The long-awaited Com­panies and other Business Entities Act [Chapter 24:31] (the new “Companies Act”) is expected to come into force in the first quarter of 2020

The long-awaited Com­panies and other Business Entities Act [Chapter 24:31] (the new “Companies Act”) is expected to come into force in the first quarter of 2020 The new Com­panies Act repeals the Companies Act [Chapter 24:03] (“Old Act”) and introduces a number of impor­tant new concepts and far-reaching changes to company law in Zim­babwe This note seeks to highlight only those key changes introduced by the new Companies Act which impact on com Shares and share capital The new Companies Act abol­ishes par value as a concept in share capital From the effective date of the new Companies Act, shares will no longer have a par or nominal value and pre-existing companies may not authorise any new par value shares or shares having a nominal value Despite the abolishment of the concept of par value, all shares is­sued with a par or nominal value by a pre-existing company, and held by a shareholder will, subject to any regulations to be made by the Minis­ter, continue to have the same rights associated with them, including that the shares will remain to have a par or nominal value The new Companies Act also de­parts from the general practice under the old Act where the terms of cer­tain classes of shares, particularly in preference share funding structures, could be recorded in agreements or other documents, separate from the memorandum or articles of as­sociation The new Companies Act requires that all preferences, rights, limitations and other terms associ­ated with a class of shares must be contained in the memorandum of association, failing which they may not be enforceable Under the new Companies Act, the board will have the right to in­crease or decrease the number of authorised shares of any class, to reclassify any authorised but unis­sued shares, to classify shares that are authorised but are unclassified and unissued and to determine the pref­erences, rights, limitations or other terms of shares which have been au­thorised but not issued Beneficial ownership register For the first time under corporate law in Zimbabwe, the new Compa­nies Act prescribes detailed require­ments to identify and record those individuals who ultimately own or control the company Companies will be required to keep and main­tain a register of beneficial owners of the company and to file such infor­mation with the Registrar of Com­panies The new Companies Act defines a ‘beneficial owner’ to include, with­out limitation, an individual who di­rectly or indirectly holds more than twenty percent of the company’s shares or directly or indirectly holds more than twenty percent of the company’s voting rights The new Companies Act further provides that not more than twenty percent shares in a company may be held by a nominee on behalf of a beneficial owner While these disclosure require­ments are welcome and could go a long way in unmasking corporate secrecy, compliance with the same could prove to be difficult in some cases This particularly because nom­inee agreements by their very nature are confidential and the company is not a party to such agreements The company is therefore left to presume the existence of such nominee ar­rangements and unless probed, there is no obligation on shareholders to disclose these nominee arrangements or beneficial ownership The fact that a director can be removed without reason under the New Companies Act could also be a disincentive for the proper implementation of these requirements Failure to comply with these dis­closures and filing requirements is an offence and companies will need to carefully consider these require­ments and put in place appropriate measures to comply In the long run, amendments may be required to these disclosure requirements to give them teeth Companies to re-register The new Companies Act requires all pre-existing companies to re-register with the Registrar of Com­panies within a period of 12 months from the date on which the new Companies Act becomes effective The re-registration by companies will not create a new legal entity or ex­punge the company’s existing rights and obligations in any way The re-registration exercise is an adminis­trative process aimed at establishing a new and updated register of com­panies as well as to remove inactive companies from the same Sections 54 and 55 of the new Companies Act make provision for the partial codification of directors’ duties At common law, directors are subject to fiduciary duties requir­ing them to exercise their powers in good faith and for the benefit of the company They also have the duty to display reasonable care, skill and dili­gence in carrying out their duties As such, a director will need to comply with both the duties set out in the new Companies Act and in terms of the common law, except where the common law duty is specifically amended or conflicts with the new Companies Act Source: Business Times All Zim News is a central hub for all things Zimbabwean, curating news from across the country so no story is missed Alongside aggregation, our team of nationwide reporters provides real-time, on-the-ground coverage Stay informed and connected — reach us at admin@allzimnews.com. Source: Businesstimes