The Companies and Other Entities Bill is presently going through public hearings throughout the country.
BY MIRIAM TOSE MAJOME
This is in line with section 141, which prescribes for consultations with interested parties and for public involvement in all legislative processes where necessary and if possible.
It is important for people in business or with some interest in it to participate in the ongoing public consultations and have their views heard and ensure they are taken seriously before the Bill becomes law.
It is a very important Bill because the Act when passed will change many aspects of how companies are registered and how businesses are conducted in the country. It is revolutionary legislation because it replaces the Companies Act, which was enacted in 1951.
The present Act had, therefore, lost relevance as many of the laws were outdated or had become irrelevant after independence.
White business interests of the pre-colonial 1950s were obviously distinct from post-independence predominantly black business interests.
This article helps people who may not have had get a chance to read the Bill but have an interest in it.
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It summarises the important changes and salient points of the intended amendments and aim of the proposed legislation.
The Bill is timely and important within the context of the national drive to make it easier to set up and do business.
It seeks to expedite the process of registration of companies and the commencement of businesses.
This is in tandem with the national mantra that Zimbabwe is open for business.
Computerisation of companies office
Among other changes is the proposal to computerise the companies office.
This will hopefully see the end of some corruption and shady dealings within the companies office.
Physical records and files routinely disappear without trace from that office.
Whole company files sometimes mysteriously vanish and some reappear with unsanctioned amendments to documents.
CR14 forms, which list company directors or shareholding records, may simply mysteriously disappear permanently without trace and sometimes appear with altered records and names of new directors all together.
The archaic record keeping presently in use must simply stop because it belongs to a long bygone era.
Justice, Legal and Parliamentary Affairs minister, Ziyambi Ziyambi, admitted as such when he was quoted saying the Bill was intended to protect shareholders and investors particularly minority shareholders.
It is intended to improve the ease of doing business through simplified decentralised and quick company formations and registrations.
If the support from the executive is genuine and sustained it will potentially lead to a revolution of business in Zimbabwe.
Other motives of the proposed Act are to aid in the enforcement of business contracts and resolve insolvency issues.
The proposed reforms aim to help with the procedure, time and cost considerations of starting and operating business in the county.
If, even a few of the many proposals succeed, it will improve the country’s ease of doing business rankings and investment ratings.
This will go a long way as the country once more makes inroads to returning to the global family of nations and competing with other countries for investors.
The average time taken for registering and setting up a new business within the sub Saharan region is about a month, but in Zimbabwe it is at least three months.
The developed world average is even much shorter ranging from a matter of hours to a few days.
The Bill aims to at least shorten the time taken presently and dispense with a lot of the bureaucratic tape to at least get up to speed with the region average and even get to international standards where possible.
Among some of the important changes is the Bill will provide for the issuance of non-par value shares rather than shares with a fixed value together with provisions for the valuation of non par value shares.
The current Act did not provide for this distinction, which led to problems in the interpretation and practical application of share purchases and allocation.
As mentioned above and which must be reiterated because of its importance, is the introduction of an electronic registry for the incorporation and registration of domestic and foreign companies and private business corporations.
The Act will include PBCs for the first time, as it had previously only catered for companies.
Private business corporations are increasingly gaining in acceptance as a business model as they are a viable option for start-up businesses especially for young people. PBCs are currently established in terms of the Private Business Corporation Act Chapter 24:11.
After promulgation of the Act, they will be administered together with other companies and this is convenient for business people.
Inspecting and investigation
Clause 38 of the proposed Act sets out the purpose and manner of the investigation and inspection of companies and other business entities. This is meant to promote good corporate governance and inspire investor confidence.
The Registrar of Companies will be accorded the same investigative powers as commissioners under the Commissioners of Inquiry Act.
The Registrar of Companies is empowered to initiate investigations and enquiries into the operations of companies and private business corporations the registrar has reasons to believe that the Act is not being complied with in respect to documents that are required to be filed according to the law.
All companies know this, but do not always comply with submitting annual returns in line with the Act.
Minority shareholders of companies, which comprise at least 5% of the total shareholding interests of a company are empowered to request company documents. The registrar is enjoined to initiate investigations into companies or PBCs.
The registrar is empowered to undertake investigations and enquiries at the initiative of a special company resolution or by order of a court requesting such investigation to take place.
If the registrar has any reason to believe the company or business entity is acting in any way whatsoever to defraud its creditors, he or she is empowered to institute investigations into that company.
The empowerment of the registrar in this way makes the duties more interactive and practical than merely administrative handling paperwork.
Clause 42 empowers any appointed inspectors to investigate any subsidiary or holding company or any company associated with the company under investigation.
The officers of the company under the investigation process are legally bound to provide and furnish the investigators and inspectors with whatever records and documents and evidence that may be demanded.
The Justice minister is furnished with the information as are interested shareholders.
At the conclusion of the investigation, the registrar will recommend one of three outcomes depending on the outcome of the investigation.
The registrar may recommend prosecution for criminal offences, or civil proceedings by any aggrieved parties to recover any damages incurred from the infringement or the registrar may recommend the winding up of the company or the business entity.
We continue looking at and simplifying other relevant aspects of the Bill next week.
