Tawanda Musarurwa
Senior Business Reporter

Legal experts say drafters of the Companies and Other Business Entities Act (Chapter 24:31) need to re-look at some of its provisions that are unclear.

The new Companies Act, which will repeal the Companies Act (Chapter 24:03), is expected to come into force during the first quarter  of 2020.

It aims to improve Zimbabwe’s ease of doing business climate, including bringing into effect several novel concepts to the country’s company law, such as the requirement for all pre-existing companies to re-register with the Registrar of Companies.

However, a number of vague provisions have been highlighted in the statute.

Retired judge Justice Moses Chinhengo said although the Companies and Other Business Entities Act (Chapter 24:31) was on the whole progressive, Sections 4, 54 and 95 required refinement.

“I think there are a number of progressive changes that have been brought to our companies law. But there are a number of faults where if I were in a position of influence I’d say please let’s refine this Act.

“Another guidance is that when you come up with your regulations, those regulations must be intra vires the Act, and those regulations will tell us exactly how the Act will be implemented. I have often stressed in other fora that Government is run on regulations and you can’t leave it to the discretion of officials to do this or that. When the regulations are clear that is the right way to go,” he told a recent Zimbabwe Association of Pension Funds (ZAPF) meeting in Harare.

“The last point I want to raise about the new Act is that it is not properly drafted. We have struggled to understand Section 4. When you draft a document and people are not clear what it means, it’s not proper. For instance, that section tells us that this Act will not apply to insurers, and we know that most of the pension funds are run by insurance companies, and then it goes on to say that  ‘unless otherwise expressly provided in this Act’.  Now if I may ask where in this Act is it expressly provided that certain provisions of the Act will apply?

“If you look at Section 95, for instance, which defines a share as movable property, well, we don’t have that concept in our law. We have always been taught that a share is an intangible property.

“Then you come to Section 54, it’s a progressive provision, the duty of care and business judgment rule, there is some difficulty in trying to understand what that section is saying, especially sub-section 4.”

Section 4 (1) reads: “Nothing contained in this Act shall apply to any banking institution, building society, insurer, micro-finance institution, co-operative society or other entity, the formation, registration and management whereof are governed by any other enactment, save as may be otherwise expressly provided in this Act or in such enactment.”

Section 54 (1) – (4) reads: “Every manager of a private business corporation and every director or officer of a company has a duty to perform as such in good faith, in the best interests of the registered business entity, and with the care, skill, and attention that a diligent business person would exercise in the same circumstances… A person who makes a business judgment acting as stated in subsection (1), (2) and (3) fulfils the duty under this section with respect to that judgment if that person— (a) does not have a personal interest as defined in Section 56 (“Transactions involving conflict of interest”) in the subject of the judgment; and (b) is fully informed on the subject to the extent appropriate under the circumstances; and (c) honestly believes when the judgment is made that it is in the best interests of the company or corporation.”

Section 95 (1) reads: “A share issued by a company is movable property and transferable in any manner provided for by the articles of the company or recognised by this Act or any other law.”

Added retired judge Justice Chinhengo:

“As I said, there is a lot to be desired in terms of drafting, just making things clear, using simple language. And it seems to me there seems to be no footprint of the Attorney-General’s Office in terms of the drafting style. There are concepts, it appears like, we borrowed from New Zealand, we borrowed from Australia in a copy and paste kind of approach and in the end we can lose the jurisprudence which has been built up over years on company law.”

In an interview with The Sunday Mail Business, Mr Nobert Phiri, managing partner with Muvingi-Mugadza Legal Practitioners, concurred with the retired judge.

“In my considered view, the new Companies Act is a welcome development and it carries provisions that are progressive in terms of the ease of doing business. However, as with new concepts that we have adopted from other jurisdictions … We have borrowed some concepts from other jurisdictions like New Zealand, perhaps Australia and South Africa; these concepts require refinement.

“There are issues that need attention, particularly if you look at Section 4, which deals with the entities that are affected or are supposed to be administered by this Act. The way in which it is drafted is not clear. Are insurance companies administered in this Act? So there are certain areas that the drafters need to relook at, because legislation needs to be clear to everyone.”