CHAD Law and Practice Contributed by: Claudy Monja and Felana Ranaivoson, John W Ffooks & Co
3. Aircraft Debt Finance 3.1 Structuring 3.1.1 Restrictions on Lending and Borrowing A loan between a non-resident entity and a resident borrower is permitted under Regulation No 02/18/ CEMAC/UMAC/CM relating to foreign exchanges in the Economic and Monetary Community of Central Africa ( Communauté économique et monétaire de l’Afrique centrale , or CEMAC), which is applicable in Chad. The loan is subject to a declaration to the Bank of Central African States ( Banque des États de l’Afrique Centrale , or BEAC) and the minister of finance 30 days prior to any payment/first drawdown under the loan. The declaration may take the form of a simple letter. 3.1.2 Effect of Exchange Controls or Government Consents See 3.1.1 Restrictions on Lending and Borrowing . In practice, after filing the declaration (a simple letter), the borrower should receive a letter from the minister of finance authorising the borrower to move forward with the transaction. Without this authorisation letter, the borrower’s local bank will refuse to process any transfer of funds from the non-resident bank. In the event that the first drawdown occurs before the min - ister’s authorisation is obtained, the funds will be kept by the borrower’s local bank for eight days and will be transferred back to the non-resident bank at the expiry of the said period if the borrower is unable to provide the authorisation letter from the minister. 3.1.3 Granting of Security to Foreign Lenders Local borrowers are permitted to grant security to for - eign lenders. 3.1.4 Downstream, Upstream and Cross-Stream Guarantees The concept of downstream, upstream and cross- stream guarantees is not expressly set forth in any legal provision. However, the closest concept under Chadian law is that of cautionnement . Cautionnement is a contract by which a guarantor ( caution ) undertakes to perform an obligation (current
or future) on behalf of a debtor, if the latter fails to meet its contracted obligation to the creditor. This commitment may be entered into without any instructions from the debtor. 3.1.5 Lenders’ Share in Security Over Domestic SPVs Pledges over shares are recognised under the OHADA Uniform Act organising securities (the “Uniform Act on Securities”). 3.1.6 Negative Pledges There is no specific provision under Chadian law on negative pledges. 3.1.7 Intercreditor Arrangements If the parties proceed with the registration at the tax office, the facility agreement could be subject to a registration fee of 1% of the facility amount. 3.1.8 Syndicated Loans While the concept of agency and the role of an agent (such as a facility agent) under a syndicated loan does not exist per se in Chad, from a practical perspective, this concept is recognised. In addition, the parties are free to establish the terms and conditions of their con - tract. This includes the right to appoint an entity or an individual as agent. 3.1.9 Debt Subordination There is no specific provision for debt subordination under local law. 3.1.10 Transfer/Assignment of Debts Under Foreign Laws The transfer or assignment of all or part of an out - standing debt under an English or New York law- governed loan may be permissible and recognised in Chad. 3.1.11 Usury/Interest Limitation Laws Usury is prohibited in Chad. However, the law does not set out a maximum threshold beyond which an interest rate is considered usurious. In Chad, each category of loan has its own effective global rate beyond which an interest rate is considered usuri - ous. In practice, the effective global rate is agreed
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