21 October 2018

Zimbabwe: 'Proposed Companies Law to Improve Corporate Governance'

Zimbabwe's proposed new companies law will improve corporate governance practices in the private sector, a leading local entrepreneur has said.

The Companies and Other Business Entities Bill 2018, which is now before Parliament, seeks to update the Companies Act of 1951.

"There is always a need to improve corporate governance practices... there is always a need to run with what is happening in terms of global best practice," former Zimbabwe National of Chamber of Commerce president Divine Ndhlukula said.

She said the proposed law will promote disclosure of company directors' remuneration and expose shareholders that hide behind investment vehicles.

"People should do business with people they trust, which is in essence the way business is done today," Ndhlukula said.

"The new corporate currency is integrity. So all those things are very important when you are running a business in this new economic order."

Some of the provisions that will improve corporate governance practices include clauses 192 to 205, which seeks to penalise directors abusing company resources and sets limits to which they can rely on an entity for benefits.

"Clause 194 provides for the remuneration of directors ("emoluments"). The emoluments of a director of a public company must be approved by shareholders at the annual general meeting of the company.

"Clause 195 prohibits loans or guarantees from the funds of the company to be made to directors, except within the conditions stated therein," reads part of a summary of the Bill.

"Clause 202 requires that disclosures of directors' salaries and pensions in the accounts of a company are laid before it in a general meeting or in a statement annexed thereto.

"Clause 203 requires certain disclosures to be made in accounts laid before members of a public company of particulars of loans made to officers of that company.

"Clause 204 sets out rules for insulating the personal financial interests of a director from the interests of the company of which he or she is a director."

Meanwhile, clauses 38 to 51 of the Companies and Other Business Entities Bill 2018, allows for and sets out provisions for the investigation and inspection of companies.

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