With the entry into force of the new Commercial Code, approved by Decree-Law No. 1/2022 of 25 May (the “CCom”), the requirement of a minimum number of shareholders was removed, making it possible – with the exception of the general partnership with limited liability company (sociedade em nome colectivo de responsabilidade limitada) – for all other types of companies to have a single shareholder.

The conversion of multi-member company (with more than one shareholder) into a single-member company (with a sole shareholder) is a simple, straightforward procedure. Indeed, the CCom merely provides that the conversion into a sole-shareholder company “(…) is carried out by means of a declaration of the sole shareholder expressing the intention to convert the company into a sole-member company” with such declaration bearing the notarized signature of the sole shareholder and be registered with the Legal Entities Registry Office (CREL) (Article 259(2) and (3) of the CCom).

However, possible because the CCom uses the term “transformation into a single-member company” instead of “conversion”, CREL has begun requiring companies that become single-member to undergo a full corporate transformation process – a requirement that is not only illegitimate but also burdensome for investors.

In fact, the transformation of companies occurs when a company changes from one corporate type to another – for example a quota company transforming into a share company -. Becoming single-member is neither technically nor legally a “transformation”. Furthermore, as noted above, the CCom is clear as to the required formalities – only a written declaration by the sole shareholder with its notarized signature is necessary.

To clarify this mater, the new Regulation of the Legal Entities Registry, approved by Decree – Law NO. 1/2024 of 8 March and in force since 8 March 2024, expressly provides in Article 14(3) that “[t[he registration of the conversion of a multi-member company into a single-member company, or vice-versa, is carried out by means of a declaration of the shareholder expressing the intention to convert the company into a single-member or multi-member company, with the notarized signature of the shareholder, and no amendment to the articles of association nor the formalities required for a corporate transformation are required” (our emphasis).

As is evident, any doubts that may have arisen from the CCom regarding the formalities for registering the conversion of a multi-member company into a single-member company have been expressly clarified by the Regulation of the Legal Entities Registry.

Nevertheless, and regrettably, CREL continues to refuse to register the conversion of a multi-member company into a single-member company unless the formalities of a corporate transformation process are complied with.

CREL´s conduct, in insisting on applying formalities solely to corporate transformations – in direct contradiction to the express wording of the law and in clear violation of Article 14(3) of the Regulation of the Legal Entities Registry – constitutes an unlawful and arbitrary act that gravely harms the business environment. This unwarranted requirement not only contradicts the existing legal framework but also creates unjustified additional costs, significant delays and legal uncertainty for national and foreign investors, undermining confidence in legal certainty and in Mozambican commercial registry system.

It is therefore important to state clearly: investors should not be intimidated by requirements that lack any legal basis. The legislator was unequivocal in simplifying the process of conversion into a single-member company and eliminating any need for corporate trasnformation or amendment of teh articles of association. CREL´s role is to apply the law – not to create obstacles where the legislator has expressly removed them.

The insistence on illegitimate practices must be firmly rejected, and economic operators should demand strict compliance with the legal framework in force. Predictably, legality and legal certainty are essential pillars for the country´s competitiveness. It is incumbent upon CREL to respect the law, safeguard investors´ Rights and contribute to a healthy, transparent and functional business environment – not the opposite-.