New Companies Act requires companies to re-register

THE Companies and Other Business Entities Act [Chapter 24:31], which replaces the old Companies Act, requires all companies to re-register within 12 months of the Act taking effect.

The COBE Act was gazetted in Government Gazette Volume Number 100 in November 2019. Section 1 states its date of commencement as the ninetieth day after promulgation, which is 12th February 2020.

The COBE Regulations [Pre-Formation and Post-Formation Formalities (SI 46 of 2020) and the COBE (Fees) Regulations (SI 47 of 2020)] were also gazetted in February 2020.

The COBE provides for the constitution, incorporation, registration, management and internal administration of companies; the (voluntary) winding up of companies and Private Business Corporations (PBCs); the voluntary registration of other business entities; ensuring the removal of defunct companies and PBCs by re-registering all existing companies and PBCs; the repeal of the Companies Act (Chapter 24:03) and the Private Business Corporations Act (Chapter 24:11); and provisions for matters connected therewith or incidental thereto.

Section 5 of the COBE provided that the following entities may be registered: public company; private company; company limited by guarantee; co-operative company; foreign company; PBC; partnerships; syndicates; joint ventures and certain other associations in terms of Section 278.

The COBE is not applicable to any banking institutions, building society, insurer, microfinance institution; co-operative society or any other entity whose formation, registration and management whereof are governed by any other enactment, except where it is expressly provided for in the COBE regulations or in the enactment Act.

Section 5 of COBE also establishes the Companies Office, which is now a legal entity/ body corporate capable of suing or being sued and headed by a Chief Registrar. It also gives powers to the Chief Registrar to investigate a company and to appoint inspectors to investigate on behalf of the Registrar or at the request of a shareholder.

The Act embraces Information and Communication Technology (ICT). The Registrar may permit electronic filings and other transactions. Section 9 permits any register, index, minute, financial statements or document to be recorded in an electronic or easily visible, readable and referable manner.

To use the electronic filing, users are supposed to apply using the CR1 “Electronic Communications” form to enter into an agreement to use the electronic registry.

Any register, index, minute, financial statements or document may be in any officially recognised language, including indigenous languages, provided that a certified English translation is provided to the Registrar (Section 9). Incorporation Agents or Service Providers An Incorporation Agent, that is a person licensed to do business entity registration work, must apply to be registered with the Registrar. Exempted from this registration are those who are legal practitioners, chartered accountants, chartered secretaries or registered under PAAB. Re-registration of Companies and PBCs

Section 303 requires all companies and PBCs to be re-registered under this Act within 12 months from the effective date of this Act. The re-registration form is provided in the 10th Schedule. Reasons for re-registration are: i. to establish a new updated Register; ii. to expunge defunct business entities from the Register.

Re-registration does not create a new legal entity, prejudice or affect the identity of the body corporate’s continuity as a legal entity or affect property rights or obligations or affect legal or other proceedings by or against the company.

The main objective of re-registration is to ensure the removal of defunct companies and PBCs by re-registering all existing companies and PBCs.

Shell and Shelf Companies

Section 293 defines shell and shelf companies. A shell company is defined as being a company that submits regular statutory returns and notices but is otherwise either not being operated in accordance with its stated objects or has not been active in business for more than 12 months after its registration.

A shelf company is defined as a shell company incorporated or registered in the name of a person who intends to transfer it to another, who may operate the company as an active business entity, a shell company or a shelf company.

Shell and shelf companies may be registered in bulk at a discount to a person engaged in business entity registration work. The person who registers the shell or shelf company must lodge a declaration to that effect, failure of which results in him being served with a Category 2 civil penalty.

Annual returns must be filed, failing which the company will be struck off the Register of Companies on the anniversary date.

Voluntary registration Partnerships, Joint Ventures, Associations, Syndicates or Consortiums may, through their authorised representative, on payment of the prescribed fee and completion of CR32, register the original constitutive document relating to the entity.

Lost Documents

The Companies Office has acknowledged the issue of lost documents and revised the manner in which lost documents are replaced. In terms of Section 16 of COBE, the registered business entity may apply to the

Registrar in the manner prescribed on Form CR 4 for leave to file a copy of the document. Where the

Registrar has lost or cannot find a document, no fee shall be payable.

Beneficial Ownership

To ensure transparency, Section

72 of COBE introduces the prohibition of the concealment of beneficial ownership and the use of nominees.

Every company is required to maintain an accurate and up-to-date register of beneficial owners, which must be kept by a specifically appointed person responsible for keeping custody of the register within Zimbabwe.

The register must state each director’s details and the nature and extent of his or her beneficial ownership in the company. The use of nominees is only permitted in specified circumstances such as executors, trustees, curators and other prescribed persons.

However, this does not affect the allotment or issue of shares to a nominee holding less than 20% of the shares/interest.

Company Secretary

Section 198 requires that every company should have a company secretary ordinarily resident in

Zimbabwe. Public companies’ boards must appoint at least one qualified company secretary.

Secretary qualifications and disqualifications for public companies are listed as well.

Directors/ principal shareholders of public companies are bound to file statements to the Registrar in the event that the Secretary to their company becomes affected by any of the listed disqualifications.

Good corporate governance

COBE requires the financial statements to comply with international standards adopted by the Public Accountants and

Auditors Act [Chapter 27:12]. The

Act provides further provisions relating to requirements for accounting records and the board’s responsibility in keeping them.

The COBE also expands the duties of care and loyalty of the governing board, which includes the director’s accountability to the shareholder, the board’s collective corporate responsibility and the prohibition of delegation of duties by individual directors.

The director liabilities are specifically stated in Section 197. Every public company board must appoint an Audit Committee. The COBE gives specific guidelines for the Board of every public company.

You need to familiarise yourself for administrative purposes with the new companies forms.

Alec Jemwa is the Research & Technical Manager of The Institute of Chartered Secretaries and Administrators in Zimbabwe (ICSAZ). For your Board induction and training, finance for non-finance people, Corporate governance training contact ICSAZ on 242 700553-5.