Introduction to the Country
Chance all; see what destiny yields.
Republic; multiparty presidential regime
The legal system is based on Portuguese civil law system and customary law; modified to accommodate political pluralism and increased use of free markets; has not accepted compulsory ICJ jurisdiction.
Angolas high growth rate is driven by its oil sector, which has taken advantage of high international oil prices. Oil production and its supporting activities contribute about 85% of GDP, Angola became a member of OPEC in late 2006 and in late 2007 was assigned a production quota of 1.9 million barrels a day.
Subsistence agriculture provides the main livelihood for most of the people, but half of the countrys food must still be imported.
In 2005, the government started using a $2 billion line of credit, since increased to $7 billion, from China to rebuild Angolas public infrastructure, and several large-scale projects were completed in 2006. Angola also has large credit lines from Brazil, Portugal, Germany, Spain, and the EU.
To fully take advantage of its rich national resources gold, diamonds, extensive forests, Atlantic fisheries, and large oil deposits Angola will need to implement government reforms, increase transparency, and reduce corruption.
Finance and Tax matters
(a) Financial assistance
(i) Does the concept of financial assistance exist
(b) Lending restrictions/banking monopolies
(i) Any restrictions applicable to the importation of capital by lenders?
According to the Angolan financial legislation all capital operations are subject to the authorization of the National Bank of Angola (BNA). Foreign banks must apply for a licence of the BNA to lend money to a company project in Angola.
(ii) Requirement for the lenders/security agent to be registered in the jurisdiction?
The performance of financial operations is limited to entities with head office, branch or representative office in Angola, duly registered with the BNA.
(iii) Can foreign lenders lend into the jurisdiction?
Foreign lenders are allowed to lend into the jurisdiction in the terms mentioned above.
(c) Restrictions relating to repatriation of dividends
(i) Are there any restrictions relating to repatriating dividends?
Pursuant to the Angolan Exchange Law (Law 5/97, of June 27) and the Private Investment Law, investors may repatriate dividends after deduction of the legal redemptions and payment of all taxes.
(i) Are there any restrictions on the convertibility of the jurisdictions currency?
There are some restrictions on the use of foreign currencies.
(e) Interest payments
(i) Are there any restrictions on the payment and compounding of interest? If so, does this also affect both local and foreign lenders?
The interest on commercial transactions cannot exceed 75% per year plus 5 or 7 %, depending on the type of security of the loan.
(i) Are there any withholding tax issues in relation to interest payments and fees to foreign lenders or payments received under any agreements?
Domestic dividends, interest and royalties are subject to withholding tax on income from capital under the provisions of Law 7/1997 on Tax Restraint.
The Capital Income Tax levied on income deriving from the use of capital, interest, distributed profits and royalties accrues at the rate of 15% or 10%, as applicable.
In terms of territorial incidence, the rules vary between the taxation of entities established in Angola on obtained capital income, regardless of its origin and, at the same time, the taxation of non residents in Angola which do not have a permanent establishment there, from capital income originated (established debtor) in the country e.g. interest on loan agreements and taxation only on income from capital originated (established debtor) in Angola e.g. distributed profits and royalties. Finally, it should be noted that credit institutions are exempted from this tax in respect of interest on loans and lines of credit and default interest, provided that they are subject to Industrial Tax.
(ii) List of double taxation treaties.
(iii) Lender risks in respect of tax liabilities/tax domiciliation as a result of providing debt and/or taking/enforcing security interests
According to the tax regime a resident company shall be taxed on income earned worldwide. The non-residents who earn income in Angola are subject to the same rules as the residents.
(iv) Can loan repayment / enforcement proceeds be treated negatively from a tax perspective for the lenders?
Apart from the applicable specific taxes on the proceeds we are not aware of any negative consequences.
(g) Stamping costs
(i) Details of stamp duty costs
Some documents and acts concerning the project company are subject to stamp duty.
Security, Enforcement and Insolvency
(a) Overview of security regime
(i) Can a security interest be obtained over a companys assets, e.g.:
(A) accounts receivable (book debts);
(B) inventory (stock in trade);
(C) shares of a company (issued and authorised);
(E) real property;
(F) insurances; and
(G) project contracts.
Pledges may be created over all movable (e.g.: shares, accounts receivable, etc) and immovable assets, although on all immovable assets (real property specifically) the pledge has to be created by means of a public deed and subsequent registration. Other types of security bringing any restriction to the disposal of the assets shall be examined on a case by case basis although, in general, this security shall be of a contractual nature only. The pledge of rights is conditioned to the rights referring to a movable asset and to that movable asset being transferrable.
(ii) Can a company grant a security interest in order to secure its obligations (i) as a borrower under a credit facility, and (ii) as a guarantor of the obligations of other borrowers and/or guarantors of obligations under a credit facility?
Charges can be created over shares in order to guarantee loans.
Shares can be validly pledged and the pledge can be enforced under an English law share charge although it might be of interest to the claimant to submit the securities to Angolan law as the system of recognition of foreign judicial decisions may be time consuming and even more complicated than the prosecution of the legal action regarding the said pledge, in Angola.
(iii) Debt obligations: can a company grant a security interest in order to secure its obligations (i) as a borrower under a credit facility, and (ii) as a guarantor of the obligations of other borrowers and/or guarantors of obligations under a credit facility?
A company can provide various types of security only in order to secure its obligations. According to the legal Angolan system several types of securities may be granted, such as mortgages, liens, pledges, etc.
(iv) If the borrowings to be secured are under a revolving credit facility, are there any special priority or other concerns?
(v) Can the relevant security interests be granted to a security agent or trustee on behalf of the lenders from time to time?
Security agents and trustees do not exist in Angola.
(vi) Please indicate the claims that would have priority over the relevant security interests.
In some situations the government is considered as a preferred creditor and so do the workers. Creditors with pledges or mortgages are also considered as preferred creditors.
(vii) Is there a public security registry?
There is a commercial public registrys office.
(viii) Formalities in respect of security creation:
(A) Statutory perfection requirements;
(B) Any other formalities
(C) Steps for perfection and length of time taken
(D) Any significant financial costs or significant time delays required to create and perfect the relevant security interest?
The costs and time required for the establishment of loan guarantees will vary depending on the type of guarantee. There are security procedures, such as pledges, that do not require many formalities, while others, such as mortgages, are subject to greater formalism and charges, in particular, require a public deed, settlement and registration duties and stamp duty.
(b) Insolvency and enforcement regime
(i) Is there a court or similar register that can be searched in respect of proceedings and insolvency actions ?
There is a commercial public register office.
(ii) Summary of the different options for an insolvency related process.
The law determines that the merchant unable to meet its obligations is considered insolvent.
The Civil Procedure Code (CPC) has some steps to recover insolvent companies, which are listed below:
- The agreement (Concordata)
When a company finds itself unable to fulfil its obligations, before the cessation of payments or within ten days after the termination, it has a duty to file at court for a declaration of bankruptcy and request the convening of its creditors (article 1140 of the CPC). Following the petition, the court shall appoint an administrator to manage the company and prepare a report and a proposal for a composition of the credits. This report and proposal shall be submitted to the approval of the creditors in a general meeting and once it is approved it becomes mandatory.
- The agreement of creditors
If there was no proposal for a composition or in the event of having been adopted the creditors may decide on setting up a limited liability company (sociedade por quotas) in order to continue to operate the business. The shares of the creditors are represented by the corresponding value of their claims after deducting the amounts for claims relating to those who have not signed the agreement.
- The bankruptcy
In the absence of bankruptcy or creditors agreement, that agreement had been reached with creditors and this agreement was rejected by the court, the debtors bankruptcy should be immediately enacted (article 1173 of the CPC), at the request of any creditor, of the public prosecutor in the case mentioned in section b) of paragraph 1 of article 1174 of the CPC or ate the presentation of the merchant outside the period provided in article 1140 of the CPC.
(iii) Are summary or expedited proceedings available?
Apart from the possibility of choosing arbitration, in Angola there is no special jurisdiction for business or commercial cases.
(iv) Are any governmental or other consents required in connection with:
(A) the enforcement of a security interest in shares;
Please contact us for further information.
(B) the enforcement of a security interest in other assets; or
Please contact us for further information.
(C) the enforcement of a guarantee (sovereign or otherwise)?
Please contact us for further information.
There is no need for governmental authorisation to initiate legal proceedings for debt recovery and enforcement of secured interests, nor to enforce a guarantee.
(v) Do lenders inherit all environmental liabilities when they become owner of the shares upon enforcement (or at any other time)?
Upon take-over of the Company, whatever the reason shall be, the rights and liabilities of the company shall be transferred to the responsibility of the new shareholders of the company. However, lenders may contractually foresee the right to (judicially) demand the former shareholders for any liabilities (more likely to be expressed financially) regarding the time before acquisition of the shares by the lenders.
(vi) Enforcement of security: can security interests be enforced by both private sale and public auction, and is it necessary to appoint a court or other official to carry out the enforcement?
Yes, as long as it is done through a legal proceeding.
Corporate, Insurance and Employment matters
(a) Corporate vehicle
(i) Project company incorporation:
(A) Type of corporate vehicle
Please refer to the âIntroduction to Power Sector section.
(b) General corporate issues
(i) Is a private company free to lend and/or issue guarantees?
Private companies can lend and/or issue guarantees freely.
(ii) Are there any restrictions on dividend distribution?
There are no restrictions on dividend distribution since the deduction of the legal redemptions and payment of all taxes due are met.
(i) Mandatory insurance: are there any insurances which the project company or the Project is required to have by law (or regulations or similar)?
Mandatory insurance has been introduced lately. Presently, a company shall have workers compensation insurance and car insurance is also going to be mandatory in 2010.
(ii) Is there any minimum requirement to place the insurance with local insurers or any other similar restrictions? If so, can reinsurance be lawfully placed internationally?
Insurance and insurance mediation activity in Angola can only be performed by companies duly authorised to operate as such by the government.
The reinsurer activity may be performed by companies previously authorised to exercise the insurance and reinsurance, international reinsurer agencies with head office in Angola and international reinsurer agencies from which the Angolan government is a shareholder.
(iii) Are there any restrictions in respect of granting security rights over the insurances or reinsurances?
There are no restrictions other than the obligation of contracting with an Angolan insurance company.
(i) Legislative/regulatory issues: is there any legislation or regulation impacting on foreign employees, in particular the conditions relating to work and residence permits? Please give an indication of the process and costs in relation to obtaining work and residence permits.
In order to work in Angola, foreign citizens shall obtain a working permit. This permit, which application shall be submitted to an Angolan consulate/ embassy, must be used within 60 days after its issuance and is valid for one year, but can be renewed. There is a fee that must be paid for the application, which varies according to the country where the permit application is filled.
(ii) Foreign restrictions: are there any restrictions that apply to foreign employees and foreign contractors/subcontractors and if so what do they need to do in order to comply with local legislation?
As mentioned above all foreign employees shall have a working permit to work in Angola. The Angolan General Labour Law establishes the responsibilities of employees and employers. The regulations encourage the recruitment of Angolan citizens and require equal payment for both national and foreign staff with the same attributions and responsibilities. Foreign staff in Angola is limited to 30% of the workforce of the company.
(a) Land registry: is there a land registry (or similar) in the country that can be searched to confirm whether a project company has granted of any mortgage, charge, option assignment, lien or other encumbrance over the whole or part of the properties or assets of a company?
The Angolan jurisdiction has the Land Registry, which aims to publicise the legal situation of the real property, namely its description, ownership, mortgage, covenants or other charges concerned.
(b) Landlords rights: please indicate whether there are any rights which accrue to the landlord (or the government or any other bodies) that may override the terms of a land lease or threaten the rights of a project company particularly any right of repossession or acquisition.
According to the Land Law, the ownership of the land originally belongs to the State. Only land included in the State private domain are likely to be granted.
The Law of Private Investment in Angola prohibits the nationalisation of assets of private investors. In an exceptional case of nationalisation and in case of expropriation, the investor shall be paid a fair compensation by the Government.
(c) Direct agreement: are you aware as to whether a direct agreement in respect of a lease has been previously been provided to lenders on other transactions?
Many of the transactions performed in Angola or relating to Angola involve foreign parties; the structures of financing and project contracts usually follow the international structure, always bearing in mind local limitations. Thus direct agreements are common.
(d) Forfeiture rights: do relief from forfeiture rights exist and would the lenders be entitled to rely on such rights?
Property rights can expire by their non-use or non-compliance with the rates of appropriate and effective utilisation for three consecutive years or six interpolated years.
(e) Is there any additional legislation governing property rights?
Property rights are established in the Angolan Constitution and Land Law (Law 9/2004, of November 2004). The main requirements on this matter concerned the power sector are mentioned on the answers above and below.
(f) Are there any formalities with which lenders need to comply when enforcing security over land?
Protective orders such as attachment, seizure, sequestration and other non specified measures are subject to registration in Angola. This registration aims to safeguard the prior right of plaintiff or applicant in the process, because he is protected against any subsequent transfer of the building.
International law and arbitration
(a) Supra-national treaties
(i) List all Bilateral Investment Treaties to which the country is party.
Angola has currently Bilateral Investment Treaties with Portugal, South Africa, United Kingdom, Italy, Germany and Cape Verde.
It also has agreements on customs cooperation with Portugal and Sao Tome and Principe and is negotiating with South Africa, the Community of Portuguese Language Countries (CPLP), Namibia, Zambia and the Democratic Republic of Congo to enter into similar agreements.
(ii) Is the country a signatory to the Energy Charter Treaty?
Angola is not a signatory to the Energy Charter Treaty.
(i) Requirements and restrictions applicable to the choice of arbitration roles and place of arbitration
According to the Angolan Arbitration Law (Law 16/03, of July 25) it is possible to use arbitration as a mean to solve disputes on available rights, between private companies and between those and the State. The seat shall be chosen by the parties or the arbitrators may fix. In the case of international arbitration, the parties may choose the language and the law ruling the Arbitration Convention.
(ii) Are foreign arbitral awards / decisions are enforceable in the country (i.e. is the country a party to the New York Convention on the Recognition of Foreign Arbitral Awards?
Angola is not a party to the New York Convention on the Recognition of Foreign Arbitral Awards.
International law and arbitration