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CURRENT DEVELOPMENT

by

Godfrey Mupanga

 

Introduction

 

Those who follow the business of Parliament will, no doubt be aware that on 15 November 2019, the Companies and Other Business Entities Act (Chapter 24:31) (the ‘new Act’ or the ‘Companies and Other Business Entities Act’) was promulgated in a Government Gazette Extra-Ordinary. Pursuant to section 1, which states that this Act will come into effect 90 days from the date of promulgation The Companies and Other Business Entities Act comes into force on 13 February 2020. The declared intentions of this new Act, as they appear from its lengthy long title are:

 

  1. i)‘To provide for the constitution, incorporation, registration, management and internal administration of companies and winding up of companies and private business corporations;
  2. ii)to enable the voluntary registration of other business entities;

iii)                  to ensure the removal of defunct companies and private business corporations by re-registering all existing companies and private business corporations;

  1. iv)to repeal the Companies Act [Chapter 24:03] and the Private Business Corporations Act [Chapter 24:11]; and
  2. v)to provide for matters connected therewith or incidental thereto.’

 

In this first instalment in a series of brief articles that we will publish on this platform in an attempt to create public awareness of the new law in the public interest, we look at what we think are some of the most important practical issues that entrepreneurs should look out for once the Act comes into force. These include some important cut-off dates to take note of; the types of businesses affected by the new Act; the migration of the Private Business Corporations Act to the new Act; and the provisions of section 303 and the Tenth Schedule that are applicable during the phase of transitioning from the old Act to the new one.

 

Four important matters of a practical nature to take note of

 

This law will introduce some changes to Zimbabwean Company Law as we have known it to date. There are four important matters of a practical nature to note immediately for those concerned with the management of businesses. These are:

 

  1. a)Important dates of 13 February 2020 and 13 February 2021

 

Firstly, the important dates of 13 February 2020 and 13 February 2021. The new Act takes effect on 13 February 2020. From 13 February 2020, all matters to do with management and internal administration of companies and other forms of businesses listed in section 5 that are subject to this Act will now be dealt with under this new Act. Why 13 February 2021? In terms of section 303, there are certain sections of the new Act that are subject to the transitional period of twelve months. The transitional period is the length of time that business entities that are subject to this Act are allowed to bring their businesses in compliance with the provisions of the new Act. So, for example, the requirement under section 303(9) that all existing companies should re-register is subject to the twelve months transitional period, which means that existing businesses that are subject to this new Act have twelve months to bring their businesses in compliance with the Act. As a practical matter, company executives may need to mark the dates of 13 February 2020 and 13 February 2021 on their calendars.

 

 

 

  1. b)Awareness of the provisions of section 303 and the Tenth Schedule is mandatory

 

Secondly, the Companies and Other Business Entities Act is very long and technical in a lot of respects, but it will be criminal if business executives fail to make themselves aware of the provisions of section 303 and the Tenth Schedule of the new Act. This is where the most important provisions for transitional arrangements are contained. By familiarising themselves with these provisions, business executives will know which changes the law requires that they be effected immediately and which ones can be effected within the twelve months’ transitional period. As a matter of practice, anyone concerned with the management of a business entity that is subject to the new Act may find it helpful to develop a checklist of what is required to be done immediately and what may be accomplished within twelve months to bring the business in compliance with the new Act.

      

  1. c)Repeal of the Companies Act and the Private Business Corporations Act

 

Thirdly, the Companies and Other Business Entities Act repeals the Companies Act [Chapter 24:03] and the Private Business Corporations Act [Chapter 24:11]– two statutes that are concerned with the registration and operation of companies and private business corporations respectively. Basically, what has happened with respect to private business corporations is that all the provisions of the Private Business Corporations Act, with any necessary changes, have been migrated to and now appear as Chapter IV of the new Act the Companies and Other Business Entities Act. Subject to the transitional provisions in section 303 and the Tenth Schedule, the Companies Act in its entirety has been expunged from our statute books.

 

  1. d)Business entities directly affected by the new Act

 

Finally, the repeal of the two statutes logically leads us to the nomenclature of the new Act that has been chosen by the drafters. While the law governing the operation of companies is currently called the Companies Act, this Act is called the Companies and Other Businesses Act. This means that the new law will apply not only to companies, but to other types of business entities as well that are not companies. The new Act is therefore more expansive in its reach than the Companies Act.

 

Other forms of business that were previously not subject to the Companies Act, will now be governed by the new Act. Section 5 of the new Act provides a list of types of business entities that are subject to the Act. The wording of the section suggests that it’s a closed list. These are: ‘a public limited company, a private limited company, a company limited by guarantee, a cooperative company, a foreign company, a private business corporation’ and businesses operated as ‘partnerships, syndicates, joint ventures and certain associations..’ that voluntarily register in terms of section 278 of the new Act. According to section 278, any partnership, syndicate, joint venture, consortium or any unregistered association of persons can opt to voluntarily bring itself under the provisions of the Companies and Other Business Entities by paying a fee and lodging with the Registrar of Companies its constitutive document in the prescribed manner.

 

Section 4 of the new Act provides that the Act shall not apply to ‘any banking institution, building society, insurer, micro-finance institution, cooperative society (note the difference between a cooperative company that is subject to the Act and a cooperative society that is not subject to the Act), or any other entity’ that is governed by another statute. Notice that the forms of business that are exempted from the application of the Companies and Other Business Entities Act in terms of section 4 have their own Acts of Parliament that are applicable to them.    

  

Conclusion.

  

In view of the wide ranging changes that the new Act introduces in Zimbabwean Company Law, an understanding of the new law by business executives in the formal sector is essential in order to ensure an effective transition from the old regime to the new one. Business persons in the informal sector may also need to have some understanding of the new Act with a view to identifying opportunities to graduate their businesses from the informal to the formal.

 

DISCLAIMER. The views and opinions expressed in this article belong solely to the author, and do not amount to legal advice. MBA will not be liable for any loss incurred howsoever in the unlikely event that anyone takes the article as constituting legal advice. For detailed advice, feel free to write to gmupanga@mbalaw.co.zw