Company Law Module - Zimbabwe Institute of Management (ZIM)

ZIMBABWE INSTITUTE OF
MANAGEMENT
Presents
EXECUTIVE DIPLOMA IN GENERAL

MANAGEMENT
COMPANY LAW AND SECRETARIAL

PRACTICE
“PROMOTING THE ART, SCIENCE AND PRACTICE OF GOOD, SOUND

MANAGEMENT”
COPYRIGHT RESERVED
ZIMBABWE INSTITUTE OF MANAGEMENT
WELCOME NOTE
WELCOME TO THE STUDY OF company law and secretarial practice!
Our study of the subject takes us through the many corridors and
intricacies of law having a bearing on companies operating in Zimbabwe
and those who practice that law. It is a law that requires of you an initial
understanding of the theoretical concepts of “Company” and “Secretary”
and the link between the two.
The best way to understand this subject is to adopt a practical approach

because the subject is practical. You are therefore urged to ensure that
as soon as you are familiar with terminology, concepts and underlying
principles of the subject, you learn the practical procedures that are the
essence of the subject.
All laws are adjusted from time to time to meet the requirements and
demands of the day. In the same vein, Company Law and Secretarial
Practice as a subject experiences certain amendments in the Act, from
cited decided cases and statutory pronouncements that are made
occasionally. The onus is on you to keep pace and be at grips with these
changes.
The subject is not difficult in any aspect. You however, have to read as
widely as possible on the subject. Articles are found in journals,
newspapers and many other periodicals on law, commerce and industry.
It is hoped that you find the subject as challenging and enterprising as it

is meant to make out of you a graduate in Company Law and Secretarial
Practice.
All the best!
ZIM
CONTENTS
Page
WELCOME NOTE
OBJECTIVES
INTRODUCTION
1. Corporate Personality
1.1 Historical Perspective

1.2 Definition
1.3 Forms of business organization
1.4 Features of a Company
Review Questions
2. Company Formation
Reasons for forming Company

Reasons Against Forming a company
What type of Company?
Companies, Partnerships, Co-operatives
Private and Public Companies
Review Questions
3. Procedure to Obtain Registration of Company
Name Search
Memorandum of Association
Statement of Intent
Articles of Association
Alteration of Memorandum and Articles
Registrar’s Office
Promoter
Review Questions
4. Management of Company
Directors
Shares – General
Shares – Types
The Rights and Liabilities of Shareholders
Review Questions
5. Commencement of Business
6. Winding Up
Judicial Management
Types of Winding Up
By Court
By Creditors
Members’ Voluntary
Consequences
Review Questions
7. Company Secretarial Practice

The Company Secretary
Duties
Termination of Appointment
7.2 Meetings
APPENDICES
OBJECTIVES OF THE COURSE
Unlike other subjects which the objectives of study may be chapter by

chapter as it were, area by area, Company Law and Secretarial Practice, as
a subject has the following as objectives that cater for and represent the
subject coverage in its entirety:
1. To explain the basic and elementary principles of company law that

are necessary for the participant to appreciate the practical
application of those principles to real-world and business situations.
2. To cause simplification and ensure deeper understanding of some of

the more complicated and confusing aspects of the subject through
leading decided cases, few as they may be (that were selected).
3. To provide sufficient knowledge to the participants to enable them to

recognize fully, problem areas (and potential ones) in the field and
thus be in a position to successfully manage those areas.
4. To ensure that the participant emerges from the course not so much
as a company law expert an/or a qualified ‘Company Secretary’,
rather, to equip him with an awareness that Company law
requirements and secretarial practice demands meet this
participants’ daily challenge and that, therefore, his role to play in
this for his organization must be more meaningful, enlightened, cost
reducing, effective and must more enjoyable after this course.
5. To share knowledge and experiences among participants and thereby

make the study of the subject more of a delight than a fright.
1. CORPORATE PERSONALITY
At the end of this topic, the participant should be able to:
a) Outline the historical perspective of Company Law in Zimbabwe.
b) Define a company as seen through the eyes of law, citing its features.
c) Understand the various forms of business organisations in Zimbabwe
1.1 Historical Perspective
The common law origins of Company Law in Zimbabwe stem from the
Roman Dutch Law introduced to this part of Africa in 1891 and
subsequently greatly influenced by English Law. Our law is therefore an
amalgam or admixture of Roman, Roman-Dutch and English Laws.
Roman Law did not encourage the existence of Private Corporations for
fear of them becoming subversive organisations, but corporate bodies
were set up by the State for various purposes even in the classical period
and by the time of justinian (527-565 AD) they could also be set up by
individuals and other non-commercial purposes. This form of corporate
body derived its nature from and was recognised by its constitution and
was known as a Univesitas, a form of association, which can exist today
in our law. Roman Dutch law did not take the common law of
corporations much further and the development of law in this country
and in South Africa owes most of the injection of English Law. In
England also the idea of the corporate body or association began in the
shape of the univesitas, mainly applicable to churches and other
religious organisations, but later in the 15th century, the Kings deviced a
way of making money by granting to groups of merchants or to trade
guilds so called “Royal chatters” which purpoted to confer on these
groups a corporate status and, as a rule, certain monopolies in trading
rights. These corporate bodies owned property and incurred liabilities
separately from their members so that a judgement against a corporation
did not permit execution against the personal assets of a member. Later
there came into being corporate bodies built created by act of parliament,
a procedure which we will still see today in the setting up by Government
of Parastatal bodies such as National Railways of Zimbabwe.
The only example in our history of a company or corporate body set up
by Royal Charter was that of the British South Africa (BSA) Company
chartered by Queen Victoria for the purposes of colonization.
The 18th century was a great time of commercial activity. There was a
great deal of abuse of the system at that time and the advantages of
separate corporate status. The fraudulent company promoter appeared
on the same scene, having purchased the Charter of a defunct company
or merely purpoting to have done so. This culminated in a grave loss of
public confidence in companies particularly in the “South Sea Bubble”
incident which ruined most investors. The British Government reacted
by introducing legislation, which delayed the further development of the
corporate idea and obliged the businesses to operate on the basis of a
so-called “deed of settlement”, a document, which, although it was of
doubtful authority, appeared to be accepted by the courts. Eventually the
Government realised that the corporate body, which came to be known
as the “company” was here to stay.
The first Companies’ Act to control such organisations was promulgated

in 1844.Its main features were:
a) It required registration of new companies with more than twenty-five

members.
b) It permitted incorporation to be by mere registration
c) It permitted companies to issue shares and shares to be transferred
d) It provided for the publicity necessary to prevent fraud
It did not, at the time, provide for the limited liability of members, an
important feature of modern company law, which was introduced eleven
years later by the limited liability Act of 1855. By permitting transfer of
shares the 1844 act of course implied established the third characteristic
of a company, viz, perpetual succession, which distinguishes it from a
partnership.
The first companies’ Act promulgated in this country was the ordinance
of 1895,prior to which the law of Cape Colony, largely modelled on
English Law, prevailed. The Act enabled corporate status to be attained
by companies whose members held shares simply by registration of a
Memorandum of association. It covered the liability of directors and other
officers and provided for the limited liability of members. It also laid
down the procedure for the liquidation or winding up of companies.
The statute which now governs the affairs of companies of the
Companies Act Chapter 24:03 which came into effect on 1st April, 1952,
has been amended since then and was last consolidated in 1976. The
main objectives of the act are:
a) To establish the corporate status of companies registered under the

act as legal personae separate from their members.
b) To establish the limits of the liability of members of companies.
c) To provide safeguards for the creditors of companies.
d) To provide safeguards for investors in companies.
e) To protect the interest of employees
1.2 Definition
The word “company” has been used variously to convey meanings that
include body of persons associated together for identifiable purposes; a
number of guests; a firm; a ship’s crew; a sub-division of a regiment; etc.
In terms of the Companies Act, “Company” means a company formed

and registered under the Companies Act. In common Law, a company is
a “legal person” or “legal entity” separate from and capable of surviving
beyond the lives of its members. “Like any juristic person, a company is
legally an entity apart from its members, capable of surviving beyond the
lives of, its members. “Like any juristic person, a company is legally an
entity apart from its members, capable of rights and duties of its own,
endowed with the potential of perpetual succession.”1 It is a legal device
for the attainment of any social or economic end and to a large extend
publicly and socially responsible. It is, therefore, a combined political,
social, economic and legal institution.
A company is an artificial or juristic person. It can therefore own

property (assets), enter into contractual relationships with other
“persons”, can sue and be sued, open an account with a bank (or other
institution) in its own name, etc. It can also be indebted (owe money) to
others as well as be a creditor or other “persons”. The point to underline
here is that the company’s property (money, assets, etc) belongs to the
company and not to the members or the shareholders in their own
capacities (of course the members/shareholders own the company). By
the same token and in the same vein, the company’s debts and liabilities
are the debts of the company, so that the shareholders cannot be held
responsible for payment.
1 Hahlo’s Casebook on Company Law, 42 (4th ed. By Hahlo and Trebicock)
It is important to understand that although a company is a legal person,
yet its activities can only be through human agents (directors) it must
have members, known as “shareholders”. Shareholders vis-à-vis the
company as well as inter se, are regulated and controlled by the
company’s Memorandum and Articles of Association, to be discussed
later.
In essence, therefore, a country is “…. an intricate, centralised, economic

administrative structure run by professional managers who hire capital
from the investor.”2 Its fundamental distinguishing principle in the
company is that it must be a person separate and distinct form the other
persons who are its members and directors.
A company must be capable for perpetual succession although it is

possible that it may become insolvent and thereby wind up its business
activities (liquidation, under an appointed person called a ‘Liquidator’).
No statutory definition – in strict, technical or legal terms – of the word

‘company’ exists. The term must be used in the context that the
company is formed for, including thee advantages concomitant with the
“separate legal existence” concept of a registered company.
1.3 Forms of Business Organisation
1.3.1 Companies formed in terms of Chapter 24:03, limited by shares,

i.e. deriving their capital from the issue, for a consideration, of
shares in the company. The holder of a share acquires certain
rights in the company and becomes a member of the company also
having certain obligations towards it. This form of company is
recognisable by the letters Ltd after its name.
1.3.2 Companies also formed in terms of the Act but for non-profit
making purposes, having no share capital and in which the
liability of members is limited to an amount which they have
undertaken (guaranteed) to pay into the company fund in the event
of winding up. Such companies must comply with certain
requirements to enable them to be licensed by the Minister.
1.3.3 Statutory Corporations – very much part of the modern scene, with
authorised share capital of half a million dollars or more.
2Managing, reviewing Livingston’s ‘The American Stockholder, (1958) 67 Yale Law Journal 1476, 1489.
1.3.4 Private Business Corporations (PBCs) – recently introduced into
our law, but not yet widely practiced. The equivalent of the PBC
was introduced in South Africa with some high degree of success.
It combines features of partnerships and private companies.
1.3.5 Co-operatives, created expressly to provide a form of organisation

designed for group production and marketing of agricultural
produce and livestock, or the sale of goods to its members, e.g. the
Farmers Co-op. The Act was amended in 1978 to provide for co-
operatives.
1.3.6 Partnerships – still a commercial reality but becoming less

frequent, although members wish to work with others, to form
partnerships – e.g. doctors, legal practitioners, accountants, etc.
1.3.7 Unincorporated associations – professional associations, clubs, etc.
1.3.8 Universitas – for charitable and non-commercial motives.
1.3.9 Chartered Companies – now extinct and anachronistic.
There is no such thing in our law as the company with unlimited

liability.
In the main, we will focus our study on to the form of company cited
under 1.3.1 above. This is a company formed in terms of the Act, limited
by the shares, that is, it raises its working capital by having people join it
by purchasing shares. Once formed the company has its own existence
and hold its own property quite distinct from that of the shareholder or
members. In the event of the company incurring any liability,
contractual or otherwise, the liability of members is limited to any
outstanding among which they have undertaken to pay for the shares
they have purchased.
1.4 Features of a Company
Incorporation (the formation of a body corporate) offers the following

distinctive features or characteristics, which tend to appear as
advantages over all forms of business organisation.
1.4.1 Independent Corporate Existence
A company is, in law, “a person”. It is a legal persona existing

independent of its members. By incorporation under the
Companies Act, the company is vested with a corporate
personality, which is distinct from the members who compose it.
This body corporate is capable of exercising all the various
functions of an incorporated company and it must have perpetual
succession. A well known illustration of the above principle is the
case of Salomon v Salomon Co. Ltd (1897) AC 22 (H.L.) which is as
follow:
One Salomon was a boot and shoe manufacturer. His business was in
sound condition and there was a substantial surplus of assets over
liabilities. He incorporated a company named Salomon & Co Ltd., for the
purpose of taking over and carrying on his business. The seven
subscribers to the memorandum were Salomon, his wife and daughter
and four sons and they remained the only members of his company.
Salomon, with his two sons, constituted the board of

directors of the company. The business was transferred to
the company for 40 000 pounds.
In payment, Salomon took 20 000 shares of 1 pound each

and debentures worth 10 000 pounds. These debentures
certified that the company owed Salomon 10 000 pounds
and created a charge on the company’s assets. One share
was given to each remaining member of his family. The
company went into liquidation within a year.
On winding up, the state of affairs was broadly something

like this – Assets – 6000 pounds, Liabilities – Salmon was
debenture holders. 10 000 pounds and unsecured creditors
– 7 000 pounds.
Thus after paying off the debenture holder, nothing would be

left for the unsecured creditors.
The unsecured creditors, therefore, contended that though incorporated

under the Act, the company never had an independent existence, it was
in fact Salomon under another name; he was the managing director, the
other directors being his sons and under his control. His vast
preponderance of shares made him absolute master. The business was
solely his, conducted solely for and by him and the company was mere
sham and fraud, in effect entirely contrary to the intent and meaning of
the Companies Act.
It was HELD, however, that Salomon & Co Ltd was a real company
fulfilling all the legal requirements. It must be treated like a company, as
an entity consisting of certain corporators, but a distinct and
independent corporation.
Not surprisingly, there have been occasions when the courts have found
it justified to ignore the separate personality of the company and have
“pierced through the corporate veil” or according to one judge. “Peered
behind the façade of a fictious separate legal persona”.
They have done this in cases where the company is being used for
fraudulent or other illegal purposes, or where matters of residence, trust
relationships and the interests of third parties are involved.
1.4.2 Limited Liability
The liability of members/shareholders is only to the extent of the

amount unpaid on their shares. “The priviledge of limiting liability for
business debts is one of the principal advantages of doing business
under the corporate form of organisation.”3
The company, being a separate person, is the owner of its assets

and is bound by its liabilities. Members are neither the owners of
the company’s undertaking nor the liability for its debts. In other
words, the liability of the members is limited. No member is bound
to contribute anything more than the nominal value of the shares
held by him.
In a partnership, the liability of the partners for the debts of the

business is unlimited, i.e. partners are bound to meet, without any
limit, all the business obligations of the firm. Speaking of he
advantages of trading with limited liability, Buckley J., said:
“The statues relating to limited liability have probably done more than
any legislation of the last fifty years to further the commercial prosperity
of the country. They have, to the advantages as well of the investor as of
the public, allowed and encouraged aggregation of all sums into large
capitals which have been employed in undertakings of great public utility
largely increasing the wealth of the country”.
3 Cadman, “The Corporation in New Jersey,” 327 (1949)
4 In “re London & Globe Finance Corp (1903) 1” Ch 728, 731
1.4.3 Perpetual Succession
An incorporated company will continue to exist even when a member

dies or resigns, i.e. a company never dies. This feature is a direct result
of the transferability of shares. The membership of the company may
change from time to time but “…the company will be the same entity,
with the same privileges and immunities, estat3es and possessions.”5
Perpetual succession, therefore, implies that the company may

experience many changes in its membership but that does not affect its
continuity. The death or insolvency of individual members does not, in
any way affect the corporate existence of the company.
Professor Gower, for example, has cited this example in a footnote in his
book:
“During the war, all the members of one private

company, while in general meeting, were killed by a
bond. But the company survived; not even by a
hydrogen bomb could have destroyed it.”6
The bankruptcy of a member of a private company is no ground for wind

up of the company.
“ Members may come and go but the company can go

on for ever.”7
1.4.4 Separate Property
As earlier pointed out, a registered company is capable of owing, enjoying

and disposing of property in its own name, since it is the owner of its
capital and assets. The company is the “real person” in which all its
property is vested, and by which it is controlled, managed and disposed
of. In other words, no member can claim himself to be the owner of the
company’s property during its existence or in its winding up. Simply
put, “The property of the company is not the property of the
shareholders, it is the property of the company.”8 in a partnership, the
distinction between the joint property of the firm and the private property
of the partners if often not clear.
5Canfield & Wormser, “Cases on Private Corporations”, 2nd ed., p.l Chap 1 on “The Legal
Conception of a Corporation”.
6Gower “Modern Company Law”, 76(5th Ed.)
7Gower, loc.citt.pp. 75-76
8 Gramophone & Typewriter Co. v Stanley, (1906) 2KB 856 p.869
1.4.5 Transferable Shares
The shares of any member of a company are movable property and

therefore transferable in the manner provided by the articles of the
company. In a partnership, a partner cannot transfer his share in
the capital of the firm except with the unanimous consent of all the
partners. If a transfer is made against the will of the other
partners, the transferee does not become a partner although he
has some rights in the dissolution of the firm.
1.4.6 Capacity to Sue and be sued
A company, being a body corporate, can sue and be sued I its own
name.
CORPORATE PERSONALITY
QUESTIONS
1.
a) What is a company?
b) Discuss, briefly, the different types of business enterprise in

Zimbabwe.
c) What are the advantages of forming a company?
2. Discuss, in greater detail, the nature, characteristics and advantages

of a registered company.
3. “The company is at law a different person altogether from the

subscribers to the memorandum”. – Do you agree?
4. A partnership firm was carrying on the business of plying buses.

Having worked for some time, some of the partners formed a private
limited company, which they could under the law even while the
partnership continued to be a running concern. Such of the partners
who formed the company sold to the company their own buses which
were, up to then, being used by the firm. The other set of partners
who constituted the minority, sued the section forming the company
for accounts and their share of profits on the ground that in reality
the company was not a different entity from the firm and the business
carried on by it was the same as that of the firm.
a) Was there a legal right to sue the plaintiffs?
b) The buses which the company was plying – whose property were
they?
c) Does the law recognize the existence of the company quite

irrespective of motives, schemes, conduct etc. of individual
shareholders?
2. COMPANY FORMATION
a) Explain the reasons for and against forming a company.
b) Understand the criteria used to distinguish and differentiate between and

among: company, partnership, co-operative, private company, public
company.
Cite some of the advantages of a private company over a public company.
2.1 Reasons for Forming a Company
2.1.1 To give limited liability to the proprietors of a business (often

rendered useless by banks demanding guarantees from the
individual shareholders).
2.1.2 To allow an association of more than 20 persons for the purpose of

earning a profit (Only Professional partnerships are allowed more
than 20 partners).
2.2 Reasons Against Forming A Company
2.2.1 Bureaucracy – must have secretary, directors, hold meetings, keep

minutes, file returns, etc.
2.2.2 Taxation - high tax bracket and extra 20% tax on dividends to
individual shareholders but not to shareholders who are
themselves companies.
Note: Listed companies have a 15% withholding tax on dividends.
2.3 What Type Of Company?
As discussed earlier, there are many types of business organization,

although there are mainly tow types of companies generally formed viz
the private and public companies. Before we look at this in some detail,
lets look at the company in general, the partnership as well as the co-
operative – all being forms of business organizations that we see here,
there and everywhere.
2.4 Companies, Partnerships and Co-operatives Compared and
Contrasted
The major differences are set out below:
COMPANY PARTNERSHIP CO-OPERATIVE
1 FORMATION Incorporated in terms of the Verbally Or In Writing Registered in terms of the

Companies Act Chapter 24:03 (Partnership Deed) Co-operative Societies Act.
2 NUMBER OF Private company 1-50, public 2-20 At least 10

MEMBERS company a minimum of 2
3 CAPITAL Private company – provide by Provided by the partners Most provided by co-
those involved in the business. operators, with loans
Public company – may have becoming more important
hundreds of shareholders, who
take no part in running the
business, contributing large
amounts of capital.
4 INTERNAL Controlled by the Act, Partners may make any Controlled by the Act and
AFFAIRS memorandum and article arrangements they wish, as by-laws, e.g. each member
long as they are lawful has one vote, no matter
how large their contribution
5 LIABILITY OF Shareholders liable only for the Each partner is liable Limited to contributions if
MEMBERS amount unpaid on their shares personally for all co-op registered
partnership debts.
Perpetual succession, i.e.
6 SUCCESSION Perpetual succession the Except where specific the co-operative, may
company may continue provision is made in a deed continue indefinitely
indefinitely. of p/ship or by will, a
p/ship terminates upon the
death or insolvency of a
partner.
7 PROPERTY Property belongs to the Any property acquired by Property belongs to the co-
company, not the shareholders. the partnership belongs to operative, not the members
all the partners in common.
8 TRANSFER OF Private company-restricted. All partners must consent Transfer of interest

INTEREST Public company – usually fully to the transfer of interest restricted.
paid shares feely transferable. from one partner to
another. A transfer will
terminate the original
partnership.
9
MAKING Shareholders have no power to Each partner is an agent of Only those co-operators
CONTRACTS contract for the company the p/ship and has implied authorized in terms of the
unless authorized. authority to enter into CO-operative’s by-laws may
contracts within the scope contract for the CO-op.
of the business.
10 SEPARATE
EXISTENCE Exists separately form the Do not have an existence Has a personality
members and is a legal person. separate form the members completely separate from
who form it. the members it is a legal
persona.
11
AUDIT Annual audit compulsory, Do not require an annual Annual audit only
except for a private company audit. necessary if required by the
with less than 10 members. co-operatives.
2.5 Private and Public Companies
The majority of companies registered in this country are those companies

registered in this country are those companies limited by shares. Such
companies will have a share capital. In general a (registered) company
may be a public company or a private company. Let us compare and
contrast between the two.
Private and Public companies Compared and Contrasted.
PRIVATE COMPANY PUBLIC COMPANY
1. COMMENCEMENT OF May start business Needs to be certified by

BUSINESS immediately on registration. the Registrar of
Companies before starting
business.
PROSPECTUS Statement
2. in lieu Not required. Compulsory.
3. APPOINTMENT OF Certain formalities dispensed Formalities required, e.g.

DIRECTORS. with – e.g. Not required to Must signed consent form
lodge consent form with with Registrar and sign for
Registrar. qualification shares.
4. OFFERING SHARES TO Prohibited No prohibition, but strict

THE PUBLIC control.
5. TRANSFER OF SHARES Must be restricted – e.g. by Generally unrestricted.

giving control of transfers to
Directors.
6. DIRECTORS’ SHARES Not required: but if directors Not required; but if

have shares, not required to directors have shares,
pay for them before company company cannot start
commences business. business until each
director has paid for their
shares.
7. DIRECTORS’ No register kept. Registers must be kept.
8. STATUTORY MEETINGS Not required. Compulsory.
9. BALANCE SHEET Not usually required to file Annual balance sheet

with Registrar. must filed with Registrar.
LOANS TO DIRECTORS Permitted if 9/10 of registered

10. share capital agrees. Not Generally prohibited. If
required to be shown in the granted, must be shown
accounts. in the accounts at the
annual general meeting.
11. AUDITOR Not required if less than 10 Compulsory.

members
Advantages of a Private Company vis-à-vis Public Company
There are more reasons and advantages of opting to form a private

company than a public one, among them the following:
1. A private company can be formed in a matter of a couple of weeks

and can commence business as soon as it is incorporated.
2. The stringent rules relating to the appointment of the first directors

(Section 148) and the absolute prohibition of any loans to directors
(Section 154) do not apply to private companies.
3. Generally, the fact that a private company has only a few members
makes for relatively easy management where decisions requiring a
resolution of the company are concerned (e.g. an increase in share
capital).
4. A private company need not file accounts and auditor’s reports

annually with the Registrar of Companies unless it is a subsidiary
of or has a member a public company.
5. The total cost of floating a private company, even if one hands the
matter to one’s legal practitioners will not cost more than a few
hundred dollars.
FORMATION FO A COMPANY
QUESTIONS
1. Compare and contrast between a private and a public company.
2. How different is a Partnership from a Co-operative?

3.PROCEDURE TO OBTAIN REGISTRATION
OF A COMPANY
a) Understand the difference between Memorandum and Articles of Association

and what each contains.
b) Explain who a “Promoter” is, his role and duties in relation to a company.
c) Outline the practical procedure following in forming a company.
d) Demonstrate his/her ability to fill in the various forms necessary in the

incorporation of a company.
Explain what each of the various company registration (CR) forms is used for,
when and why.
In order to obtain the registration of a company, it is necessary to file

an application with the Registrar of Companies. Such application
follows a certain laid down procedure which, when followed properly,
will result in a company being formed in as short a period of time as
two weeks. The procedure is described, broadly, below:
Name Search
Submit on prescribed form CR21 the proposed company name

(preferably three or even four names in order of preference). This is to
ascertain by search and examination, that a name is available for
registration, i.e. no company is in existence in the same name. The
Registrar maintains a register of company names. Identical or near-
identical names are rejected. (It must be noted that the Registrar has
the power to reject any name, for registration purposes, which in his
opinion, may be misleading, offensive, derogatory, blasphemous or
undesirable.)
A name which is in compatible with the main object of the company

being formed will not be accepted. For example, a furniture
manufacturing company will not be registered with such names as
“Dairy Marketing” or “Candy Confectionery”. Sometimes, also, the
Registrar of Companies will object to the company name if such a
name is in conflict with the provisions of Section 20 (1) of the Act.
There is a practice followed by the Registrar of Companies in the

approval of company names but this is beyond the scope of this
study/module.
It is compulsory, by law, to include the words “Limited” and “Private

Limited” after the name of the public and private limited companies,
respectively. Law requires, further, that the name of the company
shall be displayed in a very conspicuous position outside all offices or
places of operation, and it must appear on all offices or places of
operation, and it must appear on all business letters, notices, etc.
(See a specimen of Form CR21: “Application for Search as to

Availability of Name” at end.)
Memorandum and Articles of Association
Memorandum of Association
Any two (recent enactment, one) or more persons may form a

company by signing a Memorandum of Association. It is the
registered company’s charter. It regulates the company’s external
affairs and its importance lies in the fact that it states the limits and
extent of the relationship of the company to those “persons” with
whom it may have dealings and/or investments in. The
Memorandum must state the desire of the subscribers to be formed
into a company, and the agreement of each to take a specific number
of shares in the company. In Zimbabwe, no subscriber may take less
than one share. Each subscriber is required to write opposite his
name the number of shares he takes and sign the Memorandum in
the presence of at least one witness who must attest the signature.
The Memorandum of Association is the “Constitution” of the company,

and it therefore defines the main objects of the company. It is a
requirement of the Companies Act (Section 9) that the Memorandum,
state:
3.2.1.1 The Name Clause
3.2.1.2 The Objects Clause

3.2.1.3 The Liability Clause
3.2.1.4 The Capital Clause
3.2.1.1 The Name Clause
We have already discussed the details and conditions of the Name

under ‘’Name Search’ above. Nevertheless, it must be understood that
a company, being a legal person, must have a name to establish its
identity. “The name of a corporation is the symbol of its personal
existence.”9 Suitability of the name must be observed.
What is of equal importance is that the name of the company should

not be identical with the name of another registered company. The
reason is: Ünder (any) Companies Act, a company by registering its
name gains a monopoly of the use of that name since no other
company can be registered under a name identical with it or so nearly
resembling it as to be calculated to deceive.”10
A name may be said to be “calculated to deceive” when the name is

misleading e.g. when the company is with small resources, but the
name suggests that it is trading on a great scale or over a wide field.
3.2.1.2 The Objects Clause
The objects set out in the Memorandum of Association prescribe the

powers of the company. The common law recognizes that a company
is a creature of statute and only has the powers it is born with. It
regards as “”ultra vires” any act by a company which is not within the
powers set out in the objects within the Memorandum of Association.
To avoid difficulties with the ultra vires”(beyond the powers) rule, the
objects of the company usually start with the main one, e.g. “To carry
on the business of Cattle Ranching anywhere in and continue with a
long list of supplementary/ancillary objects to enable the company to
carry on business as general dealers, borrow money on security of the
company to carry on business as general dealers, borrow money ton
security of the company’s assets, open bank accounts and place
moneys therein, buy and sell land and other assets, pay dividends,
etc. The list of objects usually ends up with one all embracing object.
“To do anything incidental or conducive to the attainment of the above
objects.”
9Johnson,J. in Osborn v. The Bank of US’. 9Wheat (22US) 738
10Lawrence,J. in ‘Society of Motor Manufacturers and Traders Ltd v. Motor Manufactures and Traders
Mutual Assurance Ltd’(19250) 1 ch 675
Note: The October 1993 amendments have substantially destroyed
the ultra vires doctrine, except in so far as shareholders vis-
à-vis the company and themselves are concerned.
The choice of objects obviously lies with the subscribers to the

Memorandum and their freedom in this respect is almost certainly
unrestricted. The only obvious restrictions are that the objects should
not go against the law of the land and the provisions of the Companies
Act. Further, the Act provides that a company limited by shares cannot,
subject to a few exceptions, purchase its own shares. Accordingly, any
clause in the Memorandum giving the company a power to purchase its
own shares will be in operative.
3.2.1.3 Why Objects?
 Ownership of the corporate capital is vested in the company itself.

Yet, in reality, that capital has been contributed by the
shareholders and is thus held by the company as though in trust
for them. Such a “fund” must then be “dedicated” to some well-
defined objects so that the contributors may know the purposes to
which it can be lawfully applied. The statement of objects.
Therefore, gives a very important protection to the shareholders by
ensuring that the funds raised for one undertaking are not going to
be risked in another.
 In the second sense, the objects clause accords a certain degree of

protection to the creditors as well. The creditors of the company
trust the corporation (registered) and not the shareholders (who
may come and go). Creditors have to seek their repayment, need
to do so arising, only out of the company’s assets. The fact that
the corporate capital cannot be spent on any project not directly
within the terms of the company’s objects seems to suggest and
give the creditors a feeling of security. Creditors are important.
 By confining the corporate activities within a defined field, the

statement of objects serves the public interest also. It prevents
diversification of the company’s activities into areas and directions
not closely connected with business the business for which the
company may have been initially established. It also prevents
concentration of economic power.
3.2.1.4 The Liability Clause
Clause 3 of the Memorandum is brief, blunt and to the point, stating as

it does that “The liability of member is limited.” This means that no
member can be called upon to pay anything more than he nominal value
of the shares by him, or so much thereof as remains unpaid. If his
shares are fully paid up, his liability is nil.
3.2.1.5 The Capital Clause
This clause simply states the amount of nominal (authorized) capital

of the company and the number and value of the shares into which
such registered share capital is divided. For example, it may read:
“The Share Capital of the Company is THIRTY TWO THOUSAND

DOLLARS ($32 000) divided into THIRTY TWO THOUSAND (32
000) Ordinary Shares of the nominal value of One Dollar ($1,00)
each and such capital may be increased, reduced or varied …”
Statement of Intent to Form A Company
The statement is invariably termed as “Subscribers Declaration” or

“Subscription”.
Whatever the terminology, this is a declaration, at the end/conclusion

of the Memorandum of Association, that the subscribers are desirous
of being formed into a company in terms of the Memorandum of
Association. The printed names, addresses and occupations of the
subscribers for, written in their own handwriting. There must also be
the printed name, address and occupation of at least one witness to
the subscribers’ signatures, together with his signature.
3.2.2 Articles of Association
A company’s articles set out the way in which the company

will regulate its affairs regarding the variation of rights of
members; the issue, transfer, conversion and forfeiture of
shares; alterations of share capital; the notice required and
conduce of meetings; the appointment, qualifications, rotation
and powers and duties of the directors; the manner in which
dividends will be declared and profits capitalized, the keeping
of books of account and presentation of financial statements;
etc.
11 Lord Wrenburg in Çotman v. Brougham (1918) AC 514 at p.522

It is not a requirement that articles be registered with the
memorandum but this is normally done. If articles are not registered,
then Table A of the First Schedule of the Companies Act automatically
applies to the company. If articles are registered with the
memorandum, then they must be signed and dated by the
subscribers and their signatures witnessed. The names, addresses
and occupations of the subscribers and witness must again be
printed.
In so far as articles of a company do not exclude or modify the

regulations contained in Table A, these regulations shall apply as if
they were incorporated in the company’s own articles.
A private company’s articles must include regulation 2 of Part II of

Table A i.e.:
The company is a private company and accordingly:
a) the right to transfer shares is restricted in the manner

hereinafter prescribed.
b) the number of members of the company, excluding employees

and ex-employees, is limited to fifty.
c) any invitation to the public to subscribe for any shares or

debentures of the company is prohibited.
In the case of a private company, earlier see, the articles must restrict
the right of members to transfer shares, must limit its members to not
more than fifty and must prohibit any invitation to the public to
subscribe, and a co-operative company must have similar provisions.
One point worth noting with regard to the Articles of a Company:
They usually cover matters like the distribution of the share capital,
the rights of shareholders of different classes, transfers, liens,
forfeiture of shares, alteration of share capital, meetings, voting
procedure, appointment of Directors and their powers, keeping of
accounts. The articles constitute a contract between the company
and its members and between the members themselves but they differ
from other contracts in that the terms can be changed unilaterally by
the company in general meeting and a member joins the company
with that understanding and cannot sue the company for any breach
if it changes its articles (or Memorandum) by the proper procedure.
In other words, provided the appropriate majority are happy, the
minority have to accept the terms of the contract as amended.
The articles are not in any way a contract between the company and
any employee as such. In the case of Eley v. Positive Government
Security Life Assurance Co. Ltd (1896) 1 EX.D 88 the plaintiff had
been employed as a Company’s solicitor during which employment he
became a shareholder. When later the company ceased to employ
him and employed another solicitor, Eley sued the company for
breach of contract in terms of the articles. He failed because the
rights conferred on him by the articles were in his capacity as a
member.
ARTICLES OF ASSOCIATION
WHAT THEY ARE:
1. Regulations for the INTERNAL arrangements and the

MANAGEMENT of the company.
2. Bye-laws of the company governing its management and

embodying the powers of the directors and officers of the company
as well as the powers of the shareholders as to voting, etc.
3. Articles deal with the issue of shares, transfer of shares, alteration

of share capital, general meetings, votes and voting rights,
directors (including their appointment and powers) managing
director, secretary, dividends, accounts, audit of accounts, winding
up, etc.
4. Articles form a contract between the company and each member

and between the members.
5. A private company limited by shares must register a set of Articles

of association together with the Memorandum of Association at the
Registrar of Companies Office. If it does not, then Table A applies.
6. Articles may adopt ALL or ANY of the regulations in Table A of

Schedule 1 of the Act. Table A in Schedule 1 to the Act is a model
form of articles for a company limited by shares.
7. Thus a company may:
a) Adopt Tale A in full or subject of modification.
b) Register its own articles and exclude Table A.
8. Articles must be
a) Printed.
b) Dividend into paragraphs numbered consecutively.
c) Signed by each subscriber in the presence of one witness
d) Dated
9. Articles can be altered by Special Resolution.

WHY THEY ARE IMPORTANT TO THE COMPANY
 The Articles form a contract biding the members of the
company. (Rule in Foss v. Harbottle)
 The Articles constitute a contract binding the company to the

members.
 Members are only bound by and entitled on the above-

mentioned contract qua members i.e. in their capacity as
members.
 The Articles constitute a contract between each individual

member and every other member (in most cases, though, the
court will not enforce the contract as between the individual
members; rather it is enforceable only through the company.
 The provisions of the Articles do not constitute a contract

binding the company or any member to an OUTSIDER, i.e. a
person who is not a member of the company, OR to a member
in a capacity other than that of member e.g. that of solicitor,
promoter or director of the company.
 The contract constituted by the Articles can be VARIED to the

extent that the articles themselves can be altered in accordance
with the provisions of the Act (because of the words “SUBEJECT
TO THE PROVISIONS OF THIS ACT”).
The company may, therefore, alter the articles by special Resolution,

subject to a number of restrictions.
3.3 Alteration of Memorandum and Articles
A special resolution is always required for the alternation of the

memorandum and articles.
If the objects of the company are to be altered so as to render the

company’s name inappropriate, then the name of the company
must also be changed. Prior approval of the Chief Registrar of
Companies must first be obtained by filing for CR21 and the
proposed change of name must be advertised in the Gazette and
local newspaper. At least 14 days must elapse before applying to
the Registrar for applying to the Registrar for approval of change of
name.
Copies of all special resolutions must be filed with the Registrar of

Companies on form CR 11 together with:-
Form CR. 1 - Where the name of the company is changed.
Form CR. 4 - Where the make up of the share capital is varied.
Form CR.5 - Where the nominal capital is increase.
3.4 Actual Registration of Company – Registrar’s

Office
If the company is to be registered in Bulawayo, three copies, and if in

Harare, two copies of the memorandum of association together with the
articles (if any) must be delivered to the Registrar of Companies.
Registration fees are based on the nominal share capital and are $1 per
$100 with a minimum fee of $10 is required for the certificate of
incorporation. (figures valid as at January 1997).
If the company is a public company then the persons who are named as
directors in the articles, prospectus or statement in lieu of prospectus
must each lodge from CR12, which is their consent to at as directors,
with the Registrar of Companies.
Providing the memorandum and articles are in accordance with the

Companies Act and the registration fee has been paid and consents to
act have been received from the proposed directors of a public company,
then the Registrar will enter the name of the company in the Register.
He will endorse one copy of the memorandum and articles with the
company’s number and dote of registration and return it to the
company together with the certificate of incorporation.
Upon the incorporation of a company, form CR.6 must be lodged with

the Registrar of Companies, notifying him of the street address of the
registered office of the company. (Form CR6 is lodged at the same time
as the memorandum and articles).
Public companies will now register their prospectus or statement in lieu

of prospectus with Registrar of Companies and commence to invite
subscriptions for shares. It must obtain payment for the shares the
directors and/ or other person have agreed to take up. When the
minimum subscription has been obtained and all the directors have
paid for the shares they agreed to take, then form CR.7 must be filed by
the secretary or a director. This form is an affidavit that has to be
sworn before a Commissioner of Oaths to the effect that the minimum
subscription has been obtained and the directors have paid for their
shares. The registrar will then issue the certificate that the company is
entitled to commence business. The statutory meeting must be held
within one to three months of this date and form CR. 10 filed with the
Registrar of Companies.
For all companies, form CR. 2 “Return of Allotments” must be filed with
the Registrar within one month of an allotment of shares being made.
The share certificates must be issued to share holders within two
months of the allotment.
3.5 PROMOTER
Definition: Ä promoter is a person who brings about the

incorporation and organization of a corporation. he brings together
the persons who become interested in the enterprise, aids in
procuring subscriptions, and sets in motions the machinery which
leads to the formation itself…”
“A promoter is one who undertakes to form a company with reference

to a given project and to set it going and who takes the necessary
steps to accomplish that purpose.”14
12 Bosher v. Richmon etc. Land Co. 89 Va 455 (16) SE360 Çases on Private Corporations’
13 Cockburn, C.J., in Twyncross v. Grant, (1877) 2 CPD 469 (C.A.) at p. 541
14 Bowen, J, in ‘Whaley Bridge Calico Printing Co. v. Green & Simith (1880) 5 QDR 109:28
WR 351
A promoter is defined as “any person who is party to the preparation
of a prospectus.”
“The term promoter is a term not of law, but of business, usefully

summing up in a single word a number of operations familiar to the
commercial world by which a company is generally brought into
existence.”
Fiduciary Position
“They stand, in my opinion, undoubtedly in a fiduciary position.

They have, in their hands, the creation and molding of the
company. They have the power of defining how and when and in
what shape and under what supervision the company shall start
into existence and begin to act as a trading corporation.”
The business of promotion thus gives a very advantageous position to

the promoter in relation to the proposed company. He is expected to
stand in a fiduciary position towards the company and to work for the
company’s interests with the utmost good faith.” He is not to make a
secret profit or derive an undisclosed benefit for himself out of his
operations for the company. He may not, either, misapply or retain
any property belonging to the company (Section 278 of the Act).
Anyone who acts merely as the servant or agent of a promoter is not

himself a promoter. A solicitor, therefore, who merely does the legal
work necessary to the formation of a company is not a promoter. A
promoter is not an agent for the company which he is forming
because a company cannot have an agent before it comes into
existence. This is a view which was held in the case Kelner v. Baxter
(1866) LR2 CP 174.
A promoter must disclose a profit which he is making out of the

promotion either:
a) An independent board of directors;
Or
b) The existing and intended shareholders, e.g. by making

disclosure in a prospectus.
15 Lord Cairns, in ‘Erlanger v. New Sombrero Phosphate Co., (1878) LR# App Cas 1218:39
LT269
A function which a promoter frequently has to perform is to enter into
contracts in advance on behalf of the company he is about to create.
In English Common Law it is not possible to contract on behalf of a
non-existent person. Even in our law which does allow it in the form
of stipulatio alteri there are certain disadvantages, the principal one
being that the person who negotiates the contract on behalf of the as
yet, non-existent other person (in this context a company yet to be
formed) must do so as principal in the hope that the company will
ratify and adopt the contract when it is formed. Form a business
point of view, it is obviously necessary to have such contracts lined up
in advance.
Many companies are formed for the express purpose of undertaking

contracts and there would be little point in going to the expense of
forming a company unless the contract was already in the bag”.
Therefore, statute has come to the rescue and, in Section 32, provided
for the ratification by a company, after it is incorporated, of a contract
made on its behalf by a person who professes to be acting as agent or
trustee of the company not yet formed provided that:
The memorandum contains provision for such ratification in its

objects clause and:
The contract document (or a copy) is delivered to the Registrar along

with the memorandum (the contract must be in writing).
It is, of course, possible for the company to ratify the contract even if
the memorandum does not provide for this, but until it does the
contract is incomplete.
MEMORANDUM AND ARTICLES OF
ASSOCIATION
Questions
1. (a) What is a Memorandum of Association?
(b) Distinguish between a Memorandum of Association and Articles

of Association.
2. What is a “Promoter”?
Write about his position and duties.
3. A company purchased and operated a rice mill beyond its powers.

The rice was consigned to certain persons who paid the price. The
consignees had to sell the rice, owing to its inferior quality, at a
considerable loss. The company gave them drafts promising to pay
for the loss. The company went into liquidation and the question
about the enforceability of the drafts arose.
a) How would you describe the transaction of trading in rice?
b) Explain, showing how and why, whether the directors could

bind the company.
c) “Everyone dealing with a company is supposed to know its

powers”.
Explain this statement with reference to the position of the
consignees above.
4. (a) What are the Articles of Association?
(b) What purposes do they serve?

4. MANAGEMENT OF THE COMPANY
a) Understand the role of a director in a company.
b) Explain a share, its different types and how shares continue

various types of capital.
In theory the management of a company is controlled by its members

meeting together and issuing instructions, and there are some major
matters which can only be decided by resolution, ordinary or special,
of requisite majority of the members such as alteration of the
memorandum of articles, ratification of pre-incorporation contracts,
appointment of directors, removal of directors etc., but in practice the
detailed conduct of the affairs of the company is in the hands of the
Board of Directors. Every company, even a small private one, must
have at least two directors but of course large companies have many.
The first directors of any company are people who subscribe until
others are appointed in terms of the Articles. These usually provide
that the directors are appointed in general meetings, but often,
particularly in small private companies, the appointment is informal.
In terms of the Act a company must also have a Secretary who is the
company’s administrative manager, and has many responsibilities in
seeing that the company complies with the terms of the Act.
A company is required to designate someone as its “public officer” in

terms of the Income Tax Act and it is usually the company secretary
who finds himself in this role.
4.1 Directors
The position occupied by directors in a corporate enterprise

requires no professional qualification. A director could well be a
mere figurehead (or cog in the machinery) sitting on the board y
virtue of his nobility of reputation or because his name looks good
on company letter heads, thus giving it semblance of respectability.
Having said that, however, Section 150 (1) of the Act disqualifies
certain persons from holding office as a director of a company, the
reason being that it wants to keep management out of the hands of
unscrupulous persons. The following are disqualified, according to
the Section cited above:
 A body corporate.
 A minor or other person under a legal disability.
 An unrehabilitated insolvent, unless the court gives permission.
 A person who has been convicted of theft, fraud, forgery, uttering,

forged documents or perjury AND has been sentenced for this
offence to imprisonment without a fine, or to a fine exceeding $100
– unless court gives permission.
 Any person who is subject to an order in terms of the Companies

Act, disqualifying her/him from being a director.
 Anyone removed by a competent court form an office of trust on

account of misconduct, unless the court gives permission.
In terms of Section 146(1) every company shall have not less two
directors (other than alternate directors), at least one of whom shall
reside in Zimbabwe.
Directors are appointed at the AGM (annual General Meeting) of the

company usually, by election, and they form a small body regarded as
“governing directors” of the company.
Whatever a director’s activity or lack of it may be the law requires him

to stand in a fiduciary position in relation to the company. Thus,
anything he does in his capacity as director must be intra vires its
articles and memorandum; he has the duty of “the utmost good faith”
towards the company and must never profit himself at the company’s
expense; he has a duty toe exercise care and skill in the service of the
company and the usual remedies lie against him at the hands of the
company, its members or third parties if he defaults in this respect.
These are the common duties but in addition the Act puts many other
liabilities on his shoulders. I have no time to deal with these
provisions in detail or even to summarise them but you will find a
useful summary table in Tett and Chadwick’s book. In particular,
those provisions which ensure full disclosures by the company and/or
the directors themselves of any transactions involving the latter
should be noted as should the section dealing with the
disqualification of a director. It will be noted also that Section 152
enables a company at a general meeting by resolutions, special notice
of which ahs been given,, to remove a director from office subject to
his right to make representations and to be heard. Such removal
does not require a “special resolution” as defined in the Act, which is
required before a company may effect certain procedures.
The Act does not make it mandatory for a director of a company to

hold shares in that company although might think that in order to
provide some assurance to the investor a director should be required
to “put his money where his mouth is” and stake some of his own
wealth in the company he is putting over to the public, the taking up
of one share at a cost of $1 does not guarante4e that a director is
going to guard his investment carefully.
A director must, however, take shares where:
a) The director was a subscriber to the memorandum in which

case he must take at least one share, or:
b) The articles provide that directors must hold shares.
If required to hold shares a director is not permitted to acquire them

on terms more advantageous than those on which they are offered the
public, and he must acquire them within tow months of his
appointment (Section 149).
It is outside the scope and compass of this condensed account of the

company law to deal with the methods by which shares in a company
are offered to the public. Also the intricacies of “rights issues” and
“bonus issues” are left to deeper studies. But there is need for
mention of one more important point about shares and share capital
which is that, when an offer of shares to the public is made the
prospectus (or statement in lieu) must state the minimum
subscription which the original directors feel to be necessary to meet
the expenses of establishing the company to provide the capital
necessary for it to get into business. Until this minimum sum is
realized by offers from would-be shareholders a public company can
neither allot shares nor start in business, because, in terms of Section
91 a company which has issued a prospectus will not be granted a
certificate to enable it to commence business until the Registrar has
received an affidavit signed by the Secretary or a director testifying to
the effect that:
a) The directors have all paid for their qualification shares on the
same basis as the ordinary shareholder and;
b) The minimum subscription is in the bag.
4.2 Shares
A share is
“.. the interest of a shareholder in the company
measured by a sum of money, for the purpose of
liability in the first place, and of interest in the second,
but also consisting of a series of mutual covenants
entered into by all the shareholders inter se in
accordance with the Companies Act …… The contract
contained in the Articles of Association is one of the
original incidents of the share ….”16
Essentially, therefore, a share is measured by a sum of money, viz the

nominal amount of the share, and also by the rights and obligations
belonging to it as defined by the Memorandum and Articles of
Association. A share means a share in the capital of the company.
Each share in a company is distinguished by its appropriate number,

provided that it need not have a number if all the issued shares, or all
the issued shares of a particular class, are fully paid and rank PARI
PASSU for all purposes.
A share certificate, which specifies the shares held by the member

and which is prima facie evidence of his title to the shares is issued
to a shareholder.
Section 9(1) (iv) sets out the requirements of the capital clause of the
memorandum.
This clause must state the amount of share capital with which the
company proposes to be registered and the division thereof into
shares of a fixed amount.”
16 Farwell J., in ‘Borland’s Trustee v. Steel Bros & Co. Ltd (1901) 1 Ch 279 at p.288
The word ‘capital’ has many shades of meaning – anything which has
an ascertainable value, money, property, including such intangible as
patents, trade secrets, skills can be designated as capital – but for our
purpose we would be wise to consider only “share capital” which is
the monetary value of the aggregate of shares which a company is
authorized to issue when registered. A share is simply a fixed fraction
of that total value and is represented by a certificate (numbered for
identification) which is issued by the company to those who purchase
shares. The share capital stated in the memorandum is thus
generally known as the “Authorized” or “Nominal” share capital. It
may be, however, that, in order to provide for future expansion and to
avoid the necessity to amend its memorandum a company may set its
level of nominal capital higher than its immediate needs to that it
does not have to allot and sell its hares when it starts up. Thus we
get the term “Issued Share Capital” which means the value of the
shares which have actually been allotted to members. Again the
company may not need payment in full for the shares it issues but
may allow members to acquire, say, a $2.00 share for $1,00. The
value that he company gets from members under these circumstance
is known as the “Paid Up” capital, while the total amount still owing
to the company by thus generally member s on their share is the
“Unpaid Capital”.
It is this unpaid capital which represents the liability of members in a

company limited by shares. The company can demand its payment
(or as it is said “call it up”) at any time. Of course the issued share
capital may never exceed the authorized or nominal capital. If a
company requires more capital than its memorandum states the
memorandum must be altered by special resolution (provided that the
articles permit this, otherwise they must be amended first – if the
memorandum does not preclude such amendment). Notice of any
increase in share capital must e given to the Registrar within a month
of the passing of the special resolution. (See section 64, 65, 66). On
the other hand should a company wish to reduce its share capital and
if authorized by its articles to do so, it may again effect this by special
resolution but, in this case in order to safeguard the interests of
creditors the resolution has to be confirmed by order of court before it
can be registered and put into effect (Sections 68-72). There are
heavy penalties imposed on any officer of a company who conceals
from the court the existence of any creditor who is entitled to object to
the reduction.
Various other expressions using the word “capital” are to be found in

Company Law, e.g.
a) Debenture capital – this is really money which the Company
has borrowed and is a debt owed by it to persons who have lent
the money which loan is acknowledged by the issue to the
lender of debenture certificate.
b) Fixed capita: - this is represented by a fixed or permanent

assets of the company, such as buildings, plant.
c) Floating or circulatory capital – stock in trade as a rule.
d) Reserve Capital – Section 63 permits a company, by special

resolution determine that any portion of its share capital which
has yet been called up will not be called up except in the event
of winding up or if the company falls under judicial
management.
This must distinguished from the “Capital Redemption Reserve Fund”

of which more anon, and the Share Premium Account into which all
monies received by the company by way of premiums (i.e. extra
payments) on shares must be paid and thus become part of the
capital of the company subject to the same restriction on expenditure
or disposal as are other capital assets. Certain special items on which
moneys can be spent from the Share Premium account are sated in
Section 59.
4.3 Type of Shares
There are a number of different kinds of shares. The articles of the

company will include details a regards the varieties the company
proposes to issue and of the rights and liabilities attaching to them.
Remember what has been said regarding the status of the articles as a
contract between the company and member and between members
themselves. Quite apart from the blurb in the prospectus the prudent
would-be member of a company should therefore study its articles to
find what he is letting himself in for and what his rights will be.
The common types of shares are:
4.3.1 Ordinary Share – The Most Usual
When a dividend is declared the holder is entitled to a

payment in proportion to the number of shares he holds;
when the company is wound up he is entitled to a like
proportion of its realizable capital; in meetings he has voting
power again in proportion to his holding. The dividends
(representing the income earned by the capital invested) may
be quite high – in poor years of course there may be none al
all.
4.3.2 Preference Shares
The shareholder here is entitled to first cut in the profits.

Thus the preference shareholder is on a relatively safe be at
low odds.
There is a legal authority for the cumulative nature of

preference dividends – i.e. the carry over of shortfalls to
subsequent years, but in practice it is rare for preference
shares simplicity to be issued. They are usually created as
cumulating preference shares.
4.3.3 Redeemable Preference Shares
In general a company cannot buy its own shares. But if

authorized by its articles, Section 61 permits a company to
issue Preference shares on the understanding that it may
sometime in the future “redeem” or buy them back but it
may so redeem the shares only out of profits which would
otherwise be distributed as dividends and only if the shares
have been fully paid up. The Shares can also be redeemed
out of the proceeds of a fresh issue. Section 6.1. gives the
right to issue redeemable shares, but clearly sets out how
they may be redeemed.
Note: Any share may now be issued as redeemable.
4.3.4 Participating Preference Shares
Here the shareholder not only gets his preference dividend

but can also participate, in proportion to his holding, in the
profits available for distribution to ordinary shareholders
after the preference dividend has been paid. In other words
they rank together with ordinary shares for ordinary
dividends but have preference in the first bite at
distributable profits.
4.3.5 Vendors, Management, Founders, Promoter’s Shares

Shares issued for consideration other than cash. E.g.
services rendered to the company, or property transferred to
the company. They are sometimes called deferred shares
because the payment of dividends to their holders may be
deferred until all shareholders who have brought their
shares have received a fair dividend. It should also be noted
that because these shares have not been paid for in cash
there must be lodged with the Registrar within one month of
their allotment, a written contract showing the terms and
reason for the grant, and details of any such arrangement
must be published in the prospectus.
4.4 The Right and Liabilities of Shareholders
The liabilities of shareholders are fairly simple; they are bound to

observe their contract with the company and with their fellow
members in terms of the articles. Their main liability is to pay, on
call, any portion or any other amount of the purchase price of their
shares which is outstanding.
As regards the rights of shareholders these are as follows:
1. The right to his fair dividend if a dividend is declared.
2. The right to his fair share of the net assets of the company on
winding up.
3. The right to be put on or taken off the register of members as

appropriate (rectification).
4. The right to resist oppression (by the majority shareholders).
5. The limited right to sue for damage done to the company.
The first three of these rights are self-explanatory and 4 and 5 need some
further consideration. Taking no
The obvious snag about this rule is that, if the defaulters are majority
shareholders they can outvote the complaining minority, so exceptions to
the rule have evolve3d, the first being that where any attempt to obtain a
remedy in the company itself will be defeated by a fraudulent or
otherwise culpable majority, the minority can bring an action on behalf
of the company. See Section 171 which gives any member who believes
he is being oppressed the right to make application to the court for
redress. (Section now wider, though).
The other exceptions are:
a) When an act done in ultra vires.
b) Where the act done though not ultra vires has been done in an
irregular manner.
c) Where the personal rights of the shareholder as such have been

infringed.
Minority shareholders are also protected by the provision of the Act and
the common law which are designed to prevent so called “oppression” of
minorities.
The common law rule here is really an extension of the first exception to
the rule in Foss v. Harbottle as elaborated in the case of Atoll v.
Merryweather (1867) L.R. Eq 464n as relating to fraud on a minority. In
brief if a minority cannot gain redress for a fraud on it by a majority in
general meeting, that minority, by a legal fiction can sue in the name of
the company.
The statutory remedies available to minorities fall into two groups:
1. Those where the individual shareholder needs the requisite

support of others; these are:
a) Section 12(3)(a) – the right to object to an alteration of the

memorandum.
b) Section 134 – the right to apply for investigation of the affairs of

the company.
c) Section 170(2)(b) the right to demand to be bought out under

certain circumstances.
2. Those where an individual shareholder may seek the remedy; these

are:
a) Section 105 – the right to apply to court for order to hold a

meeting.
b) Section 171 & 171 A & B – the right to seek a remedy from the
courts other than winding up.
c) Section 180 – the right to petition for winding up. Section 270 as
read with 271 – the right to apply for an order of judicial
management.
This discussion cannot go into any detail on the procedure for issue
and allotment of a company’s share, by offer to the public, offer for
sale stock market, etc. But there is one section of the Act to which
your particular attention is drawn viz. Section 49 which specifically
prohibits the hawking or “pushing” of shares and ties up any loose
ends which might otherwise exist with regard to the requirement of a
prospectus or statement in lieu.
MANAGEMENT OF THE COMPANY
Questions
1. What does management of a company entail and how is this

achieved in practice?
2. Describe the position of a director of a company under the

following headings:
(a) Appointment
(b) Who may and who may not be a director
(c) Shares held by a director
3. (a) What is a share?
(b) Describe and differentiate among the different types of

capital.
(c) What are the various types of shares hat you are aware of?
4. What are the various rights of shareholders? Are there some

that may be ultra vires”?
5. COMMENCEMENT OF BUSINESS
 Explain when a private company can start business and when a public
company can.
 Understand the various requirements of certain sections of the Act in

relations to the business operation (Section 57-61,67,118 and 160).
A private company can commence business as soon as it is

incorporated but a public company needs to get a certificate from the
registrar before it can do so and Section 91 of the Act requires a
public company (unless licensed in terms of Section 22) which has
issued a prospectus to furnish the registrar which an affidavit to the
effect that:
Shares have been allotted to a total amount of not less than the
minimum subscription as stated in the prospectus.
Every director has paid to the same extent as other members for all
shares taken or contracted to be taken by him for which he is liable to
pay in cash.
If the public company has not issued a prospectus it must register a

statement in lieu. Only when these formalities have been observed
will the registrar issue a certificate to enable the company to
commence business.
Once a company is in business the main pre-occupation of the law is

naturally to protect the interest of the people to whom the company
owes money – its shareholders, creditors and debenture holders. The
law is determined (but not always successful) to ensure that, if any
danger of the company being unable to meet its obligations should
arise people should know as soon as possible. Hence the number of
reports and returns which a company has to render, and the penalties
imposed on those responsible as agents of the company if they
default.
It has been seen that a company may by observing the terms of the
Act lawfully alter its share capital in certain ways but its perhaps
more important to note the various provisions hidden away in various
sections which are intended to ensure that the current issued share
capital of the company is actually represented by assets.
It must be remembered, however, that share capital and the various

reserve accounts (e.g. share premium account, share redemption
account, etc.) are not represented by cash sitting in piggy banks
locked up in a safe. They must however, be identified in order that
they appear somewhere in the company’s accounts and are thus
subject to examination. In the final event, the shareholder’s or
creditor’s protection lies in their ability to read and interpret the
audited accounts of the company.
Sections of the Act designed to prevent the general public from being
taken for a ride are discussed below:
Section 57 deals with the payment of commissions to “any person in

consideration of his subscribing or agreeing to subscribe …. For any
shares in the company if …” and there follows a number of
restrictions on commission except for the purpose of raising that
capital.
Section 58 prohibits a company from providing any financial

assistance to anyone for the purchase of share sin the company or in
its holding company unless its business is that of a money lender and
the loan is made in the ordinary course of business or the shares are
to be held by or in trust for employees.
Section 59 insists that if a company issues shares at a premium – (i.e.

at a price which includes a sum additional nominal value of the
shares) it must put the money acquired as a result of the premium
into a special account – the share premium account which becomes
part of the capital of the company and subject to the same restrictions
as regards expenditure as many other part of the capital.
Section 60 puts limitations on the power of a company to issue shares

at a discount; in particular it makes such an issue subject to sanction
by the court.
Section 61 (we have already seen this) limits the conditions under
which redeemable shares may be issued. Bonus issues can of course
be made only out of profits. Section 65 and 70 make it obligatory for
any alterations in share capital in terms of section 64 and 69 to be
notified to the registrar so that the public have constructive notice of
these alterations and in the latter case, of course, sanctions by the
court is also required.
Section 67 limits the power of a company to pay interest due on

money owed out of capital only to cases where such payment is
authorized by the articles or by special resolution and it is in respect
of capital expended on capital projects. The payment must also have
the prior approval of the minister, who may, at the expense of the
company, enquire into the circumstances.
Section 118 requires the presentation of audited accounts at the

annual general meeting of every company and its subsidiaries, the
form of account being specified by Section 119 and the seventh
Schedule and article 123 of the First Schedule.
Section 160 prohibits the issue to directors of shares on more

advantageous terms than they are issued to any member of the
company and prohibits the disposal of the directors of any (or all) of
the assets of the company, unless the transaction, in specific terms is
approved by the company in general meeting.
There are many other subtle provisions in the Act which attempt to
protect the public from the evil machinations of the company and the
people who run it; but these are enough. The requirements regarding
accounting are really the final security for both members and public
because, one way or another they are publicized.
In spite of the ingenuity of the legislature which, of course is limited,

companies do go to the wall. Perhaps this is due to the legislation
with which we have been dealing. So from time to time companies go
into liquidation, because they cease to have a raison d’etre or because
they are no longer able to fulfill their objectives without prejudicing
either their members or their creditors.
6. THE WINDING UP (or Liquidation)
a) Explain why companies wind up.
b) Cite how companies can wind up.
c) Understand what judicial management is and under what

circumstances it is resorted.
d) Explain the consequences of winding up.
e) What mode of winding up is the most common in Zimbabwe.
A company may be wound up because it is no longer needed or because

it cannot continue to operate due to lack of money. It may be thus
wound up voluntarily by its owners or compulsory by its creditors. It
may also be struck off the Register as a result of error. Section 283 of
Act provides that the Registrar may strike a company off the Register if
he has reasonable grounds to believe it is no longer in business. If the
company secretary fails to render the annual return and fails to respond
to the Registrar’s reminder, the next thing he will know is when creditors
start phoning in panic because the company’s name has appeared in the
Gazette under the heading “Companies to be Struck Off”. This is
something that should be avoided at all costs, as it does not do the
company’s credit standing any good at all.
The death of a company is accompanied by formalities much more

complicated than those of a requirements mass. It is therefore fitting
that we should pay some attention to this aspect of the law before we
“put this seminar to bed”. But before we call in the undertaker and put
the company to its last resting place we ought to give the Doctor a
chance and discuss whether and how the life of a sick company can be
restored. There are, I fact, many devises to this end such as mergers,
takeovers, amalgamations, arrangements with creditors, etc. We will
deal with what is often the penultimate event in the life of a company,
viz, Judicial Management.
6.1 Judicial Management
6.1.1 Why Judicial Management
Judicial management comes about because investors and creditors are

more inclined to cut their losses and have no faith in the ability of an
uninvolved, even if professional, manager to rehabilitate a moribund
6.1.2 Granting An Order of Judicial Management
A court may grant an order of judicial management at its discretion but

it may first call for a report from the Master or for an investigation by
inspectors appointed by the Minister.
6.1.3 Effects of Judicial Management
The effect of an order of judicial management is simply to suspend the

management of the company, to remove all power from the directors and
confer these of the judicial manager. The company’s auditors however,
continues to function in collaboration with the manager whose duties are
stated in general terms in Section 274.
If at any time the judicial manager comes to the conclusion that he is

flogging a dead horse and that the company connoted be resolved he may
apply to the court for cancellation of the order and the issue of a winding
up order instead. On the other hand if the judicial manager or other
interested party is of the opinion that the company has been
rehabilitated they may apply to the court for cancellation of the order, a
request whiny may be granted subject to such directors as he court may
give regarding resumption of management, including the holding of a
general meeting to appoint directors.
WINDING UP OF COMPANIES
Although judicial management has been dealt with, so far, in what is
considered to be its logical place, this subject is preceded in the Act by
the provisions which deal with the winding up or liquidation of
companies – the last rites as it were. Indeed this subject occupies most
of Part IV of the Act and is further dealt with in a lengthy set of
regulations known as the Companies (Winding Up) Rules 1972 as
subsequently amended.
However, since winding up is really only of interest to the Company

Secretary when it is a voluntary winding up by the members, you are
thus referred to those sections of the Act dealing with winding up. The
practicalities of winding up an unwanted company is dealt with the
secretarial side of this module.
6.2 Types of winding Up
The winding up of a company may either:
1. Winding up by order of the court.
2. Voluntary winding up:
a) Creditors – voluntary winding up
b) Members – voluntary winding up
3. Voluntary winding up under court supervision.
The provisions are extensive and complicated and can be dealt with only
very superficially here. It should be noted that some of the provisions
apply to every mode of winding up, some only to winding up by court,
some to voluntary winding up by members and others to voluntary
winding up by members and others still to voluntary winding up by
creditors.
6.2.1 Winding Up By The Court
Section 179 states that a company may be wound up the court if:
a) The company has by special resolution so decided.
b) The company has defaulted in holding the statutory meeting or

lodging the statutory report.
c) The company fails to commence business within year incorporation
or suspends business for a year.
d) The number of (present) members is reduced below one.
e) 75% of share capital lost or useless.
f) Company unable to pay its debts (see Section 178 for definition).
g) The court is of the opinion that opinion that winding up would be

“just and equitable”.
This is general provision which sets out the parameters as it were, by

which the court must guided in deciding or not to grant a winging up
order. The next 90 odd sections deal with the legal procedures and
requirements for winding up.
For our purposes these are not important except to the extent that one
should know in general terms what is involved. If any company reaches
the court, legal practitioners would have been involved for months before
hand.
What is important form a practical point of view are the provisions of

section 283, and it is recommended that you read this carefully.
In essence the section provides that where Registrar has reasonable

grounds to believe that a company is defunct, he may strike it off after
due notice. In practice, therefore, if the secretary of a company gives
notice to the Registrar that a company has no assets and liabilities and
has by special resolution resolved to be wound up (Section 215) he has
reasonable grounds to believe that particular company is defunct. The
only delay usually arises from that the Collector of Taxes always files an
objection as a matter of course, until he is satisfied that no tax is due.
It is, therefore not necessary for any company to go through the

rigmarole of voluntary winding u as provided in the Act, provided it
has liquidated all its debts etc. it is only when it sees that it has an
“incurable cancer” of its bank balance that it is necessary for a
company to go through the procedure of applying to court for an order
of winding up.
6.2.2 Winding Up By Creditors
Creditors can, of course, also apply for the liquidation of a company and
by far the greater number of applications you will see in the Gazette are
for the compulsory winding up of a company. We do not need to go into
detail of this aspect here, because when a court orders the compulsory
winding up of a company, a professional liquidator is appointed, and the
matter is out of the hands of the company’s management. You should
simply be aware of the fact that the Act does deal with winding up is
some detail, with carefully conceived safeguards to protect creditors,
innocent third parties and members of the company. These safeguards
revolve around the requirement that the liquidator must, one he has
managed to sort out the accounts, give debtors and creditors a chance to
inspect and object to the accounts, and in order to give this opportunity
he must advertise in the Gazette and hold meetings of creditors. That is
why you will see your company secretary on a Friday afternoon of
Monday morning reading the Government Gazette. He is reading it not
because it is more fun than The Herald and or The Chronicle, but
because he is obliged to wade through dozens of notices to ensure that
the company does not have amongst other problems, debtors who are
about to be struck off by the Registrar, debtors who are about to wound
up by other creditors, or debtors in liquidation whose final distribution
accounts are lying open for inspection.
Incidentally, be wary of proving a claim to an insolvent estate or

liquidated company too soon. If the estate does not have sufficient
assets to pay the liquidator, you may find yourself making a
contribution. Wait until the liquidator has located enough assets to
cover his fees and then decide whether it is worth proving a claim.
6.2.3 Members Voluntary Winding Up
A liquidator is appointed and his remuneration fixed by the company in

general meeting of shareholders. The remuneration so fixed is not to be
increased in any circumstances, whether with or without the sanction of
the court. Once this is agreed upon and the liquidator is thus dully
appointed, the company then gives notice to the Registrar. The
liquidator has to inform the Registrar of his appointment and all this is
published in the Government Gazette.
Upon the appointment of the liquidator, all the powers of the board of
directors come to an end except when the company or the liquidator, or
both, sanction them to continue.
It must be made clear, here, that a members’ voluntary winding up takes
places only when the company is solvent. It is managed entirely by the
members and the liquidator is appointed by them. No meeting of the
creditors is held and no other committee is necessary to be appointed.
To obtain the benefit of this form of winding up, usually a declaration of
solvency is filed. The resolution for voluntary winding up will usually be
a Special Resolution.
Differences between Members’ and Creditors’ type of Voluntary

Winding Up
These two types of voluntary winding up are similar in may respects but
there are three important differences:
a) In the members winding up, the directors must provide security for
payment of the company’s debts within the period of twelve (12)
months of the date of the commencement of the winding up. This
is not so with the creditors winding up.
b) In a creditors’ winding up a meeting of the creditors must take

place on the same day, or the day after, the meeting at which
members pass the resolution for a voluntary winding up. A
members’ winding up does not require a meeting of the creditors.
c) A members’ winding up can only take place where the company is

still solvent, where as the creditors’ winding up is necessitated by
insolvency circumstances.
6.3 Consequences of Winding Up
1. The winding up order is deemed to be a notice of discharge to the

officers and employees of the company to be wound up.
2. As from the commencement of the winding up, the company must

cease to carry on business, except so far as is required for its
beneficial winding up although the corporate state and powers
continue until the company is dissolved.
3. No transfer of shares can be made without the sanction of the

liquidator and any alteration in he status of he members is void.
4. On the appointment of a liquidator, the powers of the director’s

cease, except so far as the company in general meeting or the
liquidator (In member’s voluntary winding up) or the creditors (in
creditors’ voluntary winding up), sanction their continuance.
5. After the winding up order has been issued, no suit or legal
proceedings can be commenced against the company except by
leave of the court and subject to such terms and conditions as the
court may impose.
This is necessary for the purpose of preserving the limited assets of the
company in the best way possible, for distribution among all the persons
who have claims on them.
WINDING UP
Questions
1. What is Judicial Management?

What is it sometimes resorted to?
Does it have any effects?
2. How may a company be wound up voluntarily?
3. Explain, in some detail, the requirements of winding up by court

under Section 179 of the Companies Act.
4. Are there any consequences in winding up a Company?
5. Half of the capital of a private company belonged to a father and

the other half to his tow elder sons. His three younger sons were
employed in the company. The father died bequeathing his shares
equally between the younger sons. The senior ones not only ref
used the junior members, but removed them from the company’s
employment and refused to supply them with copies of the
company’s accounts.
a) Could the company be given an order for dissolution

(Winding up)
b) What were the rights and obligations, if any, of both parties

in the company?
c) Could provisions of the Articles of Association of the

Company helped?
Comment fully
d) Do you thing the elder sons were justified in their actins?

Show why.
7. COMPANY SECRETARIAL PRACTICE
a) Define a Company Secretary
b) Outline the duties and role of a Company Secretary
c) Explain the various types of meetings and why and when they are
required.
d) Link the company and the role the Company Secretary plays in
practice.
Every organization, registered and/or unregistered, has certain legal

obligations that need to be respected and even from the point view of
management, there is need from time to time to see that the company
is traversing on a safe and sound pedestal.
The affairs and activities of a company, its functions, rules and

regulations relating to statutory requirements, etc. all fall directly of
indirectly on the lap of a person called a “Company Secretary”.
Not all companies have a professional or qualified Company Secretary.

There re many reasons for this, ranging from size of company being
too small to justify the employment of a full-time Secretary to
preference of secretarial work being done outside by professional firms
of accountants and consultants.
7.1 The Company Secretary
The Secretary may be an individual or a firm of practicing accounts.

It may be any person possessing the proper qualifications, appointed
to perform the duties which may be performed b a Secretary. He is an
important executive officer of the company by virtue of the fact that
duties of administrative nature are also assigned to him he is not a
mere clerk, on the contrary he has ostensible authority to sign
contracts connected with the administrative side of the company’s
affairs.
The Act is silent on the requirements, in terms of academic and in
particular professional qualifications. However, often the Company
Secretary is a “Charted Secretary”, being a member of, for example,
The Institute of Chartered Secretaries (CIS). He is appointed, usually,
by the directors.
7.1.1 Duties of The of The Company Secretary
The duties of the Secretary depend by and large on the size and nature of
the company and on the arrangement made with him. In general,, these
will cover and include the following, inter alia:
 To be present at all meetings of the company and of the directors.
 To make proper minutes of the proceedings of meetings.
 To issue, under the directions of the board, all notices to members

and others.
 In practice, he will countersign every instrument to which the seal

of the company is affixed.
 To conduct all correspondence with shareholders in regard to

transfers (and otherwise), certifying transfer, etc.
 To kept the books of the company, or such of them as relate to the

internal business of the company, e.g. register of members, etc.
 To make all necessary returns to the Registrar of Companies e.g.

the annual return, return of allotments, notice of increase of
capital etc.
7.1.2 Termination of Secretary’s Appointment
The appointment of the Secretary may terminated thus:
 By giving the agreed notice.
 If no notice is agreed, by giving reasonable notice.
 It may be terminated forthwith and without any notice if the

Secretary makes a secret profit.
 If he is an employee, he is entitled to the minimum period of notice
applicable to him under the provision of the Labour Laws in the
country.
 By the compulsory or voluntary winding up of the company.
7.2 MEETINGS
Meetings of every kind are necessary in order to achieve various

resolutions which lead to proper running of the business.
There are many types of meetings. The Act requires that certain of
these meetings be held at stipulated times while others may be held
whenever directors think fit. What is of paramount importance with
regard to meetings is the proceedings at general meetings – how many
members must be present to constitute a meeting and enable it to
transact business; who takes the chairs, how a vote is taken;
resolutions taken and passed at meetings, etc. at this level, you may
not be required to know the nitty- gritties and finer, refined details.
The area of ‘Meetings’ is so wide that for our purposes, we will confine
the study to three types of meetings, viz
 Statutory Meetings
 Annual General Meetings
 Extraordinary General Meetings.
The procedures to be adopted at these meetings will be derided from the

three main sources – the Companies Act; Articles of Association of the
company (usually adopting Table A of the 1st Schedule of the Act) and
common law.
7.2.1 Statutory Meetings
This must be held by every public company within three months )and
not less than one month) after the date of the company is permitted to
start business. At least fourteen days before this meeting a report by
the directors, called the “statutory report” showing details of share
capital received, shares allotted, income and expenditure to date,
names and addresses of directors and auditors and details of any
contract entered into by the company and of any proposed changes
there to must be circulated to members.
7.2.2 Annual General Meeting

This must be held by every company for the first time within 18 months
of the date of incorporation and, thereafter not more than six months
after the end of each ensuing financial year and within not more than
fifteen months of the last meeting.
The business usably transacted at the AGM includes, and is not confined
only to, the following:
Accounts, mainly the Income Statement (Profit and Loss Account) and
Balance Sheet for the previous financial year. Due consideration is given
as to whether or not they should be accepted and signed.
 The declaration of dividends.
 The director’s report.
 The appointment and remuneration of auditors.
 The election of the board of directors.
 Special business i.e. any other business (AOB).
7.2.3 The Extraordinary General Meeting
Any general meeting of the company, other than the annual general
meeting, is an extraordinary general meeting. The directors may, as and
when they deem fit, call for and convene an extraordinary general
meeting. Two points are noteworthy here:
 If the meeting is called by the directors, fourteen (14) days notice

must be given to the members. The notice must necessarily
indicate the business to be transacted to that he member receiving
such notice may decide whether to attend to the meeting or not.
 If, on the other hand, the meeting is convened by the members,

then the directors must call the meeting within twenty –one (21)
days, and they must give between fourteen (14) and twenty –eight
(28) days notice of the meeting. Where directors do not give notice
and /or call for the meeting, then the members requesting the
meeting may convene such meeting themselves.
It must be noted that an Extraordinary General Meeting may also be

called to pass a special resolution, i.e. a resolution passed by a majority
of members entitled to vote.
SECRETARIAL PRACTCE
Questions
1.
a) What is a statutory meeting?
b) Within what time limits must it be held?
c) What is the purpose of a statutory meeting?
2.
a) Distinguish between the different types of members’ meetings?
b) Which ones are legally necessary and which are not?
c) Must annual general meetings be held at the company’s registered

office?
3. What notice is required for:
a) Statutory Meeting
b) Annual General Meeting
c) Extraordinary General Meeting (no special resolutions)
d) Extraordinary General Meeting with special resolutions
e) Extraordinary General Meeting with resolution requiring special

notice.
4. A company was incorporated on 30 June 1995.
a) When should it hold its Annual General Meeting?
b) When else can another meeting be necessary?
5. Notices were posted on October 16 for an annual general meeting to be

held on November 7.
a) Was the notice sufficient, in terms of time?
b) Explain your answer to (a) above with specific reference to

requirements of law.

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ZIMBABWE INSTITUTE OF

EXECUTIVE DIPLOMA IN GENERAL

COMPANY LAW AND SECRETARIAL

“PROMOTING THE ART, SCIENCE AND PRACTICE OF GOOD, SOUND

WELCOME TO THE STUDY OF company law and secretarial practice!

The best way to understand this subject is to adopt a practical approach

It is hoped that you find the subject as challenging and enterprising as it

All the best!

1.1 Historical Perspective

Reasons for forming Company

3. Procedure to Obtain Registration of Company

7. Company Secretarial Practice

Unlike other subjects which the objectives of study may be chapter by

1. To explain the basic and elementary principles of company law that

2. To cause simplification and ensure deeper understanding of some of

3. To provide sufficient knowledge to the participants to enable them to

5. To share knowledge and experiences among participants and thereby

At the end of this topic, the participant should be able to:

a) Outline the historical perspective of Company Law in Zimbabwe.

c) Understand the various forms of business organisations in Zimbabwe

1.1 Historical Perspective

The first Companies’ Act to control such organisations was promulgated

a) It required registration of new companies with more than twenty-five

b) It permitted incorporation to be by mere registration

c) It permitted companies to issue shares and shares to be transferred

d) It provided for the publicity necessary to prevent fraud

a) To establish the corporate status of companies registered under the

b) To establish the limits of the liability of members of companies.

c) To provide safeguards for the creditors of companies.

d) To provide safeguards for investors in companies.

e) To protect the interest of employees

In terms of the Companies Act, “Company” means a company formed

A company is an artificial or juristic person. It can therefore own

In essence, therefore, a country is “…. an intricate, centralised, economic

A company must be capable for perpetual succession although it is

No statutory definition – in strict, technical or legal terms – of the word

1.3 Forms of Business Organisation

1.3.1 Companies formed in terms of Chapter 24:03, limited by shares,

1.3.5 Co-operatives, created expressly to provide a form of organisation

1.3.6 Partnerships – still a commercial reality but becoming less

1.3.7 Unincorporated associations – professional associations, clubs, etc.

1.3.8 Universitas – for charitable and non-commercial motives.

1.3.9 Chartered Companies – now extinct and anachronistic.

There is no such thing in our law as the company with unlimited

1.4 Features of a Company

Incorporation (the formation of a body corporate) offers the following

A company is, in law, “a person”. It is a legal persona existing

Salomon, with his two sons, constituted the board of

In payment, Salomon took 20 000 shares of 1 pound each

On winding up, the state of affairs was broadly something

Thus after paying off the debenture holder, nothing would be

The unsecured creditors, therefore, contended that though incorporated

1.4.2 Limited Liability

The liability of members/shareholders is only to the extent of the

The company, being a separate person, is the owner of its assets

In a partnership, the liability of the partners for the debts of the

An incorporated company will continue to exist even when a member

Perpetual succession, therefore, implies that the company may

“During the war, all the members of one private