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NATIONAL ASSEMBLY HANSARD 21 March 2019 VOL 45 NO 45

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PARLIAMENT OF ZIMBABWE

Thursday, 21st March, 2019

The National Assembly met at a Quarter-past Two O’clock p.m.

PRAYERS

(THE HON. SPEAKER in the Chair)

          ANNOUNCEMENT BY THE HON. SPEAKER

APPOINTMENT OF THE COMMITTEE ON MINES AND MINING DEVELOPMENT AND CHAIRPERSON OF THE COMMITTEE ON TRANSPORT AND INFRASTURAL DEVELOPMENT

          THE HON. SPEAKER: I would like to inform the House that all members of the dissolved Mines and Mining Development Committee have been reappointed to the same Committee except Hon. T. Mliswa and Hon. Nduna. For the avoidance of doubt, the following are the Members of the Portfolio Committee on Mines and Mining Development;

Hon. R. Bhila; Hon. S. Bhuda; Hon. L. Chikomba; Hon. S. Chikwinya; Hon. M. Chombo; Hon. Dzuma; E. Gwanongodza; Hon. N. Kachepa; M. T. Karimazondo; Hon. C. Kashiri; Hon. T. Khumalo; Hon. P. Machando; Hon. C. Machingauta; Hon. B. Majaya; Hon. T. R. Matangira; Hon. S. Matsunga; Hon. D. Mawite; Hon. E. Mkaratigwa; Hon. M. M. Mpofu; Hon. S. Mudarikwa; Hon. M. Mugidho; Hon. E. Musakwa; Hon. C. P. Mutseyami: Hon. E. Ncube; Hon. A. Ndebele; Hon. T. Nyabani; Hon. J. Paradza; Hon. E. Samambwa; Hon. A. Samson; Hon. T. Saruwaka; Hon. P. D. Sibanda; Hon. S. Sithole; Hon. D. Svuure; Hon. F. Taruvinga; Hon. J. Toffa; Hon. Zhou.

The newly constituted Committee shall be chaired by Hon. Mkaratigwa. - [HON. MEMBERS: Hear, hear.]  

I also wish to inform the House that Hon. Gorerino has been appointed Chairperson of the Portfolio Committee on Transport and Infrastructural Development. - [HON. MEMBERS: Hear, hear.] – The Committee membership remains unchanged except that Hon. D. Nduna is no longer a member of that Portfolio Committee.

HON. T. MLISWA: On a point of privilege Mr. Speaker.

THE HON. SPEAKER: There is no debate on the announcement. 

          *HON. MUSABAYANA:  Thank you Mr. Speaker Sir.  I rise on a point of privilege using Standing Order No 68.  Tobacco is a foreign currency earner to Zimbabwe.  The whole country is looking forward to its sales so that cash can be made available and furthermore all the businesses develop.  Last year we raised more than a billion dollars in foreign currency.  This year farmers were expecting that they would raise more money.  Over and above that the RBZ Governor promised the farmers that this year they would receive 50% in foreign currency returns and the remaining 50% would be in RTGs.  Last week we asked the relevant Ministry what the preparations were and we were promised that everything was in order. Farmers were then asked to open two accounts, the ordinary and nostro accounts.  Yesterday when the market opened they were told that all their payments would be made into the RTGs account and it was going to be 100% local money.  The farmers were urged to write letters requesting that 50% be converted into foreign currency.  Mr. Speaker Sir, this was not well received by the majority of farmers.  There has been an outcry from farmers who are apprehensive that they may lose out their money.  Previously, when the Vice President K. Mohadi was there the price of tobacco was $4.50 per kg, but immediately thereafter it fell way down and because of that may the farmers fears be allayed.  In that respect, I am requesting the Minister of Finance and Economic Development Hon. Prof. Ncube to come and give a Ministerial Statement with regards to why he went back on his word on the promises that he had made to the farmers.  In the same vein I am also requesting the Minister of Lands, Agriculture, Water, Climate and Rural Development to come with a Ministerial Statement in terms of how the prices of tobacco have gone down, whether he has carried out an investigation or if he is going to put any measures in place to ensure that farmers will not lose the money to be earned from their tobacco.  I thank you.

          THE HON. SPEAKER: Hon. Member, Hon Ziyambi as the Leader of Government business will take your message to the Minister of Lands, Agriculture, Water, Climate and Rural Development and the Minister of Finance and Economic Development.

MINISTERIAL STATEMENT

THE GLOBAL FUND COUNTERPART FINANCING POLICY

THE MINISTER OF JUSTICE, LEGAL AND PARLIAMENTARY AFFAIRS (HON. ZIYAMBI) on behalf of the MINISTER OF FINANCE AND ECONOMIC DEVELOPMENT (HON. NCUBE):  Thank you Mr. Speaker Sir.  I rise to issue a ministerial statement pertaining to the Global Fund Counterpart Financing Policy as requested by the House. 

The Global Fund to fight HIV/AIDS, Tuberculosis and Malaria allocates additional resources in the form of grants to countries to support their national response.  As a condition of the grant, countries are required to contribute a minimum percentage of the value of the grant as counterpart financing depending on the level of income of the country i.e. (low, middle and high).  According to this policy, if the country fails to meet the counterpart financing obligation, the Global Fund shall reduce the value of the grant by 15%.  Zimbabwe is considered as a low income country and is required to contribute 5% of the value of the total grant as counterpart financing.  The current grant (2018-2020) is US$483 980512.00.  Therefore the minimum required counterpart financing is US$24 199 026.00 over the three year period.  In the past this amount was covered by NAC contributions in the procurement of ARVs and other HIV/AIDS commodities.  The country through NAC had also committed to procure 15% of the national requirements on ARVs.  However, since 2018, because of foreign currency shortages and revaluing of the RTGs$, NAC is failing to meet its commitment because NAC finds are in RTGs$.

 Currently, there is an unfunded gap for adult ARVs of US$6 674 206.00 for 2019 assuming that NAC has also contributed US$20 451 689.00.  Therefore, the country will require to mobilize forex amounting to US$20 451 689.00 for NAC supported procurements and US$6 674 206.00 for the unfunded gap.  Otherwise the country risks losing 15% of US$483 980 512.00 (approximately US$72 597 077.00) which would put the country in a worse position.  Therefore, the Government is going to pay US$6 million required as part of the 5% contribution.  I thank you. 

SECOND READING

COMPANIES AND OTHER BUSINESS ENTITIES BILL [H. B. 2018]

First Order read:  Adjourned debate on Second Reading of the Companies and Other Business Entities Bill [H. B. 2018].

Question again proposed.

          HON. MATARANYIKA: Thank you very much Mr. Speaker Sir.  I rise to present a report of the Portfolio Committee on Justice, Legal and Parliamentary Affairs on the public hearings held for the Companies and other Business Entities Bill [H. B. 8, 2018].

          1.   Introduction

On 5th  October 2018, the Government of Zimbabwe gazetted the Companies and Other Business Entities Bill [H. B. 8, 2018.]. The Bill seeks to repeal the current Companies Act [Chapter 24:03] as well as the Private Business Corporation Act [Chapter 24:11]. It proposes the updating of the law relating companies and private business corporation (PBCs). The proposed law exempts from its application, bankers, building societies, co-operative societies, insurers and other entities that are regulated under specific statutes. It also excludes trade unions and employer’s organisations. It lists registrable business entities as public and private limited companies, companies limited by guarantee (no share capital), co-operative companies, foreign companies, private business corporations, partnerships, syndicates and joint ventures.

       2.   Methodology

The Portfolio Committee on Justice, Legal and Parliamentary Affairs conducted public consultations on the Companies and Other Business Entities Bill [H. B. 8, 2018] from 25th February – 1st March 2019. This is in keeping with provisions of Section 141 (b) of the Constitution, which makes it mandatory for Parliament to consult members of the public before considering Bills and passing them.  Public consultations were held in Mutare, Masvingo, Bulawayo and Harare. The choice of venues was influenced by the technical nature of the proposed legislation and these are the major cities where there is high concentration of business organisations.

The Public Hearings were not very well attended and the Committee concluded that it was because the Bill is very technical in nature and did not generate as much interest from the general public as other Bills.

        3.   General Comments

Among the most outstanding new features that will be introduced by this Bill are the following:

3.1           Provision for the issuance of non-par-value shares rather than shares with a fixed value, together with provisions for the valuation of no-par-value shares;

3.2           The introduction of an Electronic Registry for the incorporation and registration of domestic and foreign companies and private business corporations;

3.3           The substitution of criminal penalties by civil penalties wherever possible;

3.4           To establish an inspectorate to better enforce the provisions of this Bill;

3.5           To make new provision for the merger and take-over of companies and other business entities;

3.6           The licensing of business entity incorporation agents and business entity service providers;

3.7           To clarify and improve the common law principle of bona vacantia by instituting a fair and transparent method of declaring such properties to be bona vacantia (i.e. the vesting in the State of unclaimed properties of defunct companies and private business corporations);

3.8           To make the beneficial ownership of companies more transparent; it seeks to do this through the introduction of a continuous system of updating the Registry;

3.9           To introduce further provision to combat the use of the company form for criminal purposes;

3.10     To define in greater detail the corporate responsibilities of directors and boards of companies and to encourage good corporate governance;

3.11     To include additional measures to protect shareholders and investors, in particular minority shareholders and investors;

       4.   Findings and Recommendations on specific clauses

       4.1   Interpretation clause   

There is need to define the following terms in this section as these have not been defined:

a.      Shareholder

b.    Juristic person

            4.2   There is need to change the concept and definition of “near relative” to “close relative”, as this is a concept that is already in the Banking Amendment Act, 2015. This ensures consistency as scope has already been provided for in the Banking Amendment Act.

"close relative", in relation to any person, means

(a) a spouse;

(b) a child, step-child, parent or step-parent;

(c) the spouse of any of the persons mentioned in paragraph (b);

For any other new definitions, it is recommended to use definitions found in other Acts of Zimbabwe or use definitions that can be used in other legislation in future for consistency.

4.3           Clause 4: Non-Application of Act to certain Institutions. 

4.3.1 Members of the public welcomed the development to exclude the listed entities specified from the application of the Act (banks, insurance, companies, building societies, cooperative societies, etc).

4.3.2    Note, however that all these entities are registered with the Companies’ Registrar, so there is need that this Bill should it be  passed into law does not conflict with any existing legislation which primarily regulate these sectors which are mentioned in the Bill.

4.3.3   Clause 4 (1) to read “Nothing contained in this Act shall…” instead of “Nothing in this Act contained shall…..”

 

 

4.4           Clause 11: Registrar’s powers to refuse registration

4.4.1  To substitute “may” with “shall” so as to read “he or she shall refuse to register or receive the record and request that the document be appropriately amended and resubmitted or that a fresh document be submitted in its place.”

4.4.2   A statutory provision that requires exact compliance should be peremptory (use of the word shall”) rather than directory (use of the word “may”), since non-compliance will leave the ensuing act null and void. Leaving room for the Registrar to implicitly use his discretion creates room for partiality, unfairness and corruption.

4.4.3   The Registrar should also notify and give reasons for such refusal.

4.4.4   It is proposed that there be an additional clause making it mandatory for the Registrar to check and disapprove the lodging of any documents with illegalities, e.g. minors drafted in as directors of a company, directorship changes without requisite company resolutions. The required change will bring the Companies Bill into alignment with other Acts such as the Money Laundering and Proceeds of Crime Act as well as being in line with best practice and standards.

4.4.5 Banks and other financial institutions that have an obligation to fulfill ‘Know Your Customer’ requirements will not be able to fulfill the verification required without the additional clause obliging the Registrar of Companies to check and confirm the legality of documents submitted especially in the two areas mentioned above. However, this is already catered for in the Bill. 

4.5   Clause 12: Extension of time for lodging returns, etc

The extended period should also be prescribed. Leaving it to the discretion of the Registrar might lead to bias, acts of corruption or collusion between the Office and interested parties.

4.6   Clause 17: Exemption from liability for acts or omission of office and persons employed therein

It is a commendable clause in holding public officials accountable for their actions and it encourages due diligence and duty of care. However, even if the acts or omission are bona fide, some form of liability should accrue to the office so as to compensate the third parties. This view, however, is catered for in the Bill by Clause 17.

4.7      Clauses 38 to 51: Investigations & inspections

4.7.1   The provisions are conflicting as they use methods intended for criminal proceedings to address civil matters. The officials in the Registrar’s Office are not sufficiently capacitated to carry out some duties prescribed. There is need to ensure alignment of the law with the intention as well as ensuring that the methods used are commensurate with the intended outcome. Clause 43 (6) has powers of entry, search and seizure that are given to the inspectors.

4.7.2   International best practice as provided for in the OECD (Organisation for Economic Co-operation and Development) Principles of Corporate Governance encourages stakeholder’s participation to encourage good corporate governance as opposed to coercion. The best interest of any organisation is best known and upheld by its stakeholders. To this end, it is suggested that there be introduction of sustainable reporting as opposed to imposition of inspectors who may not in most instances understand certain business decision with regards to governance. The powers given to inspectors in terms of Clause 43 (6) should be limited to only enforcing existing laws as opposed to prescribing rules regarding the promotion of good governance. The idea is to move away from criminal penalties.

4.8   Clauses 52 and 53: Striking off of defunct business entities from register

In terms of these provisions and any other similarly worded provisions, it is prudent for the notice for verification of incorporation and registration status and vesting of defunct business to also be published in the local newspaper in which the property is situated as this also ensures that the notice is properly circulated. Possibly to include an electronic means in circulating that notice in the interest of the owners as some might not always have access to the Government Gazette.

4.9   Clause 75: Memorandum of company

The clause still maintains the basics of a memorandum. However, there are notable changes which are quite progressive and in line with modern practices. There is now recognition of other official languages other than English. Thus, a memorandum of a company can now be drafted in any official language recognised in Zimbabwe. This therefore caters for different types of people particularly those who want to form companies but are not acquainted with the English language.

Comment: The definition of official language is in Section 6 of the Constitution, not Section 7 (1) as stated in the Bill.

4.10   Clause 77: Alteration of memorandum

The clause which governs the alterations of a memorandum has since changed the requirement with regard to an application for cancellation. An application for cancellation can now be made by holders of not less than 5% of the nominal value of the company’s issued share capital as opposed to the current requirement which requires 15% of the holders. This gives voice to the minority of the shareholders in a company to also contribute where alterations of the memorandum are considered.

4.11   Clause 79: Articles of association and alteration thereof

This clause largely remains the same but there is a notable change with regard to companies limited by a guarantee. The current Act makes it mandatory for a company limited by a guarantee to register its articles with the memorandum whereas the draft now affords the same privileges as that of a private or public company. Members of the public were happy with the provision. 

4.12   Clause 80: Power to dispense with “limited” in certain cases

Clause 73 (5) states that, any application to the court to review the Minister’s decision in terms of sub clause (3) must be made no later than thirty days after the company in question receiving notice of the Minister’s decision to that effect, i.e. “wherein a Minister may revoke the licence to trade without the word Limited”. However, during the period within which the company is seeking relief from court, the clause does not expound on the effects of the said application or clarify what effect this application will have on the Minister’s decision.  Does an application to the court for review have the effect of suspending the decision of the Minister pending the review or does the decision of the of the Minister still stand despite the application for review to a competent court?  There is need for the Bill to clearly set out this position and also note the action or procedure relevant.

Comment: This provision is taken care of under the rules of the court.

4.13     Clauses 81 and 82: Membership of Company

4.13.1These largely remain the same with regard to the issue of liability where a company carries out its business without members.  Clause 81 (2) notes that 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 for all debts incurred by it after the six months have lapsed.

4.13.2  Clause 82 still prohibits a body corporate from being a member of a company that is its holding company. However, Clause 82 now details and provides guidelines on ascertaining whether or not the holding company or subsidiary is beneficially interested under a trust which is an exception to the prohibition stated above.

4.14   Sub-Part C: Private companies

Clause 83, the limitation to members of a company still remains at 50. The limitation of members in a private company has the disadvantage of limiting growth of such companies. It may be a consideration to increase the number of members to around 200 in line with other jurisdictions who have recently introduced changes to their Companies Act.

Comment: The Bill should provide for flexibility from the Registrar to increase the number.

4.15   Clause 135: Capitalisation of Shares

This is a new clause which has been incorporated by the new Companies Bill dealing with the treatment of capitalisation of shares.  Clause 135 (1) (c) does not read well and it is proposed should therefore be amended to read as follows:

“subject to sub-section (2), when resolving to award a capitalisation share, the board may at the same time resolve to permit any shareholder entitled to receive such an award to elect to receive payment in cash, at a value determined by the board”.

4.16     Clause 136: Distributions must be authorised by board

4.16.1   This is also a new clause which has been added by the new Companies Bill.  This clause should make it clear that distribution relates to distribution of shares.  It is therefore proposed that Clause 136 sub-clause (1) be amended as follows:

“A company shall not make any proposed distribution of shares unless -...”

4.16.2   Clause 136 subsection (1) (b) states that, “ a company must not make any proposed distribution unless  - it reasonably appears that the company will satisfy the solvency and liquidity test immediately after completing the proposed distribution”.  For clarity and avoidance of doubt, this section should give clear timelines as to when the solvency and liquidity test should be satisfied.  As a suggestion, the section can be amended as follows:

“a company shall not make any proposed distribution of shares unless – it reasonably appears that the company will satisfy the solvency and liquidity test 30 days after completing the proposed distribution.”

4.17   Clause 150 – Prohibition of Bearer Shares

This is a new section which deals with the prohibition of companies to issue bearer shares.  This is a welcome clause to be incorporated in the Bill because bearer shares by their nature are undesirable because they lack the regulation and control which is otherwise present for registered shares.

4.18   Clause 151 – Evidence of title to shares

Clause 151 sub-clause (4) should be amended to read as follows:

“The signature of a director and secretary for the purposes of sub-clause (3) may be affixed to the certificate by autographic, electronic or manual means.” 

4.19   Clause 152: Creation and Registration of Debentures; Contracts to Subscribe for Debentures

Clause 152 sub-clause (2) refers to the binding of movable property which can be registrable as a security interest in terms of the Movable Property Security Interests Act [Chapter 14:35].  While this clause is a noble one, there should be a transitional clause that caters for a situation before the Collateral Registry becomes operational.

Comment: Amend Clause 303 to include registration of security interest.

4.20     Clause 193 Subpart D: Directors & Other Officers

4.20.1   The fiduciary duties imposed on managers and directors are a welcome development. Important to note is that these duties should not be cast too widely, as they will invite non-compliance.  Also welcome is that the Company Secretary must be a natural person. There is need to ensure that entities comply with this provision as many companies have juristic persons as their company secretaries. Incorporation by reference of the application of the National Code on Corporate Governance by public companies is a welcome development.

4.20.2         Clause 193 (9) provides that a director of a public company can sit on up to six unassociated public company boards. There is no justification for the choice of six. In terms of the Public Entities Corporate Governance Act (PECGA) (Section 11), no one will be allowed to serve on more than two boards at a time though a person may serve on the board of a public entity and its subsidiary, which will count as membership of one board for these purposes. Therefore, the reference to six public company boards will be in violation of the PECGA. It is recommended that the number be reduced to four or five.

4.20.3         Clause 195 (4) (b) (ii) the sentence after the figure “5” should be deleted.

4.21      The Bill is silent about the timeframe that should be taken for the completion of the registration of a company. The time should be shorter to limit the possibility of corruption. There should be one stop shop in line with the ease of doing business campaign.  The decentralisation process requires for an extensive training of provincial officers who will be responsible for the registrations in the regions. 

4.22  There is a need for private and public enterprises to have provisions which incorporate anti-anti-corruption clauses and committees which seek to address corruption, e.g. whistle-blower provisions to expose corruption as it happens.  

4.23       Clauses 239 to 245: Foreign Companies

4.23.1    The provisions are similar to those in the existing Act. The importance to impose additional burdens on foreign companies has been recognised and applied. The registration and monitoring is sufficient.

4.23.2            Clause 240 is in order and is a good clause which has ensured there are no conflicts with the Banking and Insurance Act for establishment requirements by foreign companies or those seeking to have subsidiaries in Zimbabwe.

4.24   Clause 277: Voluntary registration of partnership agreements

For “Other Business Entities”, insert sub clause (4) to read “Any changes shall be filed with the Registrar of Companies, failure of which civil penalties shall apply”.

4.25     Chapter V: Electronic Registry

4.25.1   This chapter concerns the electronic registry which is defined as the electronic counterpart to paper-based office for the Registration of Companies and Other Business Entities. This is a welcome development as the users will have access to the registry regardless of geographical locations. This will also ease on expenses associated with travelling to centralised Companies Offices in Zimbabwe and it is in line with the country’s drive towards digitisation and e- commerce.

 In addition, the electronic registry is being used in other recently amended legislation, e.g., Movable Property Security Interests Act, Judicial Laws Amendment Act, Banking Amendment Act (Credit Reference Bureau), Deeds Registries Amendment Act and so on. There is need to ensure uniformity here. The Registration of Users and User Agreements are similar to those in the Deeds Registries Act. It is not clear how this will be accessible to foreigners, especially potential investors. It is proposed that a list of Registered Users be added on the Registrar’s website.

4.25.2            The co-operation with foreign company registries as well as Financial Intelligence Unit of the Reserve Bank of Zimbabwe is a welcome development. This office’s co-operation must extend to ZIMRA and RBZ.

4.25.3   The Companies Registry will be digitised and the eventual establishment of an electronic companies registry 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.  In particular, users of the electronic registry must subscribe to a “user agreement” with the Registrar in the form set forth in the Seventh Schedule.

4.25.4   The provisions of the user agreement governs access as a researcher which is ideal for anyone who would want to authenticate the validity or existence on non-existence thereof of a company one would want to engage with for business or information purposes. One would also make use of the registry for company registration, be it through a consultancy or as a self-actor.

4.25.5   The agreement speaks to the issue of the user having to undergo a training at their own expense, which to some extent places a hindrance as most people who would otherwise have had access to the system might not have access to the registry until they pay for the training. While this might be for a good cause to train the users, the costs involved should not be exorbitant to an extent of being a push factor as the motive is to have the registry accessible to anyone. An application fee shall also be payable for one to be able to use the system. The regulations should specify the amounts involved.

4.25.6   The agreement fairly addresses issues of security in that if a registered user has authorised agents, these must be communicated the registrar in advance and any user is prohibited from releasing any information except in the normal course of company registration or with the consent of the individual concerned.

4.25.7   There is need to ensure that the security controls in place do not allow a user to commit crimes using information illegally obtained from the system as well as a tracking system/ audit trail to ascertain who accessed what at what time and place.

5. Conclusion

The Bill is driven by a modernisation agenda. It seeks to maintain order in the corporate sector and ride on corporate governance principles that have developed in the last forty years. It is therefore an evolution, and not a revolution; it builds on the existing gains made by the 1951 Companies Act. It however tightens screws for purposes of corporate governance. By seemingly making provision for electronic based administrative systems, it complements the Ease of Doing Business strategy. It must always be stated that the Bill has innovative strategies that were absent from the old law. This is a welcome development and it is our view that should it take into account the input from various stakeholders, it will be a well-rounded Act that will not be amended at whim.   I thank you.

          HON. NDUNA:  Thank you Madam Speaker. I want to thank the Hon. Chair of the Committee on Justice, Legal and Parliamentary Affairs.  The last part that he touches on to digitize the Registry and also to revolutionarise the current antiquated Companies Act, which gives unfettered access to the judicial manager and does not give him timelines in terms of turnaround strategy for the company, which supposedly could be ailing.  Amongst other issues that I want to touch on is the reasons for alignment of our laws with the Constitution and the laws and our Acts across the divide.  In this House not so long ago came the Insolvency Act that we touched on, but I want to attach the Insolvency Act to Section 100 of the proposed Companies and Other Business Entities Bill.  The Insolvency Act is governed by a lot of pieces of legislation, amongst them is the Companies Act, which we seek today to repeal and add these clauses.  The basic pieces of legislation that cover the insolvency regime include the Insolvency Act itself, the Companies Act that I have spoken about which is antiquated, moribund, rudimental and very historic.  The Estate Administrators Act 27:20 and the Private Business Corporate Act; why do I bring this to the fore, because I seek with the bringing of this Business Entities Bill to repeal the companies Act, to also harmonize these Acts.  As you are going to see, as we debate the Mines and Minerals Act, we will seek to harmonize it with the Agrarian Reform Act.  So I do not want to lose the opportunity of getting this Act to be in sync with the Insolvency Act.

          The issue of aligning this Act with the Insolvency is very key in that you want to bring in the issue of reconstruction that the Hon. Chair has spoken about.  A scheme of arrangements as opposed to generally just look at the company on the face of it and look at its insolvency and its incapacity based on its liabilities versus its property or what it is worth.  This Bill is going to make sure that a lot of companies do not unnecessarily go into liquidation.  It is also going to make sure as has been alluded to, Section 193 of the proposed Business and Entities Bill that it is in sync with the corporate governance matrices of how we deal with the business in Government whereby to have a member sitting on more than two boards, it should be something that is also acceptable in the private sector.

  That way, we are harmonizing these Acts.  I believe in a country that has more than 15 million people, for us to continue to have people holding on to posts and positions for more than four boards as has been proposed, down from six boards is certainly asking too much and this is what breeds corruption.  We need to cast the net wide and make sure that we open space for a lot of vibrant people that we have got there that are both degreed and are quite able bodied to hold positions in boards and in companies.

          My proposal on Section 193 would be to make sure that we have nothing more than two boards per person.  We are endowed with a lot of people, technocrats out there.  Let us not close the space for our graduates and people that we can ably groom to hold positions in board appointments.

          Madam Speaker, the current Companies Act as I have spoken about does give unfettered access, in particular, I think it is Section 306 on the appointment of the judicial Manager .  It gives him unfettered access and it does not give him time limits in terms of concluding his job on that company.  It also does not give him time lines in terms of turn around.  When you take up the job of a judicial manager in the current system, you are supposed to pay; either it is 2% or 25% of the company’s value as surety in order - so that you are not just dealing with a company as though you are dealing with some briefcase company.  It has to be known that the judicial manager is also liable if there is no turnaround strategy that brings up that company. 

          So, this Business and Entities Bill seeks, amongst other things, to give a robust direction in term of making sure that we resuscitate companies and not unnecessarily put them into liquidation.  I am alive to this Committee that I used to Chair, the Transport and Infrastructure Development Committee in particular, Air Zimbabwe.  There is now, not a scheme of arrangement but there is an administrator who seeks to revive, revamp and rehabilitate Air Zimbabwe with a view of not having an eye of its liabilities versus the equipment and its value.  That is a welcome approach.

          If this Bill passes, it is going to see that such entities of a strategic nature and that are of a very high value nationally do not unnecessarily go under, by making sure that we employ the right people to turn around these entities, because there are of high value and national strategic importance. 

          Madam Speaker, I will not throw away the baby with the bath water, because I have been removed from that portfolio, but I will continue to give advice because I believe that companies should not be unnecessarily wound up because of the liabilities that far outweigh their weight in terms of what they are worth. 

          I am hoping that at the conclusion of this debate, the issue of judicial management is going to be a thing of the past.  Now I want to give impetus or give value or credence against annihilation and eradication of the judicial management process.  It has not worked at David Whitehead Textiles where Government has taken over the Cottco debt of US$68 million with a view of trying to revive the cotton industry.  The Government gave free cotton inputs to farmers to the tune of more than US$60 and $70 million, together that came to US$130 million.   That was during the Eight Parliament and we all clapped hands with a hope that we were now going to revive David Whitehead Textiles.  The value of David Whitehead is about US$15 million but its liabilities are US$20 million.  Government through ZAMCO which is Zimbabwe Asset Management Company gave to David Whitehead through the judicial manager US$2 million in order to resuscitate, rehabilitate and revamp the cotton industry through the value adding entity of David Whitehead. 

          We, hoping and keeping our fingers crossed that because there has been an input into the cotton industry by Government that company is going to be resuscitated. It has not been like that.  What we have seen is that the judicial manager has not even been able to account for the US$2 million that was given by ZAMCO.  The creditors have sat and we do not want to go through that route again.  So after the debate has been concluded, I am make a clarion call that there no longer be a judicial management process.  A judicial manager is appointed through a court process.  I believe through the Master of High Court, they can also be appointed through the Minister of Justice, Legal and Parliamentary Affairs, administrators of repute and people that can make scheme of arrangements for business entities empowered by this Bill that is going to pass through Parliament, to make sure that we do not have a repeat of the David Whitehead scenario.

The Bible says, “the day that King Hosiah died, I saw the Lord”.  Let today Madam Speaker maam, be the day that we repeal this Companies Act and completely throw away the issue of judiciary management so that we have entities that are not going to be judged on the face of them by their value in order to throw them away because of their liabilities. 

As I conclude, I also want that there be a complete separation of the directors and the companies so that the company is a separate entity from the directors.  I think I am also in my view, a victim of where there is a mixture of the two – oil and water should not be mixed and the companies should be a separate entity whether the director is also an Hon. Member of Parliament or otherwise, that should continue to have separate entities.  That way we are going to completely, effectively and efficiently conduct our business using this Business and Companies’ Entities Bill in order that we protect those companies that are of a national strategic entity.

THE HON. DEPUTY SPEAKER:  You have five minutes left Hon. Member. 

HON. NDUNA:  I want to thank you Madam Speaker maam and I want to applaud you for giving me the opportunity to debate vociferously and effectively.  I thank you.

HON. MUSHORIWA: Thank you Madam Speaker maam. I rise to add my voice to the Bill that is under discussion.  I believe that this Bill is overdue and it is a step in the right direction in terms of making sure that the Companies Act is actually looked into given that it was done years back.

My contribution relates to the issue that touches a number of Zimbabweans - most of the people that I believe are crying in this country. The Bill exempts the banking sector and there is a reason why it is so.  It is actually good because the Central Bank, the Reserve Bank being the regulatory authority, does the supervision of the banking system but there is a key sector in this economy that I believe should actually be exempted from this Bill.  It is the pensions and insurance sector.

In all economies that have done well, they are funded by the pensions and insurance.  Unfortunately in Zimbabwe, we have had a mismatch.  We have had a proper financial sector or proper banking sector primarily because every banking institution knows that you cannot cross certain lines, otherwise you will have your licence revoked by the Central Bank.  Most insurance contributors are crying – most of the people that have been contributing pensions for years have actually been suffering. 

You will recall that Judge Smith’s report which I believe will be tabled in this House in terms of the way forward but one of the key issues because we do have Ipack, which is responsible for the pensions and insurance sector – if you talk to them, they will tell you what is actually happening and why they cannot bring order and sanity in the insurance and pensions sector.  It is primarily to do with the fact that insurance companies take contributors and members’ money.  They take that money and invest in other entities.  Once they have done that, they then declare that the company needs to go through liquidation processes and there is no safety for the members.  I am talking of the insurance company and the Pensions Fund. 

This is the reason why I need the Minister of Justice to ensure that pensions and insurance funds are exempted from this Bill because I believe they should actually be managed by Ipack.  We should actually have the same system that we have in the banking sector.  We should never allow our pensions and insurances because in all countries – I wish I had brought my notes if I had known that this Bill was going to be debated today, to just show you how other countries have actually leveraged the contributions from the pensions, how they have done that with the insurance contributions in terms of development of their countries.

If you look at Zimbabwe today, yes we have been getting a lot of money through the Treasury Bills from the insurance and pensions funds but I think there is more that can be done from that sector.  To that end, that is my major contribution pertaining to this Bill at this stage. I will raise my other points in the Committee Stage.

THE MINISTER OF JUSTICE, LEGAL AND PARLIAMENTARY AFFAIRS (HON. ZIYAMBI):   I would like to thank the Chair person of the Justice Committee for a well researched and well presented report after their public hearings.  I take note of the contributions from the Committee and I want to applaud them for the work they have done....

HON. TSUNGA: On a point of order Madam Speaker, I notice there is no quorum.  Can you please confirm if that is the case?

 [Bells rung]

Quorum formed.

THE MINISTER OF JUSTICE, LEGAL AND PARLIAMENTARY AFFAIRS (HON. ZIYAMBI):  Thank you Madam Speaker.  I had earlier on applauded the Chairperson and his Committee for a job well done and I think the recommendations they bring in are progressive and I believe we need time to consider and take on board. 

I also want to thank the other Hon. Members that have contributed, but at this juncture because this is a voluminous Bill and the Committee is coming up with very progressive recommendations which I believe I should study, and also in the spirit of ensuring that we come up with a very good law, I propose that we adjourn this debate and continue having had regard to the contributions from the Committee.  I so submit Madam Speaker.

Motion put and agreed to.

Debate to resume: Tuesday, 7th May, 2019.

On the motion of THE MINISTER OF JUSTICE, LEGAL AND PARLIAMENTARY AFFIARS (HON. ZIYAMBI), the House adjourned at Twenty-one Minutes to Four o’clock p.m. until Tuesday, 7th May, 2019.

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National Assembly Hansard NATIONAL ASSEMBLY HANSARD 21 March 2019 VOL 45 NO 45