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SENATE HANSARD 28 MAY 2019 28-46
PARLIAMENT OF ZIMBABWE
Tuesday 28th May, 2019
The Senate met at Half-past Two o’clock p.m.
(THE HON. PRESIDENT OF SENATE in the Chair)
ANNOUNCEMENTS BY THE HON. PRESIDENT OF SENATE)
APPOINTMENT AS THEMATIC COMMITTEE CHAIRPERSON
THE HON. PRESIDENT OF SENATE: I wish to inform the
Senate that the Committee on Standing Rules and Orders has appointed Hon. Sen. Dr. Sekeramayi as Chairperson to the Thematic Committee on Human Rights.
INVITATION TO A CATHOLIC CHURCH SERVICE
THE HON. PRESIDENT OF SENATE: I also wish to inform
the Senate that there will be a Catholic Church Service tomorrow, Wednesday, 29th May, 2019 at 1230 hours in the Senate Chamber. All
Catholics and non Catholics are invited.
BUSINESS OF THE HOUSE
HON. SEN MUZENDA: Thank you Madam President. I move
that Order Number 1 be stood over until the rest of the Orders on today’s Order Paper have been disposed of.
HON. SEN. MOHADI: I second.
Motion put and agreed to.
REPORT OF THE ZIMBABWE DELEGATION TO THE AFREA
CONFERENCE ON MONITORING AND EVALUATION HELD IN
HON. SEN CHIEF NECHOMBO: I move the motion standing
in my name that this House takes note of the Report of the Zimbabwe Delegation to the AfrEA Conference on Monitoring and Evaluation held in Abidjan, Cote d’Ivoire from 11th to 15th March, 2019.
HON. SEN. CHIEF MTSHANE: I second.
HON. SEN CHIEF NECHOMBO: Thank you Madam President.
I would like to begin by thanking you for affording me this opportunity to move a motion which is very close to my heart; a motion I strongly believe and convinced that it is the answer to our collective dreams, hopes and aspirations as a nation.
Madam President, I have the utmost pleasure to present a report by the Zimbabwe delegation to the African Evaluation Association, which is abbreviated as AfrEA. The Conference on Monitoring and Evaluation was held from the 11th to the 15th of March, 2019 in Cote d’Ivoire,
Abidjan. The delegation was led by the Hon. Speaker of the National Assembly, Advocate Jacob Mudenda. Other members of the delegation were as follows; Hon. F. Mhona; Hon. T. Mavetera; Hon. O. Sibanda; Hon. P. Mpariwa; Hon. Sen. Chief Nechombo: Madam Mushaninga who was the secretary to the delegation.
The Conference was facilitated by the African Evaluation Association (AfrEA). This is an organisation with 36 member States proffering African solutions in pursuit of socio-economic development through the use of monitoring and evaluation, the body whose mission is to promote robust evaluation practices through its members. The monitoring and evaluation conference was themed, “Accelerating
Africa’s Development; strengthening national evaluation ecosystems”.
Madam President, for us to fully comprehend and appreciate the report, there is need to share the vision, the mission and the objectives of
AfrEA. The mission for AfrEA is, ‘the Africa rooted in the culture of evaluation for equitable and sustainable development’. The mission for
AfrEA is, ‘to promote robust evaluation practice through its members’.
Objectives of AfrEA
Madam President, in the interest of time, I encourage Hon. Members to take time from their busy schedules to read and appreciate the objectives of AfrEA for they are quite a number. However, for the purposes of us appreciating the report, I will just share on two objectives.
- Promoting Africa rooted and Africa led evaluation through sharing African evaluation perspectives;
- Supporting the establishment and growth of national evaluation associations and special evaluation interest groups, that is stakeholder engagement, collaboration and integration.
Madam President, today in the league of progressive nations, monitoring and evaluation is now an indispensable tool in the discourse of socio-economic development. The conference to us was mind provoking and an eye opener. It gave a clarion call to the implementation of the under mentioned emerging issues, which are;
- The need for monitoring and evaluation capacity building;
- Political will;
- Parliamentary participation and accountability, integration of technology and benchmarking.
During the conference, it emerged at the conference that the countries which implemented formal systems of monitoring and evaluation have recorded significant achievements in the implementation of Government programmes. To date, Rwanda, Benin, Uganda and South Africa are the African countries that have become the frontiers in the implementation of monitoring and evaluation. As a result, this leaves us with no option in the African domain of monitoring and evaluation but to constantly make reference to these countries.
Madam President, as Zimbabwe gears towards Vision 2030, it is imperative and inexcusable that it adopts formal systems of monitoring and evaluating of Government programmes and interventions in the context of the envisioned devolved state. This will lead to effective performance from the national, provincial and district levels.
Emerging Conference Issues
The five day conference was an intensive convergence of progressive African minds who sought to cross-pollinate ideas and proffer African solutions on monitoring and evaluation. The question is -
“why African solutions”. African solutions because most of the literature which is available on monitoring and evaluation is written by western scholars and there is need for us to put monitoring and evaluation in our context, hence as already alluded to in the interest of time; again I will elaborate on some of the emerging issues in brief which emerged during the conference.
The need for capacity building, it emerged as an issue. Inertia in the adoption and appreciation of monitoring and evaluation at national level has led to the realisation that there is a gap in knowledge and understanding of monitoring and evaluation.
Lack of technical personnel and specialists to drive the M&E agenda - this is quite a challenge as we do not have experts in terms of monitoring and evaluation. When you look at developed countries they already have within their institutions degrees, post graduate degrees and doctorates in monitoring and evaluation. In the African context, it is a challenge and in Zimbabwe, we only have one or two institution such as the University of Zimbabwe offering just programmes in monitoring and evaluation.
Political officials lack sufficient monitoring and evaluation knowledge so as to achieve high order goals of accountability and results based management. In terms of capacity building, South Africa has championed this by engaging development partners - Twende Mbele, Africa Development Bank and the Government itself is very much involved in monitoring and evaluation. During the conference, it was also exciting to note that we have our own children who are attached at Wits University who are doctors of monitoring and evaluation who were championing during the conference.
The need for political will emerged as an issue. Political will was identified as an essential contributor which has led to the success story in such countries as Uganda, Benin and South Africa. The said countries have a central unit in the Office of the President or the Office of the Prime Minister for monitoring and evaluation. The success of monitoring and evaluation hinges also a lot on the vision of the leadership to commit resources on monitoring and evaluation. Parliamentary participation also emerged as an issue. It also emerged that parliamentary participation strengthens the development of M&E in Uganda, Kenya, Ghana and South Africa. South African Parliaments have been actively involved in their frameworks. This has stimulated the use of M&E in the use of oversight roles by parliamentarians.
The aspect of corruption and accountability also emerged as an issue. It also emerged that monitoring and evaluation is also a progressive tool to fight corruption through providing a platform for accountability and transparency in service delivery. Monitoring and evaluation is both a proactive and reactive mechanism in the fight against corruption since monitoring and evaluation systems are undertaken at the diagnostic, formative, summative and longitudinal stages.
Fourth industrial revolution technology, 4IR – these are technologies like artificial intelligence, robotics and big data. It emerged that lack of adoption in integration of 4IR technology in monitoring and evaluation is retarding the development of national monitoring and evaluation system. Lack of ICT infrastructure – as we are all aware that monitoring and evaluation hinges a lot on data, it is a results based and so there is need for date integrity. Inadequacy of 4IR technologies has been a major drawback to the full implementation of evaluating systems because the measurement tools currently in use are cumbersome and time consuming and thereby rendering the whole process negatory.
M & E is gaining momentum in countries such as Benin, Uganda and South Africa. Benin has had 15 evaluations between 2010-2016 whilst Uganda has had 23 evaluations between 2008-2016. The issue at hand is how far have we gone as a country. Rwanda is also a case in issue whose economy has tremendously improved owing to their unrelenting efforts to implement M & E. These have been milestones in the achievements to said countries. This has holistically improved their efficiency and effectiveness both in the areas of governance and development programmes.
Benchmarking also emerged as an issue – the need for peer review.
The success of M & E is hinged on benchmarking and peer learning. Benin, Uganda and South Africa have made concerted efforts under a peer learning programme dubbed again Twende Mbele which started around 2011 for peer to peer learning in order to collaborate and implement M & E within their national development context. It also emerged that there is need for institutionalisation.
Monitoring and evaluation has to be focused in the country’s national development plan agenda. To be sustainable, governments must believe in the utilities of M & E and understand the system but to do so, they must own and institutionalise it. It needs public sector reform including national planning and budget decision making. Accordingly, M&E planning needs an integrated approach.
Stakeholder participation – monitoring and evaluation require an all inclusive stakeholder in their participation encompassing the Government, developmental partners, private sector and citizenry participation.
Monitoring and evaluation is an enabling tool for a government wide multi-sectoral development. It also emerged that monitoring and evaluation compliant countries like Rwanda, Ghana and South Africa have successfully applied monitoring and evaluation in such sectors as agriculture, health, energy and environment among others. This has reinvigorated Government efforts to fulfil national development objectives in the context of propagating the implementation of the SDGs.
Madam President, as a delegation we also made our recommendations. From the very onset, I alluded to the fact that monitoring and evaluation is the answer, the bedrock for socio-economic development. As such, the delegation made the following recommendations for adoption. The recommendations are borne out of the belief that what gets measured gets produced.
- Institutionalisation of Monitoring and Evaluation
There is need to adopt government wide monitoring and evaluation systems in all relevant Government institutions. The institutionalisation of monitoring and evaluation is key in that it brings about collaboration and integration. Monitoring and evaluation is critical in designing compliant Government policies and programmes which are in tandem with monitoring and evaluation standards.
- Capacity building and Government support
It is recommended that the key players like Government officials and Parliamentarians be capacitated through some awareness and appropriate training programmes. Resources like ICT infrastructure, computers, even free wifi at our Parliament building, our constituencies and airports is also needed to fully equip officials with the requisite tools to effectively discharge and implement their mandate. This will assist in the systematic implementation of developmental agendas for their constituencies, especially in the new dispensation where devolution is now the central thrust in development.
Budget allocation towards the establishment of a monitoring and evaluation system in our tertiary institutions is therefore an absolute necessity. South Africa is one of the countries which has significantly capacitated monitoring and evaluation institutions. To fully capacitate Parliamentarians, Government should also commit to supporting membership and participation in such regional groupings as AfrEA and APNODE which promote monitoring and evaluation ecosystems.
Additionally this will go a long way in consolidating and enhancing
Parliament and Government’s efforts in coming up with a harmonised Monitoring and Evaluation framework.
Madam President, for purposes of adopting international best practices it is recommended that Zimbabwe should leverage the experiences of other member countries like South Africa, Uganda, Zambia, Rwanda and Kenya. In that regard Zimbabwe should engage the said countries and other developed states like Malaysia, Japan and Australia.
- Development partner engagement
Government is urged to engage cooperating development partners in implementing Monitoring and Evaluation. Countries like Rwanda have managed to coordinate efforts with such organisations as the Belgian Technical Cooperation and UNICEF in order to bolster their efforts at implementing and adopting a working Monitoring and Evaluation Model.
- Political will
It is recommended that political will be the driving force to effectively implement Monitoring and Evaluation. The 2015 Zimbabwe National Monitoring and Evaluation policy is evidence of the political awareness of the importance of Monitoring and Evaluation. Madam President, at this juncture allow me to commend the Government’s commitment to Monitoring and Evaluation as evidenced by the recent appointment of Hon. Jorum Gumbo to become the Minister of State for Presidential Affairs in charge of Implementing and Monitoring.
Political will must therefore be the critical ingredient that must propel Government institutions to adopt a holistic approach towards the implementation of Monitoring and Evaluation systematically.
- Stakeholder engagement.
Monitoring and Evaluation must be a multipurpose mechanism which cuts across Government departments, institutions at all levels including such players as civil society and to some extent private sector stakeholders; in fact, there must be a buy in by all relevant stakeholders.
- Youth participation and engagement
It is axiomatic that one of the innovative ways of implementing Monitoring and Evaluation at national level is youth engagement and participation. The youth must be recognised as the current and future leaders in our development matrix. It is further recommended that for this to be effective the Government can hold national Monitoring and
Evaluation seminars and workshops in collaboration with the Zimbabwe Youth Council, a corporate body established to forge linkages between the Government and the youths.
- Climate Change and Agriculture
With regards to the Presidential Inputs Scheme and Command Agriculture Monitoring and Evaluation will come in to assess, improve and stimulate the whole framework. This will thus foster accountability, transparency in these programmes. With regards to climate change Monitoring and Evaluation is important for Zimbabwe which is yet to recover from the aftermath of the catastrophic Cyclone Idai. In this regard it is recommended that Zimbabwe embarks on a concerted Monitoring and Evaluation peer review arrangement with the fellow victim nations like Malawi and Mozambique in order to coordinate efforts in climate change mitigatory measures in the short term and long term compass.
Madam President, as I draw close to my conclusion, the urgency that comes with the need to adopt an institutionalised Monitoring and Evaluation in Zimbabwe cannot be emphasised. It is one cause which calls for both political and national convergence. Zimbabwe has come of age and it is high time the country rubs shoulders with other developing states in the championing of national Monitoring and
Evaluation systems. It is only through monitoring and evaluation in Zimbabwe that we can realise high order goals in terms of national objectives and sustainable development.
Madam President, allow me to conclude by saying Monitoring and Evaluation is the contemporary management tool at individual level, organisational level and more importantly at national level. Let it be borne in our minds that any planning without Monitoring and Evaluation is bound to fail. As such allow me again Madam President, to borrow from Socrates who posits that an unexamined life is not worth living. I thank you.
THE MINISTER OF JUSTICE, LEGAL AND
PARLIAMENTARY AFFAIRS (HON. ZIYAMBI) (HON): I move
that debate do now adjourn.
Motion put and agreed to.
Debate to resume: Wednesday, 29th May, 2019.
COMPANIES AND OTHER BUSINESS ENTITIES BILL [H. B. 8A, 2018]
First Order read: Second Reading: Companies and Other Business Entities Bill, (H. B. 8A, 2018).
THE MINISTER OF JUSTICE, LEGAL AND
PARLIAMENTARY AFFAIR, (HON. ZIYAMBI): Thank you
Madam President. I am honoured to present to you the Companies and Other Business Entities Bill, (H. B. 8A, 2018). This is a very big Bill with almost 304 clauses. The Bill principally seeks to replace and update the law relating to companies and private business corporations.
The present Companies Act was passed in 1951 and needs updating. I will just go through a few outstanding features within the Bill. Firstly, it has provision for the issuance of non-par value share rather than shares with a fixed value together with provisions for the valuation of non-par value shares.
- To introduce an electronic registry for the incorporation and registration of domestic and foreign companies and private business corporation;
- The substitution of criminal penalties by civil penalties wherever possible ;
- To establish an inspectorate to better enforce the provisions of the
- To make new provisions for the major and takeover of companies and other business entities;
- To provide the licencing of business entity, incorporation agents and business entity service providers;
- It seeks to clarify and improve the common law principle of bona vacantia, that is the vesting in the state of unclaimed properties of defect companies and private business corporations, by instituting a fair and transparent method of declaring such properties to be bona vacantia.
- To make beneficial ownership of companies more transparent;
- The introduction of a continuous system of updating the registry;
- To make further provision to combat the use of company form for criminal purposes;
- It also defines in greater detail, the corporate responsibility of directors and board of companies and encourages good corporate governance;
- Lastly, it will provide for additional measures to protect shareholders and investors and in particular, minority shareholders and investors.
Madam President, allow me to go through the individual clauses of the Bill. Clause 1 and 2 basically deal with the title of the Bill and the definition of terms. Clause 3 gives detailed guidance on who or what is an associate for the purpose of this Bill. Clause 4 says that this Bill will not apply to banks, building societies, cooperative societies, insurers and other entities whose formation is subject to other laws. It does not also apply to trade unions and employer organisations. Clause 5 outlines or lists the kind of business entities that are registrable entities under this Bill. For the first time, there is a provision for such entities as partnerships, syndicates and joint ventures.
Madam President, Part 2 of Chapter 1 contains administrative provisions and I will go through some of them. Clause 6 provides for the establishment of the registration of companies and other business entities. Clause 7 contemplates that the companies’ office will become an accounting entity for the purposes of Public Finance Management
Act. Clause 8 provides for the annual reporting of the companies’ office to Parliament through the Minister. Clause 9 is concerned with the form and language of registers and other documents required by this Act to be kept by the companies and the manner in which they are to be kept by companies and other entities.
Madam President, for the first time, officially recognised languages are given recognition for documents to be registered under this Bill. For the benefit of local and foreign investors, a copy of the official languages document must have an authenticated translation from the company concerned rendered by a person competent to do so in the opinion of the Registrar.
Madam President, Clause 10 concerns standard forms and tables used for the purpose of this Bill and the fees for services provided by the companies’ office which are set forth in the first to the fifty Schedules. Clause 11 gives the general power to the Registrar to refuse registration of any record that is legally or textually defective in any way and to allow the person responsible for the defect to correct it. Clause 12 provides for condonation for late filing of documents or delivery by the user of the registry by the Registrar.
Under Clause 13, an Affidavit by the Registrar or of any persons employed in the companies’ office as to whether or not a document has been filed with or delivered to the Registrar shall be treated as presumptive proof of the facts stated therein for the purposes of civil and criminal proceedings. Clause 14 permits the inspection, copying and extraction of the whole or any part of any document kept at the companies’ office by the public under prescribed conditions.
Madam President, Clause 15 contemplates situations where the Registrar may demand additional documents to those otherwise required by this Bill while Clause 16 empowers the Registrar to replace lost, defaced or destroyed documents that are filed with the companies’ office. Clause 17 bestows statutory immunity on the Registrar and companies offices’ employees in relation to any potential legal liability
arising out of acts or omissions by those persons done in good faith.
I now turn to Chapter 2. Chapter 2 gathers together all the provisions of the Bill that are applied in common to companies and
Private Business Corporations (PBC). I will refer to them as PBCs.
Clause 18 provides for the first step in the incorporation of companies and PBCs, namely the Lodging with the Registrar, the Memorandum of Association of a company or incorporating statement of a PBC as the case may be. Clause 19 provides for the bestowal of corporate personality and limited liability on applicant companies and PBCs that have complied with the conditions of registration under this Bill. Clause 20 states that the constituted documents of a company or PBC shall, when registered, buy in the company or PBC and members thereof, to the same extent as if they respectively had been signed by each member.
Madam President, in the case of a company, the subscribers of a Memorandum of Association entered into the Registrar of the company shall be members of that company. In the case of a PBC, a person will not become a member until the fact of his/her membership has been recorded in a registered incorporating statement. Similarly, his or her membership will not cease in most cases until that fact has been recorded and registered. The Clause also limits the liability of members of a company or PBC for dates and obligations of the company or PBC.
Clause 21 requires every company and PBC to send to every member at his/her request, a copy of the Memorandum or Articles of the Association or Incorporating Statement as the case might be. It also requires companies and PBCs to keep their constituted documents at their registered offices or at their physical address of the accounting officer respectively.
Clause 22 says that no notice shall be presumed to be given to the Third Parties of the contents of the constitutive documents of a company or PBC just because those documents are registered in the register. This provides an important measure of comfort to Third Parties dealing in good faith with companies or PBCs because it prevents companies or PBCs from repudiating or not honouring their obligations on the basis of things contained in their constitutive document.
Madam President, Clause 23 puts an obligation on companies and PBCs to ensure that their members are furnished with up to date copies of constitutive documents incorporating changes up to that date. Clause 24 presumes in favour of companies and PBCs that all their internal processes have been duly and lawfully complied with. This shifts the burden of proof to the contrary, on persons who alleged otherwise.
Clauses 25, 26, 28 and 29 revolve around the choice, use and abuse of many companies and PBCs. The prohibition of undesirable member, changes of name and the consequences of name changes and the lawful use of assumed names by companies and PBCs. Clause 27 confirms the abolition of what was called ultra vires rule of the Common Law concerning companies, which was abolished in the 1993 Companies Amendment Act. This rule says that a company could not go beyond its stated objects and if it did that, this would provide grounds for the company or a Third Party to resign or repudiate for now, honour its obligation.
Clause 30 requires that every company and PBC incorporates in their business letters in legible characters; the name of every director or member of the PBC. Clause 31 requires every company and PBC to have in Zimbabwe, a postal address and a registered office, physical address or a physical address of an accounting officer in the case of a PBC. In addition, if a company or PBC conducts its business or administration electronically, it must notify its electronic address in writing to the Registrar. Any breach of this requirement may subject the company or PBC to a civil penalty.
Clause 32 provides for ratification of incorporation contract by Putative Company or PBC. Clause 33 applies to the registration; the same advantages and obligations that natural persons have when concluding contracts.
Clause 34 applies to juristic persons, the same advantages and obligations natural persons have when using promissory notes and bills of exchange. Clause 35 empowers a company or PBC to authorise a person and its agent to execute deeds in a foreign country. It is not compulsory for companies or PBCs to have a seal but where they have them, it is important to guard against abuse. Clause 36 provides accordingly.
Madam President, Clause 37 empowers the director, secretary or authorised member of a private business corporation to authenticate documents on behalf of the company or PBC.
Part II of Chapter One
Powers of Inspection and Investigation by the Registrar.
Clause 38 sets out the purposes of investigation and inspection of companies and other business entity, which is to promote good corporate governance and inspire investor confidence. The powers and privileges of the Registrar shall be the same with those of Commissioners; however with some exception, under the powers of the Commissioners’ of Inquiries Act, Chapter10:07. Under Clause 39, the Registrar may initiate an investigation of a company or a PBC if he/she has reasonable cause to believe that this Bill is not being complied with, with respect to documents required to be submitted to him/her by that company or PBC.
Clause 40 enables minority shareholders of companies and minority members of PBCs to request the Registrar to initiate an investigation of the company or PBC, that is shareholders or members of at least 5% or the total shareholding or interests. Clause 41, the Registrar may institute an inquiry through one or more inspectors as to the ownership or control of any company or PBC. If any member requests such an investigation, that member will bear such cost. Clause 42 empowers the Registrar to undertake an investigation at the initiative of a special company resolution or by order of court requesting such an investigation. It also empowers the Registrar to undertake any such investigation when he/she reasonably believes that the entity in question is conducting its business in such a way as to defraud its creditors.
Clause 43 says an inspector assigned to investigate a company may also investigate any subsidiary or holding company or an associated company of the first mentioned company under investigation. Clause 44 provides for officers and agents of companies and PBCs to assist with factors investigation by producing records and giving evidence of the affairs of the entity to the inspector.
Under Clause 45, after completion of an investigation, a report is availed to the Registrar who must then avail it to the Minister and in the case of an investigation prompted by shareholders or interest holders or a court to those shareholders or interest holders or to the court as the case may be. Under Clause 46 the Registrar may conclude on the basis of a report that a prosecution ought to be instituted or that a company or PBC ought to be wound up or that civil proceeding in the name of the company or PBC ought to be instituted to recover damages.
Clause 47 deals with the assignment of responsibility for the expenses of an investigation of the affairs of a company or PBC. Where the Registrar deems it desirable to investigate the ownership of any shares or debentures of the company, the Registrar may, under Clause 48, require information to be furnished to him/her for any person he/she reasonably believes to be interested in shares or debentures in that company. Under Clause 49, the Registrar may impose restrictions on transactions involving shares that are the subject that belong to a company or PBC subject to an investigation under this sub-part.
Clause 50, serves Attorney Client Privilege and Banker
Confidentiality Privilege. Clause 51 makes it clear that the inspector’s report upon an investigation is admissible in court on the issue of the inspector’s opinion in relation to any matter contained therein.
Part II of Part 1- Defunct Companies and PBCs
Clause 52 empowers the Registrar to strike off from the register the de facto companies or PBCs where it is apparent that they have ceased to operate by reason of not rendering any returns. However, any member of the company or PBC that has been stuck off can apply to the Magistrate Court within whose area of jurisdiction the entity had its principal place of business for an order that the entity’s name be restored to the register.
Clause 53 embodies and improves the application of the long standing common law principle of bona vacantia where the property of de facto companies that is not distributed is versed in the State. The clause provides for the vesting in the State of any property of a de facto company or PBC, to which no one has any claim upon an application being made to that effect by the Attorney General at the request of the
Chief Registrar. It is clear that the State will not needlessly expropriate unclaimed property since the State will be obliged to publicly auction the said property.
Madam President, I turn to Part (IV) of Part (II) which concerns to provisions relating to legal proceedings that apply commonly to companies and PBCs. Clause 54 provides for the duty of care to be observed by managers, directors and other officers towards their company or PBC. It also incorporats the business judgment rule, that is to say the rule whereby managers, directors and other officers are required to discharge their duty of care in a manner that is demonstrable in good faith.
Madam President, Clause 55 provides the duty of loyalty on the part of every manager or controlling member of a private business cooperation and a director, officer or controlling member of a company. The duty consists of various elements such as the duty not to abuse the property of the entity in question for managers or officers own the benefit and not to disclose confidential information of the entity among other things.
Clause 56 sets out rules for insulating the personal financial interest of a director from the interest of the company of which he or she is a director. If the director is a sole director but does not hold all the beneficial interest of all the shares of the company, the director may not enter into any agreement in which he or she is financially interested or make any decision in which he or she or any associate is personally interested except with the prior approval of the shareholders by ordinary resolution passed by them with full knowledge of the nature and extent of the director’s interest.
Madam President, Clause 57 provides for the general duty of disclosure of any conflict of interest on the part of a person who has a duty of care towards a private business corporation or a company. While Clause 58 provides for the remedy of avoidance and other remedies in relation to transactions concluded in breach of Clause 56 but in the case of avoidance, no third party acting in good faith will be prejudiced thereby. Under sub-clause 2, the person found to have had the conflict of interest shall be liable to account for and transfered to the PBC or company any gain which he or she has made from the act or transaction and to indemnify the company for any loss or damage suffered by it as a result of the act or transaction.
Madam President, Clause 59 excuses director’s members, officers and auditors of companies and PBCs from liability or negligence, breach of duty or breach of trust in connection with his or her duties to the company or PBC. If it appears to the court hearing claims for such faulty liability that the person alleged to be at fault acted in good faith, that is to say, honestly and reasonably.
Madam President, Clause 60 provides for direct court actions by a member of a PBC or company against any manager, officer or director of that company to enforce or recover damages caused to him or her by violation of a duty incumbent upon any such manager, officer or director under this act or any other law including laws against fraud or misappropriation.
Madam President, Clause 61 provides for derivative court actions by a member on the entity’s behalf against any manager, director or officer of that company to enforce or to recover from that manager or director damages caused to the company by violation of duties owed by the manager or director to the company under this Act or any other law including laws against fraud or misappropriation.
Clause 62, Madam President, guides a court confronted by a case involving deadlock, fraud and oppression as to the kinds of remedies it may apply in such situations while Clause 63 empowers the court to demand security for costs from any company or PBC in legal proceedings if the court is satisfied that the company or PBC may be unable to pay the costs of those proceedings.
Madam President, Clause 64 provides for manual or electronic service of documents in connection with legal proceedings under this
Bill. Clause 65 strengthens the presumption of regularity under Clause 24 by requiring that any allegation of voidness or impropriety on the part of registered business entity in connection with any of its agreements, resolutions or exercise of its power cannot be substantiated except by a court ruling or a decision of the Registrar made pursuant to the exercise of his or her civil penalty jurisdiction. Clause 66 provides the grounds upon which a person owing duties of care and loyalty towards a registered business entity may be indemnified by that entity for the expenses of actions brought in connection with the alleged breach of such duties.
Madam President, allow me to turn to Part V of Chapter (I) which deals with offences and defaults common to companies and PBCs. Clause 67 provides for criminal penalties for making false statements by directors and other officers or responsible persons of companies and PBCs. Under Clause 68, the High Court will have the power to declare a director or a member or former director or member of a company or
PBC personally liable for the company’s or the PBC’s debts if he or she was responsible for carrying on its business recklessly, grossly negligently or fraudulently.
Madam President, Clause 69 provides criminal penalties for fraudulent, reckless or willful failure to comply with provisions of this
Bill to ensure proper financial accounting by companies and PBCs; also for the falsification or deliberate concealment or distraction of documents.
Clause 70 provides for the disqualification of any persons convicted of certain crimes in connection with the promotion, formation or management of a company or PBC from being managers, or directors of companies or controlling members of PBCs. Any interested persons may apply for such an order from the court.
Clause 71 criminalises unlawful impersonation of any owner of a share or an interest in a company or PBC or the misuse of any share certificate or certificate of interest to misrepresent the nature of one’s stake in a company or PBC.
Mr. President Sir, Clause 72 imposes an obligation on every company to maintain an accurate and up to date register of the beneficial owner or owners of the company to be known as the register of beneficial owners.
Clause 73 prohibits the concealment of the beneficial ownership of shares through the use of nominees but accepting certain specified circumstances. A beneficial owner is defined in this Bill as a natural person who ultimately owns, controls or benefits from a company or trust and the income it generates.
The Financial Action Task Force (FATF) has issued a recommendation to address the misuse of companies as vehicles for money laundering and terrorist financing by requiring that States establish the identity of each natural person who exercises control of a company thorough one or more nominees. Mr. President, Clause 74 provides companies or PBCs from realising or indemnifying officers of the company from their statutory duties under this Bill.
I now turn to Chapter 3. Chapter 3 gathers all provisions that are unique to companies. Sub Part A of Part 1 of Chapter 3 contains provisions for the incorporation of companies and matters incidental thereto. Clause 75 prohibits any association for gain of more than 20 persons unless that association is incorporated as a company or a PBC. Clause 76 requires that any persons wishing to form a company must subscribe their names to a Memorandum of Association,while under Clause 77 a memorandum of a company may be in English or any officially recognised language and in the later case an authenticated translation should be furnished in English to the Registrar.
Clause 78 provides for the persons who must sign the
Memorandum of Association and other conditions attaching to the Memorandum of Association while Clause 79 provides for the alteration of the Memorandum of Association under specified conditions. Clause 80 provides that in certain circumstances, the holders of any type or class of shares may be entitled to vote as a group on an amendment to the Memorandum of Association.
Mr. President Sir, Clause 81 provides for the Articles of
Association of a company, that is to say for its constitution and internal regulations. Under Clause 82, companies whose objects are not primarily for profit but rather to benefit their members may apply to the
Minister for a licence to dispense with the word ‘limited’ in their title. Companies limited by guarantee that are licenced under this section are the preferred vehicles for charities and other bodies.
Mr. President, Sub Part 2 of Part 1 of Chapter 3 contains provisions for the membership of companies in addition to that found in Clause 20 above. Under Clause 83, if a company has no members and carries on business for more than six months without members, any person who knowingly causes it to do so shall be liable jointly and severally with the company for all debts incurred by it after the six months have elapsed.
Mr. President, Clause 84 forbids any body corporate from being a member of a company which is its holding company except under certain circumstances precisely defined in this clause.
I now turn to Sub Part C of Part 1 of Chapter 3 which contains provisions for private companies. Clause 85 defines what a private company is. That is a company that restricts the right to transfer its shares, limits the number of its members to 50 and prohibits public subscription of its shares. Clause 86 says that if a private company converts itself into a public company, then instead of issuing a prospectus it may issue a statement in lieu of prospectus without complying with the formalities attaching to issuing a prospectus.
Sub Part D of Part 1 of Chapter 3 contains provisions and these are Clauses 87 to 94 for cooperative companies, which are special companies composed of members for which the company facilitates the production or marketing of agricultural produce or livestock or the sale of goods to its members or both. A cooperative company permits farmers to associate with limited liability for the purposes of pulling produce and selling it to best advantage without the necessity of raising capital in the same way as companies.
Mr. President, I now turn to Sub Part A of Part 2 of Chapter 3 which contains provisions pertaining to shares, share capital and debentures, their nature and the rights and obligations attaching thereto. Clause 95 specifies that a share in a company is transferable movable property. Clause 96 provides that a company’s memorandum must and may provide with respect to the authorisation and classification of its shares, the numbers of authorised shares of each class and the preference rights, limitations and other terms associated with each class of shares. The number of authorised shares of each class of shares a company as set out in its memorandum, may be altered by means of an amendment of the memorandum of incorporation by the shareholders thereof. Thus, should a company not have any authorised but unissued shares in its portfolio, the directors will not be able to exercise the powers afforded to them in terms of Clause 88
Mr. President Sir, Clause 97 states that all of the shares of a particular class authorised by a company have the preference rights, limitations and other terms that are identical to other shares of the same class. Clause 98 of the Bill empowers the directors to issue shares and as such, raise capital finance at their discretion and does not require them to procure the prior concern thereto of the shareholders of the company so long as and to the extent they are empowered to do so by their company’s memorandum.
Under Clause 99, if a private company proposes to issue any additional shares, each shareholder of that private company has a right before any other person who is not a shareholder of that company to be offered and within a reasonable time, to subscribe for a percentage of the shares to be issued equal to the voting power of that shareholder’s general voting rights immediately before the offer was made.
Clause 100 provides that the board of directors of a company must only issue authorised shares for adequate consideration to the company as determined by the board. Shares may be issued for future consideration or for consideration in kind under specified conditions. In exercising their powers under this Clause, directors are enjoined to be mindful of their fiduciary duty to act in the best interest of the company.
Clause 101 set out rules with respect to options for subscription of shares or debentures in a company while Clause 102 set forth the parameters of the insolvency and liquidity tests with reference to a company’s financial health that must be applied by the board of directors for certain purposes of this Bill.
Sub Part B of Part II of Chapter 3 contains provisions pertaining to the prospectus of a public company, that is to say a printed invitation offering to the public for subscription or purchase any shares or debentures of the company. Under Clause 103 a prospectus issued by or on behalf of a company or in relation to an intended company must be dated and that date will, unless the contrary is proved, be taken as the date of publication of the prospectus.
Clause 104 provides for certain matters to be stated in reports set out in the prospectus. These statements must be in English or any officially recognised languages. Matters to be stated and reports set out in the prospectus are listed.
Clause 105 provides that any statement in a prospectus purporting to be a statement of an expert must not be issued unless it gives his or her written consent to the inclusion of that statement in the prospectus while Clause 106 requires all prospectuses to be registered with the Registrar. Clause 107 says that a company shall not alter anything included in a formation contract which is mentioned in a prospectus or statement in lieu of the prospectus, unless that alteration is approved in a statutory meeting of the members of the company.
Clause 108 and 109 provide for civil liability and criminal liability respectively that are to be attached to missed statements in a prospectus and for defences to an action brought on the basis of such missed statements.
Clause 110 provides for situations where the whole or a portion of shares or debentures being offered for public subscription is underwritten. That is to say, covered by a contract of insurance to the effect that the underwriter will buy any shares or debentures that have not been taken up by public subscription.
Clause 111 deems any documents offering any shares for public subscription to be a prospectus for the purposes of this sub part while Clause 112 construes certain references to offering shares or debentures to the public as including references to offering the same to any section of the public or to clients of the promoter of the company.
Clause 113 prohibits the door to door solicitation of members of the public at their homes or offices, shops or business premises to subscribe for shares or debentures.
Sub C of Part II of Chapter 3 contains provisions pertaining to the allotment of shares or stock in a company.
Clause 114 prohibits an allotment of shares below the amount offered to the public where the prospectus stated that a certain number of minimum shares must be subscribed and that minimum has not been achieved.
In Clause 115 a public company which allots shares at any time after its formation must not allow such shares unless it lodges with the Registrar a statement in lieu of prospectus signed by the directors.
Clause 116, if any allotment of shares is made in contravention of Clauses 114 and 115, the allotment itself shall be void if an aggrieved person makes an application to the court to that effect.
Under Clause 117 an allotee of shares may void the allotment of shares if the allotment of shares were made in contravention of Clause 103. The effect of Clause 118 is that shares or debentures issued in pursuance of a prospectus must not be allotted before the expiry of three days and any legal proceeding in connection of the prospectus are stayed until the expiry of that period.
Clause 119 holds the issuer of a prospectus to any statement therein that application to list on the stock exchange has been made. The effect of this Clause is that if such application has not been applied for within three days after the first issuance of the prospectus or if permission to list on the stock exchange has been refused 21 days after the closure of the period during which members of the public may subscribe for a share in the company concerned, any allotment made in those circumstances will be void.
Clause 120 requires companies to keep registers of allotted shares at each registered office.
Sub Part D of Part II of Chapter 3 contains provisions pertaining to commissions and discounts in connection with the sale and purchase of shares.
Under Clause 121 the payment of shares as an inducement to buy any shares is regulated. Clause 122 prohibits a company from giving financial assistance to any person to buy its own shares or shares in a company of which it is a subsidiary.
Sub Part E of Part II of Chapter 3 contains provisions pertaining to the issue of shares at premium or discount and redeemable preference shares.
Clause 123 allows a company to issue shares at a premium subject to the company transferring the value of the premiums to the share premium account. This is treated the same way as reducing a company’s share capital. A company is allowed to use a share premium account to pay up unissued shares for allotment to members as full paid bonus shares.
Clause 124 allows a company to issue shares at a discount, subject to the authority of a special resolution of a company, the sanction of the court and other condition. While Clause 125 and 126 empower a company to issue shares, the company can buy back under specified conditions.
Clause 127 to 134 and these provide for the power of a company to purchase its own shares.
Sub Part F of Part II of Chapter 3 contains…
HON. SEN. MOHADI: On a point of order. I am wondering
where the Minister is reading from because his numbers are not tallying with the numbers that I have.
HON. ZIYAMBI: Maybe I can explain. I prepared Second
Reading speech. So what I am doing is that, you will recall that I am putting together like clauses and explaining them. You will find that there are provisions that apply to companies and private business corporations, I lump them together. My Second Reading speech may not be following exactly what is in the Bill. When we are now doing the Committee Stage, we will now go clause by clause and look at it. My speech is just to give you an overview of the critical sections and I have segregated them.
THE HON. DEPUTY PRESIDENT OF SENATE: I hope Hon.
Members have got that. It is very clear. The Minister is not going through the Bill at all; he is actually making a speech, a Second Reading Speech. So the way he is presenting it will not tally with the way it is presented in the Bill itself.
HON. ZIYAMBI: Thank you Mr. President Sir. I was now
turning to Sub part ‘f’ of Part 3 of Chapter 3. This basically contains miscellaneous provisions as to share capital. You will notice under Clause 135, a company may if so authorised by its Articles, arrange to pay different amounts on the issuance of any batch of its shares and make other differential arrangements specified in the Articles.
Under Clause 136, a company can, by special resolution, determine that any portion of its share capital not yet called up is not to be called up except in the case of winding up or Judicial Management. Clause 137 deals with capitalisation shares commonly called bonus shares. These are free shares offered by a company to its existing shareholders often as an alternative to increasing the dividend payout. Clause 138 provides that before making any dividend payouts, the board must, amongst other things, apply the insolvency and liquidity tests as set out in Clause 100. This provision contains safeguards for shareholders and creditors such as that; dividend distributions must be effected within 120 days of them being declared. If there is a delay in complying with this requirement, the solvency and liquidity test must be reapplied.
Mr. President, Clause 139 deals with what are called rights issues, that is to say an issue of rights to a company’s existing shareholders that entitles them to buy additional shares directly from the company in proportion to their existing holdings within a fixed time period. Rights issues subsist by virtue of existing shareholders being given by this Clause, a preemptive right to any issuance of new shares by the company. Clause 149 set forth the liability of members in respect of reduced shares and the penalties for effecting a reduction of capital that is prejudicial to a creditor or for willful concealing the name of a creditor to object to the reduction.
Mr. President, sub paragraph ‘h’ of part 2 of Chapter 3 contains provisions pertaining to the transfer of shares and debentures, evidence of titles among other things. Clause 150 stipulates that each share must be assigned a distinct number, unless all issued shares of a particular class have been fully paid up and rank with each other. Clause 151 states that no company may register a transfer of shares except on presentation to the company of a valid instrument of transfer of value of such shares. Clause 152 prohibits bearer shares – [these are shares whose ownerships are purported to be transmitted by delivery without registration in a company share register] – and the concealment of the beneficial ownership of shares through the use of nominees except in certain specified circumstances.
Under Clause 153, unless the conditions of issuance of debenture share of stock otherwise provide, a company must within two months of lodgment of transfer of the same, complete and have ready for delivery the certificate relating to those shares, debentures and debenture stocks. However, provision is made to allow for uncertified shares to be issued by companies that are registered users of the electronic registry. Clause 154 empowers a company to create and issue debantures to bind its moveable or immoveable property if so authorised by its Memorandum or Articles of Association. Clause 155 requires a company to keep a register of mortgages and a register of debantures with full relevant particulars at its registered office. Clause 156 empowers the company if so authorised by its Articles to keep in any foreign country, a branch register of debenture holders, subject to the conditions specified in the clause. Clause 157 provides for the power to reissue redeemed debentures in certain cases.
Mr. President, I will turn to Part 3 of Chapter 3. Basically, this contains provisions pertaining to the management and administration of companies. Sub Part ‘a’ provides for restrictions on commencement of business and the register and index of members. Clause 158 imposes certain conditions that must be met before a public company can commence business whilst Clauses 159 to 163 concern the keeping of a register of members by companies.
I will turn to Sub Part ‘b’ of Part 3 of Chapter 3. This contains provisions pertaining to the rendering of annual returns to the Registrar of Companies and the conduct of their meetings and proceedings.
Clause 165 requires every company to file with the Registrar an annual return which includes; a summary of shareholders, list of directors and secretaries and dates of statutory meetings. Under Clause 166, every public company must not, earlier than one month or later than three months from when it commences business, hold a statutory meeting. At least 14 days before such meeting, the directors must transmit to every member what is called a Statutory Report.
This is a kind of an agenda, the item of which includes confirmation of directors, shareholding and confirmation of secretary and auditors. Such Statutory Report must be certified as correct by the auditors and directors and must be filed with the Registrar within one month of the date of certification. Under Clause 167, an obligation is put on companies to hold Annual General Meetings for the purposes of dealing with and disposing of matters required in terms of this Bill to be dealt with and disposed of at an Annual General Meeting.
Mr. President, I will now turn to Clause 168 which compels a company to hold an Extraordinary General Meeting on the requisition of members holding at least 5% of the paid up shares of the company. Clause 169 stipulates minimum notice periods for calling meetings of members of a company. Mr. President, Clause 170 contains default provisions; that is provisions to be complied with in the absence of similar provisions in the Articles.
Clause 171 entitles a member of a company to appoint a proxy to vote on his/her behalf at membership meetings. Clause 172 entitles members of a public company to cause the adjournment of a members’ meeting if a resolution to that effect is carried by a majority to that meeting. The conditions for such adjournment are specified in this clause. Clause 173 permits bodies corporate to be represented at meetings of members of companies under specified conditions.
I turn to Clause 174, which entitles a certain number of members to place on the agenda of an Annual General Meeting of members, notice of a resolution and to have such resolution circulated to members at the expense of the requisitionist. Clause 175 provides for special resolutions; that is to say, resolutions that require a super majority of 75% of members entitled to vote and a notice of 21 days. Clause 176 provides for resolution to be passed without a meeting of members of a private company, if the resolution is circulated, members are entitled to vote. However, such manner of voting is not permitted for resolution seeking the removal of a director or auditor of the company. Clause 177 provides that whereby the articles or anything is required to be done on special notice, such notice must be given 28 days before that meeting at which it is to be moved. Clause 178; provision is made for the transmission to the Registrar of copies of special resolutions.
Clause 179 says that if a resolution of a company or of the directors of a company is passed at a meeting that resulted from the adjournment of an earlier meeting, then the date of the resolution is the date on which it was actually passed, not the date of the earlier meeting. Clauses 180 and 181 require minutes to be kept of every general meeting of a company and of its directors and to provide for the inspection or obtaining of the minutes of general meetings by any member of a company.
Sub-Part C: Part 3 [Chapter 3]
Provisions Pertaining to a Company’s Accounts and Audit
Clauses 182 (a) and 184 provide that every company is required to keep at its registered office, financial records that reflect a true and fair view of the company’s state of affairs and that the company may destroy such records eight years after the completion of the transaction to which they relate. It also provides that every company is required to prepare a statement of financial position and a statement of comprehensive income for each financial year, which is supposed to be laid before the company at each annual general meeting.
In addition, the directors of a public company must cause to be presented at each annual general shareholders’ meeting the report of the board’s audit committee disclosing among other things the total amount of remuneration paid to and the value of any benefits received by each director or former director during the financial year ended. Clause 185 clarifies the meaning of what a company is in relation to subsidiary companies and their holding companies or the meaning of a holding company in relation to its subsidiary. Clause 186 and 187 make provision for group accounts, that is to say consolidated or individually segregated accounts in the case of a company with subsidiaries, while Clause 188 requires a statement of comprehensive income to be annexed to every statement of financial position to be laid before a general meeting of the company.
Under Clause 189, there must be attached every statement of financial position laid before a company in general meeting, a report by the directors with respect to the state of the company’s affairs; providing for things as what dividends have been paid or should be paid or what profits should be retained and carried to the company reserves. Clause 190 says that members of a company must, before every general meeting receive copies of every statement of financial position and associated documents thereto. Clause 191 provides for the appointment, remuneration, duties, powers and removal of auditor. Clause 192 provides for the disqualification or appointment of revenue auditor of a company whilst Clause 193 provides for the contents of an auditor’s report. Clause 194 says that a reference in this Bill to a document annexed or required to be annexed to a company account does not include the director or auditor’s report.
Sub-Part D: Part 3 [Chapter 3]
Provisions Pertaining to a Company’s Directors and Other Officers
Clause 185 requires that a company must have directors responsible for managing and directing operations and that at least one of them must ordinarily be resident in Zimbabwe. A private company having between two and nine shareholders must have at least two directors and a private company with more than 10 shareholders must have at least three directors. Mr. President, a public company must have no fewer than seven or more than 15 directors. No director may be CEO and Chairperson of the Board of the Company at the same time. A limit has also been set on directors of unassociated companies who may not sit on no more than 6 Boards.
Clause 196 will enable decisions to be made otherwise than at meetings of boards of companies requiring the physical presence of directors such as at virtual meeting that is tele-conferences and by circular unless the memorandum of company concerned prohibits this. In terms of Clause 197, the director of a company but also an alternate director, a prescribed officer or a person who is a member of a committee of the board company or member of the audit committee of a company irrespective of whether or not the person is also a member of the company’s board may be held personally liable by the aggrieved company of which he/she is the director in accordance with the principles of the Common Law relating to the breach of duty and relating to dealings for any loss and damages or costs sustained by the company as a consequence of any breach by the director of duties contemplated among others in Clauses 54, 55, 57 and 193.
Clause 198 sets out the appointment by the board of a public company, an officer known as the Company Secretary whose functions, qualifications and disqualifications are there itemized. Clause 199 imposes restrictions on the appointment or advertisements of directors of public companies. Clause 200 sets out persons disqualified from being appointed as directors of public companies. Also private companies are not bound by this provision when appointing directors. They must file a statement with the Registrar that they have appointed director who would be disqualified from appointment as a director of a public company. A private company that fails to file this statement runs the risk of this matter becoming an issue in litigation at the instance of agreed investors who are unaware of the appointment.
Clause 201 requires the appointment of directors of public companies to be voted on individually at a general meeting of a public company. Clause 202 enables public companies, despite anything in its Articles of Association or any agreement between it and the director concerned to remove by resolution any of its directors before the expiry of his/her term of office. The right of the affected director to make representation for compensation for unlawful dismissal is served. Clause 203, 204 and 205, these make provision for the filling in of vacancies of boards of companies for quarter and tie-breaking votes at meetings of Boards of Director and for the keeping of minutes of Boards and Committees. Under Clause 206, every public company must have at least 3 non-executive or independent directors on its Board of Directors. Clause 207 provides for the remuneration of directors. Clause 208 prohibits loans or guarantees from the funds of the company to be made to directors except within the conditions stated therein. Clause 209 provides that the nature and extend of any terminal benefits to any director of a public company must be disclosed by a public company and approved by members at its general meeting.
Mr. President, Clause 210 requires the prior approval of members of the public company for any transfer of its property to an existing director as compensation for his her loss of office or retirement. Clause 211 says that where a public company is taken over merged or amalgamated, or subjected to the control of another person or company and the directors thereof are to be compensated for any loss of office resulting therefrom, the affected directors must disclose the contemplated compensation in the notice of offer made for their shares that is furnished to the shareholders.
Clause 212 creates certain presumptions in connection with the foregoing Clauses 208, 209 and 210, with a view to avoid any invasion of them by affected directors. Clause 213 compels the keeping of a register of directors’ shareholdings in a company or companies that are not private companies and imposes civil penalty sanctions for failure to do so. Clause 214 prohibits, not withstanding, anything in the Articles of Association of the company, it prohibits the allotment of shares to directors, served on the same terms as those offered to members. Directors are also prevented without the approval of the company at a general meeting to dispose of any undertaking of the company or the whole or greater part of the assets of the company. It also makes clear that any differential allotment of shares or disposals of any such undertakings or assets must be identified specifically.
Clause 215 requires disclosures of directors’ salaries and pensions in the accounts of a company are laid before it in a general meeting or in a statement annexure thereto. Clause 216 requires certain disclosures to be made in accounts laid before members of the public company of particular’s loans made to officers of that company; while clause 217 requires the keeping of a register of its directors and secretaries together with a register of its members at its registered office for public scrutiny.
Mr. President, Sub Part (e) of Part (3) of Chapter (3), contains provisions pertaining to the responsibilities of Board of Directors, Audit Committees of public companies and corporate governance guidelines for public companies. Clause 218 set forth what the role of the Board of Director is which must exercise collectively the responsibilities that directors must exercise individually under Clause 193. Provision is made for public companies to appoint Audit Committees under Clause 219. While under Clause 220, the board of every company shall establish and or adopt written corporate governance guidelines that must be consistent with the then current national code on corporate governance. The appointment by boards of officers of the company and the definition of their responsibilities is provided for under Clause 221.
I now turn to Sub Part (f) of Part III of Chapter 2 and it contains provision pertaining to the protection of minority shareholders from oppression. If you go to Clause 223, it entitles oppressed shareholders to make an application to the High Court on the ground that the company’s affairs are being or have been conducted in a manner which is oppressive or unfairly pre-judicial to the interest of some part of the members including himself or herself or that any actually or proposed act or omission of the company including an act or omission on its behalf is or would be oppressive or pre-judicial.
Under Clause 224, the Registrar is also empowered to make a similar application. I now turn to Sub Part (g) of Part III of Chapter 3, which contains provisions pertaining to mergers and related issues. In Clause 226, it contains definitions of merger and merger assets transactions. Clause 227 empowers private public companies and corporative companies to undertake mergers and describes the types of mergers that may be undertaken. Clause 228 provides comprehensively for the procedure from the beginning of a merger of a company to its end. Clause 229 provides the minimum requirements for the contents of a merger contract.
Clause 230, a private company may and a public company must if either is a part of a merger, engage an independent professional financial advisor to explain for the benefit of members and shareholders what the major is about and whether in his or her opinion his terms are fair. Clause 231, spells out in detail the legal effect of the merger of two or more companies. Under Clause 232, merger asset transactions not amounting to mergers must be subjected to shareholder approval.
Under Clause 233, it provides for descending shareholders appraisal rights, such rights enable minority shareholders in a company who descent from a corporate decision of a company in certain cases to leave the company by having the company pay them for the fair value of their shares.
I now turn to Sub Part (h) of Part III of Chapter 3, which contains provisions pertaining to take over. Clause 234 defines the words
‘associates’ and ‘control block’ for the purposes of this sub-part. Persons are deemed to be associated if being natural persons, they are related to each other or in any other case such as associations of natural juristic persons, they exercise control over each other in the form of controlling shareholdings and so on.
Clause 235 says that a person that is alone or together with any associate acquires more than 20% of the ordinary shares of a public company must, within a specified date of the acquisition, notify the company of that fact. Clause 236, says that a person who wants whether alone or together with associates, who wants to acquire a control block of shares, that is to say a block of at least 35% of the ordinary voting shares of a public company, must give at least 30 days notice of his or her intention to do so.
Clause 237 sets out the steps to be followed when notice of an intention to acquire a controlling block of shares in a public company is made. Clause 238 and 239 provides for what are known as drag along and tag along options. Drag along is the power of the acquirer in a takeover to compel 10% or less of descending shareholders to sell them their shares to the acquirer. On the tag along it is the opposite, right in favour of the descending shareholders. The acquirer in a takeover may be compelled to buy 10% or less of the shareholding of descending shareholders on the same terms as those applicable to non-descending shareholders.
I now turn to Part IV of Chapter 3 which contains provision pertaining to foreign companies. Clause 240 contains definitions used in sub part (a) of this part. Clause 241, says that every foreign company wanting to establish a place of business in Zimbabwe must lodge with the Minister, a copy of its constitutive documents, a list of directors resident or to be resident in Zimbabwe and if it is a subsidiary, the name of its holding company.
Clause 242 imposes on foreign companies conditions similar to those in Clauses 28, 30, 31 and 180.
Clause 243 says that where a foreign company redomiciles in Zimbabwe or is merged or taken over or changes its character, it may be exempted from duty for the transfer of immovable property from the original foreign company to the new company.
Sub Part B of Part IV of Chapter 3 contains Clauses 244 to 246 pertaining to prospectus of foreign companies that are issued out, circulated or distributed in Zimbabwe.
Chapter 4 gathers all provisions that are unique to PBCs and other business entities, PBCs where in business and investment vehicle introduced in 1993 by the Private Business Corporations Act. PBCs give small business people an option to form bodies to be known as private business corporations which will afford members the same protection from unlimited liability as companies but which will be simpler to establish and operate.
Under Clause 247, any number of people not exceeding 20 will be entitled to form a PBC by signing an incorporating statement and delivering it to the Registrar for registration.
In Clause 248, the creators of a PBC will have to specify the
PBC’s name and address, the names of all its members and the extent of their contributions and interest in the PBC and the name of a person to be known as the accounting officer who will be responsible for ensuring that the PBCs accounts are properly kept in terms of Sub Part E.
Upon registration of incorporation statement, the PBC concerned will be incorporated. That is, it will be established as a corporate body with legal personality and full capacity independent of its members.
Under Clause 249, PBCs will be obliged to register any changes in their membership or in their particulars to be required to be specified in their incorporation statements. Failure to do so will render the PBC members liable for their PBC debts.
Under Clause 250, a PBC will be able to convert itself to a company after applying to the Registrar in a prescribed form signed by all its members and delivering to the Registrar all the documents necessary for the formation of the company. If the Registrar is satisfied, he or she shall register the PBC as the new company which will be regarded as a continuation of the same body corporate that was formed when the PBC was first incorporated.
A company may convert itself to a PBC provided that the company has less than 20 members and otherwise complies with all provisions set out in Clause 251.
Sub Part B of Part I of Chapter 4 contains provisions pertaining to membership of PBCs.
Under Clause 252, a PBC will be limited to between 1 and 20 members.
Under Clause 253, only natural persons acting in their personal capacity will be entitled to a membership of a PBC though representative members will be allowed in the event of insolvency, minority or other legal disability of a member.
Under Clause 254, every member will be obliged to contribute towards the PBC’s assets in cash or with property or services, the value of his or her contribution will be regarded as his or her interest in the
PBC and will be recorded in the PBC incorporation statement.
Under Clause 255, the condition of cessation of membership of a PBC are specified.
Sub Part C or Part I of Chapter 4 contains provisions pertaining to members interests in PBCs.
In Clause 256, a member’s interest unlike a company, members of a PBC hold an interest rather than a share. A member’s interest in a PBC shall be expressed as a percentage, that is the total sum of the member’s interest being 100% which is not capable of being jointly owned but in the case of winding up, the member shall be entitled to equivalent percentage of free residue of the PBC that are then distributable to members.
Under Clause 257, each member will be entitled to a certificate showing a percentage of his or her interest in the PBC. Any changes in a member’s interest shall be adjusted accordingly in the certificate issued by the PBC.
Clause 258 provides that new members may acquire existing members’ interests or make contributions to the asset of the PBC in which later case the percentage of their interest will be agreed between them and the existing members.
Clauses 259 and 260 deal with the disposal of interest of members who are insolvent and deceased members respectively. The trustee of an insolvent member will have unrestricted right to sell or dispose of the insolvent member’s interest in the PBC. However, in the case of a deceased member, the executor will have to comply with the PBCs bylaws if they address such a situation.
Clause 261 provides that unless there are some other provisions in the PBC by-laws, all voluntary disposal of members interest will require the consent of every member.
Clause 262 requires the adjustment of members interest whenever the membership of PBCs is increased or diminished so that the totality of the member’s interest is maintained at 100%.
Under Clause 263, a PBC will be allowed to accept the surrender of a member’s interest or to acquire their interest so long as the PBC remains solvent after the acquisition.
Under Clause 264, a PBC will be allowed to give financial assistance for the acquisition of its member’s interest so long as all the members consent and provided the PBC is solvent after the assistance has been given.
Sub Part D of Part I of Chapter 4 contains provisions pertaining to the management and administration of PBCs.
Under Clause 265, ex-members will bind a PBC if the acts were authorised or were done in the course of the PBC business unless the members concerned had no authority and the person with whom he or she was dealing with ought to have known.
Under Clause 266, PBCs must adopt by-laws regulating the management of their laws.
Clause 267 and 268 set out the minimum requirements for the management of PBC which will apply to any PBC unless varied by agreement between the members or by the PBC’s by-laws.
Clause 269 of the Bill provides members with a remedy if they are unfairly prejudiced by the conduct of other members; on an application being made to it under this clause, a court will have very wide powers to remedy the situation and protect the interests of prejudiced members.
Clause 270 is designed to protect creditors of PBCs.
Sub Part E of Part I of Chapter 4 contains provisions pertaining to accounting by PBCs.
Clause 271, every PBC will be required to keep financial records that are sufficiently detailed to allow the nature of all transactions and the PBCs true financial position to be ascertained. Such financial records will have to be kept for six years.
Clause 272 provides that at the end of every financial year, a PBC will have to prepare financial statements consisting of a statement of financial position and an income statement and showing the state of the
PBC’s affairs at the end of the financial year, its member’s contributions and the values of its assets.
Mr. President, Clause 273 provides for making of annual financial statement while Clause 274 provides for examination of financial statements. I now turn to ClauseS 275 to 277 and these provide for duties of accounting officer, accounting officer’s right to convene meetings, access to records and termination of accounting officer’s mandate.
Mr. President, Clause 278 permits the voluntary registration by partnerships, syndicates, consortiums, joint ventures or unregistered associations of their constitutive documents by the Registrar.
Mr. President, Chapter 5 concerns the electronic registry which is defined as the electronic counterpart to paper based office of the registration of companies and other business entities. This chapter will permit the digitalisation of the company’s registry and the eventual establishment of an electronic company’s registry which will supplement the paper based one thereby greatly expediting and facilitating company registry administration.
Access to the electronic registry for the purpose of information gathering will be subject to certain safeguards against fraud, violations of privacy and other abuses. Chapter 4 deals with licencing of business entity incorporation agents and business entity service providers, shell companies and shelf companies and the undertaking of the Registrar of periodic company starter’s verification exercise. In general, no person other than a legal practitioner, chartered accountant or chartered secretary may engage in business entity registration as defined in Clause 292 (1) but persons qualified in terms of Clause 292 (3) maybe licenced by the Registrar to do such work. The same goes for business entities service providers.
Mr. President, Clause 293 makes special provision for what are called shell companies and shelf companies as defined in this clause. Such companies may pose significant administrative challenges and legal risks for the Registrar. As in respect of the administrative challenges, such companies burden the office without being economically useful to the country. Frequently, they are dumped by their creators who fail to render statutory annual returns and fees leaving the office with the task of ascertaining whether they are defined regarding the legal risks of such companies. They are sometimes used as vehicles for money laundering, fraud, hiding the assets of crime and terrorism and are of special concern to the Financial Action Task Force. Moreover, shelf companies in particular are commoditised companies, that is to say shelf companies intended to be sold for a profit to others who intend to operate them. The office is accordingly entitled to additional revenue from registering such entities.
Mr. President, Chapter 6 provides for general and transitional matters. Part 1 of Chapter 6 contains provision, these are Clauses 294 to 297, governing the civil penalty regime proposed for the better and easier enforcement of this Bill. We want to move away from criminal penalties as much as possible. The majority of offences under the existing Act are of a minor character involving only minor offences and default fines, fines for infringement of statutory requirements. This is because infringements concerned are in the nature of administrative breaches and are not criminal in themselves. In order therefore to avoid ascribing criminal stigma to persons who commit minor offences and to save time and resources expended in prosecuting offenders, it is proposed to deal with this by way of civil penalties leviable by the Registrar, the proceeds of which will be treated as debts due to the registry and accordingly recoverable through civil courts. The civil penalty regime is hedged about with safeguards to prevent abuses and due process challenges.
Mr. President, Clause 298 requires the timeous making of returns, accounts and records on part of companies and other business entities required to do so by this Bill, for default in compliance with which a civil penalty will be leviable. This part also contains provisions as to agreements with other countries with a view to the rendering of reciprocal assistance in the field of company legislation and law. This is Clause 299.
The giving by the Minister of policy directions to the Registrar,
Clause 300 and the making by the Minister of regulations necessary or expedient for this Bill, that is clause 301. Clause 302 empowers the Minister to amend certain schedules of the Bill and of the part on the electronic registry with the view to keep those provisions up to date and current with respect to the payment of fees and changes in computer technology affecting the smooth running of the electronic registry.
Mr. President, Clause 303 contains provisions governing transitional issues and savings including the repeal of the Companies
Act [Chapter 24.03] and the Private Business Corporations Act [Chapter 24.11] and the saving of regulations made under them until such time as they are replaced. Especially noteworthy, Mr. President, are the provisions requiring re-registration of existing companies and PBCs in line with the objective of updating and modernising the company registry and removing all defect companies and PBCs within 12 months of the date of commencement of the Act resulting from this Bill. The procedure is greatly simplified by requiring the mere completion and submission of a user friendly form as set out in the Tenth schedule together with the entity’s constitutive documents and annual return.
Mr. President, Clause 304 enacts special transitional provisions with respect to the status of shares, treasury shares, capital accounts, share certificates of companies existing before the enactment of this Bill as an Act.
In conclusion, Mr. President Sir, the Companies and Other Business Entities Bill is fundamental in attracting investment and enhancing the ease of doing business. I thank you Mr. President and I move that the Bill be read a second time. I thank you.
HON. SEN. CHIEF CHARUMBIRA: Mr. President, I rise to
thank the Minister for being so energetic, eloquent and patient to go through such a voluminous document this afternoon. We want him to cool down, rest a bit and then we continue with the debate tomorrow. I propose that we adjourn the debate and come back tomorrow and debate within a more settled and cooler mind. Thank you very much – [HON.
SENATORS: Hear, hear.] –
THE HON. PRESIDENT OF SENATE: It seems our capacity to
absorb – [Laughter.] – is quite challenged by this voluminous and very important Bill. On a more serious note, maybe we will afford and accord the Hon. Senators some time to try and digest this very important Bill. I had heard some people trying to raise the issue that they did not see the Bill before; it was distributed last year on the 10th of October. I think your request might just be that you need a little bit more time to read the Bill.
THE MINISTER OF JUSTICE, LEGAL AND
PARLIAMENTARY AFFAIRS (HON. ZIYAMBI): I move that the
debate do now adjourn.
Motion put and agreed to.
Debate to resume: Wednesday, 29th May, 2019.
On the motion of THE MINISTER OF JUSTICE, LEGAL AND PARLIAMENTARY AFFAIRS (HON. ZIYAMBI), the Senate
adjourned at Sixteen Minutes to Five o’clock p.m.