CHAPTER 388
COMPANIES ACT

Arrangement of Sections

   Section

PART I
PRELIMINARY

   1.   Short title

   2.   Interpretation

   3.   Effect of declaration in certified copy.

   4.   Application of Act to existing companies

   5.   Prohibition of large partnerships

 

PART II
INCORPORATION AND MODIFICATION OF COMPANIES

DIVISION 2.1—INCORPORATION

   6.   Application for incorporation

   7.   The articles of a company

   8.   Amendment of articles

   9.   Statutory declaration as to compliance with the Act

   10.   Certificates of incorporation and of share capital

   11.   Incorporation of the company

   12.   Register of companies

DIVISION 2.2—TYPES OF COMPANY

   13.   Types of company

   14.   Public companies

   15.   Repealed

   16.   Private companies

   17.   Private companies limited by shares

   18.   Repealed

   19.   Companies limited by guarantee

   20.   Unlimited companies

DIVISION 2.3—GENERAL PROVISIONS SECTION

   21.   Contractual effect of incorporation

   22.   Capacity and powers of a company

   23.   Validity of acts

   24.   Notice not presumed

   25.   No disclaimer allowed

   26.   Companies ceasing to have at least two members

   27.   No increase in a member’s liability or contribution without consent

   28.   Pre-incorporation contracts

   29.   Copies of certificate of incorporation, certificate of share capital and articles to be given to members

 

DIVISION 2.4—CONVERSION OF A COMPANY FROM ONE TYPE TO ANOTHER

   30.   Conversion of a private company limited by shares to company limited by guarantee

   31.   Conversion of private company limited by shares to unlimited company

   32.   Conversion of company limited by guarantee to company limited by shares or unlimited company

   33.   Conversion of unlimited company to private limited company

   34.   Conversion of public company to private company limited by shares

   35.   Conversion of private company limited by shares to public company

   36.   Method of conversion

DIVISION 2.5—THE NAME OF A COMPANY

   37.   Name of company

   38.   Reservation of name

   39.   Registration may allow company to dispense with “Limited” in its name

   40.   Change of name

   41.   Power of Registrar in relation to name

DIVISION 2.6—MISCELLANEOUS

   42.   Financial year of a company

   43.   Holding companies, subsidiaries and related companies

   44.   Registration of related bodies corporate

 

PART III
MEMBERSHIIP AND REGISTERS

   45.   Membership of company

   46.   Membership by company of itself or of holding company

   47.   Offence if membership of private company exceeds number specified in articles

   48.   Register of members

   49.   Inspection of register

   50.   Power of Court to rectify register

   51.   Company may keep branch register

   52.   Duties in case of securities registered in branch register

   53.   Branch registers of foreign companies kept in Zambia

   54.   No notice of trust

   55.   Register to be evidence

PART IV
SHARES AND SHARE CAPITAL

DIVISION 4.1—INTERPRETATION

   56.   Interpretation

DIVISION 4.2—ISSUE AND TRANSFER OF SHARES

   57.   Nature and transferability of shares

   58.   Numbering of shares

   59.   Redeemable shares

   60.   Capital redemption reserve

   61.   Share premium account

   62.   Variation of class rights

   63.   Return as to allotment of shares

   64.   Transfer of shares

   65.   Restrictions on transferability

   66.   Issue of share certificates

   67.   Endorsement of transfers

   68.   Share certificates as evidence

   69.   Share warrants to bearer

   70.   Transmission of shares by operation of law

   71.   Evidence of transmission of shares by operation of law

   72.   Company’s lien on shares

   73.   Rights and options to subscribe for share issue to directors, officers and employees

 

DIVISION 4.3—ALTERATION OF SHARE CAPITAL

   74.   Alteration of share capital

   75.   Power to return accumulated profits in reduction of paid up share capital

   76.   Special resolution for reduction of share capital

   77.   Creditors may object to reduction in capital

   78.   Order confirming reduction and powers of Court in making such order

   79.   Lodgment of order and issue of replacement certificate of share capital

   80.   Liability of members in respect of reduced shares

   81.   Offence of concealing name of creditor

DIVISION 4.4—RESTRICTIONS ON FINANCIAL ASSISTANCE

   82.   Restrictions on financial assistance in acquisition of shares

   83.   Relaxation of restrictions for private companies

 

DIVISION 4.5—MISCELLANEOUS

   84.   Dividends may be paid only out of profits

   85.   Exemption from property transfer tax

PART V
DEBENTURES AND CHARGES

DIVISION 5.1—DEBENTURES

   86.   Issue of debentures

   87.   Documents of title to debentures

   88.   Trustees for debenture holders

   89.   Eligibility for appointment as trustee for debenture holders

   90.   Right to copies of trust deed

   91.   Unsecured debentures to be so described

   92.   Register of debenture holders

   93.   Meetings of holders of debentures secured by a trust deed

   94.   Meetings of other debenture holders

   95.   Re-issue of redeemed debentures

DIVISION 5.2—CHARGES

   96.   Charge to secure fluctuating amount

   97.   Company’s register of charges

   98.   Registrar’s register of charges

   99.   Registration of charges by companies

   100.   Certificate to be issued by Registrar

   101.   Priorities

   102.   Entries of satisfaction and release of property from charge

   103.   Variation of registered charge

   104.   Registration of enforcement of security

   105.   Endorsement of registration on debentures of a series

   106.   Charges in favour of the State

DIVISION 5.3—RECEIVERS

   107.   Application of Division

   108.   Appointment of receiver by Court

   109.   Notification of appointment of receiver

   109A.   Statement of company's affairs

   109B.   Offences relating to reports

   110.   Payment of preferential creditors

   111.   Eligibility for appointment as receiver

   111A.   Remuneration of a receiver

   112.   Receivers appointed by the Court.

   113.   Receivers appointed otherwise than by the Court

   114.   Liabilities of receivers on contracts

   115.   Fact that receiver has been appointed to appear on correspondence

   116.   Statement of affairs and accounts where receiver of undertaking appointed

   117.   Accounts of receivers

   118.   Reports by receivers

   118A.   Vacation of office of receiver

PART VI
PUBLIC ISSUE OF SHARES, ETC.

DIVISION 6.1—INTERPRETATION

   119.   Meaning of “invitation to the public”

   120.   Offer of sale deemed to be made by the company

   121.   First publication of a prospectus

 

DIVISION 6.2—INVITATIONS TO THE PUBLIC AND PROSPECTUSES

   122.   Restrictions on invitations to the public to acquire shares and debentures

   123.   Prospectus required for invitations to the public to purchase share or debentures

   124.   Contents of prospectus

   125.   Expert’s consent

   126.   Registration of prospectuses

   127.   Over-subscription in debenture issue

   128.   Reference to stock exchange listing in prospectus-allotment of shares

   129.   Civil liability for misstatements or omissions in prospectus

   130.   Offence of misstatement or omission in prospectus

   131.   Stop trading order

   132.   Waiting period

   133.   Withdrawal of application after waiting period

   134.   Allotment and minimum subscription

   135.   Statement in lieu of prospectus

   136.   Prohibition of waiver and notice clauses

PART VII
MEETINGS AND RESOLUTIONS

   137.   Interpretation

   138.   Annual general meeting

   139.   Extraordinary general meetings

   140.   Class meetings

   141.   Requisition of a general meeting

   142.   Entitlement to receive notice of meetings

   143.   Length of notice for convening a meeting

   144.   Power of Court to order meeting

   145.   Place of meetings

   146.   Attendance at meetings

   147.   Conduct of meetings and voting

   148.   Chairman’s declaration as to result of a vote

   149.   Right to demand a poll

   150.   Voting on a poll

   151.   Proxies

   152.   Representation of bodies corporate and unincorporated associations at meetings

   153.   Circulation of members’ resolutions and supporting circulars

   154.   Circulation of members’ circulars

   155.   General provisions in regard to members’ circulars

   156.   Ordinary extraordinary and special resolutions

   157.   Written resolutions for private companies

   158.   Registration of copies of certain resolutions

   159.   Date of certain resolutions

   160.   Minutes of proceedings of meetings of company and of creditors

   161.   Inspection of minute books

PART VIII
ACCOUNTS, AUDIT AND ANNUAL RETURNS

DIVISION 8.1—ACCOUNTS

   162.   Accounting records to be kept

   163.   Financial year of holding company and subsidiary

   164.   Annual accounts to be prepared after each financial year

   165.   Group accounts

   166.   Delays in preparing group accounts

   167.   Annual accounts to include amounts paid to directors

   168.   Annual accounts to include particulars of loans to officers

   169.   Director to make disclosure of loans and receipts

   170.   Balance sheet to be signed by directors

DIVISION 8.2—AUDITORS

   171.   Appointment of auditors

   172.   Qualifications of auditor

   173.   Auditors’ rights and duties and auditors’ report

   174.   Circumstances in which accounts may include the auditors’ report or directors’ report

 

DIVISION 8.3—THE DIRECTORS’ REPORT

   175.   Interpretation

   176.   Directors’ report to be attached to balance sheet

   177.   General matters in directors’ report

   178.   Where a company carries on more than one kind of business, attribution of turnover and profitability

   179.   Average number by the month of a company’s employees and amount, by the year, of their wages

   180.   Particulars of gifts and donations

   181.   Particulars of exports

DIVISION 8.4—PROVISION OF ACCOUNTS AND REPORTS TO MEMBERS

   182.   Circulation of annual accounts

   183.   Tabling of accounts

DIVISION 8.5—ANNUAL RETURNS

   184.   Annual return to be made to the Registrar

   185.   Annual return to be made by a public company

   186.   Documents to be annexed to annual return of a public company

   187.   Annual return to be made by a private company

   188.   Additional certificates to be lodged by a private company

   188A.   Filing of "no change" return

   188B.   Filing of returns by company in liquidation

   189.   Offence relating to annual return

   189A.   Power to strike out name of company from register

PART IX
MANAGEMENT AND ADMINISTRATION

   190.   Registered office and postal address

   191.   Registered records office

   192.   Records and registers of a company

   193.   Inspection by members and others

   194.   Publication of name of company

   195.   Seal of company

   196.   Official seal for use abroad

   197.   Form of contracts and instruments

   198.   Bills of exchange and promissory notes

   199.   Execution of deeds abroad

   200.   Service of documents on company

   201.   Service of documents by company

   202.   Liability of company not affected by officer’s fraud or forgery

 

PART X
DIRECTORS AND SECRETARY

DIVISION 10.1—APPOINTMENT AND POWERS

   203.   The directors of a company

   204.   Company to have at least two directors

   205.   The secretary

   206.   Appointment of directors

   207.   Eligibility of persons to be directors

   208.   Residential requirements of directors

   209.   Director’s share qualification

   210.   Vacation of office of director

   211.   Removal of director

   212.   No directions or instructions to be given to directors by a person not eligible to be a director

   213.   Alternate directors

   214.   Managing director

   215.   Powers and duties of directors

   216.   Limitations on powers of directors

   217.   Proceedings of directors

DIVISION 10.2—INTERESTS OF DIRECTORS

   218.   Contracts in which directors are interested

   218A.   Third party declarations

   218B.   Shareholder approval for certain transaction

   219.   Prohibition of loans by companies to directors

   220.   Duties of directors in connection with sales or purchases of the company’s securities

 

DIVISION 10.3—PAYMENTS TO DIRECTORS

   221.   Interpretation

   222.   Payments to directors for loss of office or on transfer of undertaking

   223.   Payments to directors in connection with takeover bids

 

DIVISION 10.4—REGISTERS

   224.   Register of directors and secretaries

   225.   Register of shares and debentures held by or in trust for directors and secretary

   226.   Registration of particulars of directors and secretaries

 

DIVISION 10.5—MISCELLANEOUS

   227.   Where one director is named in letters, etc. all are to be named

   228.   Limited company may have directors with unlimited liability

   229.   Avoidance of acts in dual capacity as director and secretary

   230.   Restraining fraudulent persons from managing companies

   231.   Prohibition of assignment of offices

   232.   Validity of acts of officers

   233.   Company may not indemnify officers

PART XI
SCHEMES OF ARRANGEMENT, TAKE-OVERS AND THE PROTECTION OF MINORITIES

   234.   Power to compromise with creditors and members

   235.   Information as to compromises with creditors and members

   236.   Reconstruction and amalgamation of companies

   237.   Power to acquire shares of minority on take-over

   238.   Rights of minority on take-over

   239.   Remedy against oppression

PART XII
FOREIGN COMPANIES

   240.   Interpretation

   241.   Established place of business

   242.   Financial year of a foreign company

   243.   Application of Part to existing foreign companies

   244.   Register of foreign companies

   245.   Registration of a foreign company

   246.   External company must register if it has an established place of business

   247.   Returns required on alteration of registered particulars

   248.   Foreign company to appoint local director

   249.   Responsibilities of local directors

   250.   Service on foreign company

   251.   Annual accounts of foreign company

   252.   Keeping of accounting records by foreign company

   253.   Name of foreign company

   254.   Publication of name of foreign company

   255.   Registration of charges by foreign company

   256.   Notification of winding-up of foreign company

   257.   Winding-up of foreign company in Zambia

   258.   Cessation of business of foreign company

   259.   Penalties and disabilities

   260.   Invitations to the public relating to foreign companies

   261.   Invitations to the public relating to other external bodies corporate

 

PART XIII
WINDING-UP

DIVISION 13.1—GENERAL

   262.   Interpretation

   263.   Modes of winding-up

   264.   Application of repealed Act

   265.   Liability of members on winding-up

   266.   Limitation of liability

   267.   Nature of liability of a member

   268.   Liability in case of death or bankruptcy of a member

   269.   Jurisdiction to wind-up companies

DIVISION 13.2—WINDING-UP BY THE COURT

   270.   Application of Division

   271.   Persons who may petition for a company to be wound-up by the Court

   272.   Circumstances in which company may be wound-up by Court

   273.   Commencement of winding-up by Court

   274.   Payment of preliminary costs

   275.   Powers of Court on hearing petition

   276.   Power to stay or restrain proceedings against company

   277.   Avoidance of dispositions

   278.   Avoidance of attachments

   279.   Copy of order to be registered

   280.   Provisional liquidator

   281.   Stay of actions

   282.   Appointment and style of liquidators

   283.   Provisions where a person other than official receiver is appointed liquidator

   284.   Control of liquidators by official receiver

   285.   Remuneration of liquidators

   286.   Custody and vesting of company’s property

   287.   Statement of company’s affairs

   288.   Report by liquidator

   289.   Powers of liquidator

   290.   Exercise and control of liquidator’s powers

   291.   Release of liquidator and dissolution of company

   292.   Orders for release or dissolution

   293.   Dissolution of the company

   294.   Meetings to determine whether committee of inspection to be appointed

   295.   Constitution and proceedings of committee of inspection

   296.   Power to stay winding-up

   297.   Appointment of special manager

   298.   Claims of creditors and distribution of assets

   299.   Inspection of books by creditors and members

   300.   Power to summon persons connected with company

   301.   Power to order public examination

   302.   Power to arrest absconding member or officer

   303.   Powers of Court cumulative

DIVISION 13.3—VOLUNTARY WINDING-UP

   304.   Voluntary winding-up

   305.   Circumstances in which a company may be wound-up voluntarily

   306.   Commencement of voluntary winding-up

   307.   Effect of voluntary winding-up

   308.   Declaration of solvency

 

DIVISION 13.4— PROVISIONS APPLICABLE ONLY TO MEMBERS’ VOLUNTARY WINDING-UP

   309.   Provisions applicable only to members’ voluntary winding-up

   310.   Appointment of liquidator

   311.   Duty of liquidator to call creditors

   312.   Staying of members’ voluntary winding-up

 

DIVISION 13.5—PROVISIONS APPLICABLE ONLY TO CREDITORS’ VOLUNTARY WINDING-UP

   313.   Provisions applicable only to creditors’ voluntary winding-up

   314.   Meetings of creditors

   315.   Appointment of committee of inspection

   316.   Fixing of liquidator’s remuneration and vesting of directors powers in liquidator

   317.   Stay of proceedings

DIVISION 13.6—PROVISIONS APPLICABLE TO EVERY VOLUNTARY WINDING-UP

   318.   Provisions applicable to every voluntary winding-up

   319.   Distribution of property of company

   320.   Review by Court of liquidators appointment and remuneration

   321.   Powers and duties of liquidators

   322.   Power of liquidator to accept shares etc., as consideration for sale of property of company

   323.   Annual meeting of members and creditors

   324.   Final meeting and dissolution of company

   325.   When an arrangement is binding on creditors

   326.   Application to Court to have questions determined or powers exercised

   327.   Costs

   328.   Limitation on right to wind-up voluntarily

 

DIVISION 13.7—PROVISIONS APPLICABLE TO EVERY CYCLE OF WINDING-UP

   329.   Provisions applicable to every mode of winding-up

   330.   Meetings of creditors

   331.   Conduct of meetings of creditors

   332.   Eligibility for appointment as liquidator

   333.   Acts of liquidator valid

   334.   General provisions as to liquidators

   335.   Powers of official receiver where no committee of inspection

   336.   Appeal against decision of liquidator

   337.   Notice of appointment and address of liquidator

   338.   Liquidator’s accounts

   339.   Notification that a company is in liquidation

   340.   Books of company

   341.   Investment of surplus funds

   342.   Unclaimed assets

   343.   Expenses of winding-up where assets insufficient

   344.   Meetings to ascertain wishes of members of creditors

   345.   Proof of debts

   346.   Preferential debts

   346A.   Remuneration of liquidator

   347.   Avoidance of preference

   348.   Avoidance of floating charge

   349.   Liquidator’s rights to recover in respect of certain sales to or by company

   350.   Disclaimer of onerous property

   351.   Restriction of rights of creditor as to execution or attachment

   352.   Duties of sheriff as to goods taken in execution

   353.   Offences by officers of companies in liquidation

   354.   Inducement to be appointed liquidator

   355.   Penalty for falsification of books

   356.   Liability where proper accounts not kept

   357.   Liability for contracting debt

   358.   Power of Court to assess damages against delinquent officers

   359.   Prosecution of delinquent officer and members

   360.   Frauds by officers of companies which have gone into liquidation

 

DIVISION 13.8—DISSOLUTION OF DEFUNCT COMPANIES

   361.   Power of Registrar to strike defunct company off register

   362.   Power of Court to declare dissolution of company void

   363.   Registrar to act as representative of defunct company in certain events

 

DIVISION 13.9—WINDING-UP OF OTHER BODIES CORPORATE

   364.   Winding-up of other Zambian bodies corporate

   365.   Winding-up of other foreign bodies corporate

PART XIV
MISCELLANEOUS

DIVISION 14.1—ADMINISTRATION OF ACT

   366.   Administration of Act

   367.   Registrar

   368.   Seal

   369.   Keeping of registers and lodged documents

   370.   Registration of documents

   371.   Extension of time for lodgement

   372.   Documents to be in approved language

   372A.   Notice by Registrar

   373.   Prescribed forms

   374.   Inspection, copies and evidence

   375.   Evidentiary provisions

   376.   Enforcement of duty to make returns

   377.   Fees

   378.   Repealed

   379.   Appeal against a decision of the Registrar

   380.   Collection of information and statistics from companies

 

DIVISION 14.2—PENALTIES AND LIABILITIES

   381.   Penalty for false statements

   382.   Penalty for improper use of “Incorporated” or “Limited”

   383.   Civil liability for fraudulent trading

   384.   Offence of fraudulent trading

   385.   Imprisonment for failure to pay fine

   386.   Costs in actions by limited companies

   387.   Contribution between joint wrongdoers

   388.   Power to grant relief from civil liability

   389.   Exemption from liability for acts or omissions of public officers

 

DIVISION 14.3—TRANSITIONAL PROVISIONS

   390.   Certificates and documents made or lodged under former Act

   391.   Articles of existing companies

   392.   Minimum capital for existing companies

   393.   Registers, accounts, etc., of existing companies

   394.   Registration of charges

   395.   Directors’ reports for existing companies

   396.   Related bodies corporate of existing companies

   397.   Directors of existing companies

   398.   Bodies corporate formed outside Zambia with existing business in Zambia

 

DIVISION 14.4—GENERAL

   399.   Companies subject to other legislation

   400.   Regulations

   401.   Rules of Court

   402.   Repeal of former Act

      FIRST SCHEDULE

      SECOND SCHEDULE

      THIRD SCHEDULE

      FOURTH SCHEDULE

AN ACT

to provide for the formation, management, administration and winding-up of companies; to provide for the registration of charges over the undertakings or properties of companies; to provide for the registration of foreign companies doing business in Zambia; and to provide for matters connected with or incidental to the foregoing.

[12th July, 1994]

Act 26 of 1994,

Act 6 of 1995,

Act 1 of 2000,

Act 12 of 2010,

Act 24 of 2011.

PART I
PRELIMINARY

 

1.   Short title

This Act may be cited as the Companies Act.

 

2.   Interpretation

In this Act, unless the context otherwise requires—

“accounting records” includes—

      (a)   invoices, receipts, orders for the payment of money, bills of exchange, cheques, promissory notes, vouchers and other documents of prime entry; and

      (b)   such working papers and other documents as are necessary to explain the methods and calculations by which the accounts are made up;

“accounts” means profit and loss accounts and balance sheets together with any statements, reports and notes attached to or intended to be read with any of those profit and loss accounts or balance sheets, but, subject to section 174, does not include the auditors’ reports or directors’ reports;

“alternate director” means an alternate director of a company referred to in section 213;

“annual accounts” means the annual accounts referred to in section 164;

“annual general meeting” means an annual general meeting of a company referred to in section138;

“annual return” means the return referred to in section 184, together with any document required by this Act to accompany the return;

“articles” means the articles of a company described in section 7;

“auditors’ report” means the report of the auditors of a company referred to in section 173;

“body corporate” means a company or corporation incorporated under or by virtue of the laws of Zambia or of any other country, other than a corporation sole;

“book” includes accounts, deed, writing, register, document, accounting record, and any clear record of information, however compiled and whether recorded or stored in written or printed form or by electronic or photographic process or otherwise;

“branch register” means a branch register of a company established under section 51;

“capital redemption reserve” means the reserve referred to in section 60;

“certificate of incorporation” means a certificate of incorporation of a company issued by the Registrar under section 10, or a replacement of such a certificate issued under this Act;

“certificate of share capital” means a certificate of share capital of a company issued by the Registrar under section 10, or a replacement of such a certificate issued under this Act;

“certified copy” means a copy of a document of a company which has endorsed thereon or annexed thereto—

      (a)   a certificate by a notary public; or

      (b)   a declaration made and signed by an officer of the company or by some person interested therein otherwise than on behalf of the company;

to the effect that it is a true and complete copy of the original, together with, in the case of an original in a language other than English, an English translation similarly certified to the effect that it is an accurate translation of the original;

“charge” means a charge created in any way and includes—

      (a)   mortgage;

      (b)   an agreement to give or execute a charge or mortgage whether on demand or otherwise; and

      (c)   until such time as the whole of the purchase price is paid, an agreement for sale and purchase of land under which the seller remains in occupation;

“class meeting” means a meeting of those members of a company who, under the articles, belong to a particular class;

“committee of inspection” means a committee of inspection appointed in the course of a winding-up under section 295 or 315;

“company” means—

      (a)   a company incorporated under this Act; or

      (b)   subject to section 4 and Division 14.3, an existing company;

“company limited by guarantee” means a company incorporated as such, being a company satisfying section 19;

“company with share capital” means a public company, a private company limited by shares or an unlimited company;

“Court” means the High Court for Zambia;

“creditors’ voluntary winding-up of” means a voluntary winding-up with respect to which no declaration of solvency was made in accordance with section 308;

“current liability”, means a liability that would in the ordinary course of events be payable within twelve months after the end of the financial year to which the accounts or group accounts concerned relate;

“debenture” means a document issued by a body corporate that evidences or acknowledges a debt of the body corporate, whether or not it constitutes a charge on property of the body corporate, in respect of money that is or may be deposited with or lent to the body corporate, other than a document of the following kinds—

      (a)   a document acknowledging a debt incurred by the body corporate in respect of money that is or may be deposited with or lent to the body corporate by a person—

      (i)   in the ordinary course of a business carried on by the person; and

      (ii)   in the ordinary course of such business of the body corporate as is not part of a business of borrowing money and providing finance;

      (b)   a document issued by a bank in the ordinary course of its banking business that evidences or acknowledges indebtedness of the bank arising in the ordinary course of that business;

      (c)   a cheque, order for the payment of money or bill of exchange;

      (d)   a document of a kind prescribed, and in the circumstances prescribed in the regulations for the purposes of this paragraph;

and includes—

      (a)   a unit of a debenture;

      (b)   debenture stock; and

      (c)   bonds and any other securities issued by a company, whether constituting a charge on the assets of the company or not;

“debenture holder” includes a debenture stockholder;

“declaration of guarantee” means a declaration of guarantee made under section 19;

“declaration of solvency” means a declaration made in accordance with section 308;

“default” means, in reference to a person who is “in default,” that the person willfully authorised or permitted an act or omission that constitutes a contravention by a body corporate of the provision of this Act in which the expression appears;

“designating number” means the number assigned to a company or foreign company by the Registrar for the purposes of identification;

“director” means a person appointed as a director of a company under section 206; and “the directors” means the directors acting collectively as described in section 203;

“director- report” means the report by the directors of a company referred to in section 176;

“document” includes—

      (a)   any paper or other material on which there is writing or printing or on which there are marks, figures, symbols or perforations having a meaning for persons qualified to interpret them;

      (b)   a disc or tape or other article, or any material, from which sounds, images, writings or messages are capable of being reproduced with or without the aid of any other article or device;

and without limiting the generality of the foregoing, includes any summons, order and other legal process and any notice;

“equity share” means a share comprised in the equity share capital of a body corporate;

“equity share capital” means the issued share capital of a body corporate, excluding any part thereof which neither as respects dividends nor as respects capital carries any right to participate beyond a specified amount in a distribution;

“executive director” means a director to whom has been delegated any of the powers of the directors to direct and administer the business and affairs of the company;

“executive officer” means a person, by whatever name called and whether or not a director of a body corporate, who is concerned, or takes part, in the management of the body corporate;

“existing company” means a body corporate which immediately prior to the commencement of this Act was a company under the former Act;

“expert” includes an engineer, valuer, accountant, assayer, and any other person whose profession or calling gives authority to a statement by the person on the subject matter concerned;

“extraordinary general meeting” means a general meeting of a company that is not an annual general meeting;

“extraordinary resolution” means an extraordinary resolution for the purposes of section 156;

“financial year”

      (a)   in relation to a company, means the financial year of the company under section 42;

      (b)   in relation to a foreign company, means the financial year of the foreign company under section 242; and

      (c)   in relation to any other body corporate, means a period in relation to which the body corporate, in conformity with the law of the place of its incorporation, produces accounts;

“former Act” means the Companies Act repealed by section 402;

“former name” does not include—

      (a)   a name changed or disused before the person bearing the name attained the age of eighteen years;

      (b)   a name changed or ceased to be used more than twenty years previously; or

      (c)   the name by which a married woman was known prior to her marriage;

“general meeting” means an annual general meeting or an extraordinary general meeting;

“general accounts” means the accounts of a group of companies referred to in section 165;

“group of companies” means a company that is a holding company together with all its subsidiaries;

“holding company” means a body corporate that is a holding company under section 43;

“invitation to the public” means an invitation described in section 119;

“limited company” means a company limited by shares or a company limited by guarantee;

“liquidator” includes a provisional liquidator;

“managing director” means the managing director of a company appointed under section 214;

“member” means a member of a company under section 45;

“members voluntary winding-up” means a voluntary winding-up with respect to which a declaration of solvency was made in accordance with section 308;

“monetary unit” means an amount of one kwacha;

“non-current liability” means a liability that is not a current liability;

“number”, in relation to shares, includes an amount of stock;

“officer” includes—

      (a)   a director, secretary or executive officer of a body corporate;

      (b)   a local director of a foreign company;

      (c)   a receiver of any part of the undertaking of a body corporate appointed under a power contained in any instrument; and

      (d)   a liquidator of a body corporate appointed by the members in a voluntary winding-up;

but does not include—

      (i)   a receiver of any part of the undertaking of a body corporate appointed by the Court;

      (ii)   a liquidator of a body corporate appointed by the Court or by the creditors of the body corporate; or

      (iii)   an auditor of a body corporate;

“official receiver” means—

      (a)   an official receiver appointed under the Bankruptcy Act; or

      (b)   an officer appointed for the purpose by the Minister, if no such official receiver is appointed;

“ordinary resolution” means an ordinary resolution for the purposes of section 156;

“prescribed” means prescribed in the regulations made under this Act;

“private company” means a private company limited by shares, a company limited by guarantee or an unlimited company;

“private company limited by shares” means a company incorporated as such, being a company satisfying section 17;

“profit and loss account” includes income and expenditure account, revenue account or any other account showing the results of the business of a company for a period;

“public company” means a company incorporated as such, being a company satisfying section 14;

“receiver” includes an official receiver and a receiver and manager; and any reference to a receiver of the property of a company includes a reference to a receiver of part only of that property and to a receiver only of the income arising from that property, or from part thereof;

“register of foreign companies” means the register referred to in section 244;

“register of liquidators” means the register of liquidators referred to in subsection (4) of section 132;

[Ins by s 2 of Act 24 of 2011.]

“register of receivers” means the register of receivers referred to in subsection (3) of section 111;

[Ins by s 2 of Act 24 of 2011.]

“registered accountant” means a registered accountant for the purposes of the Accountants Act;

“registered member” means a person registered as a member of a company under section 48;

“registered office” means—

      (a)   in relation to a company, the registered office of the company under section 190; and

      (b)   in relation to a foreign company, the registered office of the company under section 245;

“registered records office” means the registered records office of a company referred to in section 191;

“Registrar” means the person appointed as Registrar under section 14 of the Patents and Companies Registration Agency Act, 2010;

[Subs by s 2 of Act 12 of 2010.]

“related” means related for the purposes of section 43;

“resolution for reducing share capital” means a resolution described in section 76;

“seal” means the common seal of a company or other body corporate;

“secretary”

      (a)   in relation to a company, means a person appointed as the secretary pursuant to section 205;

      (b)   in relation to a body corporate other than a company, means a person occupying the position of secretary, by whatever name called;

“share” includes stock;

“shareholder” includes a stockholder;

“share premium account” means the share premium account referred to in section 61;

“share warrant” means a share warrant issued pursuant to section 69;

“special resolution” means a special resolution for the purposes of section 156;

“Standard Articles” means the Standard Articles in the First Schedule;

“subsidiary” means a body corporate that is a subsidiary of another body corporate for the purposes of section 43;

“unlimited company” means a company incorporated as such, being a company satisfying section 20;

“waiting period” means the period of seven days after the first publication of a prospectus which has been registered, or such longer period after that date as may be stated in the prospectus as the period before the expiration of which applications, offers, or acceptances in response to the prospectus will not be accepted or treated as binding;

“wholly owned subsidiary” means a body corporate that is the wholly owned subsidiary of another body corporate for the purposes of section 43.

 

3.   Effect of declaration in certified copy.

A declaration made for the purposes of paragraph (b) of the definition of certified copy in section 2 shall be deemed to be a statutory declaration.

 

4.   Application of Act to existing companies

Subject to this Act, this Act applies to an existing company as if it had been duly incorporated under this Act as—

      (a)   a public company, if it was a public company under the former Act;

      (b)   a private company limited by shares, if it was a private company limited by shares under the former Act; or

      (c)   a company limited by guarantee, if it was a private company limited by guarantee under the former Act.

 

5.   Prohibition of large partnerships

   (1) Subject to this section, an association or partnership that—

      (a)   consists of more than twenty persons; and

      (b)   is not a body corporate;

shall not carry on any business for gain by the association or partnership or individual members of the association or partnership.

   (2) Sub-section (1) shall not apply to a partnership—

      (a)   formed for the purpose of carrying on a prescribed profession or calling; and

      (b)   having not more than the number of partners prescribed for the purposes of that profession.

   (3) If an association or partnership contravenes this section, each member of the association or partnership shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding five hundred monetary units.

PART II
INCORPORATION AND MODIFICATION OF COMPANIES

 

DIVISION 2.1—INCORPORATION

 

6.   Application for incorporation

   (1) Subject to this Act, two or more persons associated for any purpose may incorporate a company by subscribing their names to an application for incorporation in the prescribed manner and form upon payment of the prescribed fee.

   (2) Subject to subsection (3), an individual shall not subscribe to an application for incorporation if the person—

      (a)   is under eighteen years of age;

      (b)   is an undischarged bankrupt under the laws of Zambia;

      (c)   subject to an order by the court, is an undischarged bankrupt under the laws of another country;

      (d)   is of unsound mind and has been declared to be so by the court or a court of competent jurisdiction of another country; or

      (e)   has, in the last five years prior to the application, been convicted of an offence involving fraud or dishonesty in Zambia or elsewhere.

   (3) The incorporation of a company shall not be invalid by reason only that an individual or individuals subscribed to the application for incorporation in contravention of subsection (2).

[S 6 subs by s 3 of Act 24 of 2011.]

 

7.   The articles of a company

   (1) A company may have articles regulating the conduct of the company.

   (2) The articles may contain restrictions on the business that the company may carry on.

   (3) Where a provision in the articles is inconsistent with this Act or any other written law, the provision is invalid to the extent of the inconsistency.

   (4) The articles of a company may adopt the regulations of the Standard Articles, or any specified regulations thereof.

   (5) The articles of a public company or a private company limited by shares shall be deemed to have adopted the regulations of the Standard Articles except insofar as the articles exclude or modify those regulations.

   (6) The articles of a company shall be divided into paragraphs numbered consecutively.

 

8.   Amendment of articles

   (1) Subject to this Act, and to its articles, a company may amend its articles if it passes a special resolution approving the amendment.

   (2) If a company passes a special resolution approving the amendment of its articles, it shall within twenty-one days after the date of the resolution lodge a copy of the resolution with the Registrar together with a copy of each paragraph of the articles affected by the amendment, in its amended form.

   (3) The articles have effect in their amended form on and from the day of their lodgment with the Registrar or such later date as may be specified in the resolution.

   (4) If a company fails to comply with sub-section (2), the company, and each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding three monetary units for each day that the failure continues.

 

9.   Statutory declaration as to compliance with the Act

   (1) An application for incorporation shall be accompanied by a statutory declaration that the requirements of this Act in respect of registration and of matters precedent and incidental thereto have been complied with, made by—

      (a)   a legal practitioner having a practising certificate who was engaged in the formation of the company; or

      (b)   a person named in the application as a first director or secretary of the company.

   (2) The Registrar may accept the declaration as prima facie evidence of compliance.

 

10.   Certificates of incorporation and of share capital

   (1) Where an application for incorporation and the documents referred to in section 6 have been duly lodged, the Registrar shall, subject to this Act, issue a certificate in the prescribed form stating that the company is, on and from the date specified in the certificate, incorporated and that the company is the type of company specified in the application for incorporation.

   (2) If the company has share capital, the Registrar shall, at the same time, issue a certificate stating—

      (a)   the amount of share capital of the company; and

      (b)   the division of the share capital into shares of a fixed amount.

   (3) The Registrar shall keep a copy of each certificate issued under this section, and this Act shall apply to the copies as if they were documents lodged with the Registrar.

 

11.   Incorporation of the company

On and from the date of incorporation specified in the certificate of incorporation, but subject to this Act, there shall be constituted an incorporated company by the name set out in the certificate.

 

12.   Register of companies

   (1) The Registrar shall maintain a register of companies in which is entered, in respect of each company—

      (a)   a chronological record of the prescribed particulars, and of any other particulars which the Registrar thinks fit, in relation to the company; and

      (b)   a record of the documents lodged under this Act in respect of the company, other than documents whose only effect is to change particulars recorded under paragraph (a).

 

DIVISION 2.2—TYPES OF COMPANY

 

13.   Types of company

A company incorporated under this Act shall be—

      (a)   a public company; or

      (b)   a private company being—

      (i)   a private company limited by shares;

      (ii)   a company limited by guarantee; or

      (iii)   an unlimited company

 

14.   Public companies

   (1) A public company shall have share capital.

   (2) The articles of a public company shall state—

      (a)   the rights, privileges, restrictions and conditions attaching to each class of shares, if there are two or more classes; and

      (b)   the authority given to the directors to determine the number of shares in, the designation of, and the rights, privileges, restrictions and conditions attaching to each series in a class of shares, if the class of shares may be issued in series.

   (3) All shares shall rank equally apart from differences due to their being in different classes or series.

   (4) Where a public company is wound-up, a member shall be liable to contribute, in accordance with Part XIII, an amount not exceeding the amount, if any, unpaid on the shares held by him.

   (5) The articles of a public company shall not impose any restriction on the right to transfer any shares of the company other than—

      (a)   a restriction on the right to transfer any shares on which there is unpaid liability; or

      (b)   a restriction on the right to transfer shares issued to directors or other officers or employees exercising any rights or options granted under section 73, or issued in pursuance of any scheme adopted under that section; or

      (c)   a provision for the compulsory acquisition, or rights of first refusal, of shares referred to in paragraph (b), in favour of other members of the company or trustees appointed under any scheme adopted under section 73.

 

15.   …

[S 15 rep by s 3 of Act 12 of 2010.]

 

16.   Private companies

   (1) Subject to this section, the articles of a private company shall limit the number of its members to a specified number, being a number not more than fifty.

   (2) The regulations may provide that the articles of an unlimited company may, subject to any specified conditions, limit the number of its members to a number larger than fifty.

   (3) The articles of a private company shall not impose any restriction on the transferability of shares after they have been issued unless all the shareholders have agreed in writing.

   (4) For the purposes of sub-section (1)—

      (a)   joint holders of shares are counted as one person; and

      (b)   a member is not counted if he is in the employment of the company or of a related body corporate, or if he was a member while previously in the employment of the company or a related body corporate and has been a member continuously since that time.

   (5) If a private company—

      (a)   has more members than permitted by its articles; or

      (b)   invites the public to acquire shares or debentures in the company in contravention of section 122;

the Registrar may give notice to the company requiring the company to give reasons why the company should not be converted into a public company.

   (6) If, one month after the issue of the notice, the contravention concerned has not been rectified, the Court may, on the application of the Registrar, if not satisfied that the contravention was inadvertent and not likely to be repeated, order—

      (a)   that the company shall be deemed to have made an application for conversion to a public company, or conversion to a private company followed by conversion to a public company, as appropriate, and to have passed any resolutions necessary for such an application or applications in the form specified in the order; and

      (b)   that the directors, or any of them, shall be liable for the costs of the application of the Registrar and the conversion of the company.

 

17.   Private companies limited by shares

   (1) The articles of a private company limited by shares shall state—

      (a)   the rights, privileges, restrictions and conditions attaching to each class of shares, if there are two of more classes; and

      (b)   the authority given to the directors to determine the number of shares in, the designation of, and the rights, privileges, restrictions and conditions attaching to each series, if a class of shares may be issued in series.

   (2) All shares shall rank equally apart from differences due to their being in different classes or series.

   (3) Where a private company limited by shares is wound-up, a member shall be liable to contribute, in accordance with Part XIII, an amount not exceeding the amount, if any, unpaid on the shares held by him.

 

18.   …

[S 18 rep by s 4 of Act 12 of 2010.]

 

19.   Companies limited by guarantee

   (1) Each subscriber to an application for incorporation as a company limited by guarantee shall sign a declaration of guarantee specifying the amount that he undertakes to contribute to the assets of the company in the event of its being wound-up.

   (2) Each subscriber to the application for incorporation shall, on the incorporation of the company, be a member of the company.

   (3) Subject to any additional requirements imposed by the articles of the company—

      (a)   a person shall become a member of the company, on approval by a resolution of the company, by signing a declaration of guarantee and delivering it to the company; and

      (b)   a person shall cease to be a member on delivering to the company a signed notice in writing to that effect.

   (4) Within seven days after a person becomes a member or ceases to be a member of the company, the company shall lodge with the Registrar a notice in the prescribed form, together with, in the case of a person’s becoming a member, the declaration of guarantee by the person.

   (5) The company shall not carry on business for the purpose of making profits for its members or for anyone concerned in its promotion or management.

   (6) Where a company limited by guarantee is wound-up, a member shall be liable to contribute, in accordance with Part XIII, an amount not exceeding the amount specified in the declaration of guarantee made by him.

   (7) If the company carries on business for the purpose of making profits for its members or for anyone concerned in its promotion or management—

      (a)   those officers and members of the company who willfully authorise or permit the business to be carried on for that purpose shall be jointly and severally liable for the payment and discharge of all debts and liabilities of the company incurred in carrying on the business so authorised or permitted; and

      (b)   each of the officers and members referred to in paragraph (a) shall be guilty of an office, and shall be liable on conviction to a fine of not more than thirty monetary units for each day on which that business is carried on.

   (8) If the company fails to comply with sub-section (4), the company, and each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding three monetary units for each day that the failure continues.

 

20.   Unlimited companies

   (1) An unlimited company shall have share capital and its articles shall state

      (a)   the rights, privileges, restrictions and conditions attaching to each class of shares, if there are two or more classes; and

      (b)   the authority given to the directors to determine the number of shares in, the designation of, and the rights, privileges, restrictions and conditions attaching to each series, if a class of shares may be issued in series.

   (2) All shares shall rank equally apart from differences due to their being in different classes or series.

   (3) Where an unlimited company is wound-up, a member shall be liable to contribute, in accordance with Part XIII, without limitation of liability.

 

DIVISION 2.3—GENERAL PROVISIONS

 

21.   Contractual effect of incorporation

Subject to this Act, the incorporation of a company shall have the same effect as a contract under seal between the company and its members from time to time and between those members themselves, in which they agree to form a company whose business will be conducted in accordance with the application for incorporation, the certificate of share capital from time to time, the articles of the company from time to time, and this Act.

 

22.   Capacity and powers of a company

   (1) A company shall have, subject to this Act and to such limitations as are inherent in its corporate nature, the capacity, rights, powers and privileges of an individual.

   (2) A company shall have the capacity to carry on its business and exercise its powers in any jurisdiction outside Zambia to the extent that the laws of Zambia and of that jurisdiction permit.

   (3) A company shall not carry on any business or exercise any power that it is restricted by its articles from carrying on or exercising, nor exercise any of its powers in a manner contrary to its articles.

 

23.   Validity of acts

No act of a company, including any transfer of property to or by a company, shall be invalid by reason only that the act or transfer is contrary to its articles or this Act.

 

24.   Notice not presumed

No person dealing with a company shall be affected by, or presumed to have notice or knowledge of, the contents of a document concerning the company by reason only that the document has been lodged with the Registrar or is held by the company available for inspection.

 

25.   No disclaimer allowed

A company or a guarantor of an obligation of the company may not assert against a person dealing with the company or with any person who has acquired rights from the company that—

      (a)   any of the articles of the company has not been complied with;

      (b)   a shareholder agreement has not been complied with;

      (c)   the persons named in the most recent annual return or notice under section 226 are not the directors of the company;

      (d)   the registered office of the company is not an office of the company;

      (e)   a person held out by a company as a director, an officer or an agent of the company has no authority to exercise the powers and perform the duties that are customary in the business of the company or usual for such a director, officer or agent;

      (f)   a document issued by any director, officer or agent of the company with actual or usual authority to issue the document is not valid or genuine; or

      (g)   the financial assistance referred to in section 83 or the sale or disposal of property referred to in section 216 was not authorised; except where that person has, or ought to have had by virtue of his position with or relationship to the company, knowledge of the fact asserted.

 

26.   Companies ceasing to have at least two members

   (1) If at any time the number of members of a company is reduced below two and it carries on business for more than six months without at least two members, a member or director of the company who was aware that the business was being carried on with fewer than two members shall be severally liable for the payment of all the debts and liabilities of the company incurred after the end of that period of six months. Companies ceasing to have at least two members.

   (2) The Court, in any proceeding against the member or director or on application being made to it by any person interested, may relieve the member or director either wholly or partly from liability under sub-section (1) on such terms as it thinks fit, if it is satisfied that the member or director had made reasonable efforts to prevent the business from being continued, or that it is otherwise just and reasonable to do so.

   (3) The liability imposed under sub-section (1) shall be in addition to any liability of the company.

 

27.   No increase in a member’s liability or contribution without consent

A member of a company shall be bound by an alteration made in the articles on a date (in this section called the “alteration date”) after the date on which he became a member only to the extent that the alteration does not require him—

      (a)   to take or subscribe for more shares than the number held by him on the alteration date;

      (b)   in any way to increase his liability as at the alteration date; or

      (c)   to contribute to the share capital of the company or otherwise to pay money to it;

unless he agrees in writing, either before or after the alteration date, to be bound thereby.

 

28.   Pre-incorporation contracts

   (1) If a person purports to enter into a contract not evidenced in writing in the name of or on behalf of a company before it comes into existence, the person shall be bound by the contract and entitled to the benefits thereof.

   (2) If a person purports to enter into a contract evidenced in writing in the name of or on behalf of a company before it comes into existence, the person shall be bound by the contract (in this section called “the relevant contract”) and entitled to the benefits thereof except as provided in this section.

   (3) The company may, not later than fifteen months after its incorporation, adopt the contract by an ordinary resolution, and upon the adoption, subject to sub-section (4)—

      (a)   the company shall for all purposes be bound by the contract and entitled to the benefits thereof as if the company had been in existence at the date of the contract and had been a party thereto; and

      (b)   the person who purported to act in the name of or on behalf of the company shall cease to be bound by or entitled to the benefits of the contract.

   (4) Subject to sub-section (5), whether or not the relevant contract is adopted by the company, the other party to the contract may apply to the Court for an order fixing obligations under the contract as joint or joint and several, or apportioning liability between or among the company and the person who purported to act in the name of or on behalf of the company, and upon such application the Court may make any order it thinks just and equitable.

   (5) Sub-section (4) does not apply if the relevant contract expressly provides that the person who purported to act in the name of or on behalf of the company before it came into existence shall not in any event be bound by the contract nor entitled to the benefits thereof.

 

29.   Copies of certificate of incorporation, certificate of share capital and articles to be given to members

   (1) A company shall supply to any member on request copies of—

      (a)   the certificate of incorporation;

      (b)   the certificate of share capital, in the case of a company with share capital; and

      (c)   The articles of the company;

within seven days after receiving payment of the sum of one monetary unit, or such lesser sum as may be prescribed by the company, for each set of copies.

   (2) A company limited by guarantee shall supply to any member on request a list of the members with the amounts guaranteed by each in the declaration of guarantee.

   (3) A copy of the articles supplied under sub-section (1) shall have endorsed on it the registered address, the postal address and the address of the registered records office of the company.

   (4) If a company fails to comply with this section, the company, and each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding three monetary units for each day that the failure continues.

 

DIVISION 2.4—CONVERSION OF A COMPANY FROM ONE TYPE TO ANOTHER

 

30.   Conversion of a private company limited by shares to company limited by guarantee

   (1) A private company limited by shares may be converted into a company limited by guarantee if—

      (a)   there is no unpaid liability on any of its shares;

      (b)   all its members agree in writing to such a conversion;

      (c)   a special resolution amending the articles to satisfy section 19 is passed, if the articles do not satisfy that section; and

      (d)   each member makes a declaration of guarantee.

 

31.   Conversion of private company limited by shares to unlimited company

A private company limited by shares may be converted into an unlimited company if all its members agree in writing to its conversion. Conversion of private company limited by shares to unlimited company.

 

32.   Conversion of company limited by guarantee to company limited by shares or unlimited company

A company limited by guarantee may be converted into a company limited by shares or an unlimited company if—

      (a)   all the members agree in writing—

      (i)   to convert the company into such a company; and

      (ii)   to a share capital for the company and the division thereof into shares of fixed amounts; and

      (b)   each member agrees in writing to take up a specified number of shares.

 

33.   Conversion of unlimited company to private limited company

   (1) An unlimited company may be converted into a private company limited by shares or a company limited by guarantee if—

      (a)   all its members agree in writing to its conversion;

      (b)   a special resolution amending the articles to satisfy section 17 or 19, as appropriate, is passed, if the articles do not satisfy section17 and 19, as appropriate; and

      (c)   each member makes a declaration of guarantee, in the case of conversion to a company limited by guarantee.

   (2) In the case of a conversion to company limited by shares, the special resolution may—

      (a)   increase the nominal amount of the company’s share capital by increasing the nominal amount of each of its shares, subject to the condition that no part of the increased capital shall be capable of being called up except in the event and for the purposes of the company’s being wound-up; or

      (b)   provide that a specified portion of its uncalled share capital shall not be capable of being called up except in the event and for the purpose of the company’s being wound-up.

 

34.   Conversion of public company to private company limited by shares

A public company may be converted into a private company limited by shares if a special resolution is passed that—

      (a)   approves the conversion; and

      (b)   amends the articles to satisfy sections 16 and 17, if the company’s articles do not satisfy those sections.

 

35.   Conversion of private company limited by shares to public company

   (1) A private company limited by shares may be converted into a public company if a special resolution is passed that—

      (a)   approves the conversion; and

      (b)   amends the articles to satisfy section 14, if the company’s articles do not satisfy that section.

 

36.   Method of conversion

   (1) If the requirements of section 30, 31, 32, 33, 34, 35 (in this section called “the conversion section”) are satisfied with respect to a company, the company shall, within twenty-one days after the conversion section’s becoming satisfied, lodge with the Registrar an application in the prescribed form for conversion of the company in accordance with the resolution or agreement, together with the documents referred to in sub-section (4).

   (2) On receiving the application the Registrar shall—

      (a)   issue a replacement certificate of incorporation in the prescribed form worded to meet the circumstances of the case and stating the date of conversion of the company; and

      (b)   make such entries in such registers as he considers appropriate.

   (3) On and from the date stated in the certificate as the date of conversion.

      (a)   the company shall be converted into a company of the status sought;

      (b)   if the company is being converted from a company with share capital to a company limited by guarantee, the shares therein shall be validly surrendered and cancelled notwithstanding section 76;

      (c)   the articles of the company shall be amended in accordance with the documents lodged with the application; and

      (d)   where this Act requires different words to be the last words of the name of a company of the new status, the name of the company shall be changed accordingly.

   (4) The documents to be delivered to the Registrar are the following:

      (a)   the company’s certificate of incorporation;

      (b)   a copy of each paragraph in the articles affected by any amendment, in its amended form;

      (c)   a copy of the special resolution or written agreement by the members referred to in the conversion section;

      (d)   the declarations of guarantee by each member, if the company is being converted to a company limited by guarantee;

      (e)   a statutory declaration by a director and the secretary of the company stating—

      (i)   that the conditions of the conversion section have been complied with; and

      (ii)   that in their opinion the company is solvent;

      (f)   a certificate by the auditors of the company, made not more than three months before the date of the application, that they have investigated the affairs of the company and that the company is solvent at the date of the certificate;

      (g)   certified copies, certified by a director and the secretary of the company, of every balance sheet, profit and loss account, group accounts, directors’ report and auditors’ report sent to the members of the company in the preceding twelve months, if the company is being converted from a public company to a private company and has been incorporated as a public company for more than fifteen months.

   (5) The conversion of the company under this section shall not alter the identity of the company, nor affect any rights or obligations of the company except as mentioned in this section, nor render defective any legal proceedings by or against the company.

   (6) Where an unlimited company is converted to a limited company and is wound-up within three years after the conversion, a member of the company who was a member immediately before the conversion shall not be entitled to a limitation of liability under section 226.

   (7) If the company fails to comply with sub-section (1), the company, and each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding three monetary units for each day that the failure continues.

   (8) If a director, secretary or auditor of a company makes a declaration or certificate for the purposes of sub-section (4) that in his opinion the company is solvent, without having reasonable grounds for the opinion, he shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding five hundred monetary units. Division.

 

2.5—THE NAME OF A COMPANY

 

37.   Name of company

   (1) A public company shall have a name the last word of which is “PLC”.

   (2) Subject to this Division, a private company limited by shares or a company limited by guarantee shall have a name the last word of which is “Limited”.

   (3) The Registrar shall not, without the written consent of the Minister, register as the name of a company a name which in the Registrar’s opinion suggests that the company enjoys the patronage of the President.

[S 37(3) rep by s 4(a) and s 37(4) renumbered as s 37(3) by s 4(b) of Act 24 of 2011.]

   (4) The Registrar may, at the request of persons who intend to form an incorporated company, give an opinion on the acceptability of a proposed name.

[S 37(5) renumbered as s 37(4) by s 4(b) of Act 24 of 2011.]

 

38.   Reservation of name

   (1) A person or persons who propose to form a company may, subject to this section, reserve a name for the company by lodging with the Registrar an application in the prescribed form specifying the name proposed to be reserved (in this section called “the reserved name”).

   (2) If the reserved named is acceptable to the Registrar and the Registrar is satisfied that—

      (a)   the reserved name is a registered business name of the person or persons;

      (b)   the reserved name is the name of an unincorporated association consisting of or represented by the person or persons;

      (c)   the reserved name is a name under which the person or persons are trading or conducting business, or is such a name with minor modifications or additions; or

      (d)   the person is a body corporate other than a company and the reserved name is the name of the body corporate or that name with minor modifications or additions;

the Registrar shall register the name as reserved by the person or persons for a period of three months.

   (3) While the name is so registered—

      (a)   subject to this Act, the person or persons shall be entitled to incorporate a company under the name; and

      (b)   the Registrar shall treat the proposed name as the name of a company incorporated by the person or persons for the purposes of determining the acceptability of any other name as the name of a company.

 

39.   Registration may allow company to dispense with “Limited” in its name

   (1) The Registrar may, on the application of a company limited by guarantee, grant the company written permission to omit the word “Limited” from its name for the purposes of this Act apart from this Part.

   (2) The Registrar may grant the permission on such conditions as he thinks fit, and those conditions shall be binding on the company and shall, if the Registrar so directs, be inserted in the articles of the company.

   (3) The Registrar may revoke the permission at any time, after giving written notice to the company of his intention to do so and considering any objections of the company.

 

40.   Change of name

   (1) A company may pass a special resolution to change its name.

   (2) Within twenty-one days after the date of the resolution, the company shall notify the Registrar in the prescribed form that the company intends to change its name to the name specified in the resolution (in this section called the “new name”).

   (3) The Registrar, after considering the new name, shall notify the company that—

      (a)   the new name is acceptable; or

      (b)   in the opinion of the Registrar, the new name of a company would be likely to cause confusion with the name of another company or is otherwise undesirable, and that the Registrar will not register the new name.

   (4) If the new name is acceptable, the company shall, within twenty-one days after receiving the notice of the fact, lodge with the Registrar—

      (a)   the company’s certificate of incorporation; and

      (b)   a copy of the resolution.

   (5) On receiving the documents referred to in sub-section (4), the Registrar shall enter the new name on the Register in place of the former name, and shall issue a replacement certificate of incorporation worded to meet the circumstances of the case.

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   (6) A certificate under this section shall be conclusive evidence of the alteration to which it relates.

   (7) A change of name by a company shall not affect any rights or obligations of the company nor render defective any legal proceedings that could have been continued or commenced against it by its former name, and any such legal proceedings may be continued or commenced against it by its new name.

 

41.   Power of Registrar in relation to name

   (1) The Registrar may refuse to register a proposed name of a company where it appears to the Registrar that—

      (a)   the name, if registered, is likely to cause confusion with a well known name or the name of an existing company;

      (b)   the registration is sought to prevent another person who is legitimately entitled to use the name from using the name; or

      (c)   the registration of the name is otherwise undesirable or not in the public interest,

and the Registrar may direct the Company to change its name in accordance with this Division.

   (2) The Registrar shall, where the Registrar refuses to register a proposed name of a company, notify the applicant of the reasons for the refusal within seven days of the decision.

   (3) The Registrar may, where a company does not change its name after receiving a direction under subsection (1), within 50 days or such longer period as the Registrar may allow, in writing, register the designating number of the company, together with the word “Limited” or “PLC” if required by section 37, as the name of the company, and shall issue a new certificate of incorporation for the company worded to meet the circumstances of the case.

   (4) A change of name under subsection (1) shall not affect any rights or obligations of the company nor render defective any legal proceedings that could have been continued or commenced against it by its former name, and any such legal proceedings may be continued or commenced against it by its new name.

   (5) Where the Registrar directs a company to change its name, compensation shall no be payable in respect of the name ordered to be charged.

   (6) In this section, “well known name” means a name associated generally with a company, whether within or outside the Republic, and in respect of which confusion is likely to arise if registered by another company, other than the company generally known by that name.

[S 41 subs by s 5 of Act 24 of 2011.]

 

DIVISION 2.6—MISCELLANEOUS

 

42.   Financial year of a company

   (1) For the purposes of this Act, the “financial year” of a company is the period, whether or not a period of twelve months, that begins on one accounting date of the company and ends on the day before the next.

   (2) The first “accounting date” of a company is the date of its incorporation.

   (3) Subject to this section, the subsequent accounting dates of a company are—

      (a)   the date specified in the application for its incorporation as the date on which the second financial year of the company will begin, and anniversaries of that date, if the application for incorporation specified such a date; or

      (b)   the anniversaries of the date of its incorporation, if the application for incorporation did not specify such a date.

   (4) A company may change an accounting date by lodging a notice of the change in the prescribed form with the Registrar, provided that—

      (a)   the notice is lodged with the Registrar and notice of the change is given to each registered member and to the auditors (if any) of the company not later than the accounting date previous to the one to be changed; and

      (b)   the change does not result in a financial year’s being longer than fifteen months.

   (5) Where a company changes an accounting date under this section, the subsequent accounting dates of the company are, unless changed under this section, the anniversaries of that changed date.

 

43.   Holding companies, subsidiaries and related companies

   (1) For the purposes of this section, “company” means a body corporate, whether or not a company for other purposes of this Act and whether or not incorporated in Zambia.

   (2) For the purposes of this Act, a company is a “holding company” of another company if the other company is a subsidiary of it under sub-section (3).

   (3) For the purposes of this Act, the “subsidiaries” of a company (in this sub-section called “the holding company”) are the following companies:

      (a)   any company in which the holding company holds—

      (i)   more than half in nominal value of the equity share capital, if the company is incorporated in a jurisdiction that has nominal value of share capital; or

      (ii)   more than half in value of the equity share capital, if the company is incorporated in a jurisdiction that does not have nominal value of share capital;

      (b)   any company of which the holding company is a member and the composition of whose board of directors is controlled by the holding company;

      (c)   any subsidiary under paragraph (a) or (b) of a company which is itself a subsidiary of the holding company under paragraph (a) or (b) or by the repeated application of this paragraph.

   (4) For the purposes of this Act, the “wholly owned subsidiaries” of a holding company are the following companies:

      (a)   any company with no members other than the holding company and its nominees;

      (b)   any company with no members other than-

      (i)    the holding company;

      (ii)   nominees of the holding company;

      (iii)   companies which are themselves wholly owned subsidiaries of the holding company under paragraph (a) or the repeated application of this paragraph;

      (iv)   nominees of companies referred to in sub-paragraph (iii).

   (5) For the purposes of this Act, a company is “related” to a second company if—

      (i)   the first company is a subsidiary of the second;

      (ii)   the first company is a holding company of the second; or

      (iii)   both companies are subsidiaries of a third company.

   (6) For the purposes of this section, the composition of a company’s board of directors is controlled by another company if, and only if, in relation to each of more than half of the directorships—

      (a)   the other company is able, without the consent or concurrence of any other person, to appoint or remove the holder of the directorship; or

      (b)   a person’s appointment to the directorship follows necessarily from his appointment as director of the other company.

   (7) In determining whether the composition of a company’s board of directors is controlled by another company—

      (a)   subject to this sub-section, any shares held or power exercisable by a person who is the effective nominee of the other company shall be deemed to be held or exercisable by the other company;

      (b)   any shares held or power exercisable in a fiduciary capacity shall be disregarded;

      (c)   any shares held or power exercisable by any persons by virtue of the provisions of any debentures of the company or of a trust deed for securing any issue of such debentures shall be disregarded; and

      (d)   any shares held or power exercisable by a person only by way of security for the purposes of a transaction entered into in the ordinary course of business shall be disregarded if the ordinary business of the person includes the lending of money.

   (8) For the purposes of this section, a member of a company is the effective nominee of another company if he is—

      (a)   a nominee of the other company;

      (b)   a subsidiary of the other company;

      (c)   a person who is the effective nominee under paragraph (a) or (b) of a person who is himself an effective nominee of the other company under paragraph (a) or (b) or by the repeated application of this paragraph.

 

44.   Registration of related bodies corporate

   (1) A company shall, within one month after another body corporate has become related to it, lodge with the Registrar a notice of that fact together with particulars identifying the body corporate.

   (2) If a company fails to comply with this section, the company, and each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding three monetary units for each day that the failure continues.

PART III
MEMBERSHIIP AND REGISTERS

 

45.   Membership of company

   (1) The members of a company with a share capital shall be the shareholders and stockholders of the company.

   (2) On the incorporation of a company with share capital and until the first allotment of shares by the company, the members shall be those subscribers to the application for incorporation who have not given the company written notice of their ceasing to be members.

   (3) The members of a company limited by guarantee shall be the persons who are members in accordance with section 19.

 

46.   Membership by company of itself or of holding company

   (1) Except as provided in this section, a company shall not be a member of itself or of a body corporate which is its holding company.

   (2) A company may, in the capacity of personal representative or trustee, be a member of itself or a body corporate which is its holding company unless it or the holding company or a subsidiary of either of them has a beneficial interest in the membership.

   (3) A company may be a member of itself or a body corporate which is its holding company by way of security for the purposes of a transaction entered into in the ordinary course of a business which includes the lending of money, but in that case shall have no right to vote at meetings of the holding company or of any class of members thereof.

   (4) This section shall not prevent a subsidiary which was a member of a body corporate before it became a subsidiary of the body corporate from continuing to be a member.

   (5) This section shall not prevent a subsidiary which was, immediately before the commencement of this Act, a member of its holding company from continuing to be a member.

   (6) A subsidiary that continues to be a member of its holding company under sub-section (4) or (5)—

      (a)   shall have no right to vote at meetings of the holding company or any class of members thereof;

      (b)   shall not acquire further shares in the holding company except upon a general issue of fully-paid bonus shares, if the holding company is a company with share capital; and

      (c)   shall not, as a member, increase any interest in, or liability in relation to, the holding company, if the holding company is a company limited by guarantee.

   (7) For the purposes of this section, a company is deemed to be a member of a body corporate if a nominee of the company is a member.

 

47.   Offence if membership of private company exceeds number specified in articles

If a private company fails to comply with the provisions of its articles on the number of its members, the company, and each officer and member in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding five hundred monetary units.

 

48.   Register of members

   (1) A company shall maintain a register of its members and enter therein the following particulars—

      (a)   the full name and address of each member of which it has received notice;

      (b)   the occupation of the member, if the member is an individual;

      (c)   the fact that the member is a body corporate or an unincorporated association, as the case may be, if the member is not an individual;

      (d)   the date on which the company received the notice;

      (e)   if the company has share capital—

      (i)   the shares held by each member with the share numbers (if any); and

      (ii)   the amount paid or agreed to be considered as paid on the shares of each member;

      (f)   the amount that each member has guaranteed in his declaration of guarantee, if the company is limited by guarantee;

      (g)   the date on which the company received notice of any person’s ceasing to be a member.

   (2) If the company has more than fifty members, the register shall contain an index of the names of the members in a form that enables the account of each member to be found readily.

   (3) If the company fails to comply with this section, the company, and each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding ten monetary units for each day that the failure continues.

   (4) If the company fails to comply with this section because of the default of an agent charged with maintaining the register, the agent shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding ten monetary units for each day that the failure continues.

 

49.   Inspection of register

   (1) Subject to this Part, the register and index of the names of the members of the company shall be available for inspection by any member of the company or other person in accordance with section 193.

   (2) A company may, on giving notice by advertisement in a newspaper circulating generally throughout Zambia, close for any time or times not exceeding in total thirty days in each year the register of members of the company or the part thereof relating to members holding shares of any class.

 

50.   Power of Court to rectify register

   (1) If—

      (a)   a company fails to correct an error in its register of members; or

      (b)   an error in the register causes a loss to a person;

the person aggrieved or any member of the company may apply to the Court for an order that the register be rectified and the person aggrieved may apply for an order that the company pay compensation for the loss.

   (2) If an application is made under this section, the Court may make such orders as it thinks fit.

   (3) On an application under this section, the Court may decide any question relating to the title of any person who is a party to the application to have his name entered in or removed from the register, whether the question arises between members or alleged members, or between members or alleged members on the one hand and the company on the other hand, and generally may decide any question necessary or convenient to be decided for rectification of the register.

   (4) If an order is made under this section, the company shall, within twenty-one days after the making of the order, lodge a certified copy of the order with the Registrar.

   (5) If the company fails to comply with sub-section (4), the company, and each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding three monetary units for each day that the failure continues.

 

51.   Company may keep branch register

   (1) A company with share capital may, subject to its articles, keep a part of its register of members (in this Act called a “branch register”), being the part relating to members resident in a specified foreign country or countries, at a place in the foreign country, or one of the foreign countries.

   (2) The shares registered in a branch register shall be distinguished from the other shares of the company while they are held by members resident in a country to which the branch register applies.

   (3) The company shall arrange for the information as to any entry in a branch register to be transmitted to its registered records office as quickly as practicable, and shall maintain there, as part of its register of members, a duplicate of the branch register.

   (4) The company shall lodge with the Registrar notice of the physical address of the office where any branch register is kept, and of any change in that address and, if it is discontinued, of its discontinuance, and any such notice shall be given within twenty-one days after the initial keeping of the register in that office or of the change or discontinuance, as the case may be.

   (5) A branch register shall be maintained and shall be open for inspection in the manner required in sections 40 and 49, or as nearly as is practicable, except that the advertisement before closing the register shall be inserted in some newspaper circulating generally in the country where the branch register is kept.

   (6) If a company fails to comply with sub-section (3), (4) or (5), the company, and each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding ten monetary units for each day that the failure continues.

 

52.   Duties in case of securities registered in branch register

An instrument of transfer of any share registered in a branch register shall be deemed to transfer property situated outside Zambia, and, unless executed in any part of Zambia, shall be exempt from any duty chargeable in Zambia.

 

53.   Branch registers of foreign companies kept in Zambia

The regulations may provide that sections 48 and 49 shall, subject to any modifications and adaptations specified in the regulation, apply to a register of members kept in Zambia by a specified body corporate, or class of bodies corporate, incorporated under the law of a foreign country or countries.

 

54.   No notice of trust

   (1) Subject to section 70, no notice of any trust, express, implied or constructive, need be entered on the register of members of a company, or be received by the company or the Registrar.

   (2) A company shall not be bound to see to the execution of any trust, whether express, implied or constructive in respect of any of its shares.

   (3) A receipt given by a member in whose name a share stands in the register of members shall be a valid and binding discharge of the company for any dividend or other money payable in respect of such share, whether or not notice of any trust relating to the share has been given to or received by the company.

 

55.   Register to be evidence

The register of members shall be prima facie evidence of any matter by this Act directed or authorised to be inserted therein.

PART IV
SHARES AND SHARE CAPITAL

 

DIVISION 4.1—INTERPRETATION

 

56.   Interpretation

In this Part, unless the context otherwise requires, “company” means a company with share capital.

 

DIVISION 4.2—ISSUE AND TRANSFER OF SHARES

 

57.   Nature and transferability of shares

   (1) The shares or other interest of a member in a company shall be personal estate and movable property, transferable by a written transfer in a manner provided by the articles of the company or by this Act.

   (2) If an instrument of transfer of fully paid shares in a company is in the prescribed form, executed by both the transferor and the transferee, or by persons duly authorised on behalf of the transferor or the transferee, the company shall not refuse registration of the transfer on the ground of form.

   (3) Sub-section (2) shall not affect—

      (a)   the validity of any instrument which would be effective to transfer shares apart from that sub-section;

      (b)   any powers of the directors to accept in their discretion an instrument in any other form which may seem to them sufficient; or

      (c)   any right of the directors to refuse to register a person as the holder of shares on any ground other than the form in which those shares purport to be transferred to him.

   (4) Subject to sections 64 and 66 a person who transfers shares in a private company under this section shall notify the Registrar in the prescribed manner and form.

[S 57(4) ins by s 6 of Act 24 of 2011.]

 

58.   Numbering of shares

   (1) Subject to this section, each issued share in a company shall be assigned a distinguished number.

   (2) If at any time all the issued shares in a company, or all the issued shares therein of a particular class, are fully paid up, none of those shares need thereafter have a distinguishing number so long as the shares, or the shares in that class, remain fully paid up.

 

59.   Redeemable shares

   (1) The articles of a company may provide for the issue of shares which are to be redeemed, or are liable to be redeemed at the option of—

      (a)   the company;

      (b)   the share-holder, or

      (c)   either the company or the shareholder.

   (2) No redeemable shares may be issued at a time when there are no issued shares of the company which are not redeemable.

   (3) Redeemable shares shall not be redeemed unless they are fully paid.

   (4) The terms of redemption shall provide for payment on redemption.

   (5) Redeemable shares may be redeemed only out of distributable profits of the company or out of the proceeds of a fresh issue of shares made for the purposes of the redemption.

   (6) Any premium payable on redemption shall be paid either—

      (a)   out of distributable profits of the company; or

      (b)   out of the company’s share premium account (including any sum transferred to that account in respect of premiums on a fresh issue made for the purposes of the redemption).

   (7) The manner and terms of the redemption shall be as provided by the articles.

   (8) Where shares are redeemed

      (a)   the shares shall be deemed to be cancelled on redemption;

      (b)   the amount of the company’s issued share capital shall be diminished by the nominal value of the shares redeemed; and

      (c)   the amount of the company’s authorised share capital shall not be affected.

   (9) Without prejudice to sub-section (8), where a company is about to redeem any shares under this section, it may issue shares up to the nominal amount of the shares to be redeemed as if those shares had never been issued.

   (10) Subject to sub-section (11), for the purposes of this Act, shares issued by a company—

      (a)   up to the nominal amount of any shares which the company has redeemed under this section; or

      (b)   in pursuance of sub-section (9), before the redemption of shares which the company is about to redeem under this section;

shall be regarded as issued in place of the shares redeemed, or about to be redeemed, under this section.

   (11) Shares issued under sub-section (9) shall not be regarded as issued in place of the shares about to be redeemed unless those shares are redeemed within one month after the issue of the new shares.

   (12) If a company redeems any redeemable shares, it shall, within fourteen days after doing so, lodge a notice of the redemption in the prescribed form with the Registrar.

   (13) If a company fails to comply with sub-section (12), the company, and each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding three monetary units for each day that the failure continues.

 

60.   Capital redemption reserve

   (1) Where under section 59 any shares of a company are redeemed wholly out of the profits of the company, the amount by which the company’s issued share capital is diminished in accordance with sub-section (8) of that section on cancellation of the shares redeemed or purchased shall be transferred to a reserve, to be called “the capital redemption reserve”.

   (2) Where any shares of a company are redeemed wholly or partly out of the proceeds of a fresh issue of shares and the aggregate nominal value of the shares redeemed or purchased is greater than that of the shares issued, the amount of the difference shall be transferred to the capital redemption reserve.

   (3) The provisions of this Act relating to the reduction of the share capital of a company shall apply to a reduction in the capital redemption reserve as if that reserve were paid up share capital of the company, except that the reserve may be applied by the company in paying up unissued shares of the company to be allotted to members of the company as fully paid bonus shares.

 

61.   Share premium account

   (1) Where a company issues shares at a premium, whether for cash or otherwise, a sum equal to the aggregate amount of value of the premiums on these shares shall be transferred to an account, to be called “the share premium account”, and the provisions of this Act relating to the reduction of share capital of a company shall, except as provided in this section, apply as if the share premium account were paid up share capital of the company.

   (2) The share premium account may be applied by the company—

      (a)   in paying up unissued shares of the company to be issued to members of the company as fully paid bonus shares;

      (b)   in writing off—

      (i)   the preliminary expenses of the company; or

      (ii)   the expenses of, the commission paid or the discount allowed on any issue of shares or debentures of the company; or

      (c)   in providing for the premium payable on redemption of any redeemable preference shares or of any debenture of the company.

 

62.   Variation of class rights

   (1) For the purposes of this section—

      (a)   the abrogation of any rights attached to a class of shares; and

      (b)   any resolution of a company, other than a resolution for the creation or issue of further shares, the implementation of which would have the effect of—

      (i)   diminishing the proportion of the total votes exercisable at a general meeting of the company by the holders of the existing shares of a class; or

      (ii)   reducing the proportion of the dividends or other distributions payable at any time to the holders of the existing shares of a class;

shall be deemed to be a variation of the rights of that class.

   (2) If at any time the shares of a company are divided into different classes, the rights attached to any class may not be varied except to the extent and in the manner provided by the section.

   (3) If the articles expressly forbid any variation of the rights of a class, or contain provision for such a variation and expressly forbid any alteration of the provision, the rights or the provision for variation may not be varied except in accordance with the provision, or with the written consent of all the members of that class, or with the sanction of the Court under a scheme of arrangement in accordance with section 234.

   (4) If sub-section (3) does not apply, the rights attached to any class of shares may be varied with the written consent of the holders of three fourths of the issued shares of that class, or with the sanction of a special resolution passed at a separate general meeting of the holders of shares of that class.

   (5) An application for the resolution to be cancelled may be made to the Court within twenty- one days after the date of the resolution by the holders of not less in the aggregate than fifteen per centum of the issued shares of that class, and on such an application the Court may confirm or cancel the resolution.

   (6) An application under sub-section (5) may be made on behalf of the persons referred to in that sub-section or by such of their number as they may appoint in writing for the purpose.

   (7) If no application is made under sub-section (5) the company shall, within fourteen days after the end of the period for making such an application, lodge with the Registrar a copy of each paragraph of the articles affected by the variation, in its amended form.

   (8) If an application is made under sub-section (5) and the Court makes an order, the company shall, within fourteen days after the date of the order, lodge with the Registrar—

      (a)   a copy of the order; and

      (b)   a copy of each paragraph of the articles affected by the variation, in its amended form, if the order confirms the resolution.

   (9) The articles shall have effect as amended on and from the date of their lodgement.

   (10) If a company fails to comply with sub-section (7) or (8), the company, and each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding ten monetary units for each day that the failure continues.

   (11) Nothing in this section shall affect or derogate from the powers of the Court under sections 234 and 239.

 

63.   Return as to allotment of shares

   (1) Whenever a company makes an allotment of its shares, the company shall within one month thereafter lodge with the Registrar—

      (a)   a return of the allotments in the prescribed form, stating the number and the nominal amount of the shares comprised in the allotment, the names and addresses of each allottee, whether each allottee is an individual, a body corporate or an unincorporated association, and the amount (if any) paid or due and payable on each share; and

      (b)   subject to sub-section (3), in the case of shares allotted as fully or partly paid up otherwise than in cash—

      (i)   any contract constituting the tile of the allottee to the allotment;

      (ii)   any contract of sale, or for services or other consideration in respect of which that allotment was made; and

      (iii)   a return stating the number and nominal amount of shares so allotted, the extent to which they are to be treated as paid-up and the consideration for which they have been allotted.

   (2) Where a contract referred to in sub-section (1) is not in writing, the company shall lodge with the Registrar particulars of the contract.

   (3) If a company fails to comply with sub-section (1), the company, and each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding ten monetary units for each day that the failure continues.

 

64.   Transfer of shares

   (1) Subject to section 69, a company shall not register a transfer of shares unless—

      (a)   a proper instrument of transfer has been delivered to the company; or

      (b)   the right to the shares has been transmitted by operation of law.

   (2) Transfers may be lodged with the company by either the transfer or transferee.

   (3) If a company refuses to register a transfer, the company shall, within two months after the date on which the transfer was lodged with the company, send to the transferee and transferor notice in writing of the refusal, together with a statement of the facts which are considered to justify refusal.

   (4) If a company fails to comply with sub-section (1), the company, and each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding two hundred and fifty monetary units.

   (5) If a company fails to comply with sub-section (3)—

      (a)   the company, and each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding three monetary units for each day that the failure continues; and

      (b)   the transfer shall be deemed to have been registered on the day on which the transfer was lodged with the company.

 

65.   Restrictions on transferability

   (1) Save as expressly provided in a company’s articles and in this Act, shares shall be transferable without restriction by a written transfer in accordance with section 57.

   (2) The articles of a private company shall not impose any restriction on the transferability of shares after they have been issued unless all the shareholders have agreed in writing.

   (3) A company may refuse to register a transfer of shares to any person who—

      (a)   is under eighteen years of age; or

      (b)   is of unsound mind and has been declared to be so by the Court or a Court of competent jurisdiction of another country.

 

66.   Issue of share certificates

   (1) A company shall, within two months after the allotment of any of its shares or after the registration of the transfer of any shares, deliver to the registered holder thereof a certificate under the common seal of the company stating—

      (a)   the number and classes of shares held by him, and the distinguishing numbers thereof (if any);

      (b)   the amount paid on such shares and the amount (if any) remaining unpaid; and

      (c)   the full name and address of the registered holder and whether the holder is an individual, a body corporate or an unincorporated association.

   (2) If a share certificate is defaced, lost or destroyed, the company, at the request of the registered holder of the shares, shall renew the same on payment of a fee not exceeding one monetary unit and on such terms as to evidence and indemnity and the payment of the company’s expenses of investigation evidence as the company may reasonably require.

   (3) If a company fails to comply with this section, the company, and each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding three monetary units for each day that the failure continues.

 

67.   Endorsement of transfers

   (1) If the holder of any shares wishes to transfer to any person part only of the shares represented by one or more certificates, the instrument of transfer together with the relevant certificates may be delivered to the company with a request to endorse the instrument of transfer.

   (2) If a company endorses on an instrument of transfer the words “certificate lodged”, or words to the like effect, this shall be a representation to anyone acting on the faith of the endorsement that there has been produced to and retained by the company such certificates as show a prima facie title to the shares in the transferor named in the instrument of transfer, but not a representation that the certificates are genuine or that the transferor has any title to the shares.

   (3) If a person acts on the faith of a false representation made by the company under sub-section (2), the company shall be liable to compensate the person for any loss suffered as a result of so acting.

   (4) For the purposes of this section, an endorsement under this section shall be deemed to be made by a company if it is made or signed by the secretary or any other person apparently authorised to endorse instruments of transfer on the company’s behalf.

 

68.   Share certificates as evidence

A share certificate shall be prima facie evidence of the title to the shares of the person named therein as the registered holder and of the amounts paid and payable thereon.

 

69.   Share warrants to bearer

   (1) A company may, with respect to any fully paid-up shares (or stock) issue a warrant (in this Act called a “share warrant”) stating that the bearer of the warrant is entitled to the shares therein specified, and may provide by coupons or otherwise for the payment of the future dividends on the shares included in the warrant.

   (2) A share warrant shall entitle the bearer to the shares therein specified, and the shares may be transferred by the delivery of the share warrant.

   (3) The bearer of a share warrant shall be entitled, on surrendering it for cancellation, to have his name entered as a member in the register of members, and the company shall be responsible for any loss incurred by any person by reason of the company entering in its register the name of a bearer of a share warrant in respect of the shares therein specified without the share warrant being surrendered and cancelled.

   (4) The articles of the company may provide that the bearer of a share warrant shall have any or all of the rights of a registered member of the company for the purposes of this Act (other than the right to receive notices).

   (5) The company shall record the issue of a share warrant in its register of members as if the shareholder had ceased to hold those shares together with—

      (a)   the fact of the issue of the warrant;

      (b)   a statement of the shares included in the warrant, distinguishing the shares by their share numbers (if any); and

      (c)   the date of the issue of the warrant.

   (6) Until the warrant is surrendered, the particulars referred to in sub-section (5) shall be deemed to be the particulars required by this Act to be entered in the register of members in relation to the shares.

   (7) On the surrender of the share warrant, the date of the surrender shall be entered as if it were the date on which the company received notice of the transfer of the shares to the bearer.

 

70.   Transmission of shares by operation of law

   (1) In the case of the death of a shareholder of a company, the survivor or survivors where the deceased was a joint holder, and the legal personal or representative of the deceased where he was a sole holder or last survivor of joint holders, shall be the only persons recognised by the company as shareholders.

   (2) A person (in this section called “the representative”) upon whom the ownership of a share devolves by reason of his being the legal personal representative, receiver, or trustee in bankruptcy of the holder, or by operation of law may, upon such evidence being produced as the company may reasonably require—

      (a)   be registered himself as the holder of the share; or

      (b)   transfer the share to some other person without first registering himself as the holder of the share.

   (3) A company shall have the same right, if any, to decline registration of a transfer by the representative as it would have had in the case of a transfer by the registered holder, but shall have no right to refuse registration of the representative himself.

   (4) The representative shall, prior to registration of himself or a transferee, be entitled to the same dividends and other advantages as if he were the registered holder and to the same rights and remedies as if he were a member of the company, except that he shall not, subject to any order by the Court under section 144, before being registered as a member in respect of the share, be entitled to vote at any meeting of the company.

   (5) The company may at any time give notice requiring the representative to elect either to be registered himself or to transfer the share, and, if the notice is not complied with within three months, the company may thereafter suspend payment of all dividends or other moneys payable in respect of the share until the notice has been complied with.

 

71.   Evidence of transmission of shares by operation of law

The production to a company of any document which is by law sufficient evidence that the ownership of a share has been transmitted by the operation of law shall be accepted by the company as sufficient evidence of the transmission of ownership.

 

72.   Company’s lien on shares

A company shall not have or claim a lien on shares on which there is no unpaid liability, nor shall any such lien extend to any sums due from the shareholder except in respect of the unpaid liability on the shares.

 

73.   Rights and options to subscribe for share issue to directors, officers and employees

   (1) Subject to this section and to its articles, a company may create and issue, whether in connection with the issue of any of its shares or otherwise, rights or options in favour of any directors, officers or employees of the company or of any subsidiary of the company, being rights or options that entitle the holders to acquire from the company, upon such consideration, terms and conditions as may be fixed by the board of directors, shares of any class.

   (2) The terms and conditions of such rights or options, including the time or times at or within which and the price or prices at which they may be exercised and any limitations on transferability, shall be set forth or incorporated by reference in the instrument or instruments evidencing the rights or options.

   (3) Where a company proposes to issue such rights or options to one or more of the persons referred to in sub-section (1) as an incentive to service or continued service with the company or any related company, or where it proposes to issue such rights or options to a trustee on behalf of such persons, the issue shall be authorised at a general meeting by special resolution, or shall be authorised by and be consistent with a scheme adopted at a general meeting by special resolution.

   (4) If there are any pre-emptive rights in any of the shares proposed under sub-section (3) to be subject to rights or options, the issue or scheme, as the case may be, shall also be approved by the vote or written consent of the holders of a majority of the shares entitled to exercise pre- emptive rights with respect to such shares, and the vote or written consent shall release the pre-emptive rights.

   (5) The special resolution authorising the issue such rights or options, or the scheme adopted by special resolution, shall include—

      (a)   the material terms and conditions upon which the rights or options are to be issued, including any restrictions on the number of shares that eligible individuals may have the right or option to acquire;

      (b)   the method of administering the scheme, in the case of a scheme;

      (c)   the terms and conditions of payment for shares in full or by installments;

      (d)   any limitations on the transferability of the shares; and

      (e)   the voting and dividend rights to which the holders of the shares may be entitled.

   (6) The terms and conditions shall not provide for any share certificate to be delivered to a shareholder, or confer any right to vote in respect of such shares, prior to full payment therefor.

   (7) In the absence of fraud in the transaction, the decision of the directors (or, where the directors or a sufficient quorum thereof are not themselves disinterested in the issue or scheme, the decision of the general meeting) shall be conclusive as to the adequacy of the consideration, tangible or intangible, received or to be received by the company for the issue of rights or options and for the acquisition pursuant thereto of shares in the company.

   (8) This section shall not apply to the right of holders of convertible debentures to acquire shares upon the exercise of a conversion option.

 

DIVISION 4.3—ALTERATION OF SHARE CAPITAL

 

74.   Alteration of share capital

   (1) A company may, unless its articles provide otherwise, by special resolution alter its share capital as stated in the certificate of share capital by doing any of the following—

      (a)   increasing its share capital by new shares of such an amount as it thinks expedient;

      (b)   consolidating and dividing all or any of its share capital into shares of a larger amount than its existing shares;

      (c)   converting all or any of its paid up shares into stock, and re-converting that stock into paid up shares of any denomination;

      (d)   subdividing its shares, or any of them, into shares of smaller amounts than is stated in the certificate of share capital;

      (e)   cancelling shares which, at the date of the passing of the resolution, have not been allotted to any person, and diminishing the amount of its share capital by the amount of the shares so cancelled.

   (2) Where shares are subdivided under this section, the proportion between the amount paid and the amount, if any, unpaid on each reduced share shall be the same as it was in the case of the share from which the reduced share is derived.

   (3) A cancellation of un-allotted shares under this section shall be deemed not to be a reduction of share capital for the purposes of this Act.

   (4) Where a company has made any alteration referred to in sub-section (1), it shall within one month after so doing lodge with the Registrar—

      (a)   a notice in the prescribed form specifying, as the case may be, the shares increased, consolidated, divided, subdivided, converted, redeemed or cancelled or the stock reconverted; and

      (b)   a copy of the resolution authorising the alteration.

   (5) Where an alteration under this section alters a particular stated in the company’s certificate of share capital, the Registrar shall issue a replacement certificate of share capital worded to meet the circumstances of the case.

   (6) If a company fails to comply with sub-section (4), the company, and each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding ten monetary units for each day that the failure continues.

 

75.   Power to return accumulated profits in reduction of paid up share capital

   (1) If a company has accumulated a sum of undivided profits, which with the approval of the shareholders may be distributed among the shareholders in the form of a dividend or bonus, the company may, by special resolution, return the same, or any part thereof, to the shareholders in reduction of the paid up capital of the company, the unpaid capital being thereby increased by a similar amount.

   (2) Within twenty-one days after making a special resolution under sub-section (1), the company shall lodge with the Registrar a return in the prescribed form giving the details required in the case of a special resolution reducing share capital.

   (3) The resolution shall take effect as from the date of lodgement.

   (4) The provisions of this Act with respect to reduction of share capital shall not apply to a reduction of paid up share capital under this section, except as provided in sub-section (2).

 

76.   Special resolution for reduction of share capital

   (1) Subject to confirmation by the Court, a company may, if so authorised by its articles, by special resolution reduce its share capital in any way, and in particular, without prejudice to the generality of the foregoing power, may—

      (a)   extinguish or reduce the liability on any of its shares;

      (b)   either with or without extinguishing or reducing liability on any of its shares, cancel any paid-up share capital which is in excess of the wants of the company; or

      (c)   either with or without extinguishing or reducing liability on any of its shares, pay off any paid-up share capital which is in excess of the wants of the company;

and may, if and so far as is necessary, reduce the amount of its shares accordingly.

   (2) A special resolution under this section is in this Act referred to as “a resolution for reducing share capital”.

 

77.   Creditors may object to reduction in capital

   (1) If a company has passed a resolution for reducing share capital, it shall, within twenty- one days after the making of the resolution, apply to the Court for an order confirming the reduction.

   (2) If the proposed reduction of share capital involves either diminution of liability in respect of unpaid share capital or the payment to any shareholder of any paid-up share capital, sub-sections (5) and (6) shall apply to the reduction unless the Court directs otherwise.

   (3) In giving a direction under sub-section (2), the Court may direct that sub-sections (5) and (6) shall not apply to a specified class or classes of creditors.

   (4) If sub-section (2) does not apply, sub-sections (5) and (6) shall not apply unless the Court directs that they shall apply.

   (5) Every creditor of the company who at the date fixed by the Court is entitled to any debt or claim which, if that date were the commencement of the winding-up of the company, would entitle the creditor to benefit from the distribution under the winding-up, shall be entitled to object to the reduction.

   (6) The Court shall settle a list of creditors so entitled to object, and for that purpose shall ascertain, as far as possible without requiring an application from any creditor, the names of those creditors and the nature and amount of their debts or claims, and may publish notices fixing a day or days after which creditors not yet entered on the list will lose their right to object if they have not presented a claim to be entered on the list.

   (7) If a creditor entered on the list whose debt or claim is not discharged or has not been determined does not consent to the reduction, the Court may, if it thinks fit, dispense with the consent of that creditor, on the company’s securing payment of his debt or claim by appropriating—

      (a)   the full amount of the debt or claim, if the company admits the full amount of the debt, or claim, or, though not admitting it, is willing to provide for it; or

      (b)   an amount fixed by the Court after the like inquiry and adjudication as if the company were being wound-up by the Court, if the company does not admit and is not willing to provide for the full amount of the debt or claim, or if the amount is contingent or not ascertained.

 

78.   Order confirming reduction and powers of Court in making such order

   (1) The Court, if satisfied with respect to every creditor of the company who is entitled to object to the reduction, that—

      (a)   his consent to the reduction has been obtained;

      (b)   his debt or claim has been discharged or determined; or

      (c)   his debt or claim has been secured;

may make an order confirming the reduction on such terms and conditions as it thinks fit.

   (2) The order may require the publication of a notice of the reduction in capital on the issue of the replacement certificate of share capital under section 79.

   (3) Where the Court makes any such order it may, if for any special reason it thinks it proper so to do, make an order—

      (a)   directing that the company shall, during a period specified in the order, add to its name as the last words thereof the words “and reduced”; or

      (b)   requiring the company to publish as the Court directs the reasons for the reduction or such other information in regard thereto as the Court may think expedient with a view to giving proper information to the public.

   (4) Where a company is ordered to add to its name the words “and reduced”, those words shall, until the expiration of the period specified in the order, be deemed to be part of the name of the company.

 

79.   Lodgement of order and issue of replacement certificate of share capital

   (1) The Registrar, on the lodgement of an order of the Court confirming the reduction of the share capital of a company and of a minute approved by the Court showing, with respect to the share capital of the company as altered by the order—

      (a)   the amount of the share capital;

      (b)   the number of shares into which it is to be divided;

      (c)   the amount of each share; and

      (d)   the amount, if any, at the date of lodgement deemed to be paid up on each share;

shall issue a replacement certificate of share capital of the company, worded to meet the circumstances of the case.

   (2) On the issue of the certificate, the resolution for reducing share capital as confirmed by the order shall take effect.

   (3) The issue of the certificate of share reduction shall be conclusive evidence that all the requirements of this Act with respect to reduction of share capital have been complied with, and that the share capital of the company is as stated in the certificate.

 

80.   Liability of members in respect of reduced shares

   (1) Subject to this section, where the share capital of a company is reduced, a member of the company, past or present, shall not be liable in respect of any share to any call or contribution exceeding in amount the difference, if any, between the amount of the share fixed by the reduction and the amount paid, or the reduced amount, if any, which is to be deemed to have been paid, on the share, as the case may be.

   (2) If any creditor, entitled in respect of any debt or claim to object to the reduction of share capital, is, by reason of his ignorance of the proceedings for reduction, or of their nature and effect with respect to his claim, not entered on the list of creditors, and, after the reduction, the company is unable within the meaning of the provisions of this Act with respect to the winding- up by the Court to pay the amount of his debt or claim, then—

      (a)   every person who was a member of the company at the date of issue of the replacement certificate of share capital shall be liable to contribute as if the company had commenced to be wound-up on that date; and

      (b)   if the company is wound-up, the Court, on the application of any such creditor and proof of his ignorance, may if it thinks fit settle accordingly a list of persons so liable to contribute, and make and enforce calls and orders on the persons on the list as if they were ordinary contributories in a winding-up.

   (3) Nothing in this section shall affect the rights of the members among themselves.

 

81.   Offence of concealing name of creditor

   (1) Where a company has passed a resolution for reducing share capital, an officer of a company who—

      (a)   willfully conceals the name of any creditor entitled to object to the reduction;

      (b)   willfully misrepresents the nature or amount of the debt or claim of any creditor; or

      (c)   aids, abets or is privy to any such concealment or misrepresentation;

shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding five hundred monetary units.

   (2) An officer referred to in sub-section (1) shall be personally liable to pay to the creditor the amount of his debt or claim to the extent that it is not paid by the company, whether or not he has been convicted of an offence under sub-section (1).

 

DIVISION 4.4—RESTRICTIONS ON FINANCIAL ASSISTANCE

 

82.   Restrictions on financial assistance in acquisition of shares

   (1) Subject to this Part, where a person is acquiring or is proposing to acquire any shares in a company, the company or any of its subsidiaries shall not give financial assistance directly for the purpose of that acquisition.

   (2) Subject to this Part, where a person has acquired any shares in a company and any liability has been incurred (by that or any other person) for the purpose of that acquisition, the company and its subsidiaries shall not give any financial assistance directly or indirectly for the purpose of reducing or discharging the liability so incurred.

   (3) This section shall not prohibit a company from giving any financial assistance for the purpose of any acquisition of shares in the company or its holding company if—

      (a)   the giving of the assistance is an incidental part of some larger purpose of the company, and the principal purpose of the company in giving that assistance is not to reduce or discharge any liability incurred by a person for the purpose of any such acquisition; and

      (b)   the assistance is given in good faith in the interest of the company.

   (4) This section shall not prohibit—

      (a)   any distribution of a company’s assets by way of dividend lawfully made or any distribution made in the course of winding-up of the company;

      (b)   the allotment of any bonus shares;

      (c)   anything done in pursuance of an order of the Court made under this Act;

      (d)   anything done under an arrangement made in pursuance of section 234;

      (e)   anything done under an arrangement made between a company and its creditors which is binding on the creditors under section 325;

      (f)   any reduction of capital confirmed by order of the Court under this Part; or

      (g)   a redemption of any share in accordance with this Part.

   (5) This section shall not prohibit—

      (a)   the lending of money by the company in the ordinary course of its business, if the lending of money is part of the ordinary business of the company;

      (b)   the provision by a company, in accordance with an employee’s share scheme, of money for acquisition of fully paid shares in the company to be held by or for the benefit of employees of the company (including any director holding a salaried position in the company); or

      (c)   the making by a company of loans to persons, other than directors, employed in good faith by the company, with a view to enabling those persons to acquire fully paid shares otherwise than as nominees of the company.

   (6) In giving financial assistance to any person under sub-section (5), a public company shall not reduce its net assets, other than distributable profits.

   (7) A reference in this section to a person incurring any liability includes a reference to his changing his financial position by making any agreement or arrangement (whether enforceable or unenforceable and whether made on his own account or with any other person) or by any other means.

   (8) If a company fails to comply with sub-section (1) or (2), the company, and each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding two thousand monetary units or to imprisonment for a period not exceeding two years, or to both.

   (9) In this section—

“financial assistance” means:

      (a)   financial assistance given by way of gift;

      (b)   financial assistance given by way of guarantee, security or indemnity, other than an indemnity in respect of the indemnifier’s own neglect or default, or by way of release or waiver;

      (c)   financial assistance given by way of—

      (i)   a loan;

      (ii)   any other agreement under which any of the obligations of any other party to the agreement remains unfulfilled; or

      (iii)   innovation of, or the assignment of, any rights arising under any such loan or agreement; or

      (d)   any other financial assistance given by a company which has no net assets, or whereby the net assets of the company are reduced to a material extent;

“net assets” in relation to the giving of financial assistance by a company, means the amount by which the aggregate amount of the company’s assets exceeds the aggregate amount of its liabilities taking the amount of both assets and liabilities to be stated in the company’s accounting records immediately before the financial assistance is given;

“liabilities” includes any amount retained as reasonably necessary for the purpose of providing for any liability or loss which is either likely to be incurred, or certain to be incurred but uncertain as to amount or as to the date on which it will arise.

 

83.   Relaxation of restrictions for private companies

   (1) A private company may give financial assistance for the acquisition of shares in itself in accordance with this section.

   (2) A private company may give financial assistance for the acquisition of shares in a private company that is its holding company in accordance with this section unless it is the subsidiary of—

      (a)   a body corporate not incorporated in Zambia; or

      (b)   a public company;

that is also a subsidiary of the holding company concerned.

   (3) Financial assistance shall not be given under this section unless—

      (a)   the company proposing to give the financial assistance is a wholly owned subsidiary; or

      (b)   the giving of the assistance is approved by special resolution of the company.

   (4) Where the financial assistance to be given by a company is for the acquisition of shares in its holding company, financial assistance shall not be given unless approved by special resolutions of—

      (a)   that holding company; and

      (b)   any other company which is both the company’s holding company and a subsidiary of that holding company, other than a wholly owned subsidiary.

   (5) The directors of the company proposing to give the financial assistance and, where the shares to be acquired are shares in its holding company, the directors of the companies referred to in paragraphs (a) and (b) of sub-section (4), shall, not more than seven days before the special resolution is put to a meeting, make a statutory declaration in the prescribed form complying with sub-section (6) and make it available, together with the auditors’ report annexed thereto, for inspection by members of the company at the meeting at which the resolution is to be voted on.

   (6) A statutory declaration for the purposes of sub-section (5) shall—

      (a)   contain such particulars of the assistance to be given and of the business of the company of which they are directors as may be prescribed;

      (b)   identify the person to whom the assistance is to be given;

      (c)   state that, to the best of the directors’ knowledge and belief, the company will be able to pay its debts—

      (i)   in full within twelve months of the commencement of the winding-up of the company, if it is intended to commence the winding-up of the company within twelve months of the date of the declaration; or

      (ii)   as they fall due during the year immediately following that date, in any other case.

   (7) In forming their views for the purposes of the statutory declaration, the directors shall take into account any liabilities of the company which the Court would be required by section 272 to take into account in determining for the purposes of that section whether the company was unable to pay its debts.

   (8) The statutory declaration shall have annexed to it a report by the auditors of the company, addressed to the directors who made the declaration, stating that the auditors have enquired into the state of affairs of that company and are not aware of anything to indicate that the opinion expressed by the directors in the declaration is unreasonable in all the circumstances.

   (9) Where a special resolution is required under this section to be passed approving the giving of financial assistance, financial assistance shall not be given less than one month after the date on which—

      (a)   the special resolution is passed; or

      (b)   the last of the resolutions is passed, where more than one such resolution is passed;

unless each member of the company who was entitled to vote on the resolution, or any of the resolutions, voted in favour of the resolution concerned.

   (10) Where an application for the cancellation of any such resolution is made under this section, financial assistance shall not be given before the final determination of the application unless the Court otherwise orders.

   (11) Financial assistance shall not be given under this section more than two months after—

      (a)   the date on which the directors of the company proposing to give the financial assistance made the statutory declaration under sub-section (5); or

      (b)   the date on which the earliest of the declarations under sub-section (5) is made, where the company is a subsidiary and both its directors and the directors of any of its holding companies made such a declaration;

unless the Court, on an application for the cancellation of any of the resolutions, otherwise orders.

   (12) Where a special resolution under this section is passed by a company, an application may be made to the Court for the cancellation of that resolution by not fewer than one fifth of the members, being persons who did not consent to or vote in favour of the resolution, within twenty-one days after the making of the resolution.

   (13) Within twenty-one days after—

      (a)   the passing of a special resolution under this section, if there was no application under sub-section (12); or

      (b)   the decision by the Court, if there was an application made under sub-section (12) but the Court rejected the application;

the company shall lodge with the Registrar—

      (i)   the statutory declaration together with any auditors’ report annexed thereto; and

      (ii)   a copy of the special resolution.

   (14) If a company fails to comply with sub-section (13), the company, and each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding ten monetary units for each day that the failure continues.

   (15) A director of a company who makes a statutory declaration for the purposes of this section without having reasonable grounds for the opinion expressed in that declaration shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding five hundred monetary units or to imprisonment for a period not exceeding six months, or to both.

   (16) In this section, “financial assistance” and “net assets” have the same meaning as in section 82.

 

DIVISION 4.5—MISCELLANEOUS

 

84.   Dividends may be paid only out of profits

No dividend shall be payable to the shareholders of a company except out of the profits arising or accumulated from the business of the company.

 

85.   Exemption from property transfer tax

Company shares that are listed on any stock exchange in Zambia shall be exempt from the provisions of the Property Transfer Tax Act, 1984.

PART V
DEBENTURES AND CHARGES

 

DIVISION 5.1—DEBENTURES

 

86.   Issue of debentures

   (1) A company may raise loans by the issue of a debenture or of a series of debentures.

   (2) Debentures may either be secured by a charge over property of the company or be unsecured by any charge.

   (3) All debentures which by their terms, or by the terms of any resolution authorising their creation, or by the terms of any trust deed, are declared to be of the same series shall rank equally in all respects notwithstanding that they may be issued on different dates.

   (4) Any debenture stock shall be created—

      (a)   by deed under the common seal of the company in favour of trustees for the debenture stockholders; and

      (b)   as stock of a specified total amount, parts of which, represented by debenture stock certificates, are issued to separate holders.

   (5) A contract with a company to take up and pay for any debenture of the company may be enforced by an order for specific performance.

   (6) A condition contained in a debenture or in a trust deed for securing a debenture shall not be invalid by reason only of the fact that the debenture is hereby made irredeemable or redeemable only on the happening of a contingency, however remote, or on the expiration of a period, however long.

 

87.   Documents of title to debentures

   (1) A company shall, within two months after the allotment of any of its debentures or after the registration of the transfer of any debentures, deliver to the registered holder thereof the debentures or a certificate of the debenture stock under the common seal of the company.

   (2) Sections 64 and 66 to seventy-one shall apply, with the necessary modifications, in relation to debentures and debenture holders.

   (3) If any restriction is imposed on the right to transfer any debentures, notice of the restriction shall be endorsed on the face of the debenture or debenture stock certificate and, in the absence of such endorsement, the restriction shall be ineffective as regards any transferee for value whether or not he has notice of the restriction.

   (4) If a company fails to comply with sub-section (1), the company, and each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding three monetary units for each day that the failure continues.

 

88.   Trustees for debenture holders

   (1) A company shall not—

      (a)   indemnify a person who is a trustee for debenture holders of the company or a related company against any liability which under law would otherwise attach to him in respect of any breach of trust or failure to show the degree of care and diligence required of him as trustee having regard to the powers, authorities or discretion conferred on him by the trust deed; or

      (b)   compensate such a person for the cost of meeting any such liability.

   (2) A provision of a contract between the company and such a trustee shall be void if it purports to indemnify or compensate him in contravention of sub-section (1).

   (3) A release in respect of anything done or omitted to be done by a trustee may be made by a special resolution of the debenture holders.

   (4) The Court may remove a trustee for the holders of any debentures and appoint another in his place if, on the application of any debenture holder, it is satisfied that the trustee has interests which conflict or may conflict with those of the debenture holders or that for any other reason it is undesirable that the trustee should continue to act.

   (5) Upon such an application the Court may order the applicant to give security for the payment of the costs of the trustee.

 

89.   Eligibility for appointment as trustee for debenture holders

   (1) The following persons shall not be eligible for appointment or competent to act as trustee for the holders of debentures of a company—

      (a)   an individual under the age of eighteen years;

      (b)   a person under any legal disability;

      (c)   a person prohibited or disqualified from so acting by order of a Court of competent jurisdiction;

      (d)   an undischarged bankrupt;

      (e)   a person who is an officer or auditor of the company or a related company or who has been such an officer or auditor within the preceding two years, save with the leave of the Court;

      (f)   a person who has been convicted within the preceding five years of an offence involving fraud or dishonesty;

      (g)   a person who has been removed within the preceding five years from an offence of trust by order of a Court of competent jurisdiction.

   (2) A person who, in contravention of this section, acts or continues to act as a trustee for debenture holders shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding ten monetary units for each day that the contravention continues.

 

90.   Right to copies of trust deed

   (1) A copy of any trust deed for securing an issue of debentures shall be provided to a holder of those debentures at his request and on payment of the sum of one monetary unit, or such lesser sum as may be required by the company, within seven days after the receipt of the request.

   (2) If the company fails to comply with this section, the company, and each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding three monetary units for each day that the failure continues.

 

91.   Unsecured debentures to be so described

   (1) No unsecured debenture or debenture stock certificate, or prospectus relating to unsecured debentures, shall be issued by a company unless the term “debenture”, or such other term as is used to denote the debenture, is qualified by the word “ unsecured”.

   (2) If the company fails to comply with this section, the company, and each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding five hundred monetary units.

 

92.   Register of debenture holders

   (1) A company which issues or has issued debentures shall maintain a register of debenture holders.

   (2) Sections 48 to 55 shall apply, with the necessary modifications, in relation to the register.

   (3) A company shall, on the demand of any trustee for its debenture holders, within seven days furnish to him the names, addresses and other registered particulars of the debenture holders for which he is a trustee.

   (4) If the company fails to comply with this section, the company, and each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding ten monetary units for each day for which the failure continues.

 

93.   Meetings of holders of debentures secured by a trust deed

   (1) Subject to this section, sections 139 to 135 shall apply, with the necessary modifications, in relation to the holders of debentures of a company that are secured by a trust deed.

   (2) Unless the trust deed provides otherwise, the registered debenture holders shall have votes in proportion to the value of the debentures they hold.

 

94.   Meetings of other debenture holders

   (1) The terms of any debentures not secured by a trust deed may provide for the convening of general meetings of the debenture holders or of classes of debenture holders, and for the passing at such meetings of resolutions binding on all the debenture holders or on all the debenture holders of those classes.

   (2) Whether or not provision for meetings is made under the debentures, the Court may at any time direct a meeting of the debenture holders of any class to be held and conducted in such manner as it thinks fit to consider such matters as it may direct, and may give such ancillary or consequential directions as it thinks fit.

   (3) Subject to sub-section (4) and unless the debentures provide otherwise, sections 146 to 152 shall apply, with the necessary modifications, to a meeting held in accordance with this section.

   (4) Unless the terms of the debentures provide otherwise, the registered debenture holders shall have votes in proportion to the value of the debentures they hold.

 

95.   Re-issue of redeemed debentures

   (1) A company shall not re-issue any debenture which has been redeemed.

   (2) A company shall not issue a new debenture in place of a redeemed debenture on terms that the new debenture shall have the same priorities as the redeemed debenture.

   (3) The issue of a new debenture in place of a redeemed debenture shall not be treated as the issue of a new debenture for the purposes of any provision limiting the amount or number of debentures which may be issued.

   (4) A purported issue or re-issue of debentures that contravenes this section shall be void.

 

DIVISION 5.2—CHARGES

 

96.   Charge to secure fluctuating amount

Where a charge is expressed to be made to secure an indeterminate amount, or a fluctuating amount advanced on current account by, or due and owing to, the person entitled to the charge, the charge shall not be considered to be redeemed by reason only that the current account ceases to be in debit or by reason only that no amount is due or owing, as the case may be.

 

97.   Company’s register of charges

   (1) This section applies to any charge on property of the company, whether or not it is required to be registered under section 98.

   (2) A company which has any property subject to a charge shall open and maintain a register of charges over its property in which it shall, on the creation of a charge over property of the company, or on the acquisition of property subject to a charge, enter the following particulars of each charge—

      (a)   the date of creation of the charge or the date of acquisition of the property, as the case may be;

      (b)   a short description of the liability (whether present or prospective) secured by the charge;

      (c)   a short description of the property charged;

      (d)   the name of the trustee, if the charge secures debentures under a trust deed;

      (e)   if the charge does not secure debentures under a trust deed—

      (i)   the name of the chargee; and

      (ii)   the name of the person whom the company believes to be the holder of the charge.

   (3) The register shall be open for inspection—

      (a)   by any member or creditor of the company or by the Registrar or his agent, without charge; and

      (b)   by any other person on payment of an amount required by the company, not exceeding ten monetary units or such higher amount as may be prescribed.

   (4) If the company fails to comply with this section, the company, and each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding five hundred monetary units.

 

98.   Registrar’s register of charges

   (1) The Registrar shall maintain a register containing, with respect to each company, the particulars of the charges of the company that are lodged in accordance with this Part.

   (2) The register shall include, with respect to each company, a chronological index of the charges of the company.

 

99.   Registration of charges by companies

   (1) This section applies to the following charges over the property or undertaking of a company—

      (a)   a charge for the purpose of securing any issue of a series of debentures;

      (b)   a charge on uncalled share capital of the company;

      (c)   a charge to which the Trade Charges Act applies;

      (d)   a floating charge on the whole or part of the undertaking or property of the company;

      (e)   a charge on land, wherever situated, or any interest therein;

      (f)   a charge on any present or future book debts of a company;

      (g)   a charge on calls made but not paid;

      (h)   a charge on a ship or aircraft or any share in a ship or aircraft;

      (i)   charge on goodwill, on a patent or a license under a patent, on a trade mark, or on a copyright or a license under a copyright;

      (j)   a charge over shares in another body corporate, not being—

      (i)   a charge in favour of a broker who has paid for a share purchased or applied for on behalf of the company; or

      (ii)   a charge created by or accompanied by delivery of the certificates for such shares.

   (2) Subject to this section, if a company—

      (a)   creates any charge to which this section applies; or

      (b)   acquires property that is subject to a charge to which this section applies;

the company shall, within twenty-one days after the date of the creation of the charge, or after the acquisition of the property, as the case may be, lodge with the Registrar in the prescribed form the particulars referred to in sub-section (3) together with—

      (i)   particulars of the instrument by which the charge is created or evidenced sufficient to identify the instrument, if the charge is created or evidenced by an instrument by which it is already registered under this or any other Act; or

      (ii)   a certified copy of the instrument, if any, by which the charge is created or evidenced, in any other case.

   (3) The particulars required for the purposes of sub-section (2) are—

      (a)   the date of creation of the charge;

      (b)   the date of acquisition of the property by the company, where the property was subject to the charge when acquired by the company;

      (c)   the amount secured by the charge;

      (d)   short particulars of the property charged;

      (e)   the names of the charges; and

      (f)   any other prescribed particulars of the charge.

   (4) Where the property subject to a charge includes property outside Zambia, this section applies in relation to any instrument creating or evidencing or purporting to create or evidence the charge, notwithstanding that further proceedings may be necessary to make the charge valid or effectual according to the law of the country in which the property is situated.

   (5) Where a negotiable instrument has been given to a company to secure the payment of any debts owed to the company, the deposit of the instrument for the purposes of securing an advance to the company shall for the purposes of this section be deemed not to be a charge on those debts owed to the company.

   (6) Debentures entitling the holder to a charge on land shall for the purposes of this section be deemed not to be an interest in land.

   (7) Where a series of debentures is created by a company and contains, or gives by reference to any other instrument, any charge to the benefit of which the debenture holders of that series are entitled in all respects equally, sub-section (3) shall be satisfied by the lodgement of the following particulars—

      (a)   the total amount secured by the whole series;

      (b)   the date of the resolution authorising the issue of the series and the date of the document, if any, by which the security is created or defined;

      (c)   a general description of the property charged; and

      (d)   the names of the trustees, if any, for the debenture holders, together with a certified copy of the document containing the charge, or, if there is no such document, a certified copy of one of the debentures of the series;

together with, where more than one issue is made of debentures in the series, the lodgement, within twenty-one days after any issue, of particulars of the date and amount of the issue.

   (8) Where any commission, allowance, or discount has been paid or made either directly or indirectly by a company to any person in consideration of his subscribing or agreeing to subscribe, whether absolutely or conditionally, for any debentures of the company, or procuring or agreeing to procure subscriptions, whether absolute or conditional, for any such debentures, the particulars required to be lodged under this section shall include particulars as to the amount or rate per centum of the commission, discount, or allowance to be paid or made.

   (9) The deposit of any debentures as security for any debt of the company shall not for the purposes of this section be regarded as the issue of such debentures at a discount.

   (10) Lodgement of documents for the purposes of this section may be effected on the application of any person interested in the charge concerned, and if lodgement is effected by a person other than the company, that person shall be entitled to recover from the company the amount of any fees properly paid by him to the Registrar on the lodgement.

   (11) If the particulars and documents relating to a charge that are required by this section to be lodged with the Registrar are not lodged within the time required—

      (a)   the charge shall be void against the liquidator and any creditor of the company; and

      (b)   the full debt secured by the charge shall become payable immediately by the company.

   (12) Nothing in this section shall affect the provisions of any other written law relating to the registration of charges.

 

100.   Certificate to be issued by Registrar

If the particulars and documents relating to a charge that are required by this Part to be lodged with the Registrar are lodged within the time required, the Registrar shall issue a certificate of the registration of the charge stating the date of lodgement and, if applicable, the amount thereby secured, and the certificate shall be conclusive evidence that the requirements of this Part as to registration have been complied with.

 

101.   Priorities

   (1) Subject to any consent (express or implied) given by the person who would otherwise be entitled to priority, charges required by this Part to be registered shall have priority in relation to one another in accordance with the times at which they were lodged.

   (2) Where another written law by its terms accords priority as between successive charges affecting the same property, sub-section (1) shall not affect the priorities between those charges set by that written law.

   (3) Subject to sub-section (2), where a charge (other than a floating charge) gives security over property of such a kind that this Part would require its registration, and also over other property, sub-section (1) shall apply in respect of the first-mentioned property, but not in respect of the other property.

 

102.   Entries of satisfaction and release of property from charge

   (1) If there is lodged with the Registrar a statement in the prescribed form, signed on behalf of a company and by the person entitled to charge, to the effect that—

      (a)   the debt for which the charge was given has been paid or satisfied in whole or in part; or

      (b)   part of the property or undertaking charged has been released from the charge or has ceased to form part of the company’s property or undertaking;

then—

      (i)   the Registrar shall enter the fact in the register of charges;

      (ii)   the statement shall, in favour of the liquidator and any creditor of the company, be binding on the person entitled to the charge who signed the statement and on any other person claiming through him.

 

103.   Variation of registered charge

   (1) If a variation is made in the terms of a charge registered under this Part, other than a satisfaction or release to which section 102 applies, particulars after the variation in the prescribed form shall be lodged with the Registrar within twenty-one days of the making of the variation.

   (2) The particulars shall identify the terms of the original charge that have been varied and shall indicate the nature of the variation made in each such term.

   (3) Where the effect of the variation is to increase the extent of the security or the amount for which security is available, the increase shall, for the purposes of priorities, be treated as if it were a charge, being a charge for an amount which is the amount of the increase and whose particulars were lodged at the time that the particulars of the variation were lodged.

   (4) Where by its terms a registered charge secures a fluctuating amount, or an initial sum together with the words “further advances”, the making of a further advance to the company shall not, for the purposes of this section, constitute a variation in the terms of the charge.

   (5) Lodgement of documents for the purposes of this section may be effected on the application of any person interested in the charge concerned, and if lodgement is effected by a person other than the company, that person shall be entitled to recover from the company the amount of any fees properly paid by him to the Registrar on the lodgement.

   (6) If the particulars and documents relating to a charge that are required by this section to be lodged with the Registrar are not lodged within the time required—

      (a)   the charge shall be void against the liquidator and any creditor of the company; and

      (b)   the full debt secured by the charge shall become payable immediately by the company.

 

104.   Registration of enforcement of security by mortgagee

   (1) If a person enters into possession of any of the property of a company as mortgagee under any powers contained in a charge, he shall, within seven days after so doing, lodge a notice to that effect in the prescribed form with the Registrar.

   (2) Where a person who is in possession as mortgagee of property of a company goes out of possession, he shall, within fourteen days thereafter, lodge a notice to that effect in the prescribed form with the Registrar.

   (3) A person who fails to comply with this section shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding ten monetary units for each day that the failure continues.

 

105.   Endorsement of registration on debentures of a series

   (1) Where a company issues a debentures forming one of a series of debentures, or a certificate of debenture stock, and the payment of the debenture is secured by a charge registered under this Part, the company shall endorse on the debenture or certificate of debenture stock a statement that registration has been effected and the date of registration.

   (2) If the company fails to comply with sub-section (1), the company, and each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding two hundred and fifty monetary units.

   (3) A person who—

      (a)   causes to be endorsed on any debenture or certificate of debenture stock a statement that registration has been effected, which he knows to be false in any particular, or

      (b)   authorises or permits the delivery of any debenture or certificate of debenture stock bearing an endorsed statement that registration has been effected, which he knows to be false in any particular;

shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding two hundred and fifty monetary units or to imprisonment for a period not exceeding three months, or to both.

 

106.   Charges in favour of the State

This Division shall bind the State in respect of all charges to which the State is entitled.

 

DIVISION 5.3—RECEIVERS

 

107.   Application of Division

This Division shall apply in relation to a receiver of property of a company who is appointed after the commencement of this Act, even if the appointment arose out of a transaction entered into before that commencement.

 

108.   Appointment of receiver by Court

   (1) When a charge over property of a company has become enforceable, the Court may, on the application of the chargee, appoint—

      (a)   a receiver who is not also a manager; or

      (b)   a receiver and manager;

of the property.

   (2) In the case of floating charge, the Court may, whether or not the charge has become enforceable, on the application of the chargee, appoint—

      (a)   a receiver who is not also a manager; or

      (b)   a receiver and manager;

of the property and undertaking of the company if it is satisfied that events have occurred or are about to occur which render it unjust to the chargee that the company should retain power to dispose of its assets.

   (3) A receiver shall not be appointed as a means of enforcing debentures not secured by any charge.

   (4) An individual shall not be appointed as a receiver unless the individual is eligible for appointment under section 111.

[S 108(4) ins by s 7 of Act 24 of 2011.]

 

109.   Notification of appointment of receiver

   (1) A person who obtains an order for the appointment of a receiver of property of a company, or who appoints such a receiver under a power contained in an instrument, shall, within seven days after obtaining the order or making the appointment, lodge a notice with the Registrar of the order or appointment.

   (2) A person who is appointed as a receiver of property of a company shall, within fourteen days after the appointment, lodge with the Registrar a notice in the prescribed form of the physical address of the person’s office, and a postal address.

   (3) Where a person who has been appointed receiver of property of a company ceases to act as receiver, he shall, within seven days after so ceasing to act as receiver, lodge with the Registrar a notice that he has ceased to act as receiver.

   (4) On lodgement of a notice under sub-section (1) or (3), the Registrar shall cause a notice of the appointment of the person as receiver, or that the person has ceased to act as receiver, as the case may be, to be published in the Gazette.

109A.   Statement of company's affairs

   (1) Unless the court directs otherwise, the directors of a company shall, within three months of the appointment of a receiver, prepare and submit to the receiver a statement as to the affairs of the company as at the date of the appointment of the receiver, showing—

      (a)   the particulars of its assets and liabilities;

      (b)   the names and addresses of its creditors;

      (c)   the securities held by each of the creditors;

      (d)   the dates when the securities were respectively given; and

      (e)   such further information as may be prescribed or as the receiver may require.

   (2) The statement referred to in subsection (1) shall be verified by the statutory declaration of at least one director or the secretary of the company at the date of the appointment of the receiver.

   (3) Where the directors of a company fail or neglect to prepare the statement referred to in subsection (1), the receiver shall, not more than three months after the expiry of the period referred to in subsection (1), prepare and submit a statement of the affairs of the company, from the best available information.

   (4) A receiver may, subject to the direction of the court, by notice in writing, require a person—

      (a)   who is, or was, within two years before the date of the appointment of the receiver, an officer of the company; or

      (b)   who took part in the formation of the company, if the company was formed less than two years before the date of the appointment of the receiver;

to verify, by statutory declaration, such part of the statement as that person is in a position to verify.

   (5) A receiver may serve a notice on a person referred to in subsection (4) in the prescribed manner and form.

   (6) A person required to verify a statement under subsection (4) shall, within fourteen days after receiving the notice referred to in that subsection or within such extended period as the receiver or the court may specify, submit a statutory declaration verifying those matters in the statement which that person is in a position to verify.

   (7) A receiver shall, within seven days after receiving the statement under subsection (1) or a statutory declaration under subsection (3), cause copies to be—

      (a)   filed with the court, if the receiver is appointed by the court;

      (b)   lodged with the Registrar;

      (c)   delivered to the official receiver, if the official receiver is not the receiver; and

      (d)   lodged with the holder of the charge by virtue of which the receiver was appointed.

   (8) A person required under this section to verify a statement shall be paid out of the assets of the company such costs and expenses, subject to an application to the court, as the receiver considers reasonable, incurred in, and relating to, verifying the information.

(9) The Registrar may, where a receiver—

      (a)   does not submit a report under subsection (1), issue a remainder to the receiver to submit the statement within 14 days;

      (b)   does not comply with the notice issued by the Registrar under paragraph (a), cause the receiver to be disqualified from acting as a receiver under this Act.

   (10) A statement made under this section may be used as evidence in any proceedings against any person making it.

[S 109A ins by s 8 of Act 24 of 2011.]

109B.   Offences relating to reports

Where a person, company or an officer in default contravenes section 109A, the person, company or officer in default commits an offence and is liable, upon conviction—

      (a)   to a fine not exceeding one hundred thousand penalty units or to imprisonment for a period not exceeding 12 months, or to both; and

      (b)   in the case of a continuing failure, to a fine not exceeding 50,000 penalty units for each day that the failure continues.

[S 109B ins by s 8 of Act 24 of 2011.]

 

110.   Payment of preferential creditors

   (1) Where—

      (a)   a receiver is appointed, on behalf of the holder or trustee of any debenture of a company that is secured by a floating charge; or

      (b)   possession is taken by or on behalf of such a person;

of property comprised in or subject to the charge, then, if the company is not at the time in the course of being wound-up, the debts which in every winding-up are, under section 346 (relating to preferential payments), to be paid in priority to all other debts shall be paid out of any assets coming to the hands of the receiver or the person taking possession in priority to any claim for principal or interest in respect of the debentures.

   (2) For the purpose of applying section 346, the date of the appointment of the receiver or of possession being taken, as the case may be, shall be deemed to be the date of commencement of the winding-up.

 

111.   Eligibility for appointment as receiver

   (1) An individual who wishes to perform the function of a receiver shall apply for accreditation with the Registrar in the prescribed manner and form.

(2) The Minister shall prescribe—

      (a)   the qualifications for persons to be accredited under subsection (1); and

      (b)   the form of, and procedure, for issuance of accreditation certificates.

(3) A person shall not be appointed, act or continue to act as a receiver of the property or undertaking of a company if the person is—

      (a)   under the age of 18 years;

      (b)   under any legal disability;

      (c)   prohibited or disqualified from so acting by an order of a court of competent jurisdiction;

      (d)   a body corporate;

      (e)   not resident in Zambia;

      (f)   a mortgagee or charge of the company or an employee or officer of a mortgage or chargee;

      (g)   an undischarged bankrupt;

      (h)   a person who is, or has been within the previous two years, a director or officer of the company or any related body corporate, except with the leave of court;

      (i)   a trustee under a trust deed for the benefit of debenture holders of the company, except with the leave of court;

      (j)   a person who has been convicted, within the previous five years, of an offence involving fraud or dishonesty;

      (k)   a person who has been removed, within the previous five years, from an office of trust by order of a court of competent jurisdiction;

      (l)   a person who has contravened a provision of this Act in a manner which has or may materially affect creditors or contributors or persons dealing in good faith with the company;

      (m)   no longer in good standing with that person’s recognized professional body, if any, as a result of professional misconduct by that person;

      (n)   not qualified to perform the functions of a receiver under subsection (1);

      (o)   a person who has, within the period of two years immediately preceding the commencement of the receivership, had an interest, direct or indirect, in a share issued by the charger; or

      (p)   disqualified from acting as a receiver by the instrument that confers the power to appoint a receiver.

   (4) The Registrar shall-

      (a)   cause to be kept a register of receivers in the prescribed manner and form; and

      (b)   notify a professional body of any misconduct of a receiver or any removal of a receiver from the register of receivers.

   (5) A person who, in contravention of this section, acts or continues to act as a receiver commits an offence and is liable, upon conviction, to a fine not exceeding two hundred thousand penalty units or to imprisonment for a period not exceeding two years, or to both.

[S 111 subs by s 9 of Act 24 of 2011.]

111A.   Remuneration of a receiver

   (1) A receiver shall be entitled to the payment of a fee which shall be a percentage of the gross proceeds of the realization of the receivership of the company.

   (2) Notwithstanding the generality of subsection (1), the rates payable to a receiver shall not exceed such amount as may be prescribed by statutory instrument.

   (3) A receiver who collects a fee in excess of the prescribed fees shall be personally liable to reimburse the amount of the excess fees so collected.

[S 111A ins by s 10 of Act 24 of 2011.]

 

112.   Receivers appointed by the Court.

A receiver of any property or undertaking of a company appointed by the Court shall be an officer of the Court and shall be deemed, in relation to the property or undertaking, not to be an officer of the company, and shall act in accordance with the directions and instructions of the Court.

 

113.   Receivers appointed otherwise than by the Court

   (1) A receiver of any property or undertaking of a company appointed, otherwise than by a Court, under a power contained in any instrument shall, subject to section114, be deemed in relation to the property or undertaking to be an agent and officer of the company and not an agent of the persons by or on behalf of whom he is appointed, and he shall act in accordance with the instrument under which he is appointed and with any directions of the Court made under this section.

   (2) The Court may, on the application of such a receiver, make any order it thinks fit giving directions in relation to any matter arising in connection with the performance of the receiver’s functions or declaring the rights of persons before the Court or otherwise.

   (3) Subject to section 111A, the court may, on the application of a company or a liquidator of a company, by order, fix the amount to be paid by way of remuneration to any receiver and may, on application made by the company or liquidator or by the receiver, vary or amend the order.

[S 113(3) subs by s 11 of Act 24 of 2011.]

   (4) The power of the Court under sub-section (3) shall—

      (a)   extend to fixing the remuneration for any period before the making of the order or the application therefor, if the Court is satisfied that there are special circumstances making it proper to do so;

      (b)   be exercisable notwithstanding that the receiver had died or ceased to act before the making of the order or the application therefor; and

      (c)   extend to requiring the receiver or his personal representatives to account for any amount that the receiver may have been paid or retained for his remuneration, before the making of the order, that is in excess of the remuneration so fixed for that period.

 

114.   Liabilities of receivers on contracts

   (1) A receiver of any property or undertaking of a company shall be personally liable on any contract entered into by him as receiver except insofar as the contract expressly provides otherwise.

   (2) Where the contract was entered into by the receiver in the proper performance of his functions, he shall have, subject to the rights of any prior encumbrances, an indemnity in respect of liability thereon out of the property in respect of which he has been appointed to act as receiver.

   (3) Where the receiver was appointed, otherwise than by a Court, under a power contained in any instrument, and the contract was entered into by him with the express or implied authority of those appointing him, he shall also have an indemnity in respect of liability thereon from those appointing him to the extent to which he is unable to recover in accordance with sub-section (2).

 

115.   Fact that receiver has been appointed to appear on correspondence

   (1) Where a receiver of any property or undertaking of a company has been appointed, every invoice, order or business letter issued by or on behalf of the company, the receiver or the liquidator, being a document on or in which the name of the company appears, shall contain a statement that a receiver has been appointed.

   (2) If the company fails to comply with this section, the company, and each officer, liquidator and receiver in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding three monetary units in respect of each document not containing the statement.

 

116.   Statement of affairs and accounts where receiver of undertaking appointed

Where a receiver is appointed of the whole or substantially the whole of the undertaking of any company on behalf of the holders of any debentures secured by a floating charge, section 288 and 338 shall apply as regards the submission of a statement of affairs and of periodical accounts by the receiver as if the company had been ordered to be wound-up under this Act and as if the receiver had been appointed liquidator.

 

117.   Accounts of receivers

   (1) Except where section 116 applies, a receiver of any property of a company shall—

      (a)   within one month, or such longer period as the Registrar may allow, after the end of the period of six months from the date of the receiver’s appointment and of every subsequent period of three months until the receiver ceases to act, lodge with the Registrar an abstract showing the receiver’s receipts and payments during that period of three months; and

      (b)   within one month, or such longer period as the Registrar may allow, after the receiver ceases to act as receiver, lodge with the Registrar an abstract showing the receiver’s receipts and payments during the period from the end of the twelve months to which the last abstract, if any, related, and the total of those receipts and payments during the whole period of the receiver’s appointment.

   (2) The Registrar may require a receiver to produce any document or information concerning the affairs of the company.

   (3) A receiver who contravenes this section commits an offence and is liable, upon conviction, to a fine not exceeding one hundred penalty units for each day that the failure continues.

[S 117 subs by s 12 of Act 24 of 2011.]

 

118.   Reports by receivers

   (1) If a receiver, in the course of the performance of his duties as receiver of property or undertaking of a company, is satisfied that—

      (a)   there has been a contravention of, or failure to comply with, any of the provisions of this Act; and

      (b)   the circumstances are such that in his opinion the matter has not been or will not be adequately dealt with by bringing the matter to the notice of the directors of the company or, if the company is a subsidiary, of the directors of any holding company of the company; he shall as soon as is practicable report the matter to the Registrar in writing.

   (2) The Court may, on its own motion or on the application of the Registrar or of any person interested in the appointment of a receiver of the property of a company, require the receiver to submit a report to the Registrar on any matter relating to the company on which the receiver may have information.

118A.   Vacation of office of receiver

   (1) The office of a receiver shall become vacant where the receiver—

      (a)   dies;

      (b)   becomes disqualified under this Act;

      (c)   is removed by order of court; or

      (d)   is removed from the register of receivers by the Registrar pursuant to subsection (3) of section 111.

   (2) A receiver may resign from office by giving one month’s notice, in writing, of the receiver’s intention to resign to the appointing authority or the court, as the case may require.

   (3) A receiver may be removed by the court, on application to the court by the holder of a charge by virtue of which the receiver was appointed or by revocation of the deed of appointment under which the receiver was appointed.

   (4) Where a receiver vacates office—

      (a)   the receiver’s remuneration and any expenses properly incurred by the receiver; and

      (b)   any indemnity to which the receiver is entitled out of the property of the company;

shall be paid out of the property of the company which is subject to a charge and shall have priority in accordance the provisions of this Act as a preferential creditor.

   (5) Where a receiver ceases to act as a receiver or is removed by the court, the holder of the charge by virtue of which the receiver was appointed shall, within fourteen days of the cessation or removal, as the case may be, provide the Registrar notice, in writing, of the cessation or removal and the Registrar shall enter the notice in the registrar of receivers.

   (6) If, by the expiry of a period of one month following the removal of a receiver or the receiver’s cessation of office, and no other receiver is appointed, the charge by virtue of which the receiver was appointed shall cease to attach to the property subject to the charge.

   (7) A person who contravenes this section commits an offence and is liable, upon conviction, to a fine not exceeding one hundred thousand penalty units or to imprisonment for a period not exceeding one year, or to both.

[S 118A ins by s 13 of Act 24 of 2011.]

PART VI
PUBLIC ISSUE OF SHARES, ETC.

 

DIVISION 6.1—INTERPRETATION

 

119.   Meaning of “invitation to the public”

   (1) In this Part, an “invitation to the public” to acquire shares or debentures of a company means an offer of, or invitation to make an offer for, shares or debentures of a company other than one—

      (a)   made to fifteen or fewer persons; or

      (b)   made—

      (i)   to fifty or fewer persons; or

      (ii)   of the company exclusively to its existing shareholders, debenture holders or employees;

on the basis that a person who accepts the invitation may not renounce or assign the benefit of any shares or debentures to be obtained thereunder in favour of any other person.

   (2) For the purpose of this Part, the issue of any kind of application form for shares or debentures of a company shall be deemed to be an invitation to acquire those shares or debentures.

 

120.   Offer of sale deemed to be made by the company

   (1) Where a company allots or agrees to allot any of its shares or debentures to a person with a view to the public’s being invited to acquire any of those shares or debentures, then, for the purposes of this Act—

      (a)   an invitation to the public so made shall be deemed to be made by the company as well as by the person who in fact made it; and

      (b)   a person who acquires any of the shares or debentures in response to the invitation shall be deemed to be an allottee from the company of those shares or debentures.

   (2) Where a company allots or agrees to allot any of its shares or debentures to a person and an invitation to the public is made in respect of any of the shares or debentures—

      (a)   within six months after the allotment or agreement to allot; or

      (b)   before the company has received the whole of the consideration in respect of the shares or debentures;

it shall be presumed that the allotment or agreement to allot was made by the company with a view to an invitation to the public being made in respect of those shares or debentures.

 

121.   First publication of a prospectus

   (1) The first publication of the prospectus shall be presumed to be on the date of registration thereof.

   (2) Where the shares or debentures to which the invitation relates are dealt in on a stock exchange or where the prospectus states that application has been or will be made for permission to deal therein on any stock exchange, and it is necessary to advertise the prospectus in one or more newspapers to comply with the requirements of that stock exchange, the first publication of the prospectus shall be deemed to occur when the prospectus is first so advertised.

 

DIVISION 6.2—INVITATIONS TO THE PUBLIC AND PROSPECTUSES

 

122.   Restrictions on invitations to the public to acquire shares and debentures

   (1) In this section, “company” includes a company proposed to be formed.

   (2) A person shall not make an invitation to the public to acquire shares in a company unless—

      (a)   the company is a public company and the invitation complies with this Division; or

      (b)   the invitation is supervised by the Court.

   (3) A person shall not make an invitation to the public to acquire debentures in a company unless—

      (a)   all of the following conditions are satisfied:

      (i)    the company is a public company;

      (ii)   the debentures are created by deed under the common seal of the company in favour of trustees for the debenture holders; and

      (iii)   the invitation complies with this Division; or

      (b)   the invitation is supervised by the Court.

   (4) A person shall not make an invitation to the public to acquire equity shares in a company unless all the equity shares in the company already issued and all those to which the invitation relates carry an unrestricted right to vote at general meetings of the company and, on a poll, a constant number of votes which, in proportion to nominal value, is the same in the case of every share.

   (5) Sub-section (4) shall not prohibit an invitation to acquire equity shares that do not comply with that sub-section if—

      (a)   the rights making them equity shares are expressed by the terms of issue to be conditional upon the exercise by the holder of an option; and

      (b)   the shares will comply with that sub-section if the option is exercised.

   (6) Sub-section (4) shall not prohibit an invitation to acquire equity shares that do not comply with that sub-section if the shares are issued, and the invitation made, in fulfillment of an obligation entered into by the company before the commencement of this Act.

   (7) If a person acquires shares or debentures in a company as a result of any invitation to the public in contravention of this section, he shall be entitled to recover compensation for any loss sustained by him from any person making the invitation, and where a person making the invitation was a body corporate, from any officer in default.

   (8) If an invitation to the public is made in contravention of this section, each person making the invitation and, where such a person is a body corporate, each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding two thousand monetary units or to imprisonment for a period not exceeding two years, or to both.

 

123.   Prospectus required for invitations to the public to purchase share or debentures

   (1) Subject to this section, a person may invite the public to acquire shares or debentures of a public company or of a public company proposed to be formed only if—

      (a)   within six months prior to the making of the invitation there was registered by the Registrar a prospectus relating to the shares or debentures that complies with this Division;

      (b)   every person to whom the invitation is made is supplied with a true copy of the prospectus at the time when the invitation is first made to him; and

      (c)   every copy of the prospectus states on its face that it has been registered by the Registrar and the date of registration.

   (2) An invitation published in a newspaper or magazine advertisement that summarises the contents of a prospectus shall be deemed to satisfy paragraph (b) of sub-section (1) if the advertisement—

      (a)   does not contain or accompany any kind of application form for shares or debentures;

      (b)   states with reasonable prominence where copies of the full prospectus may be obtained, the fact that it has been registered and the date of registration; and

      (c)   is in terms previously approved in writing by the Registrar.

 

124.   Contents of prospectus

   (1) A prospectus shall not be lodged with the Registrar unless—

      (a)   it does not contain any untrue or misleading statement;

      (b)   it contains all information that prospective purchasers of the shares or debentures and their advisors would reasonably expect to be provided in order to make a decision on purchase; and

      (c)   either—

      (i)   it deals with the matters and provides the reports specified in the Fourth Schedule; or

      (ii)   the invitation concerned is an invitation made only to existing members or debenture holders of the company (whether or not an applicant for shares or debentures will have the right to renounce in favour of other persons).

 

125.   Expert’s consent

   (1) This section applies to a prospectus that includes a statement purporting to be made by an expert.

   (2) The prospectus shall not be lodged with the Registrar unless it is accompanied by the written consent of the expert to the publication of the prospectus with the inclusion of the statement in the form and context in which it is included.

   (3) The prospectus shall include a statement that the expert has given his consent to the inclusion of the statement and has not withdrawn his consent.

   (4) If the expert withdraws his consent to the inclusion of the statement, he shall immediately notify the Registrar and the persons responsible for issuing the prospectus.

   (5) A person responsible for issuing a prospectus shall cease to issue the prospectus after receiving a notice from an expert under sub-section (4).

   (6) A person who contravenes sub-section (5), and, if that person is a body corporate, each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding five hundred monetary units.

 

126.   Registration of prospectuses

   (1) The Registrar shall not register a prospectus for shares or debentures in a company or in a company proposed to be formed unless the copy lodged conforms with this section.

   (2) The copy shall be signed by—

      (a)   each individual named therein as a director or proposed director of the company or by his agent authorised in writing; and

      (b)   each other person making the invitation, or his agent authorised in writing.

   (3) For the purpose of paragraph (b) of sub-section (2), where the invitation is made by a body corporate or members of a firm, it shall be sufficient if the copy is signed on behalf of the body corporate by not fewer than two directors or on behalf of the firm by not fewer than half the partners, and any such director or partners may sign by his agent authorised in writing.

   (4) The copy shall have endorsed thereon or attached thereto—

      (a)   the consent of any expert required by section 125; and

      (b)   a certified copy or translation of each of the documents required to be available for inspection in accordance with paragraph 49 of the Fourth Schedule.

   (5) If a copy or translation referred to in paragraph (b) of sub-section (4) has already been lodged with the Registrar by the company, the Registrar may waive the requirement that it be attached or endorsed if he is satisfied that the copy originally delivered is readily identifiable and accessible.

   (6) The prospectus shall state at its head that a copy has been registered by the Registrar and also state immediately after that statement that the Registrar assumes no responsibility as to its contents.

   (7) The copy shall be accompanied by a statutory declaration by a director and the secretary of the company stating that the prospectus conforms to the requirements of this Division.

   (8) On registering the prospectus, the Registrar shall issue a certificate stating that the prospectus has been registered.

 

127.   Over-subscription in debenture issue

   (1) A company shall not accept or retain subscriptions to a debentures issue in excess of the amount of the issue disclosed in the prospectus unless the prospectus specifies—

      (a)   that the company expressly reserves the right to accept or retain over subscriptions; and

      (b)   a limit, expressed as a specific sum or money, on the amount of over-subscriptions that may be accepted or retained, being an amount not exceeding twenty-five per centum above the amount of the issue as disclosed in the prospectus.

   (2) Subject to the Fourth Schedule, where a company specifies in a prospectus relating to a debenture issue that it reserves the right to accept or retain over-subscriptions—

      (a)   the prospectus shall not contain any statement of, or reference to, the asset backing for the issue, other than a statement or reference to the total tangible assets and the total liabilities of the company and of its guarantor companies; and

      (b)   the prospectus shall contain a statement or reference as to what the total assets and total liabilities of the company would be if over-subscriptions to the limit specified in the prospectus were accepted or retained.

 

128.   Reference to stock exchange listing in prospectus-allotment of shares

   (1) Where a prospectus states or implies that application has been or will be made for permission for the shares or debentures offered in the prospectus to be listed for quotation on the official list of a stock exchange, then, subject to sub-section (8), no allotment of shares or debentures shall be made on an application made pursuant to the prospectus except in accordance with this section.

   (2) An allotment may be made—

      (a)   if the permission has been applied for in the form required by the stock exchange before the third day on which the stock exchange is open after the date of issue of the prospectus; or

      (b)   if the permission has been granted before the determination day.

   (3) If, on the determination day, the conditions of sub-section (2) are not satisfied, the company shall, within fourteen days after the determination day, repay without interest any money received from any applicant in pursuance of the prospectus.

   (4) If the company fails to repay money in accordance with sub-section (3), the directors shall, in addition to the liability of the company but subject to sub-section (5), be jointly and severally liable to repay that money with interest at the ruling bank rate from the end of that period of fourteen days.

   (5) A director shall not be liable under sub-section (4) if he proves that the default in the repayment of the money was not due to any misconduct or negligence on his part.

   (6) The company shall, for so long as the conditions of sub-section (2) are not satisfied, keep in a separate bank account all money received in pursuance of a prospectus.

   (7) A condition purporting to require or bind an applicant for shares or debentures to waive compliance with any requirement of this section shall be void.

   (8) The Registrar may, on the application of the company made before the determination day, by notice in the Gazette provide that this section shall not apply to the allotment of the shares or debentures.

   (9) For the purposes of this section, a statement in a prospectus to the effect that the articles comply with, or have been drawn up so as to comply with, a condition imposed by a stock exchange shall, unless the contrary intention appears, be deemed to imply that application has been, or will be, made for permission for the shares or debentures offered by the prospectus to be listed for quotation on the official list of the stock exchange.

   (10) For the purposes of this section, where a stock exchange grants the permission subject to a condition, the permission shall be deemed to be granted if and when the directors of the company give to the stock exchange a written undertaking to comply with the condition.

   (11) For the purposes of this section, the determination day is, subject to sub-section (12), the day forty-two days after the day of issue of the prospectus.

   (12) If, before the day referred to in sub-section (11), the stock exchange notifies the applicant for the permission that a later day, being a day not more than three months after the day of issue of the prospectus, will be the determination day, the determination day is that later day.

 

129.   Civil liability for misstatements or omissions in prospectus

   (1) Where a prospectus—

      (a)   contains a statement which is untrue or, in the context, misleading;

      (b)   omits any matter which is material; or

      (c)   omits to state any of the particulars or to set out any of the reports which, under this Act, it is required to state or set out;

then, subject to this section, the persons specified in sub-section (2) shall be liable to pay compensation to any persons who acquire any shares or debentures on the faith of the prospectus for any loss they may have sustained by reason of the untrue statement or omission.

   (2) The persons liable to pay compensation under sub-section (1) are the following-

      (a)   every person making the invitation to which the prospectus relates;

      (b)   every person who was a director of a body corporate making the invitation at the time when the prospectus was published;

      (c)   where the invitation was made by the company to whose shares or debentures the invitation relates—

      (i)   every person who has authorised himself to be named in the prospectus as a director or as having agreed to become a director, either immediately or after an interval of time; and

      (ii)   every promoter of the company who was a party to the preparation of the prospectus;

      (d)   the expert, if the untrue statement or omission occurs in a statement by an expert who has consented to the publication of the prospectus in accordance with section 125.

   (3) A person shall not be liable under this section if he proves—

      (a)   that as regards any untrue statement, not purporting to be—

      (i)   a statement or report made by an expert (other than himself);

      (ii)   a public official document or statement; or

      (iii)   an extract from a document referred to in paragraph (i) or (ii);

he had reasonable ground to believe and did believe up to the time of the publication of the prospectus or, where the waiting period applies, up to the expiration of the waiting period, that the statement was true;

      (b)   that as regards any untrue statement purporting to be a statement or report by an expert (other than himself) or an extract therefrom—

      (i)   it was a correct and fair copy of the statement, report or extract; and

      (ii)   he had reasonable ground to believe and did believe up to the time of the publication of the prospectus that the person making the statement was competent to make it and had given the consent required by section 125 and had not withdrawn that consent before the date of registration of the prospectus;

      (c)   that as regards any untrue statement purporting to be a copy of or extract from a public official document or a statement made by an official person, it was a correct and fair copy of or extract from the document or statement;

      (d)   that as regards any omission, he was not aware of the matter omitted, or that the matter omitted was material, up to the time of the publication of the prospectus or, where the waiting period applies, up to the expiration of the waiting period;

      (e)   that after the publication of the prospectus but before the expiration of the waiting period he, on becoming aware of any untrue statement therein or omission therefrom, withdrew his consent thereto and gave reasonable public notice of the withdrawal and of the reason therefor; or

      (f)   that the prospectus was published without his knowledge and that, on becoming aware of its publication, he forthwith gave reasonable public notice that it was published without his knowledge.

   (4) A person shall not be liable under this section by reason that subparagraph (c) (i) of sub-section (2) applies to him if he proves that, having consented to being named as a director or as having agreed to become a director, he withdrew his consent before the registration of the prospectus and that it was published without his authority or consent.

   (5) A person shall not be liable under this section by reason that paragraph (d) of sub-section (2) applies to him if he proves—

      (a)   that as regards any untrue statement made by him, he was competent to make the statement and that he had reasonable ground to believe and did believe, up to the date of publication of the prospectus or, where the waiting period applies, up to the expiration of the waiting period, that the statement was true; or

      (b)   that, after the lodgement of the prospectus with the Registrar but before publication thereof, or, where the waiting period applies, before the expiration of the waiting period, on his becoming aware of the untrue statement or omission, he withdrew his consent in writing and gave reasonable public notice of the withdrawal and of the reason therefor.

   (6) Where—

      (a)   a person is named in a prospectus as a director of a company or as having agreed to become a director of a company and he has not consented to become a director or has withdrawn his consent before the publication of the prospectus and has not authorised or consented to the publication thereof; or

      (b)   the consent of a person is required under section 125 to the publication of the prospectus and he either has not given that consent or has withdrawn it before the publication of the prospectus; every person making the invitation to which the prospectus relates and every person who was a director of anybody corporate making the invitation at the time when the prospectus was published (except any person without whose knowledge or consent the prospectus was published) shall be liable to indemnify the person referred to in paragraph (a) or (b) against all damages, costs, and expenses to which he may be made liable by reason of his name having been inserted in the prospectus or of the inclusion therein of a statement purporting to be made by him as an expert, or in defending himself against any legal proceeding brought against him in respect thereof.

 

130.   Offence of misstatement or omission in prospectus

   (1) Where any prospectus, advertisement or circular published in relation to any invitation to the public to acquire shares or debentures of a company contains any untrue statement or omits truthfully to state any of the matters which, under this Act, it is required to state, any person who authorised the publication of the prospectus, advertisement or circular shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding seven thousand monetary units or to imprisonment for a period not exceeding seven years, or to both.

   (2) It is a defence to a charge under sub-section (1) that—

      (a)   the untrue or omitted statement was immaterial; or

      (b)   the person had reasonable ground to believe and did believe, up to the time of publication of the prospectus, that the statement was true.

   (3) For the purposes of this section, a person shall not be regarded as having authorised the publication of a prospectus by reason only of his having given the consent required by section 125, and the Registrar shall not be regarded as having authorised the publication of an advertisement or circular by reason of his having given the certificate referred to in section 126.

 

131.   Stop trading order

   (1) Where a prospectus has been registered and it appears to the Registrar that it—

      (a)   contains a statement, promise, estimate or forecast that is false or misleading, whether or not the statement or other particular was false or misleading at the time the prospectus was lodged;

      (b)   fails to comply in any material respect with this Division or with the Fourth Schedule; or

      (c)   conceals or omits to state a material fact so that a statement in the prospectus is rendered misleading in the context in which it appears;

the Registrar may apply to the Court for an order under sub-section (2).

   (2) If the Court is satisfied that the ground for the application is established, it may make an order—

      (a)   cancelling the registration of the prospectus and directing the persons making the invitation to the public to which the prospectus relates—

      (i)   to withdraw the prospectus;

      (ii)   to cease to accept further subscriptions or purchases of shares or debentures offered in the prospectus; and

      (iii)   to repay with interest any money received from applicants in pursuance of the prospectus;

      (b)   declaring any contract for the subscription or purchase of shares or debentures offered in the prospectus to be voidable;

      (c)   directing the persons making the invitation to the public to which the prospectus relates to reissue forthwith the prospectus amended in such terms as the Court directs; or

      (d)   protecting the rights of persons injuriously affected by the issue of the prospectus, in such terms as it thinks fit.

   (3) In exercising its powers under this section, the Court may, on the application of the Registrar and on being satisfied of the existence of a prima facie case, make such interim orders as it considers necessary to apply for a period of not more than fourteen days after the date of the order.

 

132.   Waiting period

Where an invitation is made to the public to acquire shares or debentures of a public company or of a public company proposed to be formed, an agreement for the acquisition of the shares or debentures made before the end of the waiting period, other than a bona fide underwriting agreement, shall not be enforceable by the company or the promoters.

 

133.   Withdrawal of application after waiting period

Where an invitation is made to the public in respect of any shares or debentures of a public company, an application for such shares or debentures shall not be revocable during a period of seven days commencing on the expiry of the waiting period unless, before the expiry of that period of seven days, some person responsible for the prospectus has given a notice to the public which has the effect under section 129 of excluding or limiting the responsibility of the person giving it for any misstatement or omission in the prospectus.

 

134.   Allotment and minimum subscription

   (1) No allotment of shares offered to the public shall be made unless—

      (a)   the minimum subscription has been subscribed as required by section 15; and

      (b)   the sum payable on application for the shares so subscribed has been received by the company.

   (2) Where a cheque is given in payment of a sum under sub-section (1), the sum shall not be regarded as having been received by the company until the cheque is paid by the bank on which it is drawn.

   (3) The minimum subscription shall be calculated—

      (a)   on the nominal value of each share, if the shares are not issued at a premium; or

      (b)   on the nominal value of each share plus the premium payable, if the shares are issued at a premium.

   (4) The amount payable on application on each share offered to the public shall not be less than five per centum of the nominal amount of the share.

   (5) If the conditions of sub-section (1) have not been satisfied after the expiry of four months from the first issue of the prospectus, any money received from applicants for shares shall forthwith be repaid to them without interest.

   (6) Subject to sub-section (7), if any money received under sub-section (5) is not repaid within five months after the issue of the prospectus, the directors of the company shall be jointly and severally liable to repay that money with interest at the ruling bank rate from the expiry of the period of five months.

   (7) A director shall not be liable under sub-section (6) if he proves that the default in the repayment of the money was not due to any misconduct or negligence on his part.

   (8) An allotment made by a company to an applicant in contravention of this section shall, notwithstanding that the company is in the course of being wound-up, be voidable at the option of the applicant by written notice given to the company within one month after the date of the allotment.

   (9) A director who willfully contravenes, or willfully authorises or permits the contravention of, this section shall be liable to compensate the company and the allottee for any loss, damages or costs which the company or the allottee has sustained or incurred thereby.

   (10) Proceedings for the recovery of any compensation under sub-section (9) shall not be commenced more than two years after the date of the allotment.

   (11) A condition purporting to require or bind an applicant for shares to waive compliance with any requirement of this section shall be void.

   (12) A company shall not allot, and an officer or promoter of a company or a proposed company shall not authorise or permit the allotment of, shares or debentures to the public on the basis of a prospectus more than six months after the publication of the prospectus.

   (13) An allotment of shares or debentures shall not be voidable or void by reason only that it was made in contravention of sub-section (12).

 

135.   Statement in lieu of prospectus

   (1) A public company that does not issue a prospectus on, or with reference to, its formation shall not allot any of its shares or debentures unless it has, not later than three days before the first allotment of the shares or debentures, lodged with the Registrar a statement in lieu of a prospectus.

   (2) The statement in lieu of a prospectus shall—

      (a)   be signed by every person who is named therein as a director or a proposed director of the company or by his agent authorised in writing; and

      (b)   be in the form of a prospectus and deal with such matters specified in Part A of the Fourth Schedule as apply to the formation of a company.

 

136.   Prohibition of waiver and notice clauses

A condition purporting to require or bind any person to waive compliance with this Part or purporting to attribute to him notice of any contract document or other matter not specifically referred to in any prospectus advertisement or circular, shall be void.

PART VII
MEETINGS AND RESOLUTIONS

 

137.   Interpretation

   (1) In this Part, unless the context otherwise requires, “meeting” means any of the following meetings of a company—

      (a)   an annual general meeting;

      (b)   an extraordinary general meeting; and

      (c)   a class meeting.

 

138.   Annual general meeting

   (1) Subject to this section, a company shall hold, within three months after the end of each financial year of the company, a meeting to be called the annual general meeting of the company.

   (2) If, after any financial year, no annual general meeting is held in accordance with sub-section (1), the Registrar may, on the application of any member of the company, convene, or direct the convening of, an annual general meeting of the company and give such ancillary or consequential directions as the Registrar thinks expedient, including directions modifying or supplementing, in relation to the convening, holding and conducting of the meeting, the operation of the company’s articles, or a direction that one member of the company present in person or by proxy shall be deemed to constitute a meeting.

   (3) If the company fails to comply with sub-section (1), or with any direction of the Registrar under sub-section (2), the company, and each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding one thousand monetary units.

   (4) If the company is a private company, the annual general meeting in relation to a financial year, other than the first financial year, may be dispensed with if all the members of the company entitled to attend and vote at any annual general meeting so agree in writing before the end of the financial year.

 

139.   Extraordinary general meetings

   (1) An extraordinary general meeting of a company may be convened in accordance with other provisions of this Act, or—

      (a)   by the directors whenever they think fit; or

      (b)   if the articles so provide, by any other person in accordance with those provisions.

 

140.   Class meetings

   (1) Unless the articles provide otherwise, a meeting of members of a particular class may be convened—

      (a)   by the directors whenever they think fit; or

      (b)   by two or more members of that class, holding, at the time that notice of the meeting is sent out, not less than one-twentieth of the total voting rights of all the members having a right to vote at meetings of that class.

 

141.   Requisition of a general meeting

   (1) A member or members of the company may make a requisition for a general meeting to be held under this section if they hold, at the time when the requisition is made, not less than one-twentieth of the total voting rights of all the members having a right to vote at general meetings of the company.

   (2) The requisition shall state the nature of the business to be transacted at the meeting, and shall be signed by the requisitionists and deposited at the registered office of the company or posted to its registered postal address, and may consist of several documents in like form each signed by one or more requisitionists.

   (3) Where a requisition is made in accordance with this section, the directors shall proceed duly to convene a general meeting of the company.

   (4) If the directors do not proceed duly to convene a meeting to be held within the requisition period, the requisitionists or any of them may themselves convene a meeting, but any meeting so convened shall not be held more than three months after the receipt of the requisition by the company.

   (5) A meeting convened under this section by the requisitionists shall be convened in the same manner, as nearly as possible, as that in which meetings are to be convened by directors.

   (6) Notwithstanding anything in the articles, the notice period for a meeting convened under this section shall be the period set out in section 143 for the type of meeting concerned.

   (7) Any reasonable expenses incurred by the requisitionists by reason of the failure of the directors duly to convene a meeting shall be repaid to the requisitionists by the company, and the sum so repaid shall be retained by the company out of any sums due or to become due from the company by way of fees or other remuneration in respect of their services to such of the directors as willfully authorised or permitted the failure.

   (8) For the purposes of this section, the requisition period is the period of—

      (a)   twenty-eight days, if the meeting is to be an annual general meeting or a meeting for the passing of a special resolution; or

      (b)   twenty-one days, in any other case;

beginning on the date of receipt by the company of the requisition.

   (9) For the purposes of this section, the directors fail duly to convene a meeting if—

      (a)   they do not convene it within the requisition period; or

      (b)   they do not give such notice thereof as is required by section 143 for a meeting at which a special resolution is to be proposed, if the requisition states that a resolution is to be proposed as a special resolution at the meeting.

 

142.   Entitlement to receive notice of meetings

   (1) Where a meeting of a company is to be convened, any person who is, on the day before the latest day on which notice of the meeting may be given under this Act—

      (a)   a registered member having the right to vote at a meeting of that kind;

      (b)   a person upon whom the ownership of a share devolves by reason of his being a legal personal representative, receiver or trustee in bankruptcy of such a member and of whom the company has received notice;

      (c)   a director of the company;

      (d)   an auditor of the company; or

      (e)   a person entitled under the articles to receive such notice;

shall be entitled to receive notice of the meeting.

   (2) The proceedings of a meeting shall not be invalid by reason only of—

      (a)   the accidental omission to give notice of a meeting to a person entitled to receive notice; or

      (b)   the non-receipt of notice of a meeting duly sent to such a person.

 

143.   Length of notice for convening a meeting

   (1) Subject to this section, notice of a meeting of a company shall be given in writing served in accordance with this Act on each person entitled to receive such notice and shall be given not less than—

      (a)   twenty-one days, in the case of an annual general meeting;

      (b)   twenty-one days, in the case of a meeting at which a special resolution will be proposed; or

      (c)   fourteen days, in any other case;

and not more than fifty days before the meeting is to be held.

   (2) The articles may substitute for the minimum periods of notice provided in sub-section (1) longer periods, being periods of not more than thirty days.

   (3) Where a meeting of the company is convened with a shorter period of notice than that required under this section, full notice shall be deemed to have been given if it is so agreed—

      (a)   by all the members entitled to attend and vote at the meeting, in the case of a meeting convened as the annual general meeting;

      (b)   by a majority in number of the members having a right to attend the meeting and vote on the resolution concerned, being a majority holding not less than ninety-five per centum of the total of such voting rights, in the case of a meeting convened as a meeting at which a special resolution will be moved, and in relation to that resolution; and

      (c)   by a majority in number of the members having a right to attend and vote at the meeting, being a majority holding not less than ninety-five per centum of the total of such voting rights, in the case of any other meeting.

 

144.   Power of Court to order meeting

   (1) If for any reason it is impracticable to convene or to conduct a meeting of a company in compliance with this Act and the articles, the Court may, either of its own motion or on the application of any director of the company or of any member of the company who would be entitled to vote at the meeting, order a meeting of the company to be convened, held and conducted in such a manner as the Court thinks fit, and, where any such order is made, may give such ancillary or consequential directions as it thinks expedient, including a direction that one member of the company present in person or by proxy shall be deemed to constitute a meeting.

   (2) A meeting convened, held and conducted in accordance with an order under this section shall for all purposes be deemed to be a meeting of the company duly convened, held and conducted.

 

145.   Place of meetings

Unless the articles provide otherwise, or all the members entitled to vote at that meeting agree in writing to a meeting at a place outside Zambia, a meeting of a company shall be held in Zambia.

 

146.   Attendance at meetings

The following persons shall be entitled to attend and to speak at a meeting of a company—

      (a)   each member of the company having the right to vote at the meeting;

      (b)   each person upon whom the ownership of a share devolves by reason of his being a legal personal representative, receiver or trustee in bankruptcy of such a member;

      (c)   each director of the company;

      (d)   the secretary of the company;

      (e)   each auditor of the company;

      (f)   each person entitled under the articles to do so;

      (g)   any other person permitted to do so by the Chairman.

 

147.   Conduct of meetings and voting

   (1) Unless the articles of a company provide otherwise, members shall have votes at any meeting of the company as follows—

      (a)   a member of a company with share capital shall have one vote for—

      (i)   each share; and

      (ii)   each whole unit of stock;

that he is registered as holding;

      (b)   each member of a company limited by guarantee shall have one vote.

   (2) The articles may provide that a member shall have rights in respect of shares not registered in respect of the person, but a person who is not a member of the company shall not be entitled to vote at a meeting of the company.

   (3) Unless the articles provide otherwise, the quorum for a meeting of the company shall be two members of the company holding not less than one-third of the total voting rights in relation to the meeting.

   (4) Unless the articles provide otherwise—

      (a)   a meeting of the company may elect a Chairman; and

      (b)   on matters not provided for in this Act or in the articles, the meeting may provide for the conduct of its business.

   (5) The articles may provide that a member shall not be entitled to attend a meeting of the company unless all sums presently payable by him in respect of shares in the company have been paid.

   (6) For the purposes of this section, a “unit of stock” of a company is the amount of stock having the nominal value arrived at by adding together the nominal values of all the shares of the company other than stock, and dividing the sum by the number of those shares.

 

148.   Chairman’s declaration as to result of a vote

Unless the articles of a company provide otherwise, a statement by the Chairman of a meeting of the company that a motion or resolution at a meeting was passed by a specified majority shall be conclusive evidence that it was so passed unless a poll was demanded on the motion or resolution.

 

149.   Right to demand a poll

A poll may be demanded at a meeting of a company on any question other than the election of the Chairman of the meeting or the adjournment of the meeting by—

      (a)   not fewer than three members having the right to vote on the question, representing not less than one-twentieth of the total voting rights of all members having the right to vote on the question, where there are more than eight such members present; or

      (b)   not fewer than one third of the members present having the right to vote on the question, where there are eight or fewer such members present.

 

150.   Voting on a poll

On a poll taken at a meeting of company or a meeting of any class of members of a company, a member entitled to more than one vote need not, if he votes, use all his votes or cast all the votes he uses in the same way.

 

151.   Proxies

   (1) A member of a company entitled to attend and vote at a meeting of the company shall be entitled to appoint another person as his proxy to attend and vote instead of him.

   (2) An appointment as proxy shall be in writing under the hand of the appointer or his agent duly authorised in writing or, if the appointer is a body corporate, either under seal or under the hand of an officer or agent duly authorised.

   (3) A proxy appointed under this section shall have, subject to any instructions from the member in the instrument of appointment, all the rights and powers of the member in relation to the meeting.

   (4) If voting rights attach to shares in a company having share capital, a shareholder may appoint separate proxies to represent respectively such of the shares held by him as may be specified in their instruments of appointment.

   (5) An appointment of a director as a proxy shall not authorise the director to vote as proxy on the following business transacted at an annual general meeting—

      (a)   the declaration of a dividend;

      (b)   the consideration of the accounts and the directors’ and auditors’ reports;

      (c)   the election of directors in place of those retiring;

      (d)   the fixing of the remuneration of the directors; and

      (e)   the appointment of the auditors and the fixing of their remuneration.

   (6) In every notice convening a meeting of a company there shall appear with reasonable prominence a statement that a member entitled to attend and vote is entitled to appoint one or more proxies to attend and vote instead of him, and, unless the articles provide otherwise, that a proxy need not also be a member.

   (7) A company shall not provide a member with a form for the appointment of a proxy unless the form permits the member to direct the proxy as to how to use his vote on different matters.

   (8) A company’s articles shall not have the effect of requiring the instrument appointing a proxy, or any other document necessary to show the validity of appointment of a proxy, to be received by the company or any other person more than forty-eight hours before a meeting or adjourned meeting in order that the appointment may be effective thereat.

   (9) If a company fails to comply with sub-section (6) or (7), the company, and each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding two hundred and fifty monetary units.

   (10) If a company, for the purpose of any meeting of the company, issues invitations to appoint as proxy a person specified or listed in the invitation, and issues the invitations to some only of the members entitled to be sent a notice of the meeting and to vote thereat, the company, and every officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding two hundred and fifty monetary units.

   (11) A company shall not be regarded as issuing an invitation for the purposes of sub-section (10) if the name or list is available on request to every member entitled to vote at the meeting, and is not sent to any such member except on request.

 

152.   Representation of bodies corporate and unincorporated associations at meetings

   (1) A body corporate or an unincorporated association may, if it is a member of a company, by resolution of its directors or other governing body, authorise any person as it thinks fit to act as its representative at any meeting of the company.

   (2) A person so authorised may exercise the same powers on behalf of the body corporate or unincorporated association which he represents as it could exercise if it were an individual member of the company.

 

153.   Circulation of members’ resolutions and supporting circulars

   (1) A member of a company entitled to attend and vote at a meeting may, in accordance with this section, require the company to circulate, at the company’s expense—

      (a)   notice of any resolution which may properly be moved and is intend to be moved at the meeting; and

      (b)   a statement of not more than five hundred words with respect to the matter referred to in the proposed resolution or any other business to be dealt with at the meeting.

   (2) A requisition for the purposes of this section shall be in writing and posted to the company’s registered postal address or deposited at the company’s registered office.

   (3) If a meeting of the company is proposed and the company receives a requisition—

      (a)   not less than seven days before the end of the period during which notice of the meeting is required to be given; or

      (b)   at a time when it is practicable to include the notice and statement required with the notice of the meeting;

the company shall send the notice and statement to each person entitled to receive notice of the meeting before the end of period during which notice of the meeting is required to be given.

   (4) If the company receives a requisition and sub-section (3) does not apply, the company shall include the notice and statement required with the notice of the next meeting of the company for which it is practicable to do so.

   (5) If a requisition is made under this section and the resolution is not passed, a requisition shall not be made in relation to the same resolution, or one substantially to the same effect, to be moved at a meeting within three months after the meeting at which the resolution was moved unless—

      (a)   the directors otherwise agree; or

      (b)   the requisition is supported in writing by members of the company representing between them not less than one-twentieth of the total voting rights of all the members having at the date of the request a right to vote on the resolution to which the request relates.

 

154.   Circulation of members’ circulars

   (1) A company shall, at the written request of any member entitled to attend and vote at a meeting, circulate to members of the company a statement of not more than one thousand words with respect to any business to be dealt with at that meeting.

   (2) Unless the company otherwise resolves, the circulation of the statement shall be at the expense of that member.

   (3) The statement shall be circulated to members of the company in any manner permitted for service of notice of the meeting and at the same time as notice of the meeting or as soon as practicable thereafter.

   (4) A company shall not be bound to circulate the statement unless—

      (a)   the request, signed by the member concerned, together with the statement, is received at the registered postal address of the company or deposited at the registered office of the company not less than ten days before the meeting; and

      (b)   there is also deposited with the request a sum reasonably sufficient to meet the company’s expenses in giving effect thereto.

 

155.   General provisions in regard to members’ circulars

   (1) A company shall not be bound under section 153 or 154 to circulate any resolution or statement if, on the application either of the company or of any other person who claims to be aggrieved, the Court is satisfied that the rights conferred by those sections are being abused to secure publicity for defamatory matter.

   (2) On hearing an application under sub-section (1), the Court may order the company’s costs to be paid in whole or in part by the member making the request, notwithstanding that he is not a party to the application.

   (3) A company shall not incur liability to any person by reason only that it has circulated a resolution or statement in compliance with section 153 or 154.

   (4) If a company fails to comply with section 153 or 154, the company, and each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding five hundred monetary units.

 

156.   Ordinary extraordinary and special resolutions

   (1) A resolution shall be an ordinary resolution if it is passed by a simple majority of votes cast by such members of the company as, being entitled so to do, vote in person or by proxy at a meeting duly convened and held.

   (2) A resolution shall be an extraordinary resolution if it is passed by a majority of not less than three-fourths of the votes cast by such members of the company as, being entitled so to do, vote in person or by proxy at a meeting duly convened and held.

   (3) A resolution shall be a special resolution if it is passed by a majority of not less than three- fourths of the votes cast by such members of the company as, being entitled so to do, vote in person or by proxy at a meeting duly convened as a meeting at which the resolution will be moved as a special resolution, and duly held.

   (4) Any reference in—

      (a)   this Act;

      (b)   the articles of a company;

      (c)   any debentures or debenture trust deed;

to an ordinary, extraordinary or special resolution of a meeting of creditors or debenture holders or of any class of creditors or debenture holders shall, unless the context otherwise requires, bear a like meaning to that specified in this section, with the necessary modifications.

 

157.   Written resolutions for private companies

   (1) The members of a private company may, in accordance with this section, pass a resolution in writing without holding a meeting, and such a resolution shall be as valid and effective for all purposes as if it had been passed at a meeting of the appropriate kind duly convened, held and conducted.

   (2) The resolution shall be signed by each member who would be entitled to vote on the resolution if it were moved at a meeting of the company, or by his duly authorised representative.

   (3) The resolution shall be passed when signed by the last member referred to in sub-section (2), whether or not he was a member when other members signed.

   (4) If the resolution is described in the writing as a special resolution, it shall be deemed to be a special resolution for the purposes of this Act.

   (5) If the resolution states a date as being the date of the signature thereof by any member, the statement shall be prima facie evidence that it was signed by the member on that date.

   (6) This section shall not apply to a resolution to remove an auditor or to remove a director.

 

158.   Registration of copies of certain resolutions

   (1) A certified copy of every special resolution made by a company, or by a class of members of a company, shall, within fifteen days after the making thereof, be lodged with the Registrar.

   (2) Subject to this section, every copy of the articles of a company issued by it shall have embodied in it or attached to it a copy of every special resolution of the company in force at the time of issue.

   (3) For the purposes of sub-section (2), where the sole effect of a special resolution is to amend the articles, a copy of the articles that embodies the effect of the passing of the special resolution embodies the resolution.

   (4) If a company fails to comply with sub-section (1), the company, and each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding ten monetary units for each day that the failure continues.

   (5) If a copy of the articles is issued that fails to comply with sub-section (2), the company, and each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding three monetary units in respect of each copy.

 

159.   Date of certain resolutions

   (1) Where a resolution is passed on a poll, it shall for all purposes be deemed to have been passed on the day on which the result of the poll is declared.

   (2) Subject to sub-section (1), where a resolution is passed at an adjourned meeting of a company or of the directors be deemed to have been passed on the date of the adjourned meeting.

 

160.   Minutes of proceedings of meetings of company and of creditors

   (1) A company shall cause minutes of all proceedings of—

      (a)   meetings of the company;

      (b)   meetings of its directors and of any committee of directors;

      (c)   meetings of its debenture holders or other creditors;

to be entered in books kept for that purpose.

   (2) Any such minute, if purporting to be signed by the Chairman of the meeting at which the proceedings took place or of the subsequent meeting, shall be prima facie evidence of the facts stated in the minute in relation to the proceedings.

   (3) Where minutes have been made in accordance with this section, the meeting shall be presumed to have been duly convened, held and conducted and all appointments of directors, officers, auditors and liquidators shall be presumed to be valid.

   (4) If the company fails to comply with sub-section (1), the company, and each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding five hundred monetary units.

 

161.   Inspection of minute books

The books containing the minutes of proceedings of any meeting referred to in section 160 shall be kept at the registered records office of the company and shall be open to inspection by any member, officer, auditor, receiver or liquidator of the company, and by the Registrar or his delegate.

PART VIII
ACCOUNTS, AUDIT AND ANNUAL RETURNS

 

DIVISION 8.1—ACCOUNTS

 

162.   Accounting records to be kept

   (1) A company shall—

      (a)   keep such accounting records as correctly record and explain the transactions of the company (including any transactions as trustee) and the financial position of the company; and

      (b)   keep its accounting records in such a manner as will enable—

      (i)   the preparation from time to time of true and fair accounts of the company; and

      (ii)   the accounts of the company to be conveniently and properly audited in accordance with this Act.

   (2) The company shall retain the accounting records for a period of ten years after the completion of the transactions to which they relate.

   (3) If any accounting records of the company are kept at a place other than its registered records office, the company—

      (a)   shall keep at the registered records office such statements and records with respect to the matters dealt with in those accounting records as would enable the company to prepare true and fair accounts together with any documents required by this Act to be attached to the accounts; and

      (b)   for that purpose, shall, within fourteen days after the creation of any accounting record, transmit the appropriate statement or record to the registered records office.

   (4) The accounting records of the company shall be kept in writing in English, or in any form that enables the accounting records to be readily accessible and readily convertible into such writing.

   (5) The company shall make its accounting records kept at its registered records office available, at all reasonable times, for inspection without charge by the directors, secretary and auditors of the company.

   (6) The company shall, on being given fourteen days’ notice in writing by any director, secretary or auditor of the company that he wishes to inspect specified accounting records, make the accounting records, wherever kept, available for inspection without charge at the registered records office or such other place as may be agreed with the person giving the notice.

   (7) If a company fails to comply with this section, the company, and each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding one thousand monetary units.

 

163.   Financial year of holding company and subsidiary

   (1) Subject to this section, the directors of a company which is a holding company shall take such action (if any) as is necessary to ensure that the financial year of each subsidiary of the holding company coincides with the financial year of the holding company.

   (2) The action referred to in sub-section (1) need not be taken if the directors of the holding company lodge with the Registrar a statutory declaration that—

      (a)   the action would cause unreasonable expense or difficulty; and

      (b)   the members of the holding company will not be disadvantaged if the action is not taken.

 

164.   Annual accounts to be prepared after each financial year

   (1) Subject to this Division, the directors of a company shall, after the end of each financial year of the company but not later than twenty-one days before the annual general meeting of the company for that financial year, or, if no annual general meeting of the company is held within three months after the end of the financial year of the company, not later than twenty-one days before the end of that period of three months, caused to be made out—

      (a)   a profit and loss account for the financial year just ended, being a profit and loss account that gives a true and fair view of the profit or loss of the company for that financial year;

      (b)   a balance sheet as at the end of the financial year just ended, being a balance sheet that gives a true and fair view of the state of affairs of the company as at the end of that financial year;

      (c)   group accounts, if the company is a company required to provide group accounts, dealing with—

      (i)   the profit or loss of the company and its subsidiaries for their respective financial years most recently ended, giving a true and fair view of the profit or loss; and

      (ii)   the state of affairs of the company and its subsidiaries as at the end of their respective financial years most recently ended, giving a true and fair view of the state of affairs so far as it concerns members of the holding company.

   (2) The accounts referred to in sub-section (1) (in this Act called the “annual accounts”) shall comply with such of the requirements of the Second Schedule as are relevant to those accounts, but where accounts prepared in accordance with those requirements would not otherwise give a true and fair view of the matters required by this section to be dealt with in the accounts, the directors of the company shall add such information and explanations as will give a true and fair view of those matters.

   (3) The directors shall take reasonable steps to ensure that the annual accounts of the company and, if it is a holding company for which group accounts are required, the group accounts, are audited as required by this Part within the time allowed by sub-section (1).

   (4) The directors shall cause the auditors’ report relating to the annual accounts that is furnished to the directors in accordance with this Part to be attached to, or endorsed upon, the annual accounts.

   (5) The directors shall, before the profit and loss account and balance sheet referred to in sub-section (1) are made out, take reasonable steps—

      (a)   to ascertain what action has been taken in relation to the writing off of bad debts and the making of provisions for doubtful debts;

      (b)   to cause all known bad debts to be written off and adequate provision to be made for doubtful debts;

      (c)   to ascertain whether any current assets, other than current assets to which paragraph (a) or (b) applies, are unlikely to realise in the ordinary course of business their value as shown in the accounting records of the company and, if so, to cause—

      (i)   those assets to be written down to an amount that they might be expected so to realise; or

      (ii)   adequate provision to be made for the difference between the amount of the value as so shown and the amount that they might be expected so to realise; and

      (d)   to ascertain whether any non-current asset is shown in the books of the company at an amount that, having regard to its value to the company as a going concern, exceeds the amount that it would have been reasonable for the company to expend to acquire that asset as at the end of the financial year and, unless adequate provision for writing down that asset is made, to cause to be included in the accounts such information and explanations as will prevent the accounts from being misleading by reason of the overstatement of the amount of that asset.

   (6) The directors shall cause to be attached to the annual accounts, before the auditor reports on the accounts under this Part, a statement made in accordance with a resolution of the directors and signed by at least two directors stating whether, in the opinion of the directors—

      (a)   the profit and loss account is drawn up so as to give a true and fair view of the profit or loss of the company for the financial year;

      (b)   the balance sheet is drawn up so as to give a true and fair view of the state of affairs of the company as at the end of the financial year;

      (c)   there are reasonable grounds to believe that the company will be able to pay its debts as and when they fall due; and

      (d)   the group accounts are drawn up so as to give a true and fair view of—

      (i)   the profit or loss of the company and its subsidiaries for their respective last financial years; and

      (ii)   the state of affairs of the company and its subsidiaries as at the end of their respective last financial years, so far as they concern members of the company;

if the company has group accounts.

 

165.   Group accounts

   (1) Where at the end of its financial year a company was a holding company, the company shall, subject to this section, prepare—

      (a)   a set of consolidated accounts for the group of companies;

      (b)   separate accounts for each body corporate in the group; or

      (c)   a combination of sets of consolidated accounts and separate accounts together covering the group;

      (in this Act called the “group accounts”) for inclusion in its annual accounts for that financial year.

   (2) This section shall not oblige a company to make out group accounts if it is, at the end of its financial year, a wholly-owned subsidiary of another body corporate incorporated in Zambia.

   (3) Group accounts need not deal with a subsidiary of the company if a statutory declaration made by each director has been lodged with the Registrar to the effect that—

      (a)   it is impracticable, or would be of no real value to members of the company, in view of the insignificant amounts involved, or would involve expenses or delay out of proportion to the value to members of the company; or

      (b)   the result would be misleading or harmful to the business of the company or any of its subsidiaries;

and the omission of the subsidiary from the group accounts has been approved in writing by the Registrar.

 

166.   Delays in preparing group accounts

   (1) The directors of a subsidiary shall, at the request of the directors of the holding company, supply all such information as is required for the preparation of group accounts of the holding company and its subsidiaries, and of the report of the directors of the holding company.

   (2) The directors of a holding company shall take all reasonable steps to ensure that, when they prepare the group accounts and the directors’ report, they have available to them all the information from each subsidiary that is to be included in the group necessary for the completion of the group accounts and directors’ report of the group.

   (3) The directors of a holding company are, unless they know or have reason to suspect that any matter in any accounts, report or information furnished by the directors of a subsidiary is false or misleading, entitled to rely on the accounts, report or information for the purpose of the preparation of the group accounts and their report, so far as they relate to the affairs of the subsidiary.

   (4) Where the directors of a holding company, having taken all such steps as are reasonably available to them, are unable to obtain from the directors of a subsidiary any accounts, report or other information required for the preparation of the group accounts and the directors’ report of the group, they may cause the group accounts to be made out and make the directors’ report without those accounts, report or other information relating to the subsidiary, but with such qualifications and explanations as are necessary to prevent the group accounts and directors’ report from being misleading.

   (5) Where the directors of a holding company have caused the group accounts to be made out and have made the directors’ report in accordance with sub-section (4), they shall send to the members of the holding company, within one month after receiving the accounts, report or other information from the directors of the subsidiary, a copy of the accounts and report or a statement embodying the other information, as the case may be, together with a statement by the directors of the holding company containing such qualifications and explanations of the group accounts and of their report as are necessary having regard to the accounts, report or information received from the subsidiary.

 

167.   Annual accounts to include amounts paid to directors

   (1) The annual accounts of a company shall, subject to this section, show—

      (a)   the total amount of the emoluments paid to or receivable by the directors for their services;

      (b)   the total amount of pensions paid to or receivable by the directors or past directors for their services;

      (c)   the total amount of any compensation paid to or receivable by the directors or past directors in respect of loss of office;

in the financial year concerned.

   (2) The amount to be shown under paragraph (a) of sub-section (1) shall include any emoluments paid to or receivable by any person in respect of his services, while a director of the company—

      (a)   as director of the company;

      (b)   as director of any subsidiary; or

      (c)   otherwise in connection with the management of the affairs of the company or any subsidiary.

   (3) The amount to be shown under paragraph (b) of sub-section (1)—

      (a)   shall not include any pension paid or receivable under a pension scheme if the scheme is such that the contributions to the scheme paid in respect of the directors are adequate for the maintenance of the scheme; and

      (b)   shall include any other pension paid or receivable in respect of any of the services of a person, while a director of the company—

      (i)   as director of the company;

      (ii)   as director of any subsidiary; or

      (iii)   otherwise in connection with the management of the affairs of the company or any subsidiary;

whether the pension is paid to or receivable by the person himself or, on his nomination or by virtue of any connection with him, to or by any other person.

   (4) The amount to be shown under paragraph (c) of the sub-section (1) shall include any sums paid to or receivable by a director or past director by way of compensation for—

      (a)   loss of office as director of the company; or

      (b)   loss of any other office in connection with the management of the affairs of the company or of a subsidiary, where the loss arose from or in connection with the loss of office as director of the company.

   (5) The accounts shall also show, with the total amounts to be shown under sub-section (1), the subtotals of the amounts that are receivable or to be paid—

      (a)   in relation to emoluments and pensions, in respect of-

      (i)   services as director of the company or a subsidiary; and

      (ii)   other services; and

      (b)   in relation to compensation for loss of office, in respect of—

      (i)   loss of office as director of the company or a subsidiary; and

      (ii)   loss of any other office.

   (6) Where an amount to be shown under sub-section (1) or (5) includes an amount to be paid by or receivable from a person other than the company, the accounts shall also show the subtotals of the amounts receivable from or paid by—

      (a)   the company;

      (b)   the company’s subsidiaries; and

      (c)   any other person.

   (7) For the purposes of this section—

“compensation for loss of office” includes sums paid as consideration for or in connection with a person’s retirement from office;

“contributions” means any payment into a pension scheme (including an insurance premium paid for the purposes of the scheme) by or in respect of which pensions will or may become payable under the scheme, other than a payment in respect of two or more persons where the amount paid in respect of each of them is not ascertainable;

“emoluments” includes fees and percentages paid to a director, any sums paid by way of expenses and allowances, any contributions paid in respect of him under any pension scheme and the estimated money value of any other benefits received by him otherwise than in cash;

“pension” includes any superannuation allowance, superannuation gratuity or similar payment;

“pension scheme” means a scheme for the provision of pensions which is maintained in whole or in part by means of contributions.

 

168.   Annual accounts to include particulars of loans to officers

   (1) The annual accounts of a company shall show the particulars of any relevant loan made during the financial year to which the accounts apply, including any such loan which was repaid during that year.

   (2) The accounts shall also show the amount of any relevant loan, whenever made, that remained outstanding at the end of the financial year.

   (3) If this section is not complied with, the auditors shall include in the auditors’ report on the balance sheet of the company, so far as they are reasonably able to do so, a statement giving the required particulars.

   (4) For the purposes of this section, a relevant loan is a loan, other than a loan referred to in sub-section (5), made to—

      (a)   an officer of the company; or

      (b)   any person who, after the making of the loan, became during that financial year an officer of the company;

that was made by—

      (i)   the company or a subsidiary of the company; or

      (ii)   any other person under a guarantee from or on a security provided by the company or a subsidiary of the company.

   (5) This section does not apply to a loan that was—

      (a)   made in the ordinary course of its business by the company or a subsidiary of the company, where the ordinary business of the company or, as the case may be, the subsidiary, includes the lending of money; or

      (b)   made by the company to an employee of the company, or by a subsidiary to an employee of the subsidiary, if the loan does not exceed fifty monetary units and is certified by the directors of the company or subsidiary, as the case may be, to have been made in accordance with any practice adopted or about to be adopted by the company or subsidiary with respect to loans to its employees;

and was not made under a guarantee from or on a security provided by the company or any subsidiary.

   (6) For the purposes of this section, a subsidiary of the company is a body corporate that was a subsidiary of the company at the end of the financial year of the company during which the loan concerned was made, whether or not it was a subsidiary at the date of the loan.

 

169.   Director to make disclosure of loans and receipts

   (1) A person who is, or has at any time within the previous five years been, a director or officer of a company shall, on the request of the company, provide the company with such information relating to himself as may be necessary for the purposes of sections 167 and 168.

   (2) A person who fails to comply with this section shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding five hundred monetary units.

 

170.   Balance sheet to be signed by directors

   (1) The balance sheet of a company’s annual accounts, and every copy of the balance sheet which is laid before the company in general meeting or delivered to the Registrar, shall be signed on behalf of the company by two directors.

   (2) In the case of a company authorised by law to conduct banking business, the balance sheet shall be signed by the secretary and—

      (a)   by both the directors, where there are two only; or

      (b)   by at least three directors, where there are three or more.

   (3) If a copy of the balance sheet—

      (a)   is laid before the company in general meeting or delivered to the Registrar and is not signed as required by this section; or

      (b)   not being a copy so laid or delivered, is issued, circulated or published—

      (i)   when the balance sheet has not been signed as required by this section; or

      (ii)   without a copy of the signatures;

the company, and each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding five hundred monetary units.

   (4) If a copy of the balance sheet is issued, circulated or published without having annexed thereto copies of—

      (a)   the profit and loss account;

      (b)   any group accounts required under section 164 to be annexed; and

      (c)   the auditors’ report;

the company, and each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding five hundred monetary units.

 

DIVISION 8.2—AUDITORS

 

171.   Appointment of auditors

   (1) A company shall, within three months after its incorporation, appoint an auditor or auditors of the company, who shall hold office until the close of its first annual general meeting.

   (2) An appointment under sub-section (1) may be made by the directors or by an ordinary resolution of the company.

   (3) A company shall at each annual general meeting appoint an auditor or auditors of the company, who shall hold office until the close of the next annual general meeting held by the company.

   (4) A company shall not appoint a person as auditor unless he has previously consented in writing to the appointment and has not withdrawn the consent.

   (5) Notwithstanding any agreement between a company and an auditor, the company may, by ordinary resolution, remove the auditor before the expiration of his term of office.

   (6) If a company—

      (a)   appoints an auditor;

      (b)   removes an auditor from office;

      (c)   fails to appoint an auditor under sub-section (1) or at an annual general meeting; or

      (d)   for any reason ceases to have an auditor;

the company shall within fourteen days after the event lodge a notice of that fact in the prescribed form with the Registrar.

   (7) If a company fails to comply with sub-section (6), the company, and each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding ten monetary units for each day that the failure continues.

   (8) The directors of a company, or the company by ordinary resolution, may fill any casual vacancy in the office of auditor, and an auditor so appointed shall hold office until the close of the next annual general meeting held by the company.

   (9) If a company does not have an auditor for a period of three months, the Registrar may appoint an auditor of the company.

   (10) The remuneration of an auditor of the company, including any sums to be paid by the company in respect of the auditors’ expenses—

      (a)   may be fixed by the directors, where the appointment is made by the directors;

      (b)   may be fixed by the Registrar, where the appointment is made by the Registrar; and

      (c)   shall be fixed by ordinary resolution of the company, or in such manner as the company may determine by ordinary resolution, in any other case.

   (11) Where an individual or firm holds office as auditor of a company on the commencement of this Act—

      (a)   he or it shall be deemed to have been appointed under this Act; and

      (b)   he or it shall hold office until the close of the next annual general meeting held by the company.

   (12) Where a company has no auditor on the commencement of this Act, this section shall apply as if the company had been incorporated on that commencement.

   (13) Nothing in sub-section (5) shall deprive a person removed thereunder of compensation or damages payable to him in respect of the termination of his appointment as auditor or of any appointment terminating with that as auditor.

 

172.   Qualifications of auditor

   (1) A private company may appoint an individual or a firm as auditor of the company.

   (2) A public company may appoint—

      (a)   a registered accountant having a practice certificate issued by the Zambia Institute of Certified Accountants under the Accountants Act, or

      (b)   a firm of such registered accountants;

as auditor of the company.

   (3) Where a firm is appointed as auditor of a company, each partner of the firm shall be deemed to be an auditor of the company.

   (4) An individual or firm shall not—

      (a)   consent to be appointed as auditor of a company; or

      (b)   act as auditor of a company;

if the individual or firm is disqualified under this section.

   (5) For the purposes of this section, an individual is disqualified in relation to a company if—

      (a)   he is—

      (i)   an officer of the company;

      (ii)   a partner, employer or employee of an officer of the company; or

      (iii)   a partner or employee of an employee of an officer of the company; or

      (b)   he, or a company in which more than half the shares are beneficially owned by him, owes a debt of more than five hundred monetary units to the company concerned or to a related body corporate, not being a debt entered into by the company or related body corporate in the ordinary course of its business where the ordinary business of the company or related body corporate, as the case may be, includes the lending of money.

   (6) For the purposes of this section, a firm is disqualified in relation to a company if any member of the firm is disqualified under sub-section (5).

   (7) An auditor of a company shall not take any action that would result in his being disqualified under this section.

   (8) A person who contravenes sub-section (4) or (7) shall be guilty of an offence, and shall be liable on conviction to a fine of five hundred monetary units.

   (9) For the purposes of this section, a reference to an officer of a company includes a reference to—

      (a)   an officer of a related body corporate; and

      (b)   a person who has, at any time within the immediately preceding period of twelve months, been an officer or promoter of the company or of a related company, unless the Registrar, if he thinks fit in the circumstances of the case, directs in writing that this paragraph shall not apply to the person.

   (10) For the purposes of this section, a person shall not be regarded as an officer of a company by reason only of his being or having been the liquidator of that company.

   (11) A report, notice or consent that purports to be made or given by a firm appointed as auditor of a company shall not be duly made or given unless it is signed in the firm name and in his own name by a partner of the firm.

 

173.   Auditors’ rights and duties and auditors’ report

   (1) The auditors of a company shall make a report (in this Act called the “auditors’ report”) to the members of the company on the annual accounts and on the company’s accounting records and other records relating to those accounts.

   (2) The auditors’ report shall be furnished by the auditors to the directors of the company in sufficient time to enable the company to circulate the report in accordance with section 182.

   (3) The auditors’ report shall state whether in the auditors’ opinion—

      (a)   the annual accounts have been properly prepared in accordance with this Act; and

      (b)   the accounting records, other records and registers required by this Act to be kept by—

      (i)   the company; and

      (ii)   by any subsidiaries for which the auditors, or any of them, have acted as auditor;

have been properly kept in accordance with this Act; and

      (c)   a true and fair view is given—

      (i)   of the state of the company’s affairs as at the end of its financial year, in the case of the balance sheet;

      (ii)   of the company’s profit or loss for its financial year, in the case of the profit and loss account; and

      (iii)   of the state of affairs and profit or loss of the company and its subsidiaries so far as concerns members of the company, in the case of group accounts;

and set out any defect or irregularity in the annual accounts, and any matter not set out therein without regard to which a true and fair view of the matters dealt with by the annual accounts would not be obtained.

   (4) Where the annual accounts include group accounts, the auditors’ report shall also state—

      (a)   the names of the subsidiaries (if any) for which none of the auditors has acted as auditor;

      (b)   whether the auditors have examined the accounts and auditors’ reports of all such subsidiaries that are covered by the group accounts;

      (c)   whether they are satisfied that the accounts of subsidiaries that are to be consolidated with other accounts are in form and content appropriate and proper for the purposes of the preparation of the consolidated accounts, and whether they have received satisfactory information and explanations as required by them for that purpose;

      (d)   whether the auditors’ report on the accounts of any subsidiary was made subject to any qualification, or included any comment made under sub-section (3), and, if so, particulars of the qualification or comment; and

      (e)   the auditors’ reason for not being satisfied as to any matter referred to in paragraph (a), (b) or (c), if he is not so satisfied.

   (5) The auditors of a company, in preparing their report under this section, shall make such investigations as will enable them to form an opinion, and shall form an opinion, as to—

      (a)   whether proper accounting records have been kept by the company and proper returns adequate for their audit have been received from branches not visited by them; and

      (b)   whether the company’s balance sheet and profit and loss account are in agreement with the accounting records and returns;

      (c)   whether the procedures and methods used by the company and by each of its subsidiaries in arriving at the amounts taken into any consolidated accounts were appropriate to the circumstances of the consolidation, where any group accounts include consolidated accounts; and

      (d)   whether they agree with the reasons given by the directors for preparing any group accounts in the form in which they are prepared, where group accounts are prepared otherwise than as one set of consolidated accounts for the group;

and if the auditors are of the opinion that there is any deficiency in a matter referred to in this sub-section, they shall state that opinion in the report.

   (6) Every auditor of a company shall have a right of access at all reasonable times to the accounting records and other records, including registers, of the company and to require from any officer such information and explanations as he thinks necessary for him to perform his duties as auditor.

   (7) Every auditor of a holding company for which group accounts are required shall have a right of access at all reasonable times to the accounting records and other records, including registers, of any subsidiary, and shall be entitled to require from any officer or auditor of any subsidiary, at the expense of the holding company, such information and explanations in relations to the affairs of the subsidiary as he requires for the purpose of reporting on the group accounts.

   (8) If the auditors fail to obtain all the information and explanations which, to the best of their knowledge and belief, are necessary for the purposes of their audit, they shall state that fact in their report.

   (9) If the auditors are unable to agree on the contents of an auditors’ report, they shall provide a single report on the matters on which they agree, together with separate comments or reports on the matters on which they disagree.

   (10) An auditor of a company shall be entitled to attend any general meeting of the company and to receive all notices of and other communications relating to any general meeting which any member of the company is entitled to receive, and to be heard at any general meeting on any part of the business of the meeting which concerns him as auditor, notwithstanding that he retires at that meeting or a resolution to remove him from office is passed at that meeting.

   (11) If an auditor, in the course of the performance of his duties as auditor of a company, is satisfied that—

      (a)   there has been a contravention of, or failure to comply with, any of the provisions of this Act; and

      (b)   the circumstances are such that in his opinion the matter has not been or will not be adequately dealt with by—

      (i)   comment in the auditors’ report on the annual accounts; or

      (ii)   bringing the matter to the notice of the directors of the company or, if the company is a subsidiary, of the directors of any holding company of the company;

he shall forthwith report the matter to the Registrar in writing.

 

174.   Circumstances in which accounts may include the auditors’ report or directors’ report

   (1) A reference in this Act to a document annexed or required to be annexed to a company’s annual accounts shall not include the directors’ report or the auditors’ report except as provided in this section.

   (2) Any information which is required by this Act to be given in the annual accounts, and is thereby allowed to be given in a statement annexed, may be given in the directors’ report instead of in the accounts, and if any such information is so given the report shall be annexed to the accounts and this Act shall apply in relation thereto accordingly, except that the auditors’ report shall report thereon only so far as it gives the said information.

   (3) Where an item is shown in the directors’ report instead of in the accounts, the report shall also show the corresponding amount of that item for (or, as the case may be as at the end of) the immediately preceding financial year, except where that amount would not have had to be shown had the item been shown in the accounts.

 

DIVISION 8.3—THE DIRECTORS’ REPORT

 

175.   Interpretation

In this Division, a reference to a subsidiary of a company that is a holding company includes only those subsidiaries which the holding company is required to cover in its group accounts.

 

176.   Directors’ report to be attached to balance sheet

   (1) The directors shall prepare, in conjunction with the annual accounts, a report (in this Act called “the directors’ report”) with respect to the state of the company’s affairs, the amount, if any, which they recommend should be paid by way of dividend and the amount, if any, which they propose to carry to reserves.

   (2) The report shall deal with any change during the financial year in—

      (a)   the nature of the business of the company or its subsidiaries; or

      (b)   the classes of business in which the company or any subsidiary has an interest, whether as member of another company or otherwise;

so far as is material for the appreciation of the state of the company’s affairs by its members and will not in the directors’ opinion be harmful to the business of the company or of any of its subsidiaries.

   (3) A director of a company who willfully fails to take all reasonable steps to comply with sub-section (1) shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding five hundred monetary units or to imprisonment for a period not exceeding six months, or to both.

   (4) In any proceedings against a person for an offence under this section, it shall be a defence to prove that he reasonably believed that a competent and reliable person was charged with the duty of seeing that the provisions of that section were complied with and was in a position to discharge that duty.

 

177.   General matters in directors’ report

   (1) The directors’ report shall state—

      (a)   the names of the persons who at any time during the financial year were directors of the company;

      (b)   the principal activities of the company and of its subsidiaries in the course of that year; and

      (c)   any significant change in those activities in that year.

   (2) The directors’ report shall contain particulars of—

      (a)   any significant changes in the fixed assets of the company or of any of its subsidiaries in the financial year that occurred; and

      (b)   any significant differences between the values, as included in the balance sheet, of such assets as consist of interests in land and the market values thereof.

   (3) If the company has issued any shares or debentures in that year, the directors’ report shall state—

      (a)   the reasons for making the issue;

      (b)   the classes of shares issued;

      (c)   as respects each class of shares—

      (i)   the number issued; and

      (ii)   the consideration received by the company for the issue; and

      (d)   as respects each class of debentures—

      (i)   the amount issued; and

      (ii)   the consideration received by the company for the issue.

   (4) If, at any time in that year, arrangements subsisted to which the company was a party, being arrangements at least one of whose objects was to enable directors of the company to acquire benefits by means of the acquisition of shares in or debentures of the company or of any other body corporate, the directors’ report shall contain a statement explaining the effect of the arrangements and giving the names of the persons who at any time in that year were directors of the company and held, or whose nominees held, shares or debentures acquired under the arrangements.

   (5) The directors’ report shall contain—

      (a)   particulars of any important events affecting the company or any of its subsidiaries which have occurred during the year;

      (b)   an indication of likely future developments in the business of the company and of its subsidiaries; and

      (c)   an indication of the activities (if any) of the company or its subsidiaries in the field of research and development.

   (6) A directors’ report for a company of a class prescribed for the purposes of this paragraph shall contain prescribed information about the arrangements in force during that year for securing the health, safety and welfare at work of employees of the company and its subsidiaries, and for protecting other persons against risks to health or safety arising out of or in connection with the activities at work of those employees.

   (7) The particulars required by sub-section (6) may be given by way of notes to the company’s accounts in respect of the financial year in question, instead of being stated in the directors’ report.

   (8) Regulations made for the purposes of sub-section (6) may—

      (a)   make different provision in relation to companies of different classes;

      (b)   enable any requirements of the regulations to be dispensed with or modified in particular cases by any specified person or by any person authorised to do so by a specified authority; and

      (c)   contain such transitional provisions as the Minister thinks necessary or expedient in connection with any provision made by the regulations.

   (9) Any expression used in sub-section (6) that is also used in—

      (a)   Part I of the Factories Act; or Cap. 441

      (b)   Part I of the Public Health Act;

shall have the same meaning as in that Part.

 

178.   Where a company carries on more than one kind of business, attribution of turnover and profitability

   (1) If in the course of a financial year, a company has carried out business of two or more classes that in the opinion of the directors differ substantially from each other, the directors’ report relating to that year shall state—

      (a)   the proportions in which the turnover for that year (so far as stated in the annual accounts for that year) is divided amongst those classes (describing them); and

      (b)   as regards business of each class, the extent or approximate extent (expressed, in either case, in monetary terms) to which, in the opinion of the directors, the carrying on of business of that class contributed to or restricted, the profit of or loss,

before taxation of the company for that year.

   (2) If—

      (a)   a company has subsidiaries at the end of its financial year and submits in respect of that year group accounts prepared as consolidated accounts; and

      (b)   the company and the subsidiaries dealt with by the consolidated accounts carried on between them in the course of the year business of two or more classes that, in the opinion of the directors, differ substantially from each other;

the directors’ report relating to that year shall also state the matters referred to in sub-section (1) in relation to the company and its subsidiaries.

 

179.   Average number by the month of a company’s employees and amount, by the year, of their wages

   (1) The directors’ report of a company relating to a financial year shall state—

      (a)   the average number of persons employees by it in each month in that year; and

      (b)   the total remuneration paid or payable in respect of that year to the persons employed by it.

   (2) If, at the end of a financial year, a company has subsidiaries, the directors’ report relating to the year shall also state the matters referred to in sub-section (1) in relation to the company and the subsidiaries.

   (3) If the average number of employees for the purposes of sub-section (1) or (2) is less than one hundred, the directors’ report may state only that the average number of employees for that financial year was less than one hundred.

   (4) This section shall not apply to a company that is a wholly owned subsidiary of a company incorporated in Zambia.

   (5) For the purposes of this section, the average number of persons employed in a month shall be calculated as follows:

      (a)   for each whole calendar month during the financial year, the number of persons who, under contracts of service, were employed during the month (whether throughout it or not) by the employer or employers concerned is ascertained;

      (b)   the numbers so ascertained are added together;

      (c)   the sum is divided by the number of whole calendar months in the financial year;

      (d)   the quotient is the average number of persons employed in a month.

   (6) For the purposes of this section, no regard shall be had to a person who worked wholly or mainly outside Zambia.

   (7) In this section, “remuneration” means gross remuneration including bonuses (whether payable under contract or not).

 

180.   Particulars of gifts and donations

   (1) If a company, during a financial year, makes gifts or donations for any purpose with a total value of more than fifty monetary units, the directors’ report relating to the year shall state the total value.

   (2) If, at the end of a financial year, a company has subsidiaries, sub-section (1) shall apply to the company as if any gift or donation made by a subsidiary during the financial year had been made by the company, whether or not the subsidiary was a subsidiary at the time when the gift or donation was made.

 

181.   Particulars of exports

   (1) Where the business of a company consists of or includes the supplying of goods, the directors’ report in relation to a financial year shall, unless the turnover for that year did not exceed five hundred monetary units—

      (a)   state the value of any goods exported by the company from Zambia; or

      (b)   state that no goods were exported by the company from Zambia during that year, if no goods were exported.

   (2) If, at the end of a financial year, a company whose business consists of or includes the supplying of goods, has subsidiaries, the directors’ report relating to that year shall, unless the turnover of the company and its subsidiaries for that year did not exceed five hundred monetary units, state the matters referred to in sub-section (1) in relation to the company and its subsidiaries.

   (3) For the purposes of this section, goods exported by a company or subsidiary as the agent of another person shall be disregarded.

   (4) This section shall not require the disclosure of information if—

      (a)   it is in the national interest that the information should not be disclosed; and

      (b)   the Minister issues a certificate to that effect.

 

DIVISION 8.4—PROVISION OF ACCOUNTS AND REPORTS TO MEMBERS

 

182.   Circulation of annual accounts

   (1) Not later than twenty-one days before an annual general meeting of a company, or, if no annual general meeting is to be held within three months after the end of a financial year, twenty-one days before the end of that three months, a copy of—

      (a)   the annual accounts (including any group accounts);

      (b)   the auditors’ report or reports on the accounts; and

      (c)   the directors’ report;

relating to the previous financial year shall be sent to—

      (i)   each person entitled to receive notice of the annual general meeting; and

      (ii)   each registered debenture holder of the company.

   (2) If the copies of the documents are not sent within the period allowed by sub-section (1), they shall, notwithstanding that fact, be deemed to have been duly sent if it is so agreed in writing by all the members entitled to attend and vote at the meeting.

   (3) Where a firm has been appointed as auditor to the company, this section shall not require copies to be sent to each member of the firm who is an auditor of the company if a copy of each document is sent to the firm.

   (4) Any member or debenture holder of a company, whether or not he is entitled to receive notice of the company’s annual general meeting, may require the company to send him, without charge and within seven days after the requisition is made, a copy of the most recent annual accounts of the company, together with a copy of the relevant auditors’ report and directors’ report.

   (5) If the company fails to comply with sub-section (1), the company, and each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding five hundred monetary units.

   (6) If the company fails to comply with sub-section (4), the company, and each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding one hundred monetary units unless it is proved that the person making the demand has already been furnished with a copy of the document.

   (7) This section shall not apply in relation to the annual accounts, auditors’ report and directors’ report of a company for a financial year that began before the commencement of this Act, and the right of any person to be furnished with a copy of any of those documents, and the liability of the company in respect of a failure to satisfy that right, shall be same as they would have been if this Act had not been passed.

 

183.   Tabling of accounts

At an annual general meeting of a company—

      (a)   the annual accounts (including any group accounts);

      (b)   the auditors’ report; and

      (c)   the directors’ report; relating to the previous financial year shall be laid before the company and shall—

      (i)   remain open and accessible throughout the meeting to any person attending the meeting; and

      (ii)   be read at that meeting, if any member requests it.

 

DIVISION 8.5—ANNUAL RETURNS

 

184.   Annual return to be made to the Registrar

   (1) A company shall, after the end of each financial year of the company, lodge with the

Registrar a return (in this Act called the “annual return”) in accordance with this Division—

      (a)   within one month after the annual general meeting, if an annual general meeting is held within three months after the end of the financial year; or

      (b)   within three months after the end of the financial year, in any other case.

   (2) The annual return shall be signed by a director and by the secretary of the company.

   (3) The annual return shall state the position as at the date of the annual general meeting of the company, or if there was no annual general meeting, as at the date on which the annual return was made.

   (4) The Registrar may cause to be published from time to time, in the Gazette or in any newspaper, a list of companies whose annual returns are overdue.

   (5) No liability shall attach to the Registrar for any publication made in good faith under sub-section (4).

 

185.   Annual return to be made by a public company

   (1) The annual return of a public company shall—

      (a)   deal with the matters specified in the Third Schedule; and

      (b)   be in the prescribed form or as near thereto as circumstances admit.

   (2) The annual return may, if the return for either of the two immediately preceding years has given as at the date of that return the full particulars required by the Third Schedule, give only such of the particulars required by that Schedule as related to persons ceasing to be or becoming members since the date of the last return and to shares transferred since that date or to changes as compared with that date in the amount of stock held by a member.

 

186.   Documents to be annexed to annual return of a public company

A public company shall lodge with its annual return a certified copy, certified by both a director and the secretary of the company, of every balance sheet, profit and loss account, group accounts, directors’ report and auditors’ report sent to members and debenture holders of the company in accordance with section one hundred and eighty-two since the last annual return was made.

 

187.   Annual return to be made by a private company

   (1) The annual return of a private company shall state—

      (a)   the registered office of the company;

      (b)   the registered postal address of the company;

      (c)   the registered records office of the company;

      (d)   all the particulars with respect to any person who at the date of the return is a director or secretary of the company that this Act requires to be contained in the register of the directors and secretary of a company; and

      (e)   particulars identifying the bodies corporate related to the company at the date of the return.

   (2) There shall be annexed to the annual return a statement containing particulars of the total amount of the indebtedness of the company in respect of all mortgages and charges which are required to be registered with the Registrar under this Act.

 

188.   Additional certificates to be lodged by a private company

   (1) A private company shall lodge with its annual return a certificate that the company has not since the date of the last return or, where there has been no return since the company was incorporated as or converted to a private company, since the date of the incorporation or conversion, issued any invitation to the public to subscribe for any shares or debentures of the company.

   (2) If the company has more than fifty members, the company shall lodge with its annual return a certificate that the excess consists wholly of persons who under section 16 are to be excluded in reckoning the number of members.

   (3) The certificates required by this section shall be signed by a director and by the secretary of the company.

188A.   Filing of "no change" return

   (1) Where the status of a company required to file a return under this division has not changed, the company shall file a “no change” return indicating the financial year in which the return is filed and containing a general statement that there has been no change in any given particulars in the return from the filing of the previous return.

   (2) A “no change” return referred to in subsection (1) shall be in the prescribed form and accompanied by the prescribed fee.

   (3) Notwithstanding the filing of a “no change” return, the Registrar may cause to be inspected any records of the company which the Registrar considers necessary for the better carrying out of this Act.

[S 188A ins by s 14 of Act 24 of 2011.]

188B.   Filing of returns by company in liquidation

Where a company has been placed in receivership or is in the process of being wound up under Part XIII, a receiver or liquidator of the company shall cause an annual return to be filed until the completion of the winding up.

[S 188B ins by s 14 of Act 24 of 2011.]

 

189.   Offence relating to annual return

Where a company fails to lodge an annual return and any other documents in accordance with this Division or lodges documents which do not comply with this Division, the company and each officer in default commits an offence and is liable, upon conviction, to a fine not exceeding ten thousand penalty units.

[S 189 subs by s 15 of Act 24 of 2011.]

189A.   Power to strike out name of company from register

   (1) Where a company or officer fails to comply with this Division, the Registrar may, without prejudice to any other provisions of this Act—

      (a)   strike out the name of the company from the register of companies; or

      (b)   disqualify an officer of the company from forming or becoming a director of another company for a period of five years.

   (2) Where the Registrar has reasonable cause to believe that a company or an officer has failed to comply with this Division, the Registrar may send to the company a letter to that effect and also stating that, if an answer showing cause to the contrary is not received within one month from the date of the letter, a notice will be published in the Gazette with a view to striking out the name of the company from the Register of companies or disqualifying an officer of the company from forming or becoming a director of another company for a period of five years.

   (3) If the Registrar, at the expiration of the period of one month after the sending of the letter, is not satisfied that the company is in compliance with the Division, the Registrar may at any time thereafter cause to be published in the Gazette and send to the company a notice that at the expiration of three months from the date of that notice, unless cause is shown to the contrary, the name of the company will be struck off the Registrar of companies or an officer of the company will be disqualified from forming or becoming a director of another company for a period of five years.

   (4) The Registrar shall, after the expiration of three months from the publication in the Gazette of a notice under this section, unless cause to the contrary is shown, strike the name of the company off the register or disqualify an officer of the company from forming or becoming a director of another company for a period of five years and shall cause notice thereof to be published in the Gazette.

   (5) A company shall be dissolved on the publication in the Gazette of the notice referred to in subsection (4), but—

      (a)   the liability, if any, of every officer and member of the company shall continue and may be enforced as if the company had not been dissolved; and

      (b)   nothing in this subsection shall affect the power of the court to wind-up a company which has been dissolved under section 361.

   (6) A notice to be sent under this section to a liquidator may be addressed to the liquidator at the liquidator’s last known place of business.

   (7) The fees of the Registrar in respect of the striking off of a company or disqualification of an officer under this section and the costs incurred by the Registrar in publishing notice in the Gazette shall be payable by the company and recovered from it.

[S 189A ins by s 16 of Act 24 of 2011.]

PART IX
MANAGEMENT AND ADMINISTRATION

 

190.   Registered office and postal address

   (1) For the purposes of this Act, on the incorporation of a company—

      (a)   the registered office of the company is the place the physical address of which was notified in the application for incorporation; and

      (b)   the registered postal address is the postal address notified in the application.

   (2) A company may change its registered office or registered postal address by lodging a notice in the prescribed form with the Registrar, specifying the date from which the change will take effect.

 

191.   Registered records office

For the purposes of this Act, a company’s registered records office is—

      (a)   the place specified as the company’s registered records office in a notice in the prescribed form lodged with the Registrar, if such a notice has been lodged and not revoked by the company; or

      (b)   company’s registered office, if no such notice is current.

 

192.   Records and registers of a company

   (1) Any record, register or book required by this Act to be kept by a company may be kept either in a bound or loose leaf form, or by a system of mechanical or electronic recording or otherwise.

   (2) A company and its officers shall take adequate precautions to prevent loss or destruction of the records, registers and books, to prevent the falsification of entries and to facilitate the detection and correction of inaccuracies therein.

   (3) Where any system of mechanical or electronic recording is adopted, adequate arrangements shall be made for making the information therein available in written form in English to anyone lawfully inspecting the record, register or book.

   (4) Where a record, register or book is kept by means of a system of electronic recording, a company shall for the purposes of this Act be deemed to keep the record, register, or book at any place where the information therein is made available for inspection.

   (5) If a company fails to comply with this section, the company, and each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding five hundred monetary units.

 

193.   Inspection by members and others

   (1) Subject to this Act, where this Act requires any record, register or book kept by a company to be made available for inspection by a person, the record, register or book shall, during business hours, be open to inspection by the person at the company’s registered records office.

   (2) Where an inspection is made under sub-section (1)—

      (a)   by a member, director, or auditor of the company, or by the Registrar or his delegate, no charge may be made by the company; and

      (b)   by any other person, the company may make a charge not exceeding one monetary units, or such larger amount as may be prescribed, for each inspection.

   (3) The company may by ordinary resolution restrict the hours during which a record, book or register shall be available for inspection provided that it is available for inspection during not less than two hours in any working day.

   (4) Any person who is entitled to inspect any such record, register or book may require a copy of the whole or any part thereof on payment of a charge not exceeding one monetary unit, or such larger amount as may be prescribed, for every hundred words or part thereof required to be copied.

   (5) The company shall cause any copy so required by any person to be sent to that person not more than ten days after the day on which the requirement is received by the company.

   (6) If the company fails to comply with this section—

      (a)   the Court, on the application of a person aggrieved, may order—

      (i)   that the company comply immediately; and

      (ii)   that the company, and any officer in default, shall be liable to pay all costs of and incidental to the application for the order; whether or not any person has been convicted under paragraph (b); and

      (b)   the company, and each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding five hundred monetary units.

 

194.   Publication of name of company

   (1) A company shall—

      (a)   paint or affix, and keep painted or affixed, its name, in easily legible Roman letters above or adjacent to the principal entrance to its registered office, its registered records office and to every other office or place in which its business is carried on; and

      (b)   have its—

      (i)   name in Roman letters; and

      (ii)   designating number in Arabic numerals;

accurately stated in all business letters, invoices, receipts, notices and other publications of the company, and in all negotiable instruments or orders for money, goods or services purporting to be signed or endorsed by or on behalf of the company.

   (2) If a company fails to comply with sub-section (1), the company, and each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding five hundred monetary units.

   (3) If any officer of the company or other person signs, endorses or authorises the signing or endorsement on behalf of the company of any negotiable instrument or order for money, goods or services that does not comply with paragraph (b) of sub-section (1), the person shall be personally liable to discharge the obligation thereby incurred unless it is duly discharged by the company or otherwise, but without prejudice to any right of indemnity which the person may have against the company or any other person.

 

195.   Seal of company

   (1) A company shall have a common seal bearing its name and the words “common seal” thereon in legible Roman letters.

   (2) The common seal shall not be used except with the authority of a resolution of the directors of a committee of the directors specifically empowered to authorise the affixing of the seal.

 

196.   Official seal for use abroad

   (1) A company may, subject to its articles, have for use in any place outside Zambia an official seal, which shall be a facsimile of the common seal of the company with the addition on its face of the name of the places where it is to be used. Official seal for use abroad

   (2) Every document to which an official seal is duly affixed shall bind the company as if it had been sealed with the common seal of the company.

   (3) The company may, by writing under its common seal, authorise any agent appointed for that purpose to affix the official seal to any document to which the company is a party in that place.

   (4) Any person dealing with such an agent in reliance on the writing conferring the authority shall be entitled to assume that the authority of the agent continues during the period, if any, specified in the writing or, if no period is therein specified, until that person has actual notice of the revocation or determination of the authority.

   (5) The person affixing any such official seal shall, by writing under his hand, certify on the document to which the seal is affixed the date on which and the place at which it is affixed.

 

197.   Form of contracts and instruments

   (1) Any contract or instrument which, if entered into by a person other than a body corporate, would not be required to be under seal may be entered into or executed without seal on behalf of a company by the secretary, a director, or any person generally or specifically authorised by the directors to do so.

   (2) Any document purporting to be a document under the seal of a company, or issued on behalf of the company, shall be received in evidence and shall be presumed to be duly executed or issued.

 

198.   Bills of exchange and promissory notes

A bill of exchange or promissory note shall be deemed to have been made, accepted or endorsed on behalf of a company if made, accepted or endorsed in the name of, or by or on behalf or on account of, the company by any person acting under its authority, express or implied.

 

199.   Execution of deeds abroad

   (1) A company may, by writing under its common seal, empower any person, either generally or in respect of any specified matters, as its attorney, to execute deeds on its behalf in any place outside Zambia.

   (2) A deed signed by such an attorney on behalf of the company and under his seal shall bind the company and have the same effect as if is were under its common seal of the company.

 

200.   Service of documents on company

   (1) A document may be served on a company by—

      (a)   leaving it at the registered office of the company; or

      (b)   personal service on a director or secretary.

   (2) A document sent by post to the registered postal address of the company shall be deemed to have been served on the company if it is proved, by a receipt issued or otherwise, that the document, or a post office notification of the document, was delivered to the registered postal address.

   (3) Nothing in the section shall affect any provision in this Act relating to the service of any document, or detract from the power of any Court to direct how service shall be effected of any document relating to legal proceedings before the Court.

 

201.   Service of documents by company

   (1) For the purposes of this Act, a document may be served by a company on any member, debenture holder, director or secretary of the company—

      (a)   personally;

      (b)   by sending it by registered post in a prepaid letter addressed to him at his registered postal address or at any other address supplied by him to the company for the giving of notices to him; or

      (c)   by leaving it for him at his registered address with some person apparently over the age of eighteen years.

   (2) A document may be served by a company on the joint holders of any share of debenture of the company by serving it on the joint holder named first in the register of members of debenture holders in respect of the share of debenture.

   (3) A document may be served by a company on the person upon whom the ownership of any share or debenture has devolved by reason of his being a legal personal representative, receiver, or trustee in bankruptcy of a member of debenture holder—

      (a)   personally;

      (b)   by sending it by registered post in a prepaid letter addressed to him at a postal address notified by him to the company;

      (c)   by serving it in any manner in which it might have been served if the death, receivership or bankruptcy had not occurred, if the company has not received notice of a postal address for the person; or

      (d)   by leaving it for him at a place the address of which has been notified by him to the company, with some person apparently over the age of eighteen years.

   (4) Where a document is sent by registered post, service shall be deemed to be effected by properly addressing, prepaying and posting a letter containing the document and to have been effected at the expiration of seven days or, if it is sent to an address outside Zambia, twenty-one days, after the letter containing the same is posted.

   (5) For the purposes of sub-section (4), where a letter is sent to an address outside Zambia, it shall be despatched by airmail.

 

202.   Liability of company not affected by officer’s fraud or forgery

Where a company would be liable for the acts of any officer or agent, the company shall be liable notwithstanding that the officer or agent has acted fraudulently or forged a document purporting to be sealed by or signed on behalf of the company.

PART X
DIRECTORS AND SECRETARY

 

DIVISION 10.1—APPOINTMENT AND POWERS

 

203.   The directors of a company

   (1) For the purposes of this Act, any person who is appointed by the members of a company to direct and administer the business of the company shall be deemed to be a director of the company, whether or not he is called a director.

   (2) In this Act, unless the context otherwise requires—

      (a)   a reference to “the directors” is a reference to the directors acting collectively;

      (b)   where a decision of the directors is required for them so to act, the decision shall be made by resolution of the directors;

      (c)   a requirement that a document be signed by the directors shall be read as a requirement that a majority of the directors sign the document.

   (3) A person, not being a duly appointed director of the company, who holds himself out, or knowingly allows himself to be held out, as a director of the company—

      (a)   shall be deemed to be a director for the purposes of all duties and liabilities (including liabilities for criminal penalties) imposed on directors by this Act; and

      (b)   shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding five hundred monetary units.

   (4) A person, not being a duly appointed director of a company, on whose directions or instructions the duly appointed directors are accustomed to act shall be deemed to be a director for the purposes of all duties and liabilities (including liabilities for criminal penalties) imposed on directors by this Act.

   (5) If a company—

      (a)   holds out a person; or

      (b)   allows a person to hold himself out;

as a director of the company, knowing that the person is not a duly appointed director, the company shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding five hundred monetary units.

   (6) No limitation upon the authority of a director of a company, whether imposed by the articles or otherwise, shall be effective against a person who does not have knowledge of the limitation unless, taking into account his relationship with the company, he ought to have had such knowledge.

   (7) For the purposes of this section, a person shall not be considered to be a person in accordance with whose directions or instructions the directors of a company are accustomed to act, by reason only that the directors of the company act on advice given by him in a professional capacity.

 

204.   Company to have at least two directors

   (1) A company shall have at least two directors.

   (2) If a company carries on business for a period of more than two months with fewer than two directors, the company, and each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding ten monetary units for each day after that period of two months that the company carries on business.

 

205.   The secretary

   (1) A company shall have a secretary.

   (2) The persons named in the application for incorporation as the first secretary or joint secretaries of a company shall, on the incorporation of the company, be deemed to have been appointed as such for a term of one year.

   (3) Unless the articles provide otherwise, the secretary, other than the first secretary, shall be appointed by the directors for such a term as they think fit.

   (4) A secretary shall be appointed on such remuneration and other conditions as the directors think fit, and may be removed by them, subject to his right to claim damages from the company if removed in breach of contract.

   (5) The secretary may be a body corporate.

   (6) Two or more persons may act jointly as the secretary of a company.

   (7) The secretary of a company shall be—

      (a)   resident in Zambia, if an individual;

      (b)   incorporated in Zambia, if a body corporate.

   (8) Anything required or authorised to be done by or to the secretary may, if the office is vacant or there is for any other reason no secretary capable of acting, be done by or to any assistant or deputy secretary or, if there is no assistant or deputy secretary capable of acting, by or to any officer of the company authorised generally or specially for that purpose by the directors.

   (9) If a company carries on business for more than two months without a secretary or in contravention of sub-section (7), the company, and each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding ten monetary units for each day after that period of two months that the business is carried on.

 

206.   Appointment of directors

   (1) The number of directors of a company shall be the number of first directors named in the application for incorporation, or such other number as the company may decide by ordinary resolution.

   (2) The persons named in the application for incorporation as the first directors of a company shall, on the incorporation of the company, be deemed to have been appointed as such with a term of office that expires at the end of the first annual general meeting.

   (3) sub-sections (4) to (16) apply to a company unless the articles provide otherwise.

   (4) Where the company changes the number of directors it may, by ordinary resolution, determine in what rotation the increased or decreased number is to retire from office.

   (5) At all annual general meetings held by the company, other than the first annual general meeting, one third of the directors, or, if one third is not a whole number, the whole number next largest than one third, shall retire from office.

   (6) The directors to retire under sub-section (5) shall be those who have been longest in office, but, as between those who were appointed on the same day, those to retire shall (unless they agree otherwise among themselves) be determined by lot.

   (7) The company may, at the meeting at which a director retires under sub-section (2) or (5), appoint a person to fill the office by ordinary resolution.

   (8) A retiring director is eligible for re-appointment.

   (9) If an office is not filled under sub-section (7), and the retiring director offers himself for re- appointment and is not disqualified under this Act from holding office as a director, the retiring director shall be deemed to have been re-appointment unless at the meeting—

      (a)   it is expressly resolved not to fill the vacated office; or

      (b)   a resolution for the re-appointment of the director is put and lost.

   (10) If there are fewer directors than the number set in accordance with this section, the directors may appoint a person to be a director.

   (11) A director appointed under sub-section (10) holds office only until the next annual general meeting held by the company, and at that meeting shall not be taken into account in determining the number of directors to retire.

   (12) A director appointed under sub-section (10) shall be eligible for re-appointment as a director at the next annual general meeting.

   (13) Where a director’s office becomes vacant otherwise than under sub-section (5), the company may, by ordinary resolution, appoint a replacement, who shall be subject to retirement as if he had become a director on the day on which the person he replaced as director had last been appointed or re-appointed.

   (14) The directors shall be paid such remuneration as is from time to time determined by the company by ordinary resolution.

   (15) The remuneration shall accrue from day to day.

   (16) If the company by ordinary resolution so decides, the directors shall be paid, subject to the resolution, all travelling and other expenses properly incurred by them in attending and returning from meetings of the directors, or any committee of the directors or general meetings of the company, or otherwise in connection with the business of the company.

 

207.   Eligibility of persons to be directors

   (1) A person shall not be appointed as or continue to hold office as a director of a company if the person is—

      (a)   a body corporate;

      (b)   an infant or any other person under legal disability;

      (c)   any person prohibited or disqualified from so acting by any order of a Court; or

      (d)   an undischarged bankrupt.

   (2) A director of a company shall cease to hold office as such if—

      (a)   he is adjudged bankrupt; or

      (b)   he is removed by order of a Court from an office of trust on account of misconduct.

   (3) A person who, in contravention of sub-section (1) or (2), takes office, or continues to hold office, as a director of a company shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding five hundred monetary units or to imprisonment for a period not exceeding six months, or to both.

   (4) The articles of a company may provide further restrictions or qualifications on the appointment or continuation in office of its directors.

   (5) A person shall not be appointed as a director of a company unless he has consented in writing to be so appointed.

   (6) A contravention of this section shall not invalidate any transaction entered into by a company.

 

208.   Residential requirements of directors

Where a company is registered in Zambia, at least half of the directors of a company, including—

      (a)   the managing director, if the company has a managing director; and

      (b)   at least one executive director, if the company has executive directors;

shall be resident in Zambia.

[S 208 subs by s 17 of Act 24 of 2011.]

 

209.   Director’s share qualification

   (1) Unless the company’s articles otherwise provide, a director need not be a member of the company or hold any shares therein.

   (2) Where the articles require a director to hold a specified share qualification, a person appointed as a director shall obtain his qualification within two months after his appointment or such shorter period as may be fixed by the articles.

   (3) If a company amends its articles so as to introduce or increase the requirement of a share qualification, every director holding office at the date of the amendment shall obtain his qualification within two months after the amendment or such shorter period as may be fixed by the articles.

   (4) A director who—

      (a)   fails to comply with sub-section (2) or (3); or

      (b)   ceases to hold the specified share qualification, at any time after so complying;

shall cease to hold office.

   (5) A person who ceases to hold office under sub-section (4) shall not be re-appointed as a director of the company until he has obtained his qualification.

 

210.   Vacation of office of director

   (1) A director may resign his office by notice in writing to the company.

   (2) In addition to the other circumstances specified in this Act, an office of director shall become vacant if the director—

      (a)   is absent from meetings of the directors held during a period of six months, without the consent of the directors;

      (b)   holds any office of profit under the company, except that of managing director or principal executive officer, without the consent of the company by ordinary resolution; or

      (c)   is directly or indirectly interested in any contract or proposed contract with the company and fails to declare his interest as required by this Act.

   (3) The articles of a company may provide for the termination or vacation of office in circumstances additional to those specified in this Act.

 

211.   Removal of director

   (1) A company may, by ordinary resolution at a general meeting of the company remove from office all or any of the directors, subject to their rights to claim damages from the company if removed in breach of contract.

   (2) A resolution to remove a director shall not be moved at any general meeting unless notice of the intention to move it has been given to the company not less than twenty-eight days before the meeting.

   (3) On receipt of notice of an intended resolution to remove a director under this section, the company shall forthwith send a copy thereof to the director concerned and the director (whether or not he is a member of the company) shall be entitled—

      (a)   to be heard on the resolution at the meeting;

      (b)   to send to the company a written statement (in this section called “the director’s statement”), copies of which the company shall, subject to this section, send with every notice of the general meeting or, if the statement is received too late, shall forthwith circulate to every person entitled to notice of the meeting in the same manner as notices of meetings are required to be given; ad

      (c)   to require that the director’s statement be read to the meeting.

   (4) The company shall not be obliged to send or circulate the director’s statement if it is received by the company less than seven days before the meeting.

   (5) The Court, on application by the company or any other person who claims to be aggrieved and on being satisfied that the director’s statement is unreasonably long or that the rights conferred by this section are being abused to secure publicity for defamatory matter, may order—

      (a)   that the company shall not send or circulate the director’s statement and that the statement not be read at the meeting; and

      (b)   that the costs of the applicant are to be paid in whole or in part by the director, notwithstanding that he is not a party to the application.

   (6) On a resolution to remove a director no share shall, on a poll, carry a greater number of votes than it would carry in relation to the generality of matters to be voted on at a general meeting of the company.

   (7) A vacancy created by the removal of any director under this section, if not filled at the meeting at which he is removed, may be filled as a casual vacancy.

 

212.   No directions or instructions to be given to directors by a person not eligible to be a director

   (1) A person shall not give directions or instructions to the duly appointed directors of a company if the person is not eligible to be a director of the company.

   (2) A person who contravenes this section shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding five hundred monetary units or imprisonment for a period not exceeding six months, or to both.

 

213.   Alternate directors

   (1) Subject to any restriction in the articles of a company, a director may—

      (a)   either generally, or in respect of a specified period or specified circumstances; and

      (b)   with the approval of the directors;

appoint a person who is not a director as his alternate director.

   (2) An appointment as alternate director shall be in writing signed by the director making the appointment and the person appointed and lodged with the company.

   (3) A person shall not be appointed as an alternate director by more than one director.

   (4) Subject to this section, this Act, including the provisions on registration of directors’ particulars and interests, shall apply to an alternate director as if he were a director and not the agent of the director who appointed him.

   (5) An appointment of a person as an alternate director shall confer on him—

      (a)   the right to attend any meeting of the directors or any committee of directors at which the director who appointed him is not present; and

      (b)   one vote at such a meeting or committee.

   (6) Except in relation to meetings, both the director who appointed an alternate director and the alternate director may act as director of the company.

   (7) An alternate director shall not be required to hold any shares.

   (8) An alternate director shall not himself appoint an alternate director.

   (9) The company shall not be liable to pay additional remuneration by reason of the appointment of an alternate director.

   (10) The articles may provide that an alternate director shall be entitled to receive from the company during the currency of his appointment the remuneration to which the director who appointed him would, but for the appointment, have been entitled, and that the director who appointed him shall not be entitled to that remuneration, but, in the absence of such a provision, the alternate shall not be entitled to be remunerated otherwise than by the director who appointed him.

   (11) The appointment of an alternate director shall cease—

      (a)   at the expiration of the period, if any, for which he was appointed;

      (b)   if the director who appointed him gives written notice to that effect to the company;

      (c)   if the director who appointed him ceases for any reason to be a director; or

      (d)   if the alternate resigns by notice in writing to the company.

 

214.   Managing director

   (1) This section applies to a company unless the articles provide otherwise.

   (2) The directors may from time to time appoint one or more of their number to the office of managing director for such period and on such terms as they think fit, and subject to the terms of any agreement entered into in a particular case, may revoke any such appointment.

   (3) The managing director shall not, while holding that office, be subject to retirement by rotation or be taken into account in determining the rotation of retirement of directors, but his appointment shall terminate automatically if he ceases for any reason to be a director.

   (4) The managing director shall receive remuneration, subject to the terms of any agreement entered into in a particular case, as determined by the directors.

 

215.   Powers and duties of directors

   (1) Subject to this Act, the business of a company shall be managed by the directors, who may pay all expenses incurred in promoting and forming the company, and may exercise all such powers of the company as are not, by this Act or the articles, required to be exercised by the company by resolution.

   (2) sub-sections (2) to (6) shall apply to a company unless the articles provide otherwise.

   (3) Without limiting the generality of sub-section (1), the directors may exercise the powers of the company to borrow money, to charge any property or business of the company or all or any of its uncalled capital and to issue debentures or give any other security for a debt, liability or obligation of the company or of any other person.

   (4) The directors may, by power of attorney, appoint any person or persons to be the attorney or attorneys of the company for such purposes, with such powers, authorities and discretions (being powers, authorities and discretions vested in or exercisable by the directors), for such periods and subject to such conditions as they think fit.

   (5) A power of attorney under sub-section (5) may contain such provisions for the protection and convenience of persons dealing with the attorney as the directors think fit and may also authorise the attorney to delegate all or any of the powers, authorities and discretions vested in him.

   (6) All cheques, promissory notes, bankers drafts, bills of exchange and other negotiable instruments, and all receipts for money paid to the company, shall be signed, drawn, accepted, endorsed or otherwise executed, by any two directors or in such other manner as the directors determine.

 

216.   Limitations on powers of directors

   (1) The directors of a company shall not, without the approval in accordance with this section of an ordinary resolution of the company—

      (a)   sell, lease or otherwise dispose of the whole, or substantially the whole, of the undertaking or of the assets of the company;

      (b)   issue any new or unissued shares in the company; or

      (c)   create or grant any rights or options entitling the holders thereof to acquire shares of any class in the company.

   (2) The approval for a transaction referred to in paragraph (a) of sub-section (1) shall be an approval of the specific transaction proposed by the directors.

   (3)…

[S 216(3) rep by s 3 of Act 1 of 2000.]

   (4) This section shall not prohibit—

      (a)   the issue of any shares under a bona fide underwriting agreement; or

      (b)   the issue to a director of such shares, if any, as, under the articles of the company, he is required to hold by way of share qualification.

   (5) The validity of any transfer or disposition of property to a person dealing with the company in good faith shall not be affected by a failure to comply with this section.

   (6) This section shall not limit the powers of any liquidator or receiver of the property of a company.

 

217.   Proceedings of directors

   (1) This section shall apply to a company unless the articles provide otherwise.

   (2) The directors may meet together for the despatch of business and adjourn and otherwise regulate their meetings as they think fit.

   (3) A director may at any time, and a secretary shall on the requisition of a director, convene a meeting of the directors.

   (4) A question arising at a meeting of directors shall be decided by a majority of votes of directors present and voting, and any such decision shall for all purposes be deemed a decision of the directors.

   (5) In case of an equality of votes, the Chairman of the meeting, in addition to his deliberative vote (if any), has a casting vote.

   (6) The directors may delegate any of their powers to a committee or committees of directors, and such a power duly exercised by the committee shall be deemed to have been exercised by the directors.

   (7) If all the directors eligible to vote on a resolution sign a document or documents containing the terms of the resolution and a statement that they are in favour of the resolution, the resolution shall be deemed to have been passed at the time at which the document is signed by the last director to sign.

 

DIVISION 10.2—INTERESTS OF DIRECTORS

 

218.   Contracts in which directors are interested

   (1) For the purposes of this section, a director has an interest in a contract of the company if—

      (a)   he will derive any material benefit, whether direct or indirect, from the contract; or

      (b)   another party to the contract is a firm or body corporate and he has a material interest, whether direct or indirect, in the firm or body corporate;

but he shall not be considered to have a material interest in a body corporate by reason only that—

      (i)   he holds debentures of the body corporate; or

      (ii)   he holds shares in the body corporate comprising less than five per centum of the shares, or, where the company has classes of shares, less than five per centum of the shares in each class.

   (2) For the purposes of paragraph (a) of sub-section (1), a benefit accruing to a spouse of the director or to a child under the age of twenty-one shall be deemed to be a benefit accruing to the director.

   (3) Unless the articles of a company provide otherwise, a director shall be entitled, subject to this Act, to enter into a contract with the company, and such a contract shall not be voidable, nor shall the director be liable to account for any profit made thereby, by reason only of his being a director or of the fiduciary relationship thereby established.

   (4) A director who is interested in any contract or proposed contract of the company shall declare the nature and extent of his interest at a meeting of the directors or shareholders of the company.

   (5) If the director is interested in a proposed contract at the time that it is first considered at a meeting of the directors or shareholders, the declaration shall be made at that meeting or an earlier one.

   (6) If the director becomes interested in a contract or proposed contract at some later time, the declaration shall be made at the next meeting after he becomes so interested.

   (7) For the purposes of this section, a general declaration in writing by a director that—

      (a)   states that he has an interest in a specified body corporate or firm;

      (b)   specifies the nature and extent of the interest; and

      (c)   states that he is to be regarded as interested in any contract which may, after the date of the notice, be made with that body corporate or firm;

shall be a sufficient declaration of interest in relation to any contract so made unless, at the time the question of confirming or entering into any contract is first taken into consideration by the company, the extent of his interest in the body corporate or firm is greater than is stated in the declaration.

   (8) Subject to this section and the Articles, where a contract or arrangement in which a director is interested is considered at a meeting—

      (a)   the director shall not be counted in the quorum required for that business;

      (b)   the director shall not vote in respect of that business;

      (c)   one director shall not approve the contract until it has been evaluated by an external auditor and verified to be a contract that is being concluded in a transparent manner and on equitable terms; and

      (d)   one director shall cause a report of the evaluation conducted under paragraph (c) to be included in the auditor’s annual report;

[S 218(8) subs by s 18(a) of Act 24 of 2011.]

   (9) Sub-section (8) shall not apply in respect of—

      (a)   an arrangement for giving the director any security or indemnity in respect of money lent by him to, or obligation undertaken by him for the benefit of, the company;

      (b)   an arrangement for the giving by the company of any security to a third party in respect of a debt or obligation of the company for which the director has assumed responsibility in whole or in part under a guarantee or indemnity, or by the deposit of a security; or

      (c)   a contract by the director to subscribe for or underwrite shares or debentures of the company.

   (10) Where a member or director or any interested party to a party related transaction is of the view that the transaction is not in the interest of the company, the member, director or interested party may petition that court in accordance with section 239.

[S 218(10) ins by s 18(b) of Act 24 of 2011.]

   (11) A director who fails to comply with this section shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding five hundred monetary units.

[S 218(10) renumbered as s 218(11) by s 18(c) of Act 24 of 2011.]

218A.   Third party declarations

   (1) A third party may, where the third party intends to enter into a transaction with a company disclose—

      (a)   any possible conflict of interest that may arise as a result of the person transacting with the company in the proposed manner;

      (b)   the nature of the conflict of interest and the director or directors to whom such a conflict of interest applies; and

      (c)   the extent to which the parties to the transaction stand to gain personally from the actions of the company.

   (2) A disclosure of interest made by a third party shall be treated in the same manner that a disclosure made by a director would be treated.

[S 218A ins by s 19 of Act 24 of 2011.]

218B.   Shareholder approval for certain transaction

Where a company wishes to enter into a transaction that is subject to a declaration under sections 218 and 218A for which the value exceeds the threshold prescribed by the Articles, the transaction shall only be entered into with the approval of a simple majority of the members.

[S 218A ins by s 19 of Act 24 of 2011.]

 

219.   Prohibition of loans by companies to directors

   (1) This section shall apply to the following companies:

      (a)   a public company;

      (b)   a company related to a public company;

      (c)   a company in a prescribed class of company.

   (2) A company to which this section applies shall not—

      (a)   make a loan to a director of the company or of a related body corporate;

      (b)   enter into any guarantee or provide any security in connection with a loan made by any other person to a director of the company or of a related body corporate; or

      (c)   subject to this section-

      (i)    make a loan to; or

      (ii)   enter into any guarantee or provide any security in connection with a loan made by any other person to;

a body corporate in which a director or directors of the company, or their nominees, hold shares having in total one-fifth or more of the value of its issued share capital.

   (3) This section shall not prohibit a company from making a loan to a related body corporate, or entering into a guarantee or providing security in connection with a loan made by any other person to a related body corporate.

   (4) This section shall not prohibit a company whose ordinary business includes the lending of money, or the giving of guarantees in connection with loans made by other persons, from making a loan to, or entering into a guarantee or providing security in connection with, a director or a body corporate referred to in paragraph (c) of sub-section (2)—

      (a)   if the prior approval of the company has been given at a general meeting at which the purposes of the expenditure and the amount of the loan, or the extent of the guarantee or security, were disclosed; or

      (b)   on condition that the loan shall be repaid, or the liability under the guarantee or security shall be discharged, within eighteen months, if approval is not given by the company within twelve months at a general meeting at which the purposes of the expenditure and the amount of the loan, or the extent of the guarantee or security, are disclosed.

   (5) A company may advance to director of the company or of a related body corporate funds to meet expenditure incurred or to be incurred by him for the purposes of the company or for the purposes of enabling him properly to perform his duties as an officer or employee of the company, provided that the total amount advanced to such persons does not exceed one per centum of the assets of the company less the liabilities of the company as shown in the last audited balance sheet of the company.

   (6) If a company fails to comply with this section—

      (a)   the company, and each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding five hundred monetary units; and

      (b)   the directors who authorised the making of the loan or the entering into the guarantee or the providing of the security shall be jointly and severally liable to indemnify the company against any loss arising therefrom.

   (7) This section shall not apply in relation to a loan, guarantee or security made or provided before the commencement of this Act.

 

220.   Duties of directors in connection with sales or purchases of the company’s securities

   (1) If a director of a company, having acquired in that capacity any special information which may substantially affect the value of the share or debentures of the company or any related body corporate, buys or sells any such shares or debentures without disclosing such information to the seller or purchaser thereof, the purchase or sale shall be voidable at the option of the seller or purchaser within twelve months after the date of the agreement to sell or buy.

   (2) For the purposes of this section, any shares or debentures bought or sold shall be deemed to have been bought or sold by a director if he held before or after the transaction, directly or indirectly, any beneficial interest therein, unless it is proved that the sale or purchase was not made by him or on his instructions or advice or on the instructions or advice of any other person to whom he had imparted any special information affecting the value of the shares or debentures obtained by him in the capacity of director.

   (3) Nothing in this section shall derogate from any right or remedy which may be available under any other law.

 

DIVISION 10.3—PAYMENTS TO DIRECTORS

 

221.   Interpretation

   (1) For the purposes of this Division “payment”—

      (a)   does not include the payment of damages awarded or approved by any Court for breach of an independent service agreement or the bona fide payment of any pension or superannuation benefit in respect of past services in accordance with a service agreement; and

      (b)   includes any other benefit or advantage whether in cash or in kind.

   (2) For the purposes of this Division—

      (a)   a service agreement shall be considered independent only if it was not entered into in contemplation of such a transfer as is referred to in sub-section (1) of section 222 or such an offer as is referred to in section 223;

      (b)   a service agreement shall be presumed to have been entered into in contemplation of such a transfer or offer unless it was made more than one year before the date of the agreement to transfer or the making of the offer, and

      (c)   if—

      (i)   any payment (not being remuneration properly payable) is received by a director or former director within a period of one year before or two years after the date of the agreement to make such a transfer or offer; and

      (ii)   the company or the person to whom the transfer or by whom the offer was made was privy to the making of the payment; the payment shall be presumed to have been received by him in connection with the transfer or offer.

 

222.   Payments to directors for loss of office or on transfer of undertaking

   (1) A company shall not make to any director or former director of the company or of a related body corporate any payment by way of compensation for loss of any office in the company or in a related body corporate, or as consideration for or in connection with his retirement from office, unless the particulars relating to the proposed payment (including the amount thereof) have been disclosed to the members of the company and the proposal has been approved by an ordinary resolution of the company.

   (2) A person shall not make a payment to a director or former director of a company in connection with the transfer of the whole or any part of the undertaking or property of the company or of a related body corporate, whether the payment is expressed to be by way of compensation for loss of office or otherwise, unless the particulars relating to the proposed payment, including the amount thereof, have been disclosed to the members of the company and the proposal has been approved by an ordinary resolution of the company.

   (3) If a payment is made in contravention of this section, the amount of the payment shall be deemed to have been received in trust for the company.

 

223.   Payments to directors in connection with takeover bids

   (1) Where—

      (a)   an offer is made for the acquisition of any shares of a company on the terms that the offer is available for acceptance—

      (i)   by all the shareholders of the company or by all the holders of shares of the class to which the offer related; or

      (ii)   by the holders of shares which, together with any shares already beneficially owned by the person making the offer or any body corporate in which that person is a controlling shareholder, confer the right to exercise or control the exercise of not less than one-third of the votes at any general meeting of the company; and

      (b)   in connection with the offer a payment (in this section called “the relevant payment”) is made, or has been made or is proposed to be made to a person (in this section called the “payee director”) who is a director or former director of the company or of a related body corporate, being a payment other than payment to purchase shares held by the payee director at the same price receivable under the offer by other holders of shares in that class;

the director or former director shall take all reasonable steps to ensure that particulars of the relevant payment are included in or sent with any notice of the offer made for their shares which is given to any shareholders.

   (2) If the payee director fails to comply with sub-section (1), he shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding five hundred monetary units.

   (3) If a person who has been properly directed by the payee director to include in, or send with, a notice of offer referred to in sub-section (1) the particulars referred to in that sub-section fails to do so, he shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding two hundred and fifty monetary units.

   (4) If the relevant payment, or a part thereof, is made to the payee director, then sub-section (5)

shall apply unless—

      (a)   the payee director has complied with sub-section (1); and

      (b)   the making of the relevant payment has been—

      (i)   agreed to by all the holders of the shares to which the offer relates; or

      (ii)   approved by an ordinary resolution passed at a meeting of such holders, summoned for the purpose.

   (5) If this sub-section applies, then, subject to this section—

      (a)   the person making the payment and the payee director shall be jointly and severally liable to distribute the amount of the relevant payment among any persons who have sold their shares as a result of the offer in proportion to the number of shares sold by them;

      (b)   the payee director shall hold any amounts received by him in connection with the relevant payment on trust for such persons; and

      (c)   the expenses incurred in distributing the payment shall be borne by the persons liable to make the distribution and not retained out of the payment.

   (6) If, in proceedings instituted less than three months after the first transfer of any shares in pursuance of the offer, the Court awards or approves the payment of damages to the payee director for breach of an independent service agreement, the amount of the damages, and of any costs awarded to the payee director in the proceedings, shall be paid to or retained by the payee director out of the amount of the relevant payment and sub-section (5) shall apply only to the balance thereof, if any.

   (7) If the offer does not apply to all the shareholders or to all shareholders of a class, a meeting called for the purposes of subparagraph (b) (ii) of sub-section (4) shall be convened, held and conducted as nearly as may be as if it were a meeting of the shareholders or of a class of shareholders.

   (8) The notices convening a meeting called for the purposes of subparagraph (b) (ii) of sub-section (4) shall include a statement to the effect that, if the resolution approving the payment is not passed, the payment will be distributable among the persons who have sold their shares in pursuance of the offer, except to the extent that the Court may award or approve the payment to the payee director of damages for breach of an independent service agreement.

   (9) The offer shall not include any provision that the offer is conditional upon approval of the relevant payment, and any provision purporting to have that effect shall be void.

   (10) For the purposes of this section—

      (a)   shares shall be deemed to be beneficially owned by a body corporate if they are owned beneficially by—

      (i)   the body corporate;

      (ii)   another body corporate related to the body corporate;

      (iii)   a controlling shareholder of a body corporate referred to in paragraph (i) or (ii);

      (b)   a person shall be deemed to be a controlling shareholder of a body corporate if-

      (i)    the body corporate or its directors are accustomed to act in accordance with the directions or instructions of the person or his nominee; or

      (ii)   at a general meeting of the body corporate, the person is entitled to exercise or control the exercise of one-third or more of the votes.

 

DIVISION 10.4—REGISTERS

 

224.   Register of directors and secretaries

   (1) A company shall keep a register of its directors and secretaries in the prescribed form.

   (2) The Register shall be available for inspection by any person.

   (3) If a company fails to comply with this section, the company and each officer in default commits an offence and is liable, upon conviction, to a fine not exceeding ten thousand penalty units for every day during the default continues.

   (4) A director or secretary of a company shall give notice, in writing, to the Registrar of such matters relating to the director or secretary as may be necessary for the purposes of this section, and a person who fails to do so commits an offence and is liable, upon conviction, to a fine not exceeding ten thousand penalty units for every day during which the default continues.

[S 224 subs by s 20 of Act 24 of 2011.]

 

225.   Register of shares and debentures held by or in trust for directors and secretary

   (1) A company shall keep a register showing in respect of each director and of the secretary the number, description and amount of any shares in or debentures of the company or any related body corporate which are held by or in trust for him or of which he has any right to become the holder (whether on payment or not).

   (2) The register need not include shares in a body corporate which is the wholly-owned subsidiary of another body corporate.

   (3) Where a transaction involving any shares results in change in the register, the register shall also show the date of, and price or other consideration for, the agreement for the transaction.

   (4) The nature and extent of a director’s interest or right in or over any shares or debentures recorded in relation to him in the register shall, if he so requires, be indicated in the register.

   (5) For the purposes of this section—

      (a)   a director shall supply the company with the information relating to himself required to be registered; and

      (b)   the company shall be entitled to rely on the information provided by the director.

   (6) This section shall not require the company to make any inquiry into the rights of any person in relation to any shares, nor shall the company be taken to have, as a result of anything done under this section, any notice of a matter relating to the rights of any person in relation to the shares other than actual notice.

   (7) The register shall be open to inspection—

      (a)   by any member or holder of debentures of the company during the period beginning fourteen days before the date of the company’s annual general meeting and ending three days after the date of its conclusion; and

      (b)   by any person acting on behalf of the Registrar, at that or any other time.

   (8) The register shall be produced at the commencement of the company’s annual general meeting and remain open and accessible throughout the meeting to any person attending the meeting.

   (9) If the company fails to comply with a provision of this section, the company, and each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding five hundred monetary units.

   (10) A director who fails to comply with sub-section (5) shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding five hundred monetary units.

   (11) If the company fails to allow inspection of the register in accordance with this section, the Court may order an immediate inspection of the register.

   (12) For the purposes of this section—

      (a)   any person in accordance with whose directions or instructions the directors of a company are accustomed to act shall be deemed to be a director of the company; and

      (b)   a director of a company shall be deemed to hold or have an interest or right in or over, any shares or debentures if a body corporate other than the company holds them or has that interest or right in or over them, and either—

      (i)   that body corporate or its directors are accustomed to act in accordance with his directions or instructions; or

      (ii)   he is entitled to exercise or control the exercise of one third or more of the voting power at any general meeting of that body corporate.

 

226.   Registration of particulars of directors and secretaries

   (1) A company shall, within twenty-one days after any change occurs among its directors or in its secretary or in any of the particulars contained in the register of directors and secretaries, lodge with the Registrar notice of the change in the prescribed form, specifying the date of the change.

   (2) Any notification of a person’s having become a director or secretary of the company shall state that the person has consented in writing to act in the relevant capacity.

   (3) If the company fails to comply with this section, the company, and each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding three monetary units for each day that the failure continues.

 

DIVISION 10.5—MISCELLANEOUS

 

227.   Where one director is named in letters, etc. all are to be named

   (1) A company to which this section applies shall not state, in any form, the name of any of its directors (otherwise than in the text or as a signatory) on any business letter, trade

catalogue, circular or showcard on which the company’s name appears unless it also states in legible characters the Christian name, or the initial thereof, and surname of every director (other than an alternate director) of the company.

   (2) For the purposes of this section—

“Christian name” includes a recognised abbreviation of a Christian name;

“director” includes any person in accordance with whose directions or instructions the directors of the company are accustomed to act;

“showcard” means a card or pamphlet containing or exhibiting articles dealt with or samples of representations thereof.

 

228.   Limited company may have directors with unlimited liability

   (1) In a limited company, the liability of the directors and managers may, if the articles so provide, be unlimited.

   (2) In a limited company in which the liability of directors or managers is unlimited, a person shall not be elected or appointed to the office of director or manager unless he has signed a statement that he understands and accepts that the liability of the person holding that office will be unlimited.

   (3) If a person is elected or appointed to the office of director or manager in contravention of this section—

      (a)   the person will have unlimited liability;

      (b)   the member who proposed the person for election or appointment to the office or director or manager, the promoters of the company, the directors of the company, any managers of the company and the secretary of the company shall indemnify the person against his liability under paragraph (a); and

      (c)   the persons referred to in paragraph (b) shall each be guilty of an offence, and shall be liable on conviction to a fine not exceeding five hundred monetary units.

 

229.   Avoidance of acts in dual capacity as director and secretary

A provision requiring or authorising a thing to be done by or to a director and the secretary shall not be satisfied by its being done by or to the same person acting both as director and as, or in place of, the secretary.

 

230.   Restraining fraudulent persons from managing companies

   (1) Where—

      (a)   a person is convicted, whether in Zambia or elsewhere, on an indictment, or on any other process analogous to or in substitution of indictment—

      (i)   of any offence involving fraud or dishonesty; or

      (ii)   of any offence in connection with the promotion, formation or management of a body corporate; or

      (b)   in the course of winding-up a body corporate, whether in Zambia or elsewhere, a person has been found guilty of—

      (i)   any fraud in relation to the body corporate; or

      (ii)   any breach of duty in relation to the body corporate;

the Court, on its own motion or on the application of any of the persons referred to in sub-section (3), may order that the person shall not, without leave of the Court, be a director of or in any way, whether directly or indirectly, be concerned or take part in the management of any company, or act as secretary, auditor or liquidator of any company, or as receiver of the property or as trustee for the debenture holders of any company, for such period not exceeding five years as may be specified in the order.

   (2) In sub-section (1), “the Court” means the High Court for Zambia or—

      (b)   in relation to the making of an order against a person under paragraph (b) thereof, the Court having jurisdiction to wind-up the body corporate, if that Court is in Zambia; or

      (c)   in relation to the granting of leave, the Court which made the order from which leave is sought.

   (3) An application for an order under this section may be made by—

      (a)   the Registrar;

      (b)   the trustee in bankruptcy of the person concerned; or

      (c)   the liquidator of any body corporate.

   (4) A person intending to apply for the making of an order under this section shall give not less than twenty-eight days’ written notice of his intention to the person against whom the order is sought.

   (5) A person against whom an order has been made under this section who intends to apply for leave to act as a director or in any other capacity in relation to the property or affairs of a company shall, unless the Court otherwise orders, give at least twenty-eight days’ written notice of his intention to any person on whose application the order was made, and that person may be a party to the proceedings.

   (6) Where any order is made or leave is granted under this section—

      (a)   the person who sought the order or leave shall lodge a copy thereof with the Registrar; and

      (b)   the Registrar shall cause a summary thereof to be published in the Gazette.

   (7) A person who contravenes an order made under this section shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding two thousand monetary units or imprisonment for a term not exceeding two years, or to both.

 

231.   Prohibition of assignment of offices

A director or other officer of a company shall not assign his office to another person, and any purported assignment of the office shall be void.

 

232.   Validity of acts of officers

An act done by a director, the directors or the secretary shall not be invalid only because it is afterwards discovered that there was some defect in the appointment or qualification of a person to be a director or secretary or a member of a committee of directors, or to act as a director or secretary.

 

233.   Company may not indemnify officers

   (1) Subject to this Act, a company shall not indemnify a director or other officer of the company or a related body corporate against, or compensate him for, any liability which under law would otherwise attach to him in respect of any civil or criminal liability for any negligence, default, breach of duty or breach of trust which he may commit in relation to the company or a related body corporate after the commencement of this Act.

   (2) Any provision in a contract between the company and such a director or officer purporting to indemnify or compensate him in contravention of sub-section (1) shall be void.

   (3) This section shall not prevent a company from indemnifying or compensating such a director or officer from any costs or liability incurred by him in defending any proceedings, whether civil or criminal, in which—

      (a)   judgement is given in his favour;

      (b)   he is acquitted; or

      (c)   relief is granted to him by the Court.

PART XI
SCHEMES OF ARRANGEMENT, TAKE-OVERS AND THE PROTECTION OF MINORITIES

 

234.   Power to compromise with creditors and members

   (1) In this section, “arrangement” includes a reorganisation of the share capital of the company by the consolidation of shares of different classes or by the division of shares in shares of different classes or by both methods.

   (2) Where a compromise or arrangement is proposed between—

      (a)   a company and its creditors or any class of its creditors; or

      (b)   a company and its members or any class of its members;

the Court may, on the application of the company or of any creditor or member of the company, or, in the case of a company being wound-up, of the liquidator, order a meeting of the creditors, the class of creditors, the members or the class of members, as the case may be, to be convened, held and conducted in such manner as it thinks fit to consider the compromise or arrangement.

   (3) Subject to the order of the Court, Part VII shall apply to a meeting of members or a class of members ordered to be convened pursuant to this section.

   (4) Subject to the order of the Court, sections one hundred and forty-six to one hundred and fifty-two shall apply, with the necessary modifications, to a meeting of creditors or a class of creditors ordered to be convened pursuant to this section.

   (5) Unless the Court orders otherwise, the voting power at the meeting of creditors ordered to be convened pursuant to this section shall be assigned to the creditors in proportion to the amount of the debt outstanding from the company to each creditor.

   (6) If a meeting, by extraordinary resolution, agrees to any compromise or arrangement, the compromise or arrangement—

      (a)   shall be binding on all the creditors or the class of creditors, or on the members or class of members, as the case may be; and

      (b)   shall be binding on the company if and when—

      (i)   it has been approved by order of the Court; and

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