Corporate Governance in Tunisia

Legal framework

The primary source of corporate governance legislation in Tunisia is the Law No. 2000-93 enacting the Commercial Companies Code (CCC).

The CCC has been amended in October 2005 with Law n. 2005-96 that aims to reinforce the existing regulatory framework by consolidating financial relations’ security. This amendment was a timely reaction of the Tunisian legislator to some international financial scandals in order to prevent similar scandals occurrence in Tunisia. The Law aims to strengthen corporate financial disclosure and good governance policy by making it mandatory for all companies making a public offering to create a permanent audit committee. 

In March 2009, Law n. 2009-16 introduced new provisions to supplement the CCC by addressing the transactions subject to prior authorization of the BoD, the shareholders’ general meeting, and the audit committee. The 2009’s law also focuses on how to avoid conflicts of interests and to foster transparency by making it mandatory for all companies making a public offering to disclose top management members’ annual remuneration and benefits received. 

In June 2011, Banque Centrale de Tunisie (the Central Bank of Tunisia) issued Circulaire aux Établissements de Crédit n.°2011-06 (a circular n.°2011-06) to introduce more independence within financial institutions’ boards which must include at least two independent directors. In addition, the circular requires financial institutions to create three ad-hoc specialized committees, namely, an audit committee, a risk committee, and a credit committee (Banque Centrale de Tunisie, 2011). 

Regarding corporate governance best practices, the Arab Institute of Business Managers (IACE) has published in June 2008 the first corporate governance guidelines in Tunisia entitled “Guide de Bonnes Pratiques de Gouvernance des Entreprises Tunisiennes” (“The Tunisian Code of Best Practice of Corporate Governance” (TCBP)) serving as good practices to disseminate in Tunisian companies. The guide covers several elements of good governance such as shareholder rights, board structure and responsibilities, roles of managers, employer-employee relations, internal audit, tax transparency, auditors’ roles, business ethics and corporate social responsibility, top management remuneration, and the governance of family businesses. Even though the guide was revised in 2012, the application of its recommendations is relatively limited because they are not mandatory, depending on the discretion of the companies and business owners.

Ownership

Traditionally, the governance system of Tunisian companies is marked by the weight of state and family capitalism. Indeed, the state and the family businesses have been the locomotives of the Tunisian economy after the country’s independence. The majority of Tunisian listed companies, corresponding to 49.4% (i.e., 40 out of 81), are owned by families. This resulted in a concentration of Tunisian companies’ ownership structure and a preference for bank financing and self-financing which made the functioning of Tunisian companies opaque. In this respect, the number of Tunisian listed companies remains relatively small in comparison with other countries with a similar level of economic development.

Corporate structure

According to the Code, the board of directors (BoD) or the management board and supervisory board, are the main governance bodies of public limited companies in Tunisia. In this perspective, the Tunisian legislator allows companies to choose between two forms of governance: the monistic model or single-tier based on the existence of a BoD and the dualistic model or two-tier characterized by the separation of management and control responsibilities through a management board and a supervisory board. In Tunisia, almost all companies use the traditional corporate governance model, only one among the ten largest listed companies is organised under a two-tier system.

The CCC suggests that board members are appointed by the general meeting of shareholders for a duration fixed by the statutes but their term should not exceed 3 years. In this respect, being a shareholder is not required to be a director (Code Des Sociétés Commerciales, 2000). Concerning board size, the CCC suggests that the BoD should include at least 3 members and at most 12 members. With regard to board composition, Tunisian listed firms’ boards consist of executive, non-executive, and independent directors. Tunisian listed firms’ board composition is dominated by non-executive directors who are often representatives of large shareholders confirming the importance of capital owners’ interests in the Tunisian corporate governance system as a result of ownership concentration.

To ensure the proper fulfillment of its mission, BoD is assisted by specialized committees. Literature on corporate governance suggests the creation of supervisory committees, whose mission is to protect the interests of shareholders and to ensure that the company’s functioning complies with legislation and business ethics. The most common committees are the audit committee, the remuneration committee, and the nomination committee. In 2005, the CCC was amended by Law n. 2005-96 that requests companies issuing securities to the general public to create a permanent audit committee.

Since 2001, the Central Bank of Tunisia requests financial companies to create three key committees: audit, risk, and credit committees. Tunisian financial companies are requested to appoint independent directors as chairs of the audit and the risk committees (Banque Centrale de Tunisie, 2011). IACE (2012) suggests setting up specialized board committees such as audit, remuneration, and nomination committees taking into account the characteristics and particularities of each company. The guide suggests that the board committees must include at least one independent director. During the last 5 years, the number of internal committees in the BoD of Tunisian listed companies has increased following the evolution of corporate governance regulation and investors’ requirements

Shareholder rights

The Middle East and North Africa (MENA) region suffers from a different shareholder rights problem. Many MENA businesses—particularly successful ones that are big-name market players or listed on stock exchanges—are family owned enterprises or state-owned entities. This means that many of the shareholders themselves are part of management with skin in the game. As such, the shareholder rights issue to address in MENA is how to protect minority shareholders. 

In Tunisian companies, agency disputes often oppose majority shareholders to minority shareholders. In this respect, the CCC was amended in 2009 to strengthen the protection of the rights of minority shareholders. However, even though minority shareholders can convene a general shareholders’ meeting and include items to the agenda, a supermajority is needed to approve major changes. In this respect, IACE (2012) advocates for fair treatment of all shareholders, whether majority or minority, according to the principle of an action equal to a right to vote but also through access to relevant information.

There have been no major changes related to their implementation in Tunisian companies especially with regard to transparency requirements. In this respect, the CCC only requires a 15 days notice of the general shareholders’ meetings while 21 days are often recommended by good corporate governance best practices. IACE (2012) suggests disclosing shareholding information as well as informing and documenting shareholders at least 30 days in advance before the general shareholders meeting. Regarding shareholders’ information and disclosure, Law n.°2009-16 of 2009 allows the shareholders to benefit from a comprehensive financial disclosure however, non-financial disclosure remains very limited and does not allow non-executive shareholders to have a good understanding of the company’s organization and functioning.

Disclosure

Tunisia also suffers from disclosure deficiencies, the law does not establish comprehensive requirements for the disclosure of companies’ non-financial information. In practice, non-financial disclosures are generally poor.

Joint stock companies and banks are required to prepare annual reports in accordance with a template issued by the Securities Commission, but only banks are required to disclose them. The template does not comprise non-financial information. In practice, only four companies in our sample – three of which are banks – make their annual reports publicly available.

The stock exchange website provides some basic information on corporate governance, including their directors’ names, share capital, shareholder variations and identity major shareholders. Companies are not required to disclose whether they comply with the Corporate Governance Guide and none of the ten largest listed companies does so. Information on the board and audit committee members’ qualifications and activities is very limited.

Corporate social responsibility

Law n. 2018-35 of June 11, 2018, relating to corporate social responsibility was adopted by the Tunisian Parliament in May 2018. The law provides a legal framework for companies’ societal actions. In this respect, the law is consistent with Articles 12, 45, and 129 of the Tunisian Constitution of 2014 which emphasizes the importance of social justice, sustainable development and justice between regions, and citizens’ rights to a healthy environment. The law is aimed at listed companies operating in the field of natural resources management.

IACE (2012) clearly identifies the main stakeholders of Tunisian companies and gives recommendations to companies to manage their relationships with them. According to the code, corporate governance should identify, segment, and involve stakeholders to build a relationship of trust with them. The guide indirectly refers to CSR and sustainable development by calling on Tunisian companies to endow themselves with a code of conduct promoting the values of responsibility, integrity, transparency, fairness, justice, and respect for the person, future generations, and the environment (IACE, 2012). 

Regarding CSR disclosure, although Law n.°2009-16 obliges public listed firms to ensure a regular disclosure of information related to their financial performance, governance structure, and top management’s remuneration, CSR disclosure is not mandatory and it largely depends on the will of the companies’ top management.

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Sources:

Cho, Audrey, "A Review of Corporate Governance in Morocco and Tunisia" (2019). International Program Papers. 122. https://chicagounbound.uchicago.edu/international_immersion_program_papers/122/ 

Ben Rejeb, W. (2021). Corporate law and governance: A case of Tunisia after the Arab Spring. Corporate Law & Governance Review, 3(2), 20–29. https://doi.org/10.22495/clgrv3i2p2 

Corporate Governance in Transition Economies Tunisia Country Report of European Bank for Reconstruction and Development (December 2017) by  Gian Piero Cigna,  Ahmed Meziou, with the assistance of Nestor Advisors