COMPANIES AND OTHER BUSINESS ENTITIES ACT HIGHLIGHTS
The new act Companies and other Business Entities Act [Chapter 24.31] (C&OBE) came into operation on the 13th of February 2020 repealing the Companies Act [Chapter 24.03] of 1952 and Private Business Corporations Act [Chapter 24.11] of 1993. The Act came along with two Statutory Instruments (SI) that is SI 46 of 2020 and SI 47 of 2020. The former sets the pre and post registration formalities of entities and the latter which contains a list of applicable fees due to the Registrar on complying with the former.
Here are some of the highlights form the new Act:
Section 11 of the act notes of the powers of Registrar to refuse registration of any document(s) submitted to him if it contains any matter contrary to law or by reason of any omission or misleading description has not been duly completed or does not comply with the requirements of this Act or contains any error, alteration or erasure. Should this happen, a corrected replacement should be lodged to replace the faulty document for processing to proceed.
The new Act has come to add a touch of times in technological advancement paving way for electronic registration of company documents by a self-actor or a registered user of the electronic registry. The applicant will be furnished with Certificate of Incorporation together with Memorandum and Articles of Association, CR5 and CR6. This applies for both a private company and public company.
In addition, Section 303 sets out transitional arrangements of the registered companies under the repealed acts. Already registered companies are to remain registered but have been given 12 months from the date when the new act came into being, to re-register.Failure of which will result in de -registration of non-compliant entities. It is interesting to note at this disjuncture that there aren’t systems in place for electronic registration and indications are that the timelines set in the Act maybe extended since the registrants have been disadvantaged of the time taken without systems in place. Re registration will not create a new entity but will rather capture already available information into Registrar’s system for easy interface, access to records, electronic signatures among other issues for the purpose of compliance with the new systems in place. This came as a panacea to curb shortcomings of the manual registration process by the introduction of the Electronic registry.
Section 29 brought about an interesting new feature in the company registration fraternity. The Assumed names are now mandated be registered. The popular name for Assumed Names have been called “Trade Names”. The acceptance for registration of the assumed names remains first come first served as the case with registered names. Section 25 prohibition of “undesirable names” shall also be applicable in accepting Assumed names.
Section 294 spells out the powers of Registrar to issue civil penalties. Where default is made in complying with any provision of the Act or regulations for which a civil penalty is specified to be, the Registrar may, in addition to, any other penalties specified in the Act or any other law, serve the defaulter with a civil penalty order.
Some of the provisions are that, the business address form is now required to include an email address according to Section 76 and 77. Likewise, Annual Returns due are to be submitted within 21 days of the centenary date of the company’s incorporation, registration or re-registration in terms of section 303 (Section 165). Section 195 also provides that; a company with up to 10 shareholders must have at least two directors; and, where there are more than 10 shareholders, the company must have at least three directors.
Concerning Shell and Shelf Companies can now be discounted if registered in batches and Applicant declares as such in a prescribed form. Shell and Shelf Companies now have a lifespan of 12 months unless an annual return is submitted. (Section 293).
Section 191 contains provisions on appointment, remuneration, duties, powers and removal of auditors. No person shall serve as an auditor of a company for more than five consecutive financial years. A past auditor is required to wait for two financial years before becoming eligible for reappointment. Note Section 191(7) for circumstances under which a private company is obligated to appoint an auditor, a similar provision existed in the old Companies Act’s section 150(7).
These are some of the takeaways of the new Act, both already registered and potentials registrants should take heed of the paraphernalia of consequences of not aligning their business operations to the changes in legislation. The volatility of the Zimbabwean legislation requires technocrats to be well abreast with what is happening in the legal fraternity. MTC is here to help you should you require any help in an as far as company registration.