2/9/2021 The new Companies Act (Chapter 24:31) impact on Corporate Governance - Honey and Blanckenberg

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The new Companies Act

(Chapter 24:31) impact on
Corporate Governance
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TheAvenue 2251331
Companies and Other Business / +263
Entities 24
Act [Chapter 24:31] (hereinafter “the New
P.O.
Act”) Box
was 85
gazetted on 15 November2251334 / +263into
2019. It came 24 force on the ninetieth day after its
Harare, Zimbabwe
promulgation 2251339
– that is on 13 February / +263
2020 and 24 the Companies Act [Chapter
repeals
2251388
24:03] (hereinafter “the Old Act”) and / +263Business
the Private 4 Corporations Act [Chapter

24:11]. 762552 / +263 4

Message us 791156 / +263 4

The New Act has a number of signi 792196
cant impacts on corporate governance including the
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following: Cell number: +263
733436165
The duciary duties of o ce bearers of registered entities have been codi ed in the New
CDMA system: +263
Act. These include the duties of care and good faith (Section 54), as well as the duty of
4 2911633
loyalty (which includes prohibitions in cases of con ict of interest) (Section 55). The New
Fax: +263 4 790013 /
Act provides for the means in which members of entities, as well as other third parties,
+263 4 792537
may approach the courts for relief where o ce bearers have failed to comply with their
duciary duties (Sections 59 – 61). Other, more general, corporate governance issues dealt
with in the in New Act include requirements relating to requirements to issue out share
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certi cates within two months (Section 153), maintenance of a member register (Section
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159), requirements to prepare records of meetings within 20 days thereof (Section 180),

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2/9/2021 The new Companies Act (Chapter 24:31) impact on Corporate Governance - Honey and Blanckenberg

and the requirement that auditors may only serve for 5 consecutive years after which they
must take a 2 year break (Section 191).

Public companies have additional corporate governance provisions imposed, including the
requirement that they shall establish or adopt written guidelines covering matters such as
“standards for quali cation and independence of a director, directors’ responsibilities including
meeting attendance, diligence in reviewing materials, and rules for disclosure and review of
potential con icts of interest with the company, director compensation policy, succession
planning for both directors and o cers, and other corporate governance matters deemed
appropriate” (Section 220). In addition, public companies must set up an audit committee,
all of whom should be independent directors (Section 219).
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The New Act sets out penalties against persons who breach their duties, including against
200 Herbert Chitepo Landlines: +263 24
those who provide false statements or oaths in any “statement, return, report, certi cate,
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statement of nancial position or other document required” by or under the New Act,
P.O. Box 85 2251334 / +263 24
which includes nes and imprisonment for up to two years (Section 67). Similarly, carrying
Harare, Zimbabwe 2251339 / +263 24
out business in a fraudulent, reckless or grossly negligent manner, or wilfully failing to
2251388 / +263 4
account properly or keep proper nancial records, may attract civil penalties, nes and/or
762552 / +263 4
imprisonment (Sections 68 and 69).
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Contactrequirements
form 792196
Additional relating to directors are also set out under the New Act, and the
Cell number: +263
minimum number of required directors will now be dependent on the number of members
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of the company (whereby a private company with between 1 and 10 members must have
CDMA system: +263
two directors, and any private company with more than 10 members must have at least
4 2911633
three directors. Public companies shall have between seven and fteen directors) (Section
Fax: +263 4 790013 /
195), of which at least three must be independent (Section 206).
+263 4 792537
No director may sit on the board of more than 6 un-associated public companies (Section

195(9)). Any contravention shall result in civil penalties. All companies must also appoint
one or more
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Rights “o cers” who shall manage and the company, and a head o cer may

be elected
Conditions (CEO, president, Managing Director and other similar roles) (Section 221). The
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2/9/2021 The new Companies Act (Chapter 24:31) impact on Corporate Governance - Honey and Blanckenberg

New Act also set outs that no director or o cer may act as a proxy for a shareholder, and
shall be subject to a civil penalty if he or she purports to do so (Section 171).

The New Act also sets out requirements for company secretaries in relation to public
companies. A persons quali ed to act as company secretary for a public company if:

“(a) for at least three of the ve years immediately before his or her appointment as
secretary, he or she held o ce as secretary of a public company; or (b) he or she is

registered or entitled to be registered as a chartered accountant under the Chartered

Accountants Act [Chapter 27:02]; or (c) he or she is registered or entitled to be registered as

a chartered secretary under the Chartered Secretaries (Private) Act [Chapter 27:03]; or (d)
he or she is registered or entitled to be registered as a legal practitioner under the Legal
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Practitioners Act [Chapter 27:07]; or (e) he or she is registered or entitled to be registered
200 Herbert Chitepo Landlines: +263 24
as a public accountant or public auditor under the Public Accountants and Auditors Act
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[Chapter 27:12]; or (f) he or she holds such other quali cation as may be prescribed in
P.O. Box 85 2251334 / +263 24
regulations” (Section 198). Disclosure Provisions
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2251388of/ +263
Various sections provide for the disclosure 4 information which includes:
certain
762552 / +263 4
Duty by a controlling member791156
to disclose con4 ict of interest (Section 57)
/ +263
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Duty to disclose the particulars of a bene cial owner (Section 72)
792196
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Duty to disclose to the Registrar
Cella number:
return showing
+263 purchase by the company of its
own shares (Section 132) 733436165
Duty to disclose the particulars of other
CDMA directorships
system: +263 for directors of public

companies (Section 195) 4 2911633

Duty to disclose payments forFax:
loss+263
of o 4ce (Sections
790013 / 209 – 211)
Duty to disclose particulars of+263
directors’ emoluments and pensions (Section 215)
4 792537
Duty to disclose particulars of loans, guarantees and security provided by the

company to directors or o cers (Section 216)

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This 2021   |   All
analysis is not Rights Reserved   |   Privacy   |   Terms
intended to cover all changesand which have been introduced under the
Conditions  
New Act, but simply highlights certain aspects which may be of interest to readers. The

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2/9/2021 The new Companies Act (Chapter 24:31) impact on Corporate Governance - Honey and Blanckenberg

same is strictly for information purposes and that we do not take responsibility for any loss

or damage su ered by any person as a result of the reliance upon the information

contained therein.

HONEY & BLANCKENBERG

By H&B Team | February 14th, 2020 | Corporate & Commercial, H&B | Comments O

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Honey & Blanckenberg,2251334 / +263
the oldest legal24rm in Zimbabwe, was established in
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that caters for large corporates, small and
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2/9/2021 The new Companies Act (Chapter 24:31) impact on Corporate Governance - Honey and Blanckenberg

Visit us at Call us on
200 Herbert Chitepo Landlines: +263 24
Avenue 2251331 / +263 24
P.O. Box 85 2251334 / +263 24
Harare, Zimbabwe 2251339 / +263 24
2251388 / +263 4
762552 / +263 4

Message us 791156 / +263 4

Contact form 792196

Cell number: +263
733436165
CDMA system: +263
4 2911633
Fax: +263 4 790013 /
+263 4 792537

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