Nature and Classification of Companies

COMPANY LAW  

The expression “company law” may be defined as a branch of law governing the companies. It deals with all aspects relating to companies, such as incorporation of companies, allotment of shares and share capital, memberships in companies, borrowing by companies, management and administration of companies, winding up of companies. Thus, the company law is that law which exclusively deals with all matters relating to companies.

 DEFINITION OF COMPANY

In Rwanda, commercial companies are governed by the N°07/2009 of 27/04/2009 relating to companies.

The concept of commercial company is defined on article 2, 12° of company law as a corporate body composed of one or more persons for making profit. Thus, is legal sense, a company is one which is formed and registered under the companies’ law aforementioned.

It may be noted that legally, a company is regarded as a person, which has rights and duties at law. However it is not a natural person as human beings are. It is only a legal or artificial person, recognized by the law. Since, the company is created by the law i.e by registration under the law, it is known as a legal person, and as it has no body, no soul or conscience, no physical existence except in the eyes of law.

According to the legal definition of the company under Rwandan law, it is evident from this definition that the contractual character is not more compulsory for companies. Article 3 of the law goes on to say that a company is a legal entity which is made up with one physical person or corporate person for commercial purposes and after filling in a form thereto related and basing up on the provisions of this Law. The company shall be formed by filling in the form attached herewith as Appendix

In addition article 2, 16° defines a corporation by eliminating all categories of persons which are not regarded by this as body corporate, they include:  a) a statutory corporation;

  • a sole proprietorship;
  • a registered co-operative society;
  • a trade union;
  • a registered organization;

At the face of the above list, one sum up the list of exclusion as follows: the first element corresponds to a government company which may be a trader such as RECO RWASCO or ONATRACOM.  The second category excluded from corporation merely because the trader in this category is a real person (not a group of individuals putting together their credit and assets). The last three categories are rather civil society organizations.

The contractual conception of the company prevailed for a long time. It has been followed then by another tendency that considered the company like a mixture of both the notions of contract and moral person to some extent depending on the type of companies.  The present conception has the tendency to become gradually a combination of two notions but with a predominance of the institutional conception of a company.

 

THE COMPANY AS CONTRACT

Insofar as a company is a contract, it supposes a minimum of two parties and thus complies with general conditions of validity of the contracts with regard to its incorporation: consent of the parties, capacity to inter into agreement, actual object and legal cause.

However, besides the above conditions common to all contract, a company contract has particular conditions.  The mere contractual explanation is indeed insufficient insofar as the legislator regulates in an imperative way conditions to create a commercial company.

In the same way a company legally comes into existence after its compliance with an administrative formality of registration with the Office of the Registrar General (art.4).

As with regard to company contract, the shareholders agree to put in together the values, goods or how know in order to share the profits.

The content of this agreement governs the functioning of the company.  There is no company contract unless there is a combination of the following elements:

  • The shares from one or several shareholders; The vocation of all to the profits;
  • The affectio societatis.           

. SHARES

In order to contribute to the formation of a share capital of the company, every shareholder must commit to make a share and is debtor of the share that he vowed to give. He owes to the company a guarantee similar to that of the seller in case of eviction. The share differs from a sale in that in return to the good of which it property transferred, a shareholder doesn’t receive a price, but titles representing the share capital of the company which is the beneficiary of shares. Besides, to the difference of the sale that is a commutative contract, the share has an uncertain character because even though a shareholder knows the value of that he brings, he ignores the value of the share that he receives in return.

The company contract implies therefore putting together shares by each of the contracting parties.  The share indeed, is the good which is transferred to the company by the shareholder in trade of which he is entitled some shares. In other words, it is good that the shareholder commits to put at the disposal of a company for a common exploitation. The notion of shares is instrumental to the constitution of a company, especially when it comes to corporations, where without share the whole idea of a company lacks substance. Article 31 of company law states Share capital shall mean all the shares received whether paid or not. The same article refers to other types of shares other than in cash without précising whether they are physical or know how as it was the case in the previous law.

A contract involving shares implies two kinds of successive contract:

  • the commitment to issue a share: the subscription
  • the actual performance of the obligation which entails the dispossession of share to the profit of company: fulfillment.

In principle, the proportion of share capital which must be availed at the time of the subscription and that of the date of the calls for the outstanding is determined by articles of association. In return for his contribution, the shareholder gets some shares. Article 77 of company law provides, any shares created or issued after the commencement of this Law may either be of par value or of no par value.

The share par value

The share is said to be paid in cash or par value when the contribution is nothing other than money; which is the most usual and simplest of the shares.

The share no par value

It consists in a contribution of a physical or incorporeal good.  In other words, it is any share apart from those paid in money or in industry.  The rule is that any goods that are legally in trade may be object of a share.

 

 VOCATION TO PROFITS SHARING

The company is constituted to achieve profits which will be thereafter shared between members. Thus, the decisive criterion is not the search of profits but the sharing of profits between members. It is this criterion that distinguishes a company from an association. With the latter, profits are not shared between the members.

The term profit has three possible significances:

  • to begin with, it has been considered as a way of making money or a positive gain;
  • then profit their benefit when there is an economy out of an expense;
  • finally the profit is any pecuniary or material gain that is added to the fortune of the shareholders.

The profits and the modes of payment depend on the contractual will of the shareholders.  The shareholders can adopt in the articles of association modes of distribution, but when the articles of association are mute, distribution of profits is proportionate to shares held by every shareholder.

Indeed, their profits should be measured against the involvement in investment. Also shareholders commit to contribute to losses.            

AFFECTIO SOCIETATIS

Two essential elements at stake are estate sharing and vocation to the profits, it is necessary to add an intentional element which is in Latin “affectio societatis “.

This notion is multiform, as it is subject to several doctrinal definitions.  The least common denominator is the will of all shareholders to collaborate, on an equal footing to the success of the common enterprise; this common will must not exist at the time of the creation of the company only, but must also continue during the whole social life.  The affectio societatis is often strong in small size company but inexistent in the immense majority of companies ranked in stock market.

In short, the affectio societatis must be understood as the shareholders desire to unite in order to collaborate to the common enterprise success without any subordination to one another while accepting common risks. Some authors estimate that affectio societatis is of no value, since the contract of company requires the consent. It is therefore obvious that this contract implies the intention to create a company. The affectio societatis is however more of a feeling than a legal concept.

COMPANY AS INSTITUTION

Once formed, a company must appear as, a living organism, oriented toward a profit meant for its shareholders.

In order to achieve that, the company is provided with organs to allow it decide without requiring its shareholders consensus.

What is evident is that the company contract doesn’t have for main effect to create the subjective rights and obligations, but rather create that of its shareholders and issues rules to such group.  It is that organization that is referred to as an institution.

The institutional theory is enshrined by the law, since article 2, 12 of company law defines a company as being a legal entity.

It is necessary to underline however that neither of these two theories, contractual or institutional, is satisfactory enough in itself to exclude the other. This is how the legislator took into consideration both aspects.

 FORMS OF BUSINESS ORGANISATION

 Civil law distinguishes in the first place between a combination of individuals for the purpose of profit and a combination for some other purpose. The business association is termed a company, whereas any other combination is termed an association.

COMMERCIAL ACTIVITIES

 General notions (Generalities)

The Decree of August 2nd, 1913 on Traders and the Proof of Commercial Agreements uses the expression “commercial activities” without defining it.  It is almost impossible to have a unique notion of lucrative (commercial) activity because of the diversity of its forms.

Although it is next to impossible to enlist all possible commercial activities, the decree of 1913 has attempted an exhaustive list of what might be regarded as commercial activities under Rwandan law.

It is important to bear in mind that this list must not be interpreted strictly for two reasons:

Commercial activities are both changing and limitless and

The Decree law that is being referred to was enacted more than 85 years ago.

All commercial activities present a common character; they are made in order to gain a profit. The spirit of lucre must characterise the commercial operation.  Without this, the activity is not commercial.

 

Enumeration of commercial activities

According to the provisions of article 2 of the decree of August 2nd, 1913, commercial activities can be divided into three broad categories:

  • Commercial activities by nature;
  • Commercial activities by form;
  • Commercial activities by relation or by the theory of accessory.
  • Very often, mixed commercial activities are considered but they do not constitute another category; they are merely a modality of commercial activities. They are activities, which present commercial character for one of the parties          

 COMMERCIAL ACTIVITIES BY NATURE

Some activities are commercial even when they are isolated and others must be repeated (theory of enterprise or “venture”).

Definition of a commercial organisation

The commercial company  is a legal person which is the result of a contract ofseveral persons who agree to contribute their assets in cash, in kind or in the form of services to an activity for the purpose of sharing profits or benefits or losses arising there from.

 

  DISTINCTION BETWEEN COMPANIES AND OTHER  BUSINESS ORGANISATIONS

Rwanda law recognizes five types of commercial companies:

  • General partnership;
  • Limited partnership; 3. Partnership limited by shares;
  • Private limited company:
  • Public limited company.

These commercial companies are commonly separated into two groups: partnership or companies where the liability is not limited and a company or partnership  who’s liability is limited by shares. The former includes the companies of the first, second and fourth types, in which, in principle, the interests of the participants are neither assignable nor heritable, The rationale for the interest of the participants not being assignable nor heritable is that the personality of the participants is of paramount importance. The organisation with shares, on the other hand, which comprise, the third and fifth types, fulfil the same functions as the public limited company.

The company being the result of a contract comprising several persons, a couple i.e., husband and wife may by themselves or in association with other persons be partners in the same company and take part together or not in the management of the company. However a husband and wife may not be partners in the same partnership or private company  in which they shall be jointly and severally liable without limit for the debts of the organisation.          

 LEGAL STATUS OF COMPANIES

Every company shall be a public company unless it is stated in its application for incorporation that it is a private company.

Type 5 above – a Public Limited Company shall be:

  • a company limited by shares;
  • a company limited by guarantee;
  • a company limited by both shares and guarantee;

 

A company limited by shares and by guarantee may be public or private. However, a company limited only by guarantee or an unlimited company shall not be public.

Where the liability of the shareholders of a company is limited, the registered name of the company shall end with the word “Limited” or the abbreviation “Ltd”.

PRIVATE LIMITED COMPANY

The private limited company must have at least two members and a maximum of  100 members, Employed or formerly employed not included (Article 8). The minimum capital required is 500.000frw and the capital must be entirely subscribed and paid up. The capital shall be divided into equal shares whose face value shall not be less than 1000 Frw. The public are not invited to be shareholders, no prospectus is to be issued

Company name: The company’s name may either be one descriptive of its business or one composed of the names of one or more of its members, In either case the name must be immediately followed by the words Limited.

Limited Liability: As the name suggests the liability of members is limited to the amount of their contributions.

Management: Management is insured by a Board of Directors (BoD) or managers. It is by the law that on the BoD, there must be a minimum of 3 up to a maximum of 12 directors.

Transferability of shares: Shares cannot be offered to the public., except the articles of association provide otherwise. Shares may be freely transferred between shareholders, the spouse of the transfer, the deceased shareholder orthird party as prescribed by the articles of association.

Dissolution: The death, bankruptcy, incapacity or retirement of a member does not involve the dissolution of the company unless the articles of association so provide.

PUBLIC LIMITED COMPANY:

According to Article 7 of Law 7/2009  –  “ Every company shall be a public company unless it is stated in its application for incorporation that it is a private company”.

In order that a public limited company is validly constituted there must be a minimum of seven members. There are two types of public limited companies: a public limited company that does not offer its shares to the public and one that offers its shares to the public. In the former case the minimum share capital required is 100.000.000frw while 200.000.000 frw is required in the latter.

Company Name: It is forbidden for the name of a shareholder to appear in the company name. The name of the company must be followed by Limited or Ltd.

Liability: As the name suggests the liability of the shareholders is limited to the amount of their contributions.

The incorporation procedure for a company that offers its shares to the public requires the completion of a series of acts. Drawing up and publication of the draft articles of association in the Official Gazette (OG), publication of the prospectus, subscription of the share capital and payment for shares. In the second place, there must be a statutory meeting of the shareholders with a notary attending. This meeting (i.e. statutory or constituent  meeting applies to both types of limited company) must appoint not less than three and not more than twelve persons, adopt the Memorandum of Association and, if there are to any, the articles of association. It must also appoint one or more auditors whose function is to watch over the accounts in the shareholders’ interest.

The acceptance of their office by the directors and auditors marks the birth of the company. But it is still essential for the details of the company to be registered with the Office of the Registrar General  before the company can start doing business. The company must also comply with publication requirements.

It is a condition of valid incorporation that where the share contribution is in kind this must be entirely paid up at the time the company goes operational while where the contribution is cash  1/3 must be paid up when the company goes operational and the balance within two years of the company’s existence         

THE LEGAL STATUS OF COMMERCIAL COMPANIES

When commercial companies have been constituted they are required in law) to register with the Office of the Registrar General before commencing any commercial activity in Rwanda. Upon registration a commercial company acquires legal personality. This is to say that it is treated as an entity separate and distinct from that of its owners.  Hence it is capable of enjoying rights and of being subject to duties which are not the same as those enjoyed or borne by its members except to the extent and in the manner provided by law. The consequences of legal personality are that the commercial company possesses

  • a name;
  • domicile;
  • nationality; patrimony.
  • One or more shares
  • Limited or Unlimited liability
  • One or more diretcors
  • A business occupation – Memorandum and Articles of Association
 The company has a name

All commercial companies must have a name. Commercial companies of which the liability of its partners is unlimited i.e. partnerships (general  and limited partnerships) have a firm name which comprises the names of all the partners or of some of them. As regards commercial companies having shares the name of the company must be followed Limited or Ltd. Note that although the owners of a commercial company are at liberty to choose a name for their company, the name must not be identical or too similar to the name of an already registered company.

The company has a domicile

A commercial company also has a domicile, which is distinct from that of its individual members. The domicile is the place where the commercial company has its principal place of business i.e. its registered office. The registered office is the place where the company has, principally, its legal, administrative, financial and technical office as opposed to where it merely does business (irrespective of its importance and the presence of a secondary administrative or ex[ploitation unit).

The distinction between the registered office and the exploitation office is important for it is the registered office that determines the territorial competence of the court, in the event where someone institutes proceedings against the company, the place where an action in bankruptcy can be instituted, including the nationality of the company.       

 The company has a nationality

A commercial company has a nationality, which is determined by the laws of the country, which regulates its organisation and functioning (definition of powers of management, procedure of shareholders meetings, rules as to liquidation etc.).

 The commercial company has a patrimony

The commercial company has a patrimony, which is constituted by its assets and liabilities distinct from that of its members. Although the members of the company make a contribution which constitute the patrimony of the company they do not have ownership rights over company property, all they have during the life time of the company is a right to a claim during the distribution of the assets of the company. Note that the patrimony of a company serves as security to its creditors.

 The commercial company acts through its legal representatives

Although the commercial company possesses a legal personality, as it is not a human being, it cannot act for itself.

It is represented in its daily activities by human beings – managers. It is through these persons that the company can acquire and dispose of property, institute legal proceedings as well as defend an action against the company However, the company is liable for the wrongful acts committed by its legal representative as far as civil matters are concerned. 

THE DISAPPEARANCE OF LEGAL PERSONALITY

When a commercial company acquires a legal personality the personality does not persist for life i.e., it is not permanent, some day it will end. The disappearance of legal personality is the consequence of dissolution of the company, which entails the dissolution and distribution of its patrimony among shareholders (partners).

Causes of Disappearance

The causes of disappearance are of two types, the one is applicable to all commercial companies; the other relates to individual partners and is restricted to those companies in which the personality of the participant is fundamental.

General Causes

There are four general causes:

  • A commercial company established for a certain and defined period of time dissolves at the end of that period in the absence of a resolution extending its life.
  • A decision taken by the shareholders (partners) to dissolve the company before the time agreed upon.
  • Loss of the object or impossibility of performance
  • If the object has been attained

 Peculiar causes

The causes peculiar to an individual do not apply to all commercial companies. They relate exclusively to partnerships. Accordingly the death, incapacity or insolvency of a partner will result in  dissolution.

However in practice, partnership agreements usually contain a provision (clause) making it possible for the partnership to continue doing business not withstanding any of the above causes that may lead to its dissolution.

A partnership cannot be dissolved by the unilateral will of one partner except if he acts in good faith. The last cause for dissolution, which is applicable to all types of commercial companies, is the dissolution for just cause. Here dissolution may be requested by an individual shareholder or partner. The just cause is left to the appreciation of the court. Some of the factors, which may be considered as just cause, include failure by a partner to respect his obligations, permanent disability of a partner, antagonism that makes it impossible for the partners to work together etc.

Note that the regular transformation of a commercial company  from one form into another shall not entail the creation of a new legal entity. The same shall apply to an extension of the existence of a company or any other amendment of its Articles of Association (partnership Agreement) with formalities of publication both at the time of constitution (formation) to any amendment of its Articles of Association (partnership Agreement)            

COMMERCIAL LAW

INTRODUCTION

Law is a social science: it has to provide for the changing needs of a developing Community and consequently is inseparably bound up within the community it has to serve. For a thorough understanding of the law, it is essential to have knowledge not only of the community in which it functions, but also of its history and of the factors, which led to its origin and development. This is one of the reasons why every study of the law includes a study of the history of the law. Another reason is that a knowledge of legal history helps in evaluating probable trends of future development.

 

Rwandan commercial law, unlike for example most European continental legal systems, is not codified (that is recorded in one comprehensive piece of legislation) a knowledge of the law applying in the Republic is based on Roman-Germanic law. This means that our system finds its roots in Roman as well as in Germanic law. Although Rwandan commercial law is based on Romanic law, we shall not analyse the Romanic law instead, we shall concentrate on basic principles of Rwandan commercial law.

Commercial law or business law is in essence part of private law and regulates legal relationships, which are commonly found in commercial life.

DEFINITION

The term Commercial law known as Mercantile Law may be defined as that branch of law, which comprises laws concerning trade, industry and commerce. It is an ever-growing branch of law with the changing circumstances of trade and commerce.

With the increasing complexities of the modern business world, the scope of commercial law has enormously widened. It is generally understood to include the laws relating to contracts, sale of goods, partnership, companies, negotiable Instruments, insurance, insolvency, carriage of goods, and arbitration.

The commerce is the exchange of merchandises or services especially on a large scale: buying and selling. Commercial law can be defined as a body (corpus) of judicial rules relating to the commerce. This means that it is the law which governs traders and commercial related activities.

Commercial rules only apply to a determined category of persons, traders, for activities performed in case of their professional activity; To different transactions (operations) or activities to which the legislator has attributed a commercial character.

The commercial law is part of private/civil law which regulates matters between individuals. It is a branch of civil law that deals exclusively with the juridical implications of commercial activities either among traders themselves or between traders and their customers. The commercial law is thus a special law distinct from the civil law which constitutes its basis: some provisions (articles) apply where the commercial law or commercial usages do not settle a case.

Commercial activities are primarily governed by a collection of several laws[1] dealing with different aspects of commercial law. It is important to keep in mind that commercial law is neither autonomous nor self sufficient (i.e. it must not be understood that commercial law provides answers and deals with every aspect of commercial and industrial activities), but applies within the general scope of civil law.

Business law is different from commercial law. Business law, may be defined as a branch of private law which by derogation from civil law, regulates in a specific manner activities of production, distribution and services.

Business law is seen by a majority as being more extensive than commercial law, which was traditionally perceived as the private law of commerce. Business law encompasses questions which are under public law (intervention of the state in the economy) such as tax law, labour law etc. Business law also encroaches into civil law, notably in the protection of consumers. In addition, business law applies not only to traders, but also applies to non-traders such as farmer and members of the liberal profession.

NECESSITY OF COMMERCIAL LAW

The exercise of commerce cannot always follow rules of the private law because:

It requires conditions of:

  • Promptness: the speed of commercial operations and their frequent repetition require a minimum of formalities that is not necessary in private law:
  • Credit (or loan): hence the creation of documents allowing the raising of debts

(credits);

  • Guarantee: with regards to the importance of credit the guarantee of debts must be provided. In this case, dispositions of commercial law will have to be more rigorous (hash) than those of civil law.
  • Its proper institutions require a particular regulation. Here, we should notice that till now the institution of commercial tribunal does not exist in Rwanda.
  • It uses certain practices which require a certain control.
  • It was thus necessary to have a commercial law adapted to the needs and usages of commerce.

In addition to the above, commercial law facilitates planning. This function of law is very important as business is concerned, e.g. contract and sales law. In making the courts available to enforce contracts, the legal system ensures that the parties to the contract will either carry out their promises or be liable for damages. For example, through contracts, a manufacturing company can count on either receiving the raw materials and machinery it has ordered or else getting money from the contracting supplier to cover the extra expense of buying substitutes.

Commercial law is also used as an instrument to promote social justice. For example, tax laws seek not only to raise revenue for government expenditure but also to redistribute wealth by imposing a higher income tax on wealthy people. The antitrust laws seek to prevent certain practices that might reduce competition and thus increase prices. Similarly, consumer laws among others seek to prohibit the sale of unsafe products.

SOURCES OF COMMERCIAL LAW

The Rwandan law consists of a number sources. Some sources are authoritative while others merely have persuasive authority. Actually, the sources of commercial law are the same as the sources of other aspects of Rwandan law. The sources of Rwandan commercial law, in the order in which they are usually consulted, are the followings:

In order i.e.

  • legislation (written law),
  • custom,
  • the general principles of law and equity, courts’ decisions (case law) and
  • scholarly opinions (doctrine).

STATUTE LAW OR COMMERCIAL LEGISLATION

Legislation is the making of law by competent authority. Today, legislation is the most important source of the law. The law is to be found in statutes enacted by parliament and provincial legislatures.

 

With Rwandan Commercial law, there is no commercial code in Rwanda. In 1967, there was an attempt, which resulted in a draft of commercial code. However, until now the process of elaboration of a commercial code stagnates. The commercial legislation is made up of scattered legal instruments (texts), which have been introduced in Rwandan law during the Belgian mandate and trusteeship. It is really time for the legislator to enact rules and regulations, which take into account the evolution of commercial profession.

However with all the attempts mentioned above,  Legislation may be defined as the setting down of binding rules of law in a formalised way, by an authority, such as that vested in Parliament, or subordinate, such as that vested in administrative authorities.

Parliament may pass any law, subject to the constitution. It may also pass laws allowing other bodies to make certain laws for certain purposes. In this way, Parliament gives administrative authorities the capacity to pass regulations called subordinate or delegated legislation because they are subject to the laws passed by Parliament. If there is any conflict between the law passed by Parliament and any subordinate legislation, the law passed by Parliament will prevail.

Legislation consists of the Civil Code and statutes (law voted by Parliament) together with provisions of legislative acts of subordinate authorities, such as presidential decree and that of other administrative authorities. These constitute the primary source of business law. 

CIVIL (PRIVATE) LAWS

As said above, commercial law is not self-sufficient. It does not contain a complete regulation of all aspects of commercial and industrial activities. The civil law must apply to commercial matters as long as an express disposition does not exclude it. If it happens that there is a conflict between the civil law and the commercial law the latter is applied (Specialia generalibus derogant) special things derogate from the general one.          

CUSTOMS, THE GENERAL PRINCIPLES OF LAW AND

EQUITY

Certain rules of conducts are observed because it has become customary in a particular group of people to respect such usages. Customary law does not consist of written rules, but develops from the habits of the community and is carried down from generation to generation.

In modern communities where the rate of development is very rapid, custom has less opportunity to develop into law. Once the need for a particular legal rule arises, the legislature simply steps in and lays down such a rule. Yet, even today it may still happen that custom develops into law.

In order for the custom to be recognised as a customary rule:

  • It must be reasonable
  • It must have existed for a long time
  • It must be generally recognised and observed by the community
  • The contents of the customary rule must be certain and clear.

It is generally understood that in matters not provided for in the existing law, Rwandan tribunals and courts have to apply local customs and general principles of law and equity. Furthermore, article 98 of the Rwandan Constitution of 1991 calls for the application of customs provided the custom in question meets certain conditions. These conditions are:

  • An existing law has not modified it:
  • It does not contradict the Constitution and/or any other laws, rules and regulations:
  • It is not against public order and good morality.

Article 201 of the 2003 Rwandan constitution also recognises the applicability of customary law. Article 201(3) states that “ unwritten customary law remains applicable as long as it has not been replaced by written laws, is not inconsistent with the constitution, laws and regulations, and does not violate human rights, prejudice public or offend public decency and morals”.

Customs generated by trade activities may provide the legal basis for matters not covered by the legislation. For example, certain usages within a particular type of trade can become part of the expectations of those engaged in trading activities. The same might apply on some simple activities of buying and selling.

There are two types of customs: contractual customs and binding customs.

Contractual customs are not mandatory; they may be discarded by agreement of the parties. For this reason, it is said that they derive their authority from the theory of contractual freedom. Accordingly, if the parties have not expressly excluded a custom, they are deemed to have adopted it. Note that a custom will supplement a contract when the law is silent on a point.

Binding customs are those that do not depend on the law or the free will of the contracting parties because they are mandatory in character. We find these customs in commercial law as opposed to civil law. A binding custom supplements the law. For instance, there is a presumption of joint liability of creditors as opposed to the Civil Code which provides that there is no presumption of joint liability of creditors.

INTERNATIONAL CONVENTIONS

The implications of international conventions on commercial law have been compounded by recent developments and increasing interdependence in international commercial activities. Some might even argue that the result of these developments might have had same or uniform (unified) international law. The implications of international conventions on Rwandan commercial law are both direct and indirect.

Direct implication happens when a convention or an agreement becomes part of domestic law or provides the basis for domestic law of similar content (e.g. the decree of December 10th, 1951 which deals with cheques and the decree of July 28th, 1934 which deals with the bill of exchange the promissory note and protests). The content of both laws are based on the Geneva Conventions of June 7th, 1930 and of March 19th, 1931, which deals with cheques and bills of exchange.

Indirect implication of international conventions can be found in the adoption of Rwanda of the Vienna Convention on the International Sale of Goods of April 1980, which deals primarily with external trade relations.

CASE LAW (JURISPRUDENCE) OR DECIDED CASES

The courts and tribunals through their traditional role of judicial interpretation of laws, represent a significant source for both the understanding and application of commercial law rules. It is through this role that different areas of the law are clarified and resolved.

By decided cases we mean a judicial determination of an issue of law in a uniform and consistent manner, such that it has a declaratory force (persuasive weight) in any other case. It does not establish rules of law which are binding in a formal sense, they only possess persuasive authority.         

SCHOLAR OPINIONS (DOCTRINE)

Although the doctrine is not considered as a formal source of law it can be consulted in order to create new concepts or to suggest some solutions, which can be followed by the jurisprudence or the legislator. 

Doctrine has to do with the opinions of academic lawyers to be found in textbooks, learned journals and the notes to cases reported in law reports. It depends on its capacity to persuade the judges and through them legal practitioners; and its persuasiveness depends, not only on the prestige of the individual academic lawyer, but also on the extent to which the individual judge is willing to be persuaded.

 USAGES OR MERCANTILE PRACTICES

The importance of commercial usages comes from the fact that the commercial law must adapt itself to new concepts and the world of business create some relations between professionals and those relations become sometimes habits or usages. The commercial custom and practice can be regarded as one of the essential sources of commercial law.

 COMPANIES MORAL PERSONALITY

The object of this part is to shed light on the notion of companies’ legal personality, show the government position concerning recognition of company moral personality, as well as determine its attributes.

GENERAL NOTIONS ON MORAL PERSONALITY

The legal technique assigns the status of recipients of right to an entity created by man aiming at the realization of different interests to those of natural persons who enliven it. Even though the moral personality is man’s work, its conditions of existence can only be determined by the law.

The moral personality likewise the natural personality is nothing else than the faculty to become a recipient of rights and obligations. It consists therefore in assigning to a group of people or goods legal personality.

The modern doctrine considers the notion of moral person as a mere technique devised by jurists in order to succeed in achieving some desirable results only. A moral person has no actual will of its own, but people lend it the will of its organs. The moral person however is entitled to rights and assumes liability as in the case of natural persons despite the existence of its members.

STATE’S POSITION CONCERNING RECOGNITION OF COMPANIES’ MORAL PERSONALITY

States are free to recognize or refuse moral personality to such group so that its propensity to granting or refusal differs from a State to the other.

ATTRIBUTES OF THE MORAL PERSONALITY

Legal persons of companies like natural persons stems from several features that one can legally group in two points:

  • Anything that serves to identify a company as compared to other companies (a name, an address, a commercial activity, etc.)
  • Patrimonial autonomy and the legal capacity of companies.

[1] Such as:

–       The Decree of August 2nd, 1913 relating to Traders and the Proof of commercial agreements; –            The Decree of April 24th, 1924 relating to Marriage Settlements of Traders.

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