Every other day Rwanda is doing its best to become heaven for most companies in the world wishing to have business friendly environment. With such a target, Rwanda has introduced many incentives and mechanisms to increase the number of companies registered in Rwanda, for example, there is no official fees required for incorporation of a company in Rwanda, and the other is that a company having its headquarters in Rwanda has several given tax benefits, and among other incentives as provided under the law governing companies and the investment laws.

In 2021 Rwanda enacted law N° 007/2021 of 05/02/2021 governing companies. This law introduced many and different aspects regarding governance of companies in Rwanda, and among which the new company law introduced a form of company known as community benefit company.This created the exception to the notion under company law that every company is considered to be established for commercial purposes.

By definition a community benefit company is a company with primary social objectives whose surpluses are re-invested, for that purpose, in the business or in the community rather than being driven by the need to maximize profit for its shareholders or owners.

Hence, introducing community benefit company in Rwanda ideally created a way-out for all investors and other persons that have always wished to cause positive impact in the community and the environment, but failed or couldn’t because of the lengthy process of registration of NGOs and other related organizations. Therefore, everyone can now easily cause positive impact to the community and the environment, this is because of the eased incorporation process in relation to a community benefit company, and the modest/simplified requirements for its operations compared to other organizations like NGO’s and other organizations.   

WHAT IS THE EXACT PURPOSE OF A COMMUNITY BENEFIT COMPANY?

Normally, one of the purposes of every community benefit company is to have a positive impact on society and the environment, taken as a whole, that is:

1.  proportionate to the size and nature of the business of the company; and
2. created by the manner in which the company is operated.
   
   

In Rwanda, the law provides that the incorporation documents of a community benefit company may also identify one or more of the following social objectives that it is a purpose of the community benefit company:

1. providing low-income or underserved individuals or communities with beneficial products or services;
2. promoting economic opportunity for individuals or communities beyond the creation of jobs in the normal course of business;
3. conserving and promoting the environment;
4. improving human health;
5. promoting the arts, sciences and advancement of knowledge;
6. conferring any other particular benefit on society or the environment.

However, it must be noted and appreciated that the identification of a specific social objective in a community benefit company’s incorporation documents does not limit the purpose of the company to have a positive impact on society and the environment taken as a whole.

CAN AN ALREADY EXISTING COMPANY ADOPT THE STATUS OF BECOMING COMMUNITY BENEFIT COMPANY?

Yes, a company that already exists in Rwanda can adopt the status of becoming a community benefit company. This is done by having a shareholders’ resolution, and lodging it at the Office of the Registrar General. This means that a private company or a public company can have the status of a community benefit company if its incorporation documents are amended to include a statement that the company is a community benefit company.

CAN A COMPANY CHANGE ITS STATUS OF BEING A COMMUNITY BENEFIT COMPANY?

According to the law governing companies in Rwanda, a community benefit company may change its status when its shareholders adopt a special resolution altering its incorporation documents. This means that a person can establish a community benefit company with intentions of causing positive impact to the society and the environment, but later he/she realizes that the company has the capacity/potential of maximizing profit. In such a case, the law gives the option of changing the status of the company to a normal company with sole purpose of making profits/ for commercial purposes.

WHAT ARE THE DUTIES OF DIRECTORS OF A COMMUNITY BENEFIT COMPANY?

The company law enshrines that in discharging the fundamental duties under the law, a director/s of a community benefit company must consider the effects of any action or inaction on:  the shareholders;  the employees and work force of the company and its stakeholders; the interests of customers or beneficiaries;  community and societal factors, including those of each community in which offices or facilities of the company or its stakeholders are located;  the local and global environment; the short-term and long-term interests of the company, including benefits that may accrue to the company from its long-term plans and the possibility that these interests may be best served with transparency; and  the ability of the company to accomplish its purposes.

IS IT REQUIRED FOR A COMMUNITY BENEFIT COMPANY TO HAVE AN ANNUAL BENEFIT REPORT?

In Rwanda, the law requires that the community benefit company must post all of its annual benefit reports on the public portion of its Internet website, if any. If the company does not have an Internet website, the company must provide a copy of its most recent annual benefit report to any person that requests a copy.

Additionally, the Board of Directors of a community benefit company must include with the documents required to be disclosed to shareholders under the law governing companies, a report that includes a narrative description of both:

1.  the ways in which the company pursued its purposes under the law governing companies and the extent to which those purposes were accomplished; and
2. any circumstances that hindered the accomplishment of those purposes.
   

As discussed above, community benefit company in Rwanda is a way-out for all the investors and other persons that have always wished to cause positive impact in the community and the environment, but failed or couldn’t because of the lengthy process of registration of NGOs and other related organizations. This is because of the eased incorporation process in relation to a community benefit company, and the modest/simplified requirements for its operations compared to other organizations like NGO’s and other organizations.   

LEGAL BASIS

– Law N° 007/2021 of 05/02/2021 governing companies