17 December 2018

Zimbabwe: PLC Clears Companies Bill

The Companies and Other Business Entities Bill is set for the Second Reading stage any time from now after the Parliamentary Legal Committee (PLC) came up with a non-adverse report.

The PLC's non-adverse report was received on December 6.

A non-adverse report usually suggests the PLC would have been satisfied with a Bill insofar as its provisions are consistent with the national constitution.

Experts say the Bill's Second Reading stage would start once debate on the 2019 National Budget has subsided.

Work to reform the Companies Act that was passed in 1951, started in 2015 with an initial target of completing it in December of the same year.

However, various challenges including the content of the Bill, stalled progress.

The speedy conclusion of the Companies and Other Business Entities Bill is seen as critical in abetting Government's drive to improve the ease of doing business in the country with a view to attracting more investors.

Key new features that would be introduced by the Bill include the provision 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 Bill also introduces an electronic registry for the incorporation and registration of domestic and foreign companies and private business corporations.

It also substitutes criminal penalties with civil penalties wherever possible, and establishes an inspectorate to better enforce the provisions of this Bill.

The Bill also makes a new provision for the mergers and takeovers of companies and other business entities, and provides for the licensing of business entity incorporation agents and business entity service providers.

Critically, the Bill clarifies and improves the common law principle of bona vacantia (the vesting in the State of unclaimed properties of defunct companies and private business corporations) by instituting a fair and transparent method of declaring such properties to be bona vacantia.

Beneficial ownership of companies is set to be made more transparent once the Bill becomes an Act, while also combating the use of the company form for criminal purposes.

The Bill also defines in greater detail the corporate responsibilities of directors and boards of companies, and encourages good corporate governance which has glaringly been lacking in most companies.

Bad corporate governance has led to company closures and in the case of banks, depositors have been swindled of their hard earned cash as directors engage in untoward dealings such as dishing insider loans.

The Bill has additional measures to protect shareholders and investors, in particular minority shareholders and investors.

About 10 out of 14 laws that impeded the ease of doing business in the country have since been gazetted.

The laws include the Public Procurement and Disposal of Public Assets Act, the Movable Property Securities Interests Act and the Insolvency Act.

Government wants to reduce the cost and time of doing business in the country so as to ride on the "Zimbabwe is Open for Business" mantra which has seen heightened interest by investors to explore available investment opportunities.

Zimbabwe

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