whether a natural or legal person) or in default the relevant supervisory body, should request that the relevant entries be vacated.
This again is a novelty, since entries in the commercial register were previously vacated only in the following circumstances(2):
- Permanent cessation of trade;
- Death of trader;
- Permanent closure of business premises;
- Entry of trader (whether a natural or legal person) into an insolvency regime;
- Dissolution of corporate trader;
- Court order for vacation of registered entries.
The Order introduces another measure worth underlining, namely a requirement that the activities covered by a registration of limited validity must be homogeneous. Under the new legislation, they must come within a single sector of the nomenclature for economic activities requiring registration in the commercial register.
This provision is manifestly unclear in its intended scope.
It is difficult to determine whether the requirement applies to the business activity codes shown on the commercial register, to the nature of the activities in themselves, or to their subject matter.
In terms of implementation, this measure immediately gives rise to a number of problems. Companies wishing to make imports on their own behalf, as part of their production operations, are faced with the need for a business activity code for imports. Will this be capable of registration in parallel with existing activities? Will such companies be required to separate their import activities from their main commercial register entry, with the additional administrative burden that would involve? Does the obligation to renew registrations apply?
Clarification is required from the administration if this measure to be better understood.
Finally, the Order gives currently-registered traders a period of six (6) months, running from the date of its publication in the Official Journal, to comply. It specifically provides that after expiry of this period, non-compliant entries in the register will be null and void, and the competent supervisory bodies will request that the traders concerned be removed from the register.
While this requirement is understandable for traders whose registration is more than two years old, those who have been registered less than two years should have been permitted to leave the compliance process until shortly before the end of the second year of registration.
It should be mentioned in conclusion that compliance with this control measure could be taken, wrongly in our opinion, as a means for the administration to compel companies created before the CFL 2010 to comply with the 51/49 and 70/30 rules on capital ownership.
However, if the aim is to lay down a validity period for commercial register extracts relating to companies and individuals operating in particular sectors, this should not entail compliance with the so-called rules of 49/51 and 70/30 as it constitutes, in principle, one of the exceptions contained in Article 4a of Order 01/03 on the development of investment.
Here again, clarification is required from the administration.
1 Pursuant to art. 2 of Law 04-08 of August 14, 2004, on the requirements for carrying out business activities
2 Art. 22 of Executive Decree 97-41 of January 18, 1997, on registration in the trade register