THE COMPANIES BILL, 2013 MEMORANDUM

Transcription

1 THE COMPANIES BILL, 2013 MEMORANDUM The objects of this Act are to (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) promote the development of the economy by encouraging entrepreneurship and enterprise efficiency and creating flexibility and simplicity in the formation and maintenance of companies; encourage transparency and high standards of corporate governance by providing for the functions and obligations of company secretaries and directors; provide for the incorporation, categorization, management and administration of different types of companies; provide for mergers, amalgamations, and takeovers; provide for the registration of foreign companies doing business in Zambia; provide for co-operatives to operate under the style of companies and be registered; provide for the colour coding of certificates of incorporation of Zambian companies and of the registration certificates of foreign companies; incorporate financial reporting provisions; provide for the responsibilities of public companies; provide for the start up and functioning of small companies; repeal and replace the Companies Act, 1994; and 1

2 (l) provide for matters connected with or incidental to the foregoing. Mumba Malila ATTORNEY - GENERAL 2

3 ARRANGEMENT OF SECTIONS TABLE OF CONTENTS Section PART I PRELIMINARY 1. Short title 2. Application 3. Interpretation PART II REGISTRATION AND INCORPORATION 4. Incorporation of company 5. Essential requirements 6. Articles of association and amendments 7. Signing and adoption of articles of association 8. Effect of articles of association 9. Adoption of new articles of association 10. Registration and certificate of incorporation 11. Certificate to be evidence of incorporation 12. Legal status of registered company 13. Register and other records PART III TYPES OF COMPANIES AND REQUIREMENTS 3

4 14. Type of Companies 15. Categories of companies 16. Public companies 17. Private companies limited by shares 18. Companies limited by guarantee 19. Unlimited companies 20. Statutory regulated company. 21. Conversion of company limited by shares to company limited by guarantee. 22. Requirements for converting company 23. Conversion of limited company into unlimited company 24. Conversion of unlimited company into limited company 25. Associated bodies corporate 26. Colour coding PART IV COMPANY NAME 27. Abbreviation of limited company 28. Dispensation of Limited in company name 29. Revocation of dispensation of Limited by Registrar. 30. Reservation of company name 31. Application for name and reservation of name 32. Change of company name 33. Date of effect of change of name 4

5 34. Company to ensure name is correctly stated 35. Company incorrectly stated 36. Effect of change of name on public notices PART V CAPACITY, POWERS AND VALIDITY OF ACTS 37. Capacity, powers and rights 38. Dealings between company and other persons 39. No presumption of knowledge of articles of association PART VI DE-REGISTRATION OF COMPANY 40. Power of registrar to de-register company. 41. Property of deregistered company 42. Registrar to represent defunct company 43. Continuation of liability of directors, shareholders and others 44. Power of court to declare dissolution of company void PART VII ADMINISTRATION AND MANAGEMENT OF A COMPANY 45. Registered office 46. Changing registered office 47. Records kept at company s registered office 48. Inspection of records 5

6 49. Seal of company 50. Official seal for use abroad 51. Form of contracts and instruments registered 52. Bills of exchange 53. Execution of deeds abroad 54. Service of documents on company 55. Service of documents by company 56. Liability of company occasioned by agent PART VII SECRETARY AND DIRECTORS 57. Company Secretary 58. Duties of company secretary 59. Body corporate or partnership may be appointed company secretary 60. Management of company 61. Limitations on powers of directors 62. Shareholder to be member of the Board 63. Delegating powers of company 64. Board Committe 65. Shareholder to be member of Board 66. Residential requirements of directors 67. Qualifications of director 6

7 68. Consent in writing before appointment as director 69. Starting to hold office as director 70. Court may appoint Directors 71. No directions or instructions to be given to directors by person not eligible to be director 72. Alternate directors 73. Request to increase number of directors 74. Removal from office of director 75. Vacancy in office of director 76. Notice of change of Directors 77. Resignation by director 78. Replacing company s majority shareholder who dies 79. Non accumulation of duties 80. Disclosure of replacement of directors 81. Duty of directors to act in good faith and in best interest of company 82. Exercise of powers in relation to employees 83. Directors to comply with Act and articles 84. Reckless trading 85. General duties of director 86. Risk Management 87. Fiduciary duty of directors 88. Duty to promote success of company 89. Duty to exercise independent judgment 90. Duty to exercise reasonable care, skill and diligence 91. Duty to avoid conflict of interest 92. Meaning of interest 7

8 93. Duty not to accept third party benefits 94. Directors duty of care 95. Use of information and advice 96. Transaction requiring approval by company 97. Transaction in which a director has a personal interest 98. Disclosure of interest of director 99. Transaction in which member of the board of directors has interest to be void 100. Effect of voiding transaction 101. Non voting by directors interested in transaction 102. Disclosure of information 103. Disclosure of interest in shares issued by company 104. Obligation of member of the board of directors to disclose acquisition or disposal of shares 105. Restrictions applicable to members of the board of directors regarding disposal of shares 106. Liability for amount equivalent to fair value of shares or debentures 107. Exception for companies dealing with securities 108. Proceedings of board of directors 109. Remuneration and other benefits for member of board of directors and executives 110. Decisions that board of directors may approve instead of meeting of shareholders 111. Transactions by a company with regard to issuing a guarantee or loan 112. Rights of share holders 8

9 113. Ethics and duties of a company s officers 114. Liability of director or officer who commits breach of duty 115. Criteria for decision to be considered valid 116. Liability and indemnity with regard to decisions that are made 117. Compensation by company 118. Criteria for compensation 119. Subscribing for insurance for director or employee of company or subsidiary company PART IX SHARES AND DEBENTURES 120. Legal nature of shares 121. Rights and powers attaching to shares 122. Types of shares 123. No nominal value 124. Transferability of shares 125. Issue of shares on incorporation and amalgamation 126. Issue of other shares 127. Notice of share issue 9

10 128. Shareholder approval for issue of shares 129. Pre-emptive rights 130. Consideration for issue of shares 131. Consideration to be decided by board 132. Exceptions to section Consideration in relation to issue of options convertible securities 134. Consent to issue shares 135. Time of issue of shares 136. Board may authorise distributions 137. Dividends 138. Shares in lieu of dividends 139. Recovery of distributions 140. Reduction of shareholder liability and distribution 141. Company may acquire its own shares 142. Acquisition of company s own shares 143. Board may make offer to acquire shares 144. Special offers to acquire shares 145. Disclosure document 146. Stock exchange acquisition subject to prior notice to shareholders 147. Disclosure document for stock exchange acquisitions 148. Stock exchange acquisitions not subject to prior notice to shareholders 149. Cancellation of shares repurchased 150. Enforceability of contract to repurchase shares 151. Company may hold its own shares 10

11 152. Rights and obligations of shares company holds in itself suspended 153. Reissue of shares company holds in itself 154. Redeemable shares 155. Redemption at option of company 156. Company shall satisfy solvency test 157. Special redemption of shares 158. Disclosure document 159. Cancellation of shares redeemed 160. Redemption at option of shareholder 161. Redemption on fixed date 162. Financial assistance 163. Company shall satisfy solvency test for financial assistance 164. Special financial assistance 165. Disclosure document for special financial assistance 166. Financial assistance not exceeding five percent of shareholders funds 167. Enforceability of transactions 168. Subsidiary may not hold shares in holding company 169. Statement of shareholders rights 170. Transfer of shares 171. Transfer of shares by operation of law 172. Company to maintain share register 173. Place of share register 174. Evidence of legal title to shares 175. Director s duty to supervise share register 176. Power of court to rectify register 11

12 177. Trusts not to be entered on register 178. Personal representative shall be registered 179. Assignee of bankrupt shall be registered 180. Share certificates 181. Perpetual debentures 182. Power to reissue redeemed debentures 183. Specific performance of contracts to subscribe for debentures PART X PUBLIC ISSUE OF SHARES 184. Interpretation 185. Offer of sale deemed to be made by the company 186. First publication of prospectus 187. Invitations to the public and prospectuses 188. Prospectus required for invitations to the public to purchase share or debentures 189. Contents of prospectus 190. Experts consent 191. Registration of prospectus 192. Over subscription in debenture issue 193. Reference to stock exchange listing prospectus-allotment 194. Civil liability for misstatements or omissions in prospectus 195. Offence of misstatement or omission in prospectus 196. Stop trading order 12

13 197. Waiting period 198. Withdraw of application after waiting period 199. Allotment and minimum 200. Statement in lieu of prospectus 201. Prohibition of waiver and notice PART XI SHAREHOLDERS AND THEIR RIGHTS AND OBLIGATIONS 202. Shareholder 203. Liability of shareholders 204. Liability of former shareholders 205. Additional provisions relating to liability of shareholders and former shareholders 206. Liability for calls 207. Shareholders not required to acquire shares by alteration to articles 208. Liability of personal representative 209. Liability of assignee 210. Exercise of powers reserved to shareholder 211. Exercise of powers by ordinary resolution 212. Powers exercised by special resolution 213. Unanimous assent to certain types of action 214. Company to satisfy solvency test 215. Management review by shareholders 216. Shareholder shall require company to purchase shares 217. Notice requiring purchase 13

14 218. Price for shares to be purchased by company determined 219. Prices for shares referred to arbitration if shareholder objects price 220. Interest payable on outstanding payments 221. Timing of transfer of shares 222. Purchase of shares by third party 223. Court may grant exemption 224. Court may grant exemption if company insolvent 225. Classes and interest groups 226. Alteration of shareholder rights 227. Shareholder may require company to purchase shares 228. Actions not invalid 229. Annual general meeting and extraordinary general meetings 230. Business to be transacted at annual general meeting 231. Non approval of financial statements at annual general meeting 232. Special meetings of shareholders PART XII MEETINGS AND RESOLUTIONS 233. Resolution in lieu of meeting 234. Annual General Meeting 235. Extra Ordinary General Meetings 236. Class Meetings 237. Requisition of a general meeting 14

15 238. Entitlement to receive notice of meetings 239. Length of notice for convening a meeting 240. Power of court to order meeting 241. Place of meetings 242. Attendance at meetings 243. Conduct of meetings and voting 244. Chairman s declaration as to result of a vote 245. Right to demand a poll 246. Voting on a poll 247. Proxies 248. Representation of bodies corporate and unincorporated associations at meetings 249. Circulation of members resolutions and supporting circulars 250. Circulation of members circulars 251. General provisions in regard to members circulars 252. Ordinary, extraordinary and special resolutions 253. Written resolution for private companies 254. Registration of copies of certain resolutions 255. Date of certain resolutions 256. Minutes of proceedings of meetings of company and of creditors 257. Inspection of minute books 258. Shareholders entitled to receive distributions, attend meetings, and exercise rights PART XIII DEBENTURES AND CHARGES 15

16 259. Issue of debentures 260. Documents of title to debentures 261. Assignees for debenture holders 262. Eligibility for appointment as assignee for debenture holders 263. Right to copies of trust deed 264. Unsecured debentures to be so described 265. Register of debenture holders 266. Meetings of holders of debentures secured by a trust deed 267. Meeting of other debenture holders 268. Re-issue of redeemed debentures 269. Charge to secure fluctuating amount 270. Company s register of chargers 271. Registrar s register of charges 272. Registration of charges by companies 273. Certificate to be issued by Registrar 274. Priorities 275. Entries of satisfaction and release of property from charge 276. Variation of registered charge 277. Registration of enforcement of security by mortgagee 278. Endorsement of registration on debentures PART XIV ENFORCEMENT 279. Meaning of an entitled person, former shareholder etc 280. Restraining Order 16

17 281. Filing a claim on behalf of company 282. Filing claim by shareholders 283. Shareholder s rights 284. Approving decisions made PART XV ACCOUNTING RECORDS AND AUDIT 285. Accounting records 286. Place accounting records to be kept 287. Appointment of auditors 288. Auditor s resignation 289. Auditor s fees and expenses 290. Auditing firm 291. Signing of auditor s report 292. Qualifications of auditors 293. Automatic reappointment of auditor 294. Auditor not wanting to be reappointed 295. Payment to auditor who resigns or completes duties 296. Replacement of auditor 297. Auditor to avoid conflict of interest 298. Auditor s report 299. Access to information 300. Auditor s attendance at meeting of shareholders 301. Furnishing auditor s report 302. Small private companies 303. Appointment of auditor for small private company 17

18 304. Financial statement preparation 305. Standards for financial statement preparation 306. Obligation to provide consolidated financial statement 307. Profit and loss statement when company becomes a subsidiary 308. Date for financial statement of subsidiary company 309. Annual return to be made to the Registrar 310. Annual return to be made by a public company 311. Documents to be annexed to annual return of a public company 312. Offence relating to annual return 313. Notice of adopted date to be given to Registrar 314. Date of financial statement of subsidiary company 315. Date of group financial statements 316. Financial statements of company and financial statements of group of companies 317. Content of financial statements 318. Content of consolidated financial statement 319. Obligation to prepare annual report 320. Sending copy of annual report to company s shareholders 321. Content of annual report 322. Inspection of company s documents by shareholders 323. Records to be made available for inspection 324. Manner of inspection 325. Commencement of Inspection 326. Amalgamation PART XVI AMALGAMATION 18

19 327. Amalgamation proposal 328. Amalgamation resolution 329. Documents forwarded to shareholders of amalgamating company 330. Procedures before amalgamation 331. Approving amalgamation proposal 332. Filing notice of amalgamation 333. Registration of amalgamation proposal 334. Certificate of amalgamation 335. Effect of certificate of amalgamation 336. Removing amalgamating companies from register 337. Property, rights, powers and privileges of amalgamated companies 338. Liabilities and obligations of amalgamated companies 339. Enforcement of court ruling by new company 340. Opposing amalgamation 341. Respecting provisions of amalgamation proposal PART XVII FOREIGN COMPANY 342. Definition of foreign company 343. Registration of foreign company 344. Foreign company that shall not be registered 345. Filing notice of change of companies authorised agent 346. Deadline for replacement of authorised agent 19

20 347. Change in Particulars 348. Filing of court order with Registrar 349. Balance Sheet 350. Obligation of foreign company to comply with requirements applicable to local companies 351. Obligation to comply with International Accounting Standards 352. Foreign company to file notice of particulars of its business in Zambia with balance sheet 353. Branch registers 354. Notice of place where register is kept 355. Notice of any change in register 356. Certificate primacie evidence of registration 357. Financial requirements before certificate is issued 358. Cessation of business in Zambia 359. De-registration of foreign company 360. Registration of foreign company and continuation of business 361. Prohibition to conduct business in certain sectors 362. Funds invested by foreign company 363. Prohibition against borrowing initial investment PART XVIII DORMANT COMPANIES 364. Definition of dormant company 365. A company which may be registered as dormant company 366. Banking or insurance companies prohibited from self declaration as dormant 20

21 367. Notice by dormant company 368. Notice by company which ceases to be dormant 369. Exemption for dormant company PART XIX ADMINISTRATION OF THE ACT 370. Administration of Act 371. Establishment of companies office 372. Powers of registrar 373. Appointment of officers 374. Seal of the Agency 375. Register of companies 376. Inspection of register 377. Registrar to furnish information from register on request 378. Immunity of officers regarding official acts 379. Registration of documents 380. Extension of time 381. Documents to be approved in English 382. Prescribed forms 383. Evidentiary provisions 384. Inspection of records 385. Waiver of fees 386. Appeal against decision of registrar 387. Collection of information and statistics from companies 388. Oaths and affirmations 389. Evidence of entries and documents 390. Power of registrar to award costs 21

22 391. Proceedings before the registrar 392. Loss or destruction of certificate 393. Reference to High Court by Registrar 394. Registrar to appear in legal proceedings 395. Costs of the registrar 396. Regulations PART XX MISCELLANEOUS PROVISIONS 397. Electronic transactions PART XXI OFFENCES AND PENALTIES 398. Failure to comply with this Act 399. Failure to keep books 400. Failure to provide documents 401. False or misleading notice Cap Knowingly furnishing false document Cap Fraudulent use or destruction of property Cap Falsification of records Cap Using fraudulent document Cap Carrying on business fraudulently 407. Penalties for carrying on business fraudulently 408. Persons prohibited from managing companiescap Other offences Cap 87 22

23 410. Liability of Directors and management 411. General penalty 412. Non compliant company excluded from incentives Act No. of , Act No. 11 of 2006, Cap Penalty for false statements 414. Penalty for improper use of incorporated or Limited 415. Civil liability for fraudulent trading 416. Offence of fraudulent trading 417. Imprisonment for failure to pay fine 418. Costs in action of limited companies 419. Contribution between joint wrongdoers 420. Power to grant relief from civil liability 421. Exemption from liability for actions or omissions 422. Falsification of entries in register 423. Altering of documents 424. Deceiving or influencing the registrar or an officer 425. Witness giving false evidence 426. Aiding and abetting 427. False representation about Companies Office 428. Penalties 429. Rules of Court PART XXII TRANSITIONAL PROVISIONS 430. Registration of charges 23

24 431. Companies subject to other legislation Effect of this Act on those persons holding office at commencement of Act 432. Act made under Cap 388 to continue 433. Effect of the existing companies articles of association and resolutions of shareholders at the commencement of Act 434. Effect of the repeal of Cap 388 on judicial proceedings, etc 435. Register, fund and account under Cap Company registration 437. Fee, charge or sum paid or unpaid 438. Approval of acts and resolutions 439. Continuing the winding up process cap Repeal of Cap Repeal of inconsistent provisions Cap

25 A BILL ENTITLED An Act to provide for the incorporation, categorization, management and administration of different types of companies; to provide for modern day practices in company law such as mergers, acquisitions, amalgamations and restructuring; to provide for the registration of foreign companies doing business in Zambia; to provide for cooperatives to operate under the style of companies and be registered; to provide for the colour coding of certificates of incorporation of Zambian companies and of the registration certificates of foreign companies; to incorporate corporate governance and financial reporting provisions and provide for the functions and obligations of a company secretary and a director; to provide for the responsibilities of public companies; to provide for the start up and functioning of small companies; to repeal and replace the Companies Act, 1994; and to provide for matters connected with or incidental to the foregoing. 25

26 Enactment ENACTED by the Parliament of Zambia PART I PRELIMINARY Short title and commencement 1. (1) This Act may be cited as the Companies Act, (2) This Act shall come into operation when the Insolvency Act, 2013 comes into operation. Application and administration of Act 2. (1) Notwithstanding subsection (2), this Act shall not apply to a corporate body established or registered under the provisions of any other law, in respect of any business carried on by it under the name by which it is so established or registered. (2) Notwithstanding any other law, this Act shall apply to co-operatives, co-operative unions and trusts for purposes of registration and incorporation. (3) This Act shall be administered by the Agency. Interpretation requires - 3. In this Act, unless the context otherwise Agency means the Patents and Companies Act No. 15 of 2010 Registration Agency established under the Patents and Companies Registration Act; 26

27 accounts means the financial statements of a company together with accompanying notes, but does not include the auditors report or annual report of the company; accountant means a person qualified in the theory and practice of accountancy, an auditor, tax consultant and tax adviser registered under the Act No. 13 of 2008 Accountants Act; accounting records include (a) invoices, receipts, orders for the payment of money, bills of exchange, cheques, promissory notes, vouchers and other documents of prime entry; and (b) such working papers and other documents as are necessary to explain the methods and calculations by which the accounts are made up; accounting period means the period in respect of which the financial statements of a company or other body corporate are made up, whether that period is a year or not; address means a place where an individual or company is located and in the case of the address of - (a) an individual person, means the full 27

28 address of the place where that person usually lives; and (b) a company, means its registered office or its principal place of business; agency deed means a deed executed by a company or a debenture holder's representative in relation to the issue of debentures and a supplementary document, resolution or scheme of arrangement modifying the terms of the deed and a deed substituted for it; annual accounts the annual financial statements of a company that gives a true and fair view of the financial performance, financial position and cash flows of the company; and includes consolidated financial statements for a group that gives a true and fair view of the group s financial performance, financial position and cash flows; annual general meeting means an annual general meeting of the shareholders of a company, required under this Act; annual report means an annual report of the affairs of a company required to be prepared under this Act; "annual return" means the return referred to in section three-hundred and nine, together with 28

29 any document required by this Act to accompany the return; approved valuer means a technical or professional who is a lawfully registered expert under any other law and includes - (a) a qualified auditor; (b) an urban engineer; (c) a qualified architect; (d) a qualified inspector; (e) a land surveyor; and (f) any other person registered or designated as such under any law; arrangement means the re-organization of the share capital of a company by the consolidation of shares of different classes, by the division of shares into shares of different classes or by other methods intended to change the shares; articles means the articles of association of a company provided for under section six; auditor means a person holding a practicing certificate or a firm registered under the Act No. 13 of 2008 Accountants Act and appointed to perform any auditing functions; auditor s report means the report of the auditors of a company referred to in section two hundred 29

30 and ninety one. board of directors means (a) persons appointed or nominated as directors of a company who number not less than the required quorum acting together as a board; or (b) if the company has at the time only one director, that director; "body corporate" means a company or corporation incorporated under or by virtue of the laws of Zambia or of any other country, other than a corporation sole; "book" includes accounts, deed, writing, register, document, accounting record, and any clear record of information, however compiled and whether recorded or stored in written or printed form or by electronic or photographic process or otherwise; "branch register" means a branch register of a company established under this Act; certified true copy means - (a) a copy or extract of a document, certified in such a manner as may be approved by the Registrar to be a true and complete copy of the original, or extract of the document; (b) in relation to a translation of a 30

31 document in a language other than English, a document certified in such a manner as may be approved by the Registrar to be a correct and accurate translation of the original document into English; citizen means a citizen of Zambia; Act No. 9 of 2006 Act No. 9 of 2006 citizen empowerment company has the meaning assigned to it under section 5 of this Act ; citizen owned company has the meaning assigned to it under section 5 of this Act ; class means a class of shares having attached to the shares the same rights, privileges, limitations and conditions; company means a business enterprise incorporated under this Act; company s book includes any account, deed, writing or document and any other record of information however compiled, recorded in or stored belonging to a company; company limited by guarantee means a company formed on the principle of having the liability of its members limited by its constitution to such amount as the members may respectively undertake to contribute to the assets of the company in the event of it being wound up; company limited by shares means a company in 31

32 which the liability of a shareholder is limited to the amount unpaid on subscribed shares; compromise has the meaning assigned to the term under the Insolvency Act, 2013; co-operative has the meaning assigned to the term under the Co-operative Societies Act; corporation means a body corporate, including a foreign company or any other body corporate in or outside Zambia that is registered under this Act to do business in Zambia; court means the High Court for Zambia; ; creditor means a person who, in a liquidation, is entitled to claim that a debt is owing to that person by a company; debenture has the same meaning assigned to it under the Insolvency Act, 2013; director means a person appointed as a member of the board of directors under Part VII, or an alternate director, by whatever name designated; dividends means a number or quantity of money to be divided among shareholders; entitled person means a shareholder or any other person who is recognised under a company s articles as enjoying a shareholder s rights and obligations; extraordinary general meeting means a general 32

33 Cap.387 meeting of a company that is not an annual general meeting; extraordinary resolution means a resolution passed by a majority of at least seventy-five percent of the votes cast by such shareholders, as being entitled so to do, vote in person or by proxy at a meeting duly convened and held; financial institution has the meaning assigned to financial service providers under the Banking and Financial Services Act; foreigner owned company means assigned to it under section 5 of this Act; group of companies means a group comprising a holding company and its subsidiaries; holding company means a company that (a) controls the composition of the board of another company; (b) is in a position to exercise, or control the exercise of, more than one-half the maximum number of votes that can be exercised at a meeting of another company; (c) holds more than one-half of the issued shares of another company, other than shares that carry no right to participate beyond a specified amount in a 33

34 distribution of either profits or capital; or (d) is entitled to receive more than one-half of every dividend paid on shares issued by another company, other than shares that carry no right to participate beyond a specified amount in a distribution of either profits or capital; indictable offence means an offence which, if committed by an adult, is triable on indictment; initial investment means the amount required to start a business venture and excludes working capital; insolvency test has the meaning assigned to it under the Insolvency Act, 2013; insurance broker has the same meaning assigned to Act No. 27 of 1997 Act No. 27 of 1997 that term under the insurance Act; insurance business has the meaning assigned to the term under the Insurance Act; interest register means the register into which the interest, of a director or shareholder, regarding any business of a company is recorded; international financial reporting standards means principle based standards, adopted by the International Accounting Standards Board, that provide a global framework on how companies should prepare and disclose their 34

35 Act No of financial statements; international standards on auditing means auditing standards, issued by the International Auditing Standards Board, that members are expected to follow in the conduct of audits of financial statements; limited company means a company limited by guarantee or a company limited by shares; "liquidator" has the meaning assigned to it in the Insolvency Act, 2013; meeting means an annual general meeting, extraordinary general meeting or special meeting; member means a shareholder or stockholder of a company or a subscriber to a company limited by guarantee; nominee means a person entitled to exercise a right only in accordance with instructions given by another person; non-executive director means a director who is not involved in the day to day management of a company; officer includes- (a) a director, company secretary or executive officer of a company; (b) a local director of a foreign company; 35

36 ordinary resolution means a resolution passed by a simple majority of votes cast by such shareholders as, being entitled so to do, vote in person or by proxy at a meeting duly convened and held; person concerned means - (a) a person who is or has been employed by a company as a director, banker, accountant, advocate or legal practitioner, Registrar or otherwise; (b) a person who, or in relation to whom, there are reasonable grounds for suspecting that the person - (i) has in the person s possession any property of a company; (ii) is indebted to a company; (iii) is able to give information concerning the promotion, formation, management, dealings, affairs or property of a company; pre-emptive rights means shares issued or proposed to be issued by a company that rank or would rank as to voting or distribution rights, or both, equally with or prior to shares already issued by the 36

37 company which may be offered, for a reasonable period, for acquisition to the holders of the shares already issued in a manner and on terms that would, if accepted, maintain the existing voting or distribution rights, or both, of those holders; prescribed" means prescribed in the regulations made under this Act; "private company" means a private company limited by shares, a company limited by guarantee or an unlimited company; "private company limited by shares" means a company incorporated as such, being a company satisfying any provision under this Act; property means property of every kind whether tangible or intangible, real or personal, corporeal or incorporeal and includes all rights, in relation to property whatever their nature; prospectus means a notice, circular, advertisement or request inviting applications or offers from the public to subscribe for or purchase, a share in, or debenture of, a company or proposed company; receiver has the same meaning assigned to it in the Act No. of 2012 Act No. 13 of 2008 Insolvency Act, 2013; "registered accountant" means an accountant 37

38 registered under the Accountants Act; register means the register of companies kept at the Agency under this Act; registered means lodged with the Registrar and entered in the register; Registrar means the person appointed as Registrar Act No. 15 of 2010 under the Patents and Companies Registration Agency Act; related entity of a director means a company or corporation in which the director and any relative or relatives of the director between them hold, themselves or through nominees, voting interests that exceed fifty percent; repealed Act means the Companies Act Chapter 388 of the Laws of Zambia; "seal" means the common seal of a company or other body corporate; secured creditor has the meaning assigned to the term under the Insolvency, 2013; Act No. of 2012 security includes - (a) a mortgage; (b) a given property or part of it; (c) a deposit of a share or debenture certificate; (d) a lien consisting of shares or 38

39 debentures; (e) a lien over a motor vehicle; (f) a lien over industrial materials; (g) an agreement to give a charge; but does not include the following: (a) a hire-purchase agreement and rentals; (b) rent charges; and (c) annuities granted or reserved out of land; shareholder means a person whose name - (a) is entered in the share register as the holder for the time being of one or more shares in a company; or (b) appears in a request for company registration at the time of a company s incorporation and who is regarded as a shareholder until the person s name is entered in the share register; or (c) is to be entered in the share register under an amalgamation proposal and is regarded as a shareholder in an amalgamated company until the person s name is entered in the share certificate; shares includes stock; 39

40 share register means the register referred to under section one hundred and seventy two. small private company means any company whose total investment, excluding land and buildings, annual turnover and the number of persons employed by the enterprise, does not exceed the numerical value prescribed; Act No. 20 of 1998 Cap.387 Act No. of statutory regulatory Act means the Co-operative Societies Act, the Land (Perpetual Succession) Act, the Banking and Financial Services Act or the Insurance Act, as the case may be; special meeting means a meeting called in accordance with section two hundred and thirty to considered any matter provided under this Act; special resolution means a resolution approved by at least seventy - five per cent of the votes of the shareholders, as being entitled so to do, vote in person or by proxy at a meeting duly convened as a meeting at which the resolution will be moved as a special resolution and duly held, or such higher majority percentage as the articles of association may require; subsidiary means a company that is a subsidiary to a holding company; Cap. 186 trust means an arrangement in which a person 40

41 transfers property to one or more assignees who will hold such property for the benefit of one or more persons and which is regulated under the Lands (Perpetual Succession) Act; unlimited company means a company formed on the principle of having no limit placed on the liability of its shareholders. PART II REGISTRATION AND INCORPORATION Incorporation of company 4. (1) Subject to this Act, two or more persons associated for any purpose may incorporate a company by subscribing their names to an application for incorporation in the prescribed manner and form upon payment of the prescribed fee. (2) Subject to subsection (3), an individual shall not subscribe to an application for incorporation if the person (a) is under eighteen years of age; (b) is an undischarged bankrupt under the laws of Zambia; (c) subject to an order by the court, is an undischarged bankrupt under the laws of another country; (d) is of unsound mind and has been declared 41

42 to be so by the court or a court of competent jurisdiction of another country; or (e) has, in the last five years prior to the application, been convicted of an offence involving fraud or dishonesty in Zambia or elsewhere. (3) The incorporation of a company shall not be invalid by reason only that an individual or individuals subscribed to the application for incorporation in contravention of subsection Essential requirements 5. (1) Every company shall - (a) have a name; (b) have an address; (c) (d) have a main business objective; be limited by shares or guarantee or have unlimited liability for the obligations of the company; Content of memorandum of association (e) (g) have two or more directors; and, Every company shall have a nominal Capital or guaranteed amount which shall not be less than the prescribed minimum. (2) The minister shall prescribe the minimum issued share capital or guaranteed amount. Articles of association and amendments 42

43 6. (1) A company shall have articles regulating the conduct of the company. (2) The articles of association may contain restrictions on the business that the company may carry on. 3) A company shall not carry on any business or exercise any power that it is restricted by its articles from carrying on or exercising, nor exercise any of its powers in a manner contrary to its articles. (4) Where a provision in the articles is inconsistent with this Act or any other written law, the provision is invalid to the extent of the inconsistency. (5) A company may adopt the provisions of standard articles set out in the Schedule. (6) The articles of association of a public company or a private company limited by shares shall be deemed to have adopted the provisions of the standard articles set out in the Schedule, except insofar as the articles exclude or modify those provisions. (7) The articles of association shall be divided into paragraphs numbered consecutively. (8) Subject to this Act, and to its articles, a company may amend its articles of association if it passes a special resolution approving the 43

44 amendment. (9) If a company passes a special resolution approving the amendment of its articles of association, it shall within twenty-one days after the date of the resolution lodge a copy of the resolution with the Registrar together with a copy of each paragraph of the articles affected by the amendment, in its amended form. (10) The articles of association have effect in their amended form on and from the day of their lodgment with the Registrar or such later date as may be specified in the resolution. (11) If a company fails to comply with subsection (9), the company, and each officer in default, commits an offence, and shall be liable on conviction to a fine not exceeding forty thousand penalty units for each day that the failure continues. Signing and adoption of articles of association 7. The articles of association of a company shall be signed by persons who shall constitute the first members of the company. Effect of articles of association 8. (1) The articles of association of a company shall have the effect of a contract - (a) between the company and each member or shareholder; and (b) between or amongst the members 44

45 or shareholders. (2) The articles of association shall bind the company and its members. (3) The articles of association shall take effect on the day on which they are lodged with the Registrar. (4) If a company does not lodge articles of association with the Registrar, the company shall be deemed to have adopted the standard articles. Adoption of new articles of association Registration and certificate of incorporation 9. The shareholders of a company may, by special resolution, adopt new articles of association of a company where they consider it necessary to do so. 10. (1)As soon as the Registrar receives an application for registration of a company, the Registrar shall (a) (b) register the proposed company; issue a certificate of incorporation in the prescribed form; (c) assign a unique number to the company, as its registration number; and (d) colour code the certificate of incorporation in accordance with Part II 45

46 (2) A certificate for the incorporation of a company may be in electronic form. Certificate to be evidence of incorporation 11. A certificate of incorporation of a company is conclusive evidence that - (a) all the requirements of this Act regarding registration have been complied with; and (b) on and from the date of incorporation stated in the certificate, the company is incorporated under this Act. Legal status of registered company 12. A company registered under this Act shall be a company with a separate legal status, with the name by which it is registered and shall continue to exist until it is removed from the register. Register and other records 13. (1) The Registrar shall keep a register of companies at the Agency, which may be in manual or electronic form. (2) The register shall contain - (a) particulars of all incorporated companies; (b) the company s articles of association; (c) the names of the shareholders; and 46

47 (d) the names of the directors. (3) The Registrar shall keep a record of such other details as may be prescribed, including charges on a company s assets and any offences committed by a company, its shareholders or directors. PART III TYPES OF COMPANIES AND REQUIREMENTS Types of companies 14. There shall be the following types of companies: (a) a company limited by shares; (b) a company limited by guarantee; (c) an unlimited company. Categories of companies 15. (1) Every company shall be incorporated under one of the following categories: (a) a public company; (b) a private company, being- (i) a company limited by shares; (ii) a company limited by guarantee; or (iii) an unlimited company; (c) a statutory regulated company, being a- (i) a cooperative; (ii) a trust; 47

48 (iii) a bank; (iv) (v) (vi) a financial institution; a insurance business; a insurance broker; or (vii) such other company as may be prescribed under an under an Act of Parliament. (2) A company incorporated under this Act may be sub categorized as a- (a) citizen empowerment company where twentyfive to fifty percent of company equity is owned by citizens. (b) citizen owned company where at least fifty percent of company equity is owned by citizens (c) citizen participatory company where five to twenty-five of company equity is owned by citizens. (d) foreign-owned company where over fifty percent of company equity is owned by foreigners. (3) Notwithstanding section four, an unlimited company shall not be a public company. Prohibition on micro and small foreign companies and foreign owned companies (4). A foreign company or foreigner owned company shall be disqualified from incorporation if, when registered, will fall under the category of micro or small enterprise. Public companies 48

49 capital. 16. (1) A public company shall have share (2) The articles of a public company shall state - (a) the rights, privileges, restrictions and conditions attaching to each class of shares, if there are two or more classes; and (b) the authority given to the directors to determine the number of shares in, the designation of, and the rights, privileges, restrictions and conditions attaching to, each series in a class of shares, if the class of shares may be issued in series. (3) All shares shall rank equally apart from differences due to their being in different classes or series. (4) Where a public company is wound-up, a member shall be liable to contribute, in accordance with Insolvency Act 2012, an amount not exceeding Act No. of 2012 the amount, if any, unpaid on the shares held by him. (5) The articles of association of a public company shall not impose any restriction on the right to transfer any shares of the company other than - (a) a restriction on the right to transfer any shares on which there is unpaid 49

50 liability; (b) a restriction on the right to transfer shares issued to directors or other officers or employees exercising any rights or options granted under section seventy-three, or issued in pursuance of any scheme adopted under that section; or (c) a provision for the compulsory acquisition, or rights of first refusal, of shares referred to in paragraph (b), in favour of other members of the company or assignees appointed. under any scheme adopted under Private companies limited by shares 17. (1) The articles of association of a private company limited by shares shall state- (a) the rights, privileges, restrictions and conditions attaching to each class of shares, if there are two of more classes; and (b) the authority given to the directors to determine the number of shares in, the designation of, and the rights, privileges, restrictions and conditions attaching to, each series, if a class of shares may be issued in 50

51 Act 2012 No. series. (2) All shares shall rank equally apart from differences due to their being in different classes or series. (3) Where a private company limited by shares is wound-up, a member shall be liable to contribute, in accordance with the Insolvency Act, an amount not exceeding the amount, if any, unpaid on the shares held by that member. Companies limited by guarantee 18. (1) Each subscriber to an application for incorporation as a company limited by guarantee shall sign a declaration of guarantee specifying the amount that the subscriber undertakes to contribute to the assets of the company in the event of its being wound-up. (2) Each subscriber to the application for incorporation shall, on the incorporation of the company, be a member of the company. (3) Subject to any additional requirements imposed by the articles of the company- (a) a person shall become a member of the company, on approval by a special resolution of the company, by signing a declaration of guarantee and delivering it to the company; and (b) a person shall cease to be a member on 51

52 Act No of delivering to the company a signed notice in writing to that effect. (4) Within seven days after a person becomes a member or ceases to be a member of the company, the company shall lodge with the Registrar a notice in the prescribed form, together with, in the case of a person's becoming a member, the declaration of guarantee by the person. (5) A company limited by guarantee shall not carry on business for the purpose of making profits for its members or for anyone concerned in its promotion or management. (6) Where a company limited by guarantee is wound-up, a member shall be liable to contribute, in accordance with the Insolvency Act, an amount not exceeding the amount specified in the declaration of guarantee made by the member. (7) If the company carries on business for the purpose of making profits for its members or for anyone concerned in its promotion or management- (a) those officers and members of the company who willfully authorise or permit the business to be carried on for that purpose shall be jointly and severally liable for the payment and discharge of all debts and liabilities of the company incurred in carrying 52

53 on the business so authorised or permitted; and (b) each of the officers and members referred to in paragraph (a) commits an office, and shall be liable on conviction to a fine of not more than one hundred thousand penalty units for each day on which that business is carried on. (8) If the company fails to comply with subsection (4), the company, and each officer in default, commits an offence, and shall be liable, on conviction, to a fine not exceeding thirty thousand penalty units for each day that the failure continues. Unlimited companies 19. (1) An unlimited company shall have share capital and its articles of association shall state - (a) the rights, privileges, restrictions and conditions attaching to each class of shares, if there are two or more classes; and (b) the authority given to the directors to determine the number of shares in, the designation of, and the rights, privileges, restrictions and conditions attaching to each series, if a class of 53

54 shares may be issued in series. (2) All shares shall rank equally apart from differences due to their being in different classes or series. (3) Where an unlimited company is wound-up, a member shall be liable to contribute, in accordance Act No. of 2012 Statutory regulated company with the Insolvency Act, without limitation of liability. 20. (1) A statutory regulated company shall be registered and incorporated in accordance with this Act and regulated under the relevant law. (2) The requirements applicable to companies shall apply mutatis mutandis to statutory regulated companies. Conversion of company limited by shares to company limited by guarantee 21. (1) A company limited by shares may be converted to a company limited by guarantee by a special resolution where (a) there is no unpaid share; (b) all its members agree in writing to the conversion and to the voluntary surrender of the company for cancellation of all the shares held by them immediately before the conversion; and (c) new articles of association appropriate to a company limited by 54

55 guarantee are filed. (2) The new articles of association of the company limited by guarantee shall be filed to the Registrar for registration. Requirement for converting company 22. The conversion of a company shall (a) take effect on the issue of the certificate; (b) operate so that all shares are deemed to have been validly surrendered and cancelled; (c) have effect so that every member who has not agreed to contribute to the share capital of the company shall cease to be a member; (d) not affect any right or obligation of the company except as otherwise provided in this section or render defective any proceedings by or against the company. Conversion of limited company into unlimited company 23. A limited company may convert to an unlimited company by passing a special resolution to that effect and by making any necessary amendments to its articles and filing with the Registrar a copy of the resolution. 55

56 Conversion of unlimited company into limited company 24. An unlimited company may convert to an limited company by passing a unanimous resolution to that effect and filing with the Registrar a copy of the resolution. Associated bodies corporate 25. (1) A body corporate shall be considered as associated if one is a subsidiary of the other or both are subsidiaries of the same body corporate. (2) A company shall be considered as associated if one is a subsidiary of the other or both are subsidiaries of the same body corporate. Colour coding 26. (1) The various companies and their certificates of incorporation, or certificates of registration, in the case of a foreign company incorporated outside Zambia, shall be colour coded. (2) The Minister may make regulations providing for the colour coding of companies. PART IV COMPANY NAME Abbreviation of Limited Company 27. Where the liability of the shareholders of a company is limited, the registered name of the company shall end with the word "Limited" or the 56

57 abbreviation "Ltd". Registrar may allow company to dispense with "Limited" in its name 28. (1) The Registrar may, on the application of a company limited by guarantee, grant the company written permission to omit the word "Limited" from its name. (2) The Registrar may grant the permission on such conditions as the Registrar thinks fit, and those conditions shall be binding on the company. (3) The Registrar may make a decision to dispense with the word "Limited" from its name for a company which is already registered if the Registrar is satisfied that the company is or becomes a company limited by guarantee. (4) On incorporation a company limited by guarantee shall enjoy all the privileges of a limited company, and be subject to all its obligations, except those of using the abbreviation "Ltd" as part of its name. Revocation of dispensation of Limited. 29. (1) The Registrar may revoke a decision made under section twenty-eight, where the reasons for the dispensation cease to be valid. (2) Where a revocation of a decision is made by the Registrar the revocation shall take effect on 57

58 such date as the Registrar shall determine. Reservation of company name Application for name and reservation of name 30. The Registrar shall register a company or a change of the name of a company where the name has been cleared and granted by the Registrar. 31. (1) The Registrar may refuse to reserve or register a proposed name of a company where it appears to the Registrar that the name, if registered, is likely to cause confusion with a well known name; or the registration is sought to prevent another person who is legitimately entitled to use the name from using the name; or the registration of the name is otherwise undesirable or not in the public interest; and the Registrar may direct the Company to change its name in accordance with this Division. (2) The Registrar shall, where the Registrar refuses to register a proposed name of a company, notify the applicant of the reasons for the refusal within seven days of the decision. The Registrar may, where a company does not change its name after receiving a direction under subsection (1), within fifty days or such longer period as the Registrar may allow, in writing, register the designating number of the company, together with the word "Limited" or "PLC" if required by section thirty seven, as the name of the company, and shall issue a new certificate of incorporation for the 58

59 company worded to meet the circumstances of the case A change of name under subsection (1) shall not affect any rights or obligations of the company nor render defective any legal proceedings that could have been continued or commenced against it by its former name, and any such legal proceedings may be continued or commenced against it by its new name. (5) Where the Registrar directs a company to change its name, compensation shall not be payable in respect of the name ordered to be changed. (6) In this section, "well known name" means a name associated generally with a company, whether within or outside the Republic, and in respect of which confusion is likely to arise if registered by another company, other than the company generally known by that name. Change of name 32. (1) A company may pass a special resolution to change its name. (2) Within twenty-one days after the date of the resolution, the company shall notify the Registrar in the prescribed form that the company intends to change its name to the name specified in the resolution in this section called the 59

60 "new name". (3) The Registrar, after considering the new name, shall notify the company that- (a) the new name is acceptable; or (b) in the opinion of the Registrar, the new name of the company would likely cause confusion with the name of another company or is otherwise undesirable, and that the Registrar will not register the new name. (4) If the new name is acceptable, the company shall, within twenty-one days after receiving the notice of the fact, lodge with the Registrar- (a) the company's certificate of incorporation; and (b) a copy of the resolution. (5) On receiving the documents referred to in subsection (4), the Registrar shall enter the new name on the register in place of the former name, and shall issue a replacement certificate of incorporation worded to meet the circumstances of the case. (6) The Registrar shall require the company to cause a notice to that effect to be published in a newspaper of general circulation or in the Gazette. (7) A certificate under this section shall be conclusive evidence of the alteration to which it 60

61 relates. (8) A change of name by a company shall not affect any rights or obligations of the company nor render defective any legal proceedings that could have been continued or commenced against it by its former name, and any such legal proceedings may be continued or commenced against it by its new name. Date of effect of change of name 33. The change of name of a company shall take effect from the date contained in the certificate of incorporation. 34. (1) A company shall ensure that its name is clearly stated - (a) in every written communication sent by, or on behalf of the company; and (b) on every document issued or signed by or on behalf of the company and which evidences or creates a legal obligation of the company. (2) If a company fails to comply with subsection (1), the company, and each officer in default, commits an offence, and shall be liable on conviction to a fine not exceeding forty thousand penalty units. 61

62 A company name incorrectly stated 35. Where the name of a company is incorrectly stated in a document which evidences or creates a legal obligation of the company and a person issues or signs the document by or on behalf of the company, every person who issues or signs the document is liable to the same extent as the company unless the person who issues or signs the document proves that the person in whose favour the obligation was incurred was aware at the time the document was issued or signed that the obligation was incurred by the company. Effect of change of company name on public notices issued 36. Where, within a period of twelve months prior to a company s release of any public notice the name of the company changes, the company shall ensure that the notice, that is published in a newspaper of general circulation or in the Gazette, states - (a) that the name of the company has changed; (b) the specific date or month in which it changed; and (c) the former name or names of the company. (2) If a company fails to comply with subsection (1), the company, and each officer in default, commits an offence, and shall be liable on 62

63 conviction to a fine not exceeding forty thousand penalty units for each day that the failure continues. PART V CAPACITY, POWERS AND VALIDITY OF ACTS Capacity, powers and rights of Company 37. (1) A company shall have, subject to this Act and to such limitations as are inherent in its corporate nature, the capacity, rights, powers and privileges of an individual. (2) A company shall have the capacity to carry on its business and exercise its powers in any jurisdiction outside Zambia to the extent that the laws of Zambia and of that jurisdiction permit. Dealings between company and other persons 38. (1) A company or a guarantor of an obligation of a company shall not disadvantage a person dealing with the company or with a person who has signed a contract or received rights or interests from the company based on the fact that - (a) the provisions of this Act, the articles of association and the internal rules and regulations of the company, have not been complied with; or (b) a person named as a director or employee of the company in the 63

64 most recent notice received by the Registrar - (i) is not a director or employee of a company; (ii) is not duly appointed; or (iii) does not have authority to exercise powers usually performed by a director or employee of a company. (2) A person appointed by a company as a director, employee, or nominee of the company with special authority granted by the owners of that company to exercise those powers held by persons in those posts may exercise those powers. (3) A document issued on behalf of a company by a director, employee, or nominee of a company with actual or usual authority to issue the document is valid or genuine. (4) Notwithstanding subsection (3), a document may be opposed or become invalid where the person has, or ought to have, by virtue of the person s position in a company, knowledge of the matters referred to in this section or that the documents used are forged documents. (6) Subsection (1) shall apply even though a person referred to in subsections (2) to (4) acts 64

65 fraudulently or forges a document that appears to have been signed on behalf of a company, unless the person dealing with the company or with a person who has acquired property, rights, or interests from the company has actual knowledge of the fraud or forgery. No presumption of knowledge of article of association 39. A person shall not be affected by, or be deemed to have notice or knowledge of the contents of the articles of association of, or any other document relating to, a company merely because the articles of association or the document are - (a) (b) registered ; or are available for inspection at an office of the company. PART VI DE-REGISTRATION OF COMPANY Power of Registrar to strike company off register 40. (1) Where: (a) a company has not filed annual returns in accordance with this Act, or (b) the Registrar has reasonable cause to believe that the company is not carrying on business or is not in operation, the Registrar may send to the company by registered post a letter to that effect and also stating 65

66 that, if the annual returns are not lodged within one month from the date of the notice or an answer showing cause to the contrary is not received within one month from the date of the letter, a notice will be published in the Gazette with a view to dissolving the company under this section. (2) If, at the expiration of the period of one month after the sending of the letter, the company does not file annual returns or the Registrar is not satisfied that the company is carrying on business or is in operation, the Registrar may at any time thereafter cause to be published in the Gazette and send to the company by registered post a notice that at the expiration of three months from the date of that notice, unless cause is shown to the contrary, the company will be dissolved. Property of deregistered company 41. The property of a company which is removed from the register includes leasehold rights and all other rights vested in or held on behalf of or on trust for the company prior to its removal but does not include property held by the former company on trust for any other person. Registrar to act as representati ve of defunct company in certain events 42. (1) Where, after a company has been dissolved, the Registrar is satisfied- (a) that the company, if still existing, would 66

67 be legally or equitably bound to carry out, complete or give effect to some dealing, transaction or matter; and (b) that in order to carry out, complete or give effect thereto, some purely administrative and not discretionary act should have been done by or on behalf of the company, or should be done by or on behalf of the company if it were still existing; the Registrar may, as representing the company or its liquidator; do or cause to be done any such act. (2) The powers of the Registrar under subsection (1) shall include the powers to execute or sign any relevant instrument or document, and the Registrar shall, when so executing or signing an instrument or document, endorse thereon a note or memorandum to the effect that he has done so under this section, and such an execution or signature shall have the same force, validity and effect as if the company had been in existence and had executed the instrument or document. (3) Neither the Registrar nor the Government shall incur any liability to any person by reason of any act done or caused to be done by the Registrar under this section. Continuation of liability of directors, shareholders and others 43. The removal of a company from the register shall not affect the liability of any former 67

68 director or shareholder of the company or any other person in respect of any act or omission that takes place before the company is removed from the register and that liability continues and may be enforced as if the company has not been removed from the register. Power of court to declare dissolution of company void 44. (1) Where a company has been dissolved under this Act, the court may at any time within two years after the date of dissolution, on application by the reveiver or liquidator of the company or by any other person who appears to the court to be interested, make an order upon such terms as the court thinks fit declaring the dissolution to have been void, and thereupon such proceedings may be taken as might have been taken if the company had not been dissolved, except that, for the purposes of any period of limitation, time shall not be deemed to run during the period between the dissolution and the date of the order, or of such other date as the order specifies. (2) The court may by the order give such directions and make such provisions as it thinks just for placing the company and all other persons in the same position as nearly as may be as if the company had never been dissolved. (3) The person on whose application the order 68

69 is made shall, within seven days after the making of the order or such further time as the court may allow, lodge with the Registrar and with the official receiver a copy of the order, and the Registrar shall thereupon cause notice thereof to be published in the Gazette or otherwise as the court may direct. (4) If the person fails to comply with subsection (3), he shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding three monetary units for each day that the failure continues. Application for administrative restoration to the register (5) An application in the prescribed form and upon payment of the prescribed fees may be made by a former director to the registrar to restore to the register a company that has been struck off the register under section fourty provided that the Registrar may not restore the company to the register if: (a) the application has been made after the end of the period of five years from the date of dissolution; (b) there has not been payment of all outstanding fees including penalties due at the date of dissolution 69

70 PART VII ADMINISTRATION AND MANAGEMENT OF A COMPANY Registered office 45. (1) Every company shall have a registered office in Zambia to which all communications and notices may be addressed and which shall constitute the address for service, of legal proceedings, on the company. (2) Every company shall display, in a conspicuous place at the registered office, the company s certificate of incorporation. Changing registered office 46. (1) The Board of directors of a company may, at any time, change the registered office of the company. (2) The change of the registered office shall be notified to the Registrar in the prescribed form within 15 days of such change. (3) The change of the registered office shall take effect on the date contained in the notice. Records kept at company s registered office 47. A company shall keep the following records at its registered office: (a) articles of association; (b) minutes of all meetings and resolutions of shareholders within 70

71 the last five years; (c) an interests register; (d) minutes of all meetings and resolutions of directors and directors committees within the last five years; (e) the full names and addresses of the current directors; (f) copies of all written communications to all shareholders or all holders of the same class of shares during the last ten years, including annual reports; (g) copies of all financial statements for the last ten years completed accounting periods; (h) the accounting records for the last five years; (i) the shares register; and (j) the copies of instruments creating or evidencing charges required to be registered under this Act. (k) Any other document or record as the Minister may prescribe 48. Every shareholder and director shall be entitled, on giving reasonable notice, to inspect the 71

72 records of the company, without charge and at a reasonable time. Seal of company office 49. (1) A company shall have a common seal bearing its name and the words "common seal" thereon in legible Roman letters. (2) The common seal shall not be used except with the authority of a resolution of the directors of a committee of the directors specifically empowered to authorise the affixing of the seal. Official seal for use abroad 50. (1) A company may, subject to its articles, have for use in any place outside Zambia an official seal, which shall be a facsimile of the common seal of the company with the addition on its face of the name of the places where it is to be used. (2) Every document to which an official seal is duly affixed shall bind the company as if it had been sealed with the common seal of the company. (3) The company may, by writing under its common seal, authorise any agent appointed for that purpose to affix the official seal to any document to which the company is a party in that place. (4) Any person dealing with such an agent in reliance on the writing conferring the authority shall be entitled to assume that the authority of the agent continues during the period, if any, specified in the writing or, if no period is therein specified, until that person has actual notice of the revocation or 72

73 determination of the authority. (5) The person affixing any such official seal shall, by writing under his hand, certify on the document to which the seal is affixed the date on which and the place at which it is affixed. Form of contracts and instruments registered office 51. (1) Any contract or instrument which, if entered into by a person other than a body corporate, would not be required to be under seal may be entered into or executed without seal on behalf of a company by the secretary, a director, or any person generally or specifically authorised by the directors to do so. (2) Any document purporting to be a document under the seal of a company, or issued on behalf of the company, shall be received in evidence and shall be presumed to be duly executed or issued. Bills of exchange and promissory notes Execution of deeds abroad 52. A bill of exchange or promissory note shall be deemed to have been made, accepted or endorsed on behalf of a company if made, accepted or endorsed in the name of, or by or on behalf or on account of, the company by any person acting under its authority, express or implied. 53. (1) A company may, by writing under its common seal, empower any person, either generally or in respect of any specified matters, as its attorney, to execute deeds on its behalf in any place outside Zambia. 73

74 (2) A deed signed by such an attorney on behalf of the company and under his seal shall bind the company and have the same effect as if is were under its common seal of the company. Service of documents on company 54. (1) A document may be served on a company by- (a) leaving it at the registered office of the company; or (b) personal service on a director or secretary. (2) A document sent by post to the registered postal address of the company shall be deemed to have been served on the company if it is proved, by a receipt issued or otherwise, that the document, or a post office notification of the document, was delivered to the registered postal address. (3) Nothing in the section shall affect any provision in this Act relating to the service of any document, or detract from the power of any court to direct how service shall be effected of any document relating to legal proceedings before the court. Service of documents by company 55. (1) For the purposes of this Act, a document may be served by a company on any member, debenture holder, director or secretary of the company- (a) (b) personally; by sending it by registered post in a 74

75 prepaid letter addressed to him at his registered postal address or at any other address supplied by him to the company for the giving of notices to him; or (c) by leaving it for him at his registered address with some person apparently over the age of eighteen years. (2) A document may be served by a company on the joint holders of any share of debenture of the company by serving it on the joint holder named first in the register of members of debenture holders in respect of the share of debenture. (3) A document may be served by a company on the person upon whom the ownership of any share or debenture has devolved by reason of his being a legal personal representative, receiver, or trustee in bankruptcy of a member of debenture holder- (a) personally; (b) by sending it by registered post in a prepaid letter addressed to him at a postal address notified by him to the company; (c) by serving it in any manner in which it might have been served if the death, receivership or bankruptcy had not occurred, if the company has not received notice of a postal address for the person; or (d) by leaving it for him at a place the address of which has been notified by him to the company, with some person apparently over the age of eighteen years. (4) Where a document is sent by registered post, service shall be deemed to be effected by properly addressing, prepaying and posting a letter 75

76 containing the document and to have been effected at the expiration of seven days or, if it is sent to an address outside Zambia, twenty-one days, after the letter containing the same is posted. (5) For the purposes of subsection (4), where a letter is sent to an address outside Zambia, it shall be despatched by airmail. Liability of company not affected by officer's fraud or forgery 56. Where a company would be liable for the acts of any officer or agent, the company shall be liable notwithstanding that the officer or agent has acted fraudulently or forged a document purporting to be sealed by or signed on behalf of the company. PART VIII SECRETARY AND DIRECTORS Division Company Secretary Company secretary 57. (1) Every company shall appoint a company secretary. (2) The persons named in the application for incorporation as the first company secretary or joint company secretary s of a company shall, on the incorporation of the company, be deemed to have been appointed as such for a term of one year. (3) A public company shall appoint a person knowledgeable or experienced in relevant laws as a company secretary. (4) Unless the articles provide otherwise, the 76

77 company secretary, other than the first company secretary, shall be appointed by the directors for such a term as they think fit. (5) A company secretary shall be appointed on such remuneration and other conditions as the directors think fit, and may be removed by them, subject to the company secretary s right to claim damages from the company if removed in breach of contract. (6) The secretary of a company shall be- (a) resident in Zambia, if an individual; (b) incorporated in Zambia, if a body corporate. (7) Anything required or authorised to be done by or to the secretary may, if the office is vacant or there is for any other reason no company secretary capable of acting, be done by or to any assistant or deputy company secretary or, if there is no assistant or deputy company secretary capable of acting, by or to any officer of the company authorised generally or specially for that purpose by the directors. (8) If a company carries on business for more than two months without a company secretary or in contravention of subsection (8), the company, and each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not 77

78 exceeding ten thousand penalty units for each day after that period of two months that the business is carried on. (9) Within sixty business days after a vacancy arises in the office of company secretary, the board shall fill the vacancy by appointing a person whom the directors consider to have the requisite knowledge and experience (10) The minister may prescribe minimum qualifications for company secretaries in specific sectors. Duties of company secretary 58. (1) A company s secretary shall be accountable to the company s board. (2) A company secretary s duties shall include but shall not be restricted to the following: (a) providing the directors of the company collectively and individually with guidance as to their duties, responsibilities and powers; (b) to inform members of the Board of Directors about all the necessary regulations or those which may affect the meetings of shareholders and of the Board of Directors, reports thereof and their submission 78

79 to different relevant authorities provided for under the Law as well as the impact of failure to comply with such Laws; (c) to ensure minutes of the meetings of shareholders or the Board of Directors are well prepared and registers provided for by the articles of association are accurately kept; (d) to ensure the annual financial statements and other types of required documents are submitted to the Registrar, as provided for by this Act; (e) to ensure copies of the annual financial statements and activity reports, where necessary, are submitted to all those provided for by this Act. (f) (g) reporting to the company s board any failure on the part of the company or a director to comply with the Memorandum of Incorporation or rules of the company or this Act; certifying in the company s annual financial statements whether the 79

80 company has filed required returns and notices in terms of this Act, and whether all such returns and notices appear to be true, correct and up to date; (h) carrying out the functions of a person designated in terms of section 33(3). Body corporate or partnership may be appointed company secretary 59. (1) A body corporate or partnership may be appointed to hold the office of company secretary, (2) A change in the membership of a body corporate or partnership that holds office as company secretary shall not constitute a casual vacancy in the office of company secretary. Division Board of Directors Management of company 60. (1) The business and affairs of a company shall be managed by, or under the direction and supervision of a board of directors. (2) The board of directors shall have all the powers necessary for managing, directing and supervising the management of the business and affairs of the company. (3) Without limiting the generality of 80

81 subsection (1), the directors may exercise the powers of the company to borrow money, to charge any property or business of the company or all or any of its uncalled capital and to issue debentures or give any other security for a debt, liability or obligation of the company or of any other person. (4) Subsections (1) and (2) are subject to any modifications, exceptions or limitations contained in this Act or in the company s articles of association. Limitations on powers of directors 61. (1) The board of directors shall not, without the approval in accordance with this section of an ordinary resolution of the company- (a) sell, lease or otherwise dispose of the whole, or substantially the whole, of the undertaking or of the assets of the company; (b) issue any new or unissued shares in the company; or (c) create or grant any rights or options entitling the holders thereof to acquire shares of any class in the company. (2) The approval for a transaction referred to in paragraph (a) of subsection (1) shall be an approval of the specific transaction proposed by the directors. 81

82 (3) This section shall not prohibit- (a) the issue of any shares under a bona fide underwriting agreement; or (b) the issue to a director of such shares, if any, as, under the articles of the company, the director is required to hold by way of share qualification. (4) The validity of any transfer or disposition of property to a person dealing with the company in good faith shall not be affected by a failure to comply with this section. (5) This section shall not limit the powers conferred by the Insolvency Act on any liquidator or receiver of the property of a company. Shareholder to be member of the Board 62. Any shareholder on whom the articles of association confer powers to exercise activities of the board of directors, shall be considered a member of the board of directors, in accordance with this Act. Delegating powers of company 63. (1) Subject to the articles of association, the board of directors of a company may delegate to a committee of directors, a director or employee of the company, or any other person, any one or more of its powers. 82

83 (2) The board of directors that delegates any power in accordance with subsection (1) shall be responsible for the exercise of the power by the delegate as if the power had been exercised by the board of directors itself. Board committee 64. (1) Except to the extent that the articles of association of a company provides otherwise, the board of a company may (a) appoint any number of committees of directors; and (b) delegate to any committee any of the authority of the board. (2) Except to the extent that the articles of association of a company, or a resolution establishing a committee, provides otherwise, the committee (a) may include persons who are not directors of the company, but (i) any such person shall not be ineligible or disqualified to be a director; and (ii) no such person has a vote on a matter to be decided by the committee; (b) may consult with or receive advice 83

84 from any person; and (c) has the full authority of the board in respect of a matter referred to it. (3) The creation of a committee, delegation of any power to a committee, or action taken by a committee, does not alone satisfy or constitute compliance by a director with the required duty of a director to the company. Division Directors Directors 65. (1) A person shall be appointed as a director by the annual general meeting. (2) The board of directors shall comprise a) in the case of a private company, at least two directors; or b) in the case of a public company, or a company limited by guarantee, at least three directors. (3) A company s articles of association may specify a higher number in substitution for the minimum number of directors specified under subsection (2). (4) A person, not being a duly appointed director of the company, who holds out, or 84

85 knowingly allows that person to be held out, as a director of the company- (a) shall be deemed to be a director for the purposes of all duties and liabilities including liabilities for criminal penalties imposed on directors by this Act; and (b) shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding five hundred monetary units. (5) If a company- (a) holds out a person; or (b) allows a person to hold himself out; as a director of the company, knowing that the person is not a duly appointed director, the company shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding five hundred monetary units. (6) No limitation upon the authority of a director of a company, whether imposed by the articles or otherwise, shall be effective against a person who does not have knowledge of the limitation unless, taking into account his relationship with the company, he ought to have had such knowledge. 85

86 Residential requirements of directors (7) The directors shall act in a collegial administration and shall be of a sufficient number provided for in the articles of association to attain a quorum, or if the company has one director, that director acting alone. 66. (1) Half of the directors of a company, including- (a) the managing director, if the company has a managing director; and (b) at least one executive director, if the company has executive directors, shall be resident in Zambia; Qualifications of director 67. (1) A company shall appoint a natural person as director. (2) A person shall not be appointed to hold office as a director if that person (a) is under eighteen years of age; (b) is an undischarged bankrupt; (c) is prohibited from being a director or promoter of or being concerned or taking part in the management of a company; (d) is not a natural person; (e) has been proven to be of unsound mind; (f) does not comply with the 86

87 qualifications for directors contained in the articles of association of the company. (3) The articles of a company may provide further restrictions or qualifications on the appointment or continuation in office of its Directors. (4) A person who is disqualified from being appointed as a director but who acts as a director shall be deemed to be a director, for the purposes of duties and obligations of a director of a company under this Act. Consent in writing before appointment as director 68. A person shall not be appointed as a director of a company unless that person has consented in writing to be a director and made a declaration that that person is not disqualified from being appointed or holding office as a director of a company. Starting to hold office as director 69. (1) A person appointed as a director in an application for incorporation or in an amalgamation proposal shall hold office as a director from the date of incorporation or the date the amalgamation proposal until that person ceases to hold office as a director in accordance with this Act. (2) All subsequent directors of a company shall, unless the articles of association of the 87

88 company otherwise provide, be appointed by ordinary resolution. Court may appoint Directors 70. (1) If (a) there are no directors of a company, or the number of directors is less than two or less than the quorum required for a meeting of the board; and (b) it is not possible or practicable to appoint directors in accordance with the company's articles, a shareholder or creditor of the company may apply to the court to appoint one or more persons as directors of the company, and the court may make an appointment if it considers that it is in the interest of the company to do so. (2) An appointment may be made on such terms and conditions as the court thinks fit. No directions or instructions to be given to directors by person not eligible to be director 71. (1) A person shall not give directions or instructions to the duly appointed directors of a company if the person is not eligible to be a director of the company. (2) A person who contravenes this section shall be guilty of an offence and shall be liable on conviction to a fine not exceeding eighteen thousand 88

89 monetary units or imprisonment for a period not exceeding six months, or to both. Alternate directors 72. (1) Subject to any restriction in the articles of a company, a director may- (a) be appointed either generally, or in respect of a specified period or specified circumstances; and (b) with the approval of the directors; appoint a person who is not a director as his alternate director. (2) An appointment as alternate director shall be in writing signed by the director making the appointment and the person appointed and lodged with the company. (3) A person shall not be appointed as an alternate director by more than one director. (4) Subject to this section, the provisions of this Act including provisions on registration of directors' particulars and interests, shall apply to an alternate director as if the alternate director were a director and not the agent of the director who appointed the alternate director. (5) An appointment of a person as an alternate director shall confer on the alternate director- (a) the right to attend any meeting of 89

90 the directors or any committee of directors at which the director who appointed the alternate director is not present; and (b) one vote at such a meeting or committee. (6) Except in relation to meetings, both the director who appointed an alternate director and the alternate director may act as director of the company. (7) An alternate director shall not be required to hold any shares. (8) An alternate director shall not appoint an alternate director. (9) The company shall not be liable to pay additional remuneration by reason of the appointment of an alternate director. (10) The articles may provide that an alternate director shall be entitled to receive from the company during the currency of the director s appointment the remuneration to which the director who appointed the alternate director would, but for the appointment, have been entitled, and that the director who appointed the alternate director shall not be entitled to that remuneration, but, in the absence of such a provision, the alternate shall not be entitled to be remunerated otherwise than by the 90

91 director who appointed the alternate director. (11) The appointment of an alternate director shall cease- (a) at the expiration of the period, if any, for which the alternate director was appointed; (b) if the director who appointed the alternate director gives written notice to that effect to the company; (c) if the director who appointed the alternate director ceases for any reason to be a director; or (d) if the alternate director resigns by notice in writing to the company. Request to increase number of directors 73. Where the number of directors is less than the quorum required in the company s articles of association, any injured shareholder or creditor of the company shall request that the number be increased. Removal from office of director 74. (1) A director of a public limited company may be removed from office by an ordinary resolution passed at a meeting called for that purpose. (2) A director of a private limited company 91

92 may be removed from office by an ordinary resolution passed at a meeting called for that purpose. (3) The notice of the meeting shall state the purpose of the meeting as being the removal of the director. (4) A resolution to remove a director shall not be moved at any general meeting unless notice of the intention to move it has been given to the company not less than twenty-eight days before the meeting. (5) On receipt of notice of an intended resolution to remove a director under this section, the company shall forthwith send a copy thereof to the director concerned and the director (whether or not the director is a member of the company) shall be entitled- (a) to be heard on the resolution at the meeting; (b) to send to the company a written statement in this section called "the director's statement", copies of which the company shall, subject to this section, send with every notice of the general meeting or, if the statement is received too late, shall forthwith circulate to every person entitled to notice of the meeting in the same manner as notices of meetings are 92

93 required to be given; and (c) to require that the director's statement be read to the meeting. (6) The company shall not be obliged to send or circulate the director's statement if it is received by the company less than seven days before the meeting. (7) The court, on application by the company or any other person who claims to be aggrieved and on being satisfied that the director's statement is unreasonably long or that the rights conferred by this section are being abused to secure publicity for defamatory matter, may order- (a) that the company shall not send or circulate the director's statement and that the statement not be read at the meeting; and (b) that the costs of the applicant are to be paid in whole or in part by the director, notwithstanding that he is not a party to the application. (8) On a resolution to remove a director no share shall, on a poll, carry a greater number of votes than it would carry in relation to the generality of matters to be voted on at a general meeting of the company. (9) A vacancy created by the removal of any 93

94 director under this section, if not filled at the meeting at which the director is removed, may be filled as a casual vacancy. Vacancy in office of director 75. (1) The office of director of a company shall be vacated if the person holding that office - (a) resigns in accordance with subsection (2); (b) is removed from office in accordance with this Act; (c) becomes disqualified from being a director under this Act; (d) dies; or (e) vacates office in accordance with the articles of association of the company. (2) A director of a company may resign office by signing a written notice of resignation and delivering it to the registered office of the company. The notice is effective when it is received at that address or at a later time specified in the notice. (3) In addition to the other circumstances specified in this Act, an office of director shall become vacant if the director- (a) is absent from three consecutive meeting without reasonable cause; 94

95 (b) holds any office of profit under the company, except that of managing director or principal executive officer, without the consent of the company by ordinary resolution; or (c) is directly or indirectly interested in any contract or proposed contract with the company and fails to declare his interest as required by this Act. (4) The articles of a company may provide for the termination or vacation of office in circumstances additional to those specified in this Act. (5) Notwithstanding the vacation of office, a person who held office as a director remains liable under the provisions of this Act that impose liabilities on directors in relation to acts and omissions and decisions made while that person was a director. Notice of change of Directors 76. (1) The board of a company must ensure that notice in the prescribed form of (a) a change in the directors of a company, whether as the result of a director ceasing to hold office or the appointment of a new director, or both; or 95

96 (b) a change in the name or the residential address of a director of a company is delivered to the Registrar for registration. (2) A notice under subsection (1) shall (a) specify the date of the change; and (b) include the full name and residential address of every person who is a director of the company from the date of the notice; and (c) in the case of the appointment of a new director, have attached the form of consent; and (d) be delivered to the Registrar within twenty working days of (i) the change occurring, in the case of the appointment or resignation of a director; or (ii) the company first becoming aware of the change, in the case of the death of a director or a change in the name or residential address of a director. (3) If the board of a company fails to 96

97 comply with this section, every director of the company commits an offence and is liable to a fine not exceeding ten thousand penalty units. Resignation by director 77. (1) Where a company has only two directors, and one director intends to resign, that director shall not resign from office until that director calls a meeting of shareholders to receive notice of the resignation or until one or more new directors are appointed. (2) The resignation by one of two directors of a company shall take effect on the date on which the meeting of shareholders is held. Replacing company s majority shareholder who dies 78. (1) Where a person who is a director and majority shareholder of a private company dies, the heir, or where the person leaves no heir, the personal representative under the relevant regulations, may appoint a director. (2) Where the heir fails to appoint a director within thirty days of the death of the last director or majority shareholder, the Registrar may apply to Court for the appointment of a fit and proper person to act as director, until the appointment of a director by the heir. Non accumulation of duties 79. Where a person who is a director and 97

98 majority shareholder of a company is unable to manage the affairs of the company by reason of mental incapacity, the guardian appointed may act as director or appoint a person as director. Disclosure of replacement of directors 80. (1) The Board of directors shall disclose to, or cause to be registered by the Registrar, within thirty days, the following: (a) a replacement of any one of the members of the Board of directors; or (b) any change of name, address or any other details of a member of the Board of directors. (2) Where the Board of directors fails to comply with the provisions of this section all its members commit an offence and shall be liable upon conviction to a penalty of ten thousand penalty units. Division Duties of Directors Duty of directors to act in good faith and in best interests of company 81. (1) Subject to this section, a director of a company, when exercising powers or performing duties, shall act in good faith and in what the director believes to be the best interests of the company. (2) A director of a company that is a 98

99 wholly-owned subsidiary may, when exercising powers or performing duties as a director, if expressly permitted to do so by the articles of the company, act in a manner which the director believes is in the best interests of that company's holding company even though it may not be in the best interests of the company. (3) A director of a company that is a subsidiary may, when exercising powers or performing duties as a director, if expressly permitted to do so by the constitution of the company and with the prior agreement of the shareholders other than its holding company, act in a manner which the director believes is in the best interests of that company's holding company even though it may not be in the best interests of the company. (4) A director of a company that is carrying out a joint venture between the shareholders may, when exercising powers or performing duties as a director in connection with the carrying out of the joint venture, if expressly permitted to do so by the articles of association of the company, act in a manner which he or she believes is in the best interests of a shareholder or shareholders, even though it may not be in the best interests of the company. 99

100 Exercise of powers in relation to employees 82. Nothing under this Act limits the power of a director to make provision for the benefit of employees of the holding or subsidiary company in connection with the company ceasing to carry on the whole or part of its business. Directors to comply with Act and articles 83. A director of a company must not act, or agree to the company acting, in a manner that contravenes this Act or the articles of the company. Reckless trading 84.A director of a company shall not (a) agree to the business of the company being carried on in a manner likely to create a substantial risk of serious loss to the company's creditors; or (b) cause or allow the business of the company to be carried on in a manner likely to create a substantial risk of serious loss to the company's creditors. General duties of director 85. The general duties under this Part are 100

101 owed by a director of a company to the company. Risk Management 86. The directors of a company shall take measures necessary to prevent, reduce, contain and manage any attendant risks to the business of a company. Fiduciary duty of directors 87. (1) A director shall (a) exercise power in accordance with this Act and act within the company s constitutional powers; (b) act within the company s articles; (c) promote the company to ensure its success; (d) exercise independent judgment; (e) exercise reasonable care, skill and diligence; (f) declare a conflict of interest; (g) disclose information about their remuneration in the financial statements of their companies; (h) exercise powers for the purpose for which they are 101

102 conferred; and (i) declare an interest in a proposed transaction or arrangement. Duty to promote success of company 88. (1) A director of a company shall act in the way the director considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole, and in doing so have regard, amongst other things, to - (a) the likely consequences of any decision in the long term; (b) the interests of the company s employees; (c) the need to foster the company s business relationships with suppliers, customers and others; (d) the impact of the company s operations on the community and the environment; (e) the desirability of the company maintaining a reputation for high standards of business conduct; and (f) the need to act fairly as between members of the company. (2) Where or to the extent that the purposes of the company consist of or include purposes other 102

103 than the benefit of its members, subsection (1) has effect as if the reference to promoting the success of the company for the benefit of its members were to achieving those purposes. (3) The duty imposed by this section has effect subject to any enactment or rule of law requiring directors, in certain circumstances, to consider or act in the interests of creditors of the company. Duty to exercise independent judgment 89. (1) A director of a company shall exercise independent judgment in the conduct of the affairs of the company. (2) This duty is not infringed by his acting (a) in accordance with an agreement duly entered into by the company that restricts the future exercise of discretion by its directors, or (b) in a way authorised by the company s constitution. Duty to exercise reasonable care, skill and diligence 90. (1) A director of a company shall exercise reasonable care, skill and diligence. (2) The care, skill and diligence are those that would be exercised by a reasonably diligent person with - (a) the general knowledge, skill and 103

104 (b) experience that may reasonably be expected of a person carrying out the functions carried out by the director in relation to the company; and the general knowledge, skill and experience that the director has. Duty to avoid conflict of interest 91. (1) A director of a company shall avoid a situation in which the director has, or can have, a direct or indirect interest that conflicts, or possibly may conflict, with the interests of the company. (2) Subsection (1) applies in particular to the exploitation of any property, information or opportunity (and it is immaterial whether the company could take advantage of the property, information or opportunity). (3) The duty in this section does not apply to a conflict of interest arising in relation to a transaction or arrangement with the company. (4) The duty is not infringed (a) if the situation cannot reasonably be regarded as likely to give rise to a conflict of interest; or (b) if the matter has been authorised by the directors. (5) Authorisation may be given by the 104

105 directors - (a) where the company is a private company and nothing in the company s articles invalidates such authorisation, by the matter being proposed to and authorised by the directors; or (b) where the company is a public company and its articles includes provision enabling the directors to authorise the matter, by the matter being proposed to and authorised by them in accordance with the articles. (6) The authorisation is effective only if (a) any requirement as to the quorum at the meeting at which the matter is considered is met without counting the director in question or any other interested director, and (b) the matter was agreed to without their voting or would have been agreed to if their votes had not been counted. (7) Any reference in this section to a conflict of interest includes a conflict of interest and duty and a conflict of duties. 105

106 Meaning of Interest 92. (1) Subject to subsection (2), a director of a company shall have interest in a transaction to which the company is a party where the director- (a) is a party to, or shall or may derive a material financial benefit from the transaction; (b) has a material financial interest in or with another party to the transaction; (c) is a director, officer or assignee of another party to, or person who shall or may derive a material financial benefit from the transaction, not being a party or person that is (i) the company s holding company being a holding company of which the company is a wholly-owned subsidiary; (ii) a wholly-owned subsidiary of the company; or (iii) a wholly-owned subsidiary of a holding company of which the company is also a wholly-owned subsidiary; (d) is the parent, child or spouse of 106

107 another party to, or person who shall or may derive a material financial benefit from, the transaction; or (e) is otherwise directly or indirectly materially interested in the transaction. (2) A director of a company shall not be deemed to be interested in a transaction to which the company is a party if the transaction comprises only the giving by the company of security to a third party and at the request of that third party which has no connection with the director and in respect of a debt or obligation of the company for which the director or another person has personally assumed responsibility in the whole or in part under a guarantee, indemnity; or by the deposit of a security. Duty not to accept third party benefits 93. (1) A director shall not accept a benefit from a third party conferred by reason of the director - (a) being a director; or (b) doing (or not doing) anything as director. (2) A third party means a person other than the company, an associated body corporate or a person acting on behalf of the company or an associated body corporate. 107

108 (3) Benefits received by a director from a person by whom the director s services as a director or otherwise are provided to the company are not regarded as conferred by a third party. (4) the duty under this section is not infringed if the acceptance of the benefit cannot reasonably be regarded as likely to give rise to a conflict of interest. Director's of care duty 94. A director of a company, when exercising powers or performing duties as a director, shall exercise the care, diligence, and skill that a reasonable director would exercise in the same circumstances taking into account, but without limitation, (a) (b) (c) the nature of the company; and the nature of the decision; and the position of the director and the nature of the responsibilities undertaken by the director. Use of information and advice 95.(1) Subject to subsection (2), a director of a company, when exercising powers or performing duties as a director, may rely on reports, statements, and financial data and other information prepared or supplied, and 108

109 on professional or expert advice given, by any of the following persons: (a) an employee of the company whom the director believes on reasonable grounds to be reliable and competent in relation to the matters concerned: (b) a professional adviser or expert in relation to matters which the director believes on reasonable grounds to be within the person's professional or expert competence: (c) any other director or committee of directors upon which the director did not serve in relation to matters within the director's or committee's designated authority. (2) Subsection (1) applies to a director only if the director (a) acts in good faith; and (b) makes proper inquiry where the need for inquiry is indicated by the circumstances; and (c) has no knowledge that such reliance is unwarranted. 109

110 Transaction requiring approval by company 96. Where any transaction under this Act requires approval by a company, details of such a transaction and the interest that a member of the Board of directors may have in the transaction shall be clearly explained and shall be specifically approved by the following: (a) a resolution which is duly forwarded to the shareholders for signature and signed by at least three quarters of those entitled to vote in the meeting of shareholders without including those with an interest in the concerned transaction; or (b) an ordinary resolution voted for in a general meeting and where those members of the Board of directors or those shareholders with an interest in the concerned transaction do not vote whether directly or indirectly or, where the latter vote, their votes become null and void. (2) Approval by the company may be granted before or after the circumstances of the transaction. (3) A resolution for the approval of one or several transactions, or of a series of existing transactions shall not be valid unless it is signed and 110

111 approved within fifteen days following the date on which the first series of transactions commences. Transaction in which a director has a personal interest 97. A director shall be deemed to have an interest in a transaction that a company is interested in where - (a) the director is linked to such a transaction or may benefit from it financially; (b) the director benefits from such a transaction financially or has a relationship with any other person concerned with the transaction; (c) a member of the board of directors, an employee or attorney of the person concerned with the transaction or that can be interested in it and that is other than - (i) a subsidiary company; or (ii) a subsidiary of another subsidiary; (d) the director is the parent, the child or the spouse of another party to the transaction and who may have financial interest in it; or (e) is to some extent directly or indirectly interested in the 111

112 transaction. Disclosure of interest of director 98. A director of a company shall, forthwith after becoming aware of the fact that a director is interested in a transaction or proposed transaction with the company, cause to be entered in the interests register and disclose to the board of directors of the company - (a) where the monetary value of the director s interest is able to be quantified, the nature and monetary value of that interest; and (b) where the monetary value of the director s interest cannot be quantified, the nature and extent of that interest. Transaction in which member of the Board of directors has interest to be void 99. (1) A transaction entered into by a company in which a director of the company is interested may be avoided by the company at any time before the expiration of six months after the transaction is disclosed to all the shareholders. (2) A transaction shall not be avoided where the company receives fair value for it. (3) The question as to whether a company receives a fair value under a transaction shall be determined on the basis of the information known to 112

113 the company and to the interested director at the time the transaction is entered into. Effect of voiding transaction 100. The avoidance of a transaction shall not affect the title or interest of a person in or to property which that person has acquired where the property is acquired - (a) from a person other than the company; (b) for an appropriate price; or (c) without knowledge of the circumstances of the transaction under which the person acquires the property from the company. Non voting by directors interested in transaction 101. (1) A director of a company, who is interested in a transaction entered into, or to be entered into, by the company shall not vote on any matter relating to the transaction. (2) Where a director with an interest in a matter votes on it, the vote shall be null and void. Disclosure of information 102. (1) Unless otherwise provided by Law, a director or employee shall not disclose to anyone and for any use the information that the director possesses by virtue of the director s or employee s duty and to which the director or employee would not 113

114 have had access in other circumstances. (2) A director may, upon notice given to the Board of directors, put to use or disclose information to a person whose interests the director represents or to the person authorized to be informed following guidelines, instructions, powers and responsibilities of the company. (3) The Board of directors may authorise a director to disclose, put to use information or act depending on the information provided the company s interests are not jeopardized. (4) Any interest that a director obtains from using the information the director has access to shall be made known to the company. (5) A director of a company has a relevant interest in a share issued by a company if the director - (a) is a beneficiary of the share; (b) has the power to exercise any right to vote attached to the share; (c) has the power to control the exercise of any right to vote attached to the share; (d) has the power to acquire or dispose of the share; (e) has the power to control the acquisition or disposition of the 114

115 (f) share by another person; or may at any time, have such power following an agreement or consensus. Disclosure of interest in shares issued by company 103. Any person who is a director of a public company, and who has a relevant interest in any shares issued by the company shall forthwith - (a) disclose to the Board of directors the number and class of shares in which the relevant interest is held and the nature of the relevant interest; and (b) ensure that the particulars disclosed to the Board of directors are entered in the interests register. Obligation of member of the Board of directors to disclose acquisition or disposal of shares 104. A director of a public company who acquires or disposes of a relevant interest in shares issued by the company shall forthwith, after the acquisition or disposition disclose to the Board - (a) the number and class of shares in which the relevant interest has been acquired; (b) the nature of the relevant interest; (c) the consideration paid or received; and 115

116 (d) the date of the acquisition or disposition. Restrictions applicable to members of Board of directors regarding disposal of shares 105. (1) Where a director of a company or employee in the capacity of a director or employee of the company or a subsidiary company, has information which is material to an assessment of the value of shares or debentures issued by the company or a subsidiary company, being information that would not otherwise be available to him or her, the director or employee may acquire or dispose of those shares or debentures only where - (a) in the case of an acquisition, the consideration given for the acquisition is not less than the fair value of the shares or debentures; or (b) in the case of a disposition, the consideration received for the disposition is not more than the fair value of the shares or securities. (2) The fair value of shares or debentures is to be determined on the basis of all information known to the director, employee or publicly available at that time. (3) The provisions of subsection (1) of this section shall not apply to a share or security that is 116

117 acquired or disposed of by a director or employee, only as a nominee for the company or a related company. Liability for amount equivalent to fair value of shares or debentures 106. Where a director acquires shares or debentures, the director shall be liable to the person from whom the shares or debentures are acquired for the amount by which the fair value of the shares or debentures exceeds the amount paid by the director. Exception Disposing for of companies shares or dealing debentures with for the securities amount by which 107. The provisions of this Act as far as restrictions for the members of the Board of directors with regard to disposing of shares are concerned shall not apply in relation to companies dealing with shares on the capital market. Proceedings of Board of directors 108. The proceedings of the Board of directors which are not provided for in this Act shall be governed by instructions of the Registrar. Remuneration and other benefits for members of Board of directors and executives 109. (1) A company shall by ordinary resolution approve the remuneration of the company s directors and any benefit payable to the directors, or to a former director, including any compensation to a director for loss of employment. (2) The Board of directors may determine the 117

118 terms of any service contract with a managing director, other executive director or senior manager. (3) Directors may be reimbursed expenses properly incurred by them in the performance of their duties as directors. Decisions that Board of directors may approve instead of meeting of shareholders 110. (1) The Board of directors may, instead of the meeting of shareholders of a company, approve (a) the payment of remuneration or the provision of other benefits by the company to a director; or (b) the payment, by the company to a director or former director, of compensation for loss of office. (2) Where the Board of directors has to approve any payment, it shall forthwith enter, or cause to be entered, in the interests register and in minutes, details of the payment. (3) Any shareholder who (a) considers that the payment is not fair to the company; and (b) holds at least ten per cent of the company s voting share capital; may, within one month of knowledge of that payment request the Board to reconsider the payments or request the Board to call a meeting of shareholders to approve or reject the payment by way of ordinary 118

119 resolution. (4) Where the payment is not approved, it shall constitute a debt payable by the directors to the company. Transactions by a company with regard to issuing a guarantee or loan 111. A company may - (a) grant a loan to a subsidiary of the company upon approval by the Board; (b) enter into any guarantee or provide any security in connection with a loan made by any person to any holding company; (c) provide a director with funds to meet expenditure incurred or to be incurred by the director for the purpose of the company or for the purpose of enabling the director to perform duties as an officer of the company; (d) grant a loan in the ordinary course of the business of lending money, where that business is carried on by the company; (e) grant a loan to a director who is engaged in the salaried employment of the company or its subsidiary 119

120 company, in accordance with a scheme for the making of loans to employees of the company which is approved by a meeting of shareholders of the company in so far as its application concerns the Board of directors; (f) grant a loan in respect of a director who holds salaried employment under the company or in a holding company or a subsidiary of the company. (2) A loan granted without complying with the provisions of this section shall be cancelled by a resolution of the company and shall be paid back forthwith irrespective of the loan agreement entered into previously. Rights of shareholders 112. (1) The shareholders of a company may, by unanimous resolution or by unanimous shareholder agreement, approve any payment, provision, benefit, assistance or any other distribution. (2) An approval under subsection (1) shall only be made where there are reasonable grounds to believe that, after the distribution, the company is likely to satisfy its solvency test. 120

121 Ethics and duties of a company s officers 113. Every officer of a company shall exercise - (a) the powers and discharge the duties of his or her office honestly, in good faith and in the best interests of the company; and (b) a degree of care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances. Liability of director or officer who commits breach of duty 114. Where a director or officer willfully commits a breach of any duty the director or officer - (a) shall be liable to compensate the company for any loss it suffers as a result of the breach; (b) shall be liable to account to the company for any profit made as a result of such breach; and (c) any contract entered into between the director or the officer and the company with regard to that transaction may be rescinded by the company. Criteria for decision to be considered valid 115. (1) A decision made by a director or another officer of a company shall subject to 121

122 requirements as to disclosure, be considered valid if - (a) it is made in good faith for a proper purpose; (b) the director or officer does not have a material personal interest; (c) the company is appropriately informed of the decision s subject matter; (d) the director or officer reasonably believes that the decision is in the best interests of the company. (2) The director s or officer s belief that the decision referred to in subsection (1) is in the best interests of the company shall be taken to be a reasonable one unless a reasonable person in that position would hold otherwise. Liability and indemnity with regard to decisions that are made 116. (1) Where a company establishes that a decision made by a director or an officer is not valid, the director or officer shall be held liable for that decision. (2) Where a company establishes that the decision made by a director or an officer is valid, the director or officer shall be indemnified for that decision. 122

123 Compensation by company 117. A company may indemnify a director or employee of the company or a subsidiary company for any expenses incurred by the director in the discharge of the directors. Criteria for compensation 118. A company may indemnify a director or employee of the company or a subsidiary company in respect of - (a) liability to any person, other than the company or a subsidiary company, for any act or omission in the director s or employee s capacity as a director or employee; or (b) costs incurred by that director or employee in defending or settling any claim or proceedings relating to any such liability. Subscribing for insurance for director or employee of company or subsidiary company 119. (1) A company may, with the prior approval of the Board of directors, effect insurance for a director or employee of a company or a subsidiary company in respect of - (a) liability, not being criminal liability, for any act or omission in that person s capacity as a director or employee; (b) costs incurred by that director or 123

124 employee in defending or settling any claim or proceeding relating to any such liability; (c) costs incurred by that director or employee in defending any criminal proceedings - (i) that have been brought against the director or employee in relation to any act or omission in that person s capacity as a director or employee; or (ii) in which that person is acquitted; (iii) in relation to which a nolle prosequi is entered. (2) The Board of directors shall - (a) enter or cause to be entered in the interests register; (b) record or cause to be recorded in the minutes of a directors meeting; (c) disclose or cause to be disclosed in the annual report; the particulars of any indemnity given to, or insurance policy effected for, any director or employee of the company or a subsidiary company. 124

125 (2) Where an insurance policy is effected for a director or employee of a company or a subsidiary company and this section is not being complied with, the director or employee shall personally be liable to the company for the cost of effecting the insurance policy unless the director or employee proves that it was fair to the company at the time the insurance policy was effected. PART IX SHARES AND DEBENTURES Division 9.1 Issue of Shares Legal nature of shares 120. A share in a company is personal property. Rights and powers attaching to shares 121. (1) Subject to subsection (2), a share in a company confers on the holder (a) the right to one vote on a poll at a meeting of the company on any resolution, including any resolution to (i) appoint or remove a director or auditor; (ii) adopt and alter the company s articles; 125

126 (iv) approve a major transaction; (v) approve an amalgamation of the company; (vi) put the company into liquidation in accordance with the Insolvency Act, (b) the right to an equal share in dividends authorised by the board: (c) the right to an equal share in the distribution of the surplus assets of the company. (2) Subject to this Act, the rights specified in subsection (1) may be negated, altered, or added to by the articles of the company or in accordance with the terms on which the share is issued. Types of shares 122. (1) Subject to the articles of the company, different classes of shares may be issued in a company. (2) Without limiting subsection (1), shares in a company may (a) be redeemable; or 126

127 (b) confer preferential rights to distributions of capital or income; or (c) confer special, limited, or conditional voting rights; or (d) not confer voting rights. No nominal value 123. (1) A share shall not have a nominal or par value. (2) Nothing in subsection (1) prevents the issue by a company of a redeemable share. Transferability of shares 124. (1) Subject to any limitation or restriction on the transfer of shares in the constitution, a share in a company is transferable. (2) A share is transferred by entry in the share register. (3) The personal representative of a deceased shareholder may transfer a share even though the personal representative is not a shareholder at the time of transfer. Issue of shares on incorporation and amalgamation 125. A company shall, (a) forthwith after the incorporation of the company, issue to any person or persons named in the 127

128 application for incorporation as a shareholder or shareholders, the number of shares specified in the application as being the number of shares to be issued to that person or those persons: (b) in the case of an amalgamated company, forthwith after the amalgamation is effective, issue to any person entitled to a share or shares under the amalgamation proposal, the share or shares to which that person is entitled. Issue of other shares 126. Subject to this Act and the articles of the company, the board of a company may issue shares at any time, to any person, and in any number it thinks fit. Notice of share issue 127. (1) The board of a company shall deliver to the Registrar for registration, within ten working days of the issue of shares, a notice in the prescribed form of the issue of the shares by the company. (2) If the board of a company fails to 128

129 comply with subsection (1), every director of the company commits an offence and is liable on conviction to the penalty set out in this Act. Shareholder approval for issue of shares 128. (1) Notwithstanding section one hundred and twenty two, if shares cannot be issued by reason of any limitation or restriction in the company's articles, the board may issue shares if the board obtains the approval for the issue in the same manner as approval is required for an alteration to the articles that would permit such an issue. (2) Subject to the terms of the approval, the shares may be issued at any time, to any person, and in any number the board thinks fit. (3) Within ten working days of approval being given under subsection (1), the board shall ensure that notice of that approval in the prescribed form is delivered to the Registrar for registration. (4) Nothing in this section shall affect the need to obtain the approval of an interest group which relates to the alteration of shareholders' rights if the issue of shares affects the rights of that interest group. (5) A failure to comply with this section does not affect the validity of an issue of shares. 129

130 (6) If the board of a company fails to comply with subsection (3), every director of the company commits an offence and is liable to the penalty set out in this Act. Pre-emptive rights 129. (1) Shares issued or proposed to be issued by a company that rank or would rank as to voting or distribution rights, or both, equally with or prior to shares already issued by the company shall be offered for acquisition to the holders of the shares already issued in a manner and on terms that would, if accepted, maintain the existing voting or distribution rights, or both, of those holders. (2) An offer under subsection (1) shall remain open for acceptance for a reasonable time. (3) The articles of a company may negate, limit, or modify the requirements of this section. Consideration for issue of shares 130. (1) The consideration for which a share is issued may take any form and may be cash, promissory notes, contracts for future services, real or personal property, or other securities of the company. 130

131 (2) A shareholder shall not be liable to pay or provide any consideration in respect of an issue of shares unless (a) the articles of the company specifies the consideration to be paid or provided for those shares; or (b) the shareholder is liable to pay or provide consideration for those shares pursuant to either a pre-incorporation contract or a contract entered into after the registration of the company. Consideration to be decided by board 131. (1) Before the board of a company issues shares under section one, the board shall (a) decide the consideration for which the shares will be issued and the terms on which they will be issued; and (b) if the shares are to be issued for consideration other than cash, determine the reasonable present cash value of the consideration for the issue; and 131

132 (c) resolve that, in its opinion, the consideration for and terms of the issue are fair and reasonable to the company and to all existing shareholders; and (d) resolve that, in its opinion, the present cash value of the consideration to be provided for the issue of the shares is not less than the amount to be credited for the issue of the shares. (2) The directors who vote in favour of a resolution required by subsection (1) shall sign a certificate (a) stating the consideration for, and the terms of, the issue; and (b) describing the consideration in sufficient detail to identify it; and (c) where a present cash value has been determined in accordance with subsection (1) (b), stating that value and the basis for assessing it; and (d) stating that, in their opinion, the consideration for and terms of 132

133 issue are fair and reasonable to the company and to all existing shareholders; and (e) if the shares are to be issued other than for cash stating that, in their opinion, the present cash value of the consideration to be provided for the issue of the shares is not less than the amount to be credited for the issue of the shares. (3) Before shares that have already been issued are credited as fully or partly paid up other than for cash, the board shall (a) determine the reasonable present cash value of the consideration; and (b) resolve that, in its opinion, the present cash value of the consideration is (i) fair and reasonable to the company and to all existing shareholders; and (ii) not less than the amount to be credited in respect of the shares. (4) The directors who vote in favour of a 133

134 resolution under subsection (3) shall sign a certificate (a) describing the consideration in sufficient detail to identify it; and (b) stating (i) the present cash value of the consideration and the basis for assessing it; and (ii) that the present cash value of the consideration is fair and reasonable to the company and to all existing shareholders; and (iii) that the present cash value of the consideration is not less than the amount to be credited in respect of the shares. (5) The board shall deliver a copy of a certificate that complies with subsection (2) or subsection (4) to the Registrar for registration within ten working days after it is given. (6) For the purposes of this section, shares that are or are to be credited as paid up, whether wholly or partly, as part of an arrangement that involves the transfer of 134

135 property or the provision of services and an exchange of cash or cheques or other negotiable instruments, whether simultaneously or not, must be treated as paid up other than in cash to the value of the property or services. (7) A director who fails to comply with subsection (2) or subsection (4) commits an offence and is liable to the penalty set out in this Act. (8) Nothing in this section applies to the issue of shares in a company on (a) the conversion of any convertible securities; or (b) the exercise of any option to acquire shares in the company. (9) If the board of a company fails to comply with subsection (5), every director of the company commits an offence and is liable, to the penalty set out in this Act. Exceptions to section Section one hundred and thirty-one shall not apply to (a) the issue of shares that are fully paid up from the reserves of the company to all shareholders of the same class in proportion to 135

136 the number of shares held by each shareholder: (b) the consolidation and division of the shares or any class of shares in the company in proportion to those shares or the shares in that class: (c) the subdivision of the shares or any class of shares in the company in proportion to those shares or the shares in that class. Consideration in relation to issue of options and convertible securities 133. (1) Before the board of a company issues any securities that are convertible into shares in the company or any options to acquire shares in the company, the board shall (a) decide the consideration for which the convertible securities or options, and, in either case, the shares will be issued and the terms on which they will be issued; and (b) if the shares are to be issued other than for cash, determine the reasonable present cash 136

137 value of the consideration for the issue; and (c) resolve that, in its opinion, the consideration for and terms of the issue of the convertible securities or options, and, in either case, the shares are fair and reasonable to the company and to all existing shareholders; and (d) if the shares are to be issued other than for cash, resolve that, in its opinion, the present cash value of the consideration to be provided is not less than the amount to be credited for the issue of the shares. (2) The directors who vote in favour of a resolution required by subsection (1) shall make a declaration (a) stating the consideration for, and the terms of, the issue of the convertible securities or options, and, in either case, the shares; and 137

138 (b) describing the consideration in sufficient detail to identify it; and (c) where a present cash value has been determined in accordance with subsection (1) (b), stating that value and the basis for assessing it; and (d) stating that, in their opinion, the consideration for and terms of issue of the convertible securities or options, and, in either case, the shares are fair and reasonable to the company and to all existing shareholders; and (e) if the shares are to be issued other than for cash, stating that, in their opinion, the present cash value of the consideration to be provided is not less than the amount to be credited for the issue of the shares. (3) The board shall deliver a copy of the declaration that complies with subsection (2) to the Registrar in the prescribed form for registration within ten working days after it is 138

139 given. (4) For the purposes of this section, shares that are to be credited as paid up, whether wholly or partly, as part of an arrangement that involves the transfer of property or the provision of services and an exchange of cash or cheques or other negotiable instruments, whether simultaneously or not, must be treated as paid up other than in cash to the value of the property or services. (5) A director who fails to comply with subsection (2) commits an offence and is liable on conviction to the penalty set out in this Act. (6) If the board of a company fails to comply with subsection (3), every director of the company commits an offence and is liable to the penalty set out in this Act. Consent to issue shares 134. The issue by a company of a share that (a) increases a liability of a person to the company; or (b) imposes a new liability on a person to the company shall be void if that person or an agent of that person authorised in writing does not consent in writing to becoming the holder of the share before it is issued. 139

140 Time of issue of shares 135. A share shall be issued when the name of the holder is entered on the share register of a company. Division Distributions to Shareholders Board may authorise distributions 136. (1) The board of a company that is satisfied on reasonable grounds that the company will, immediately after the distribution, satisfy the solvency test may, subject to this Act and the articles of the company, authorise a distribution by the company at a time, and of an amount, and to any shareholders it thinks fit. (2) The directors who vote in favour of a distribution must sign a declaration stating that, in their opinion, the company will, immediately after the distribution, satisfy the solvency test and the grounds for that opinion. (3) If, after a distribution is authorised and before it is made, the board ceases to be satisfied on reasonable grounds that the company will, immediately after the distribution is made, satisfy the solvency test, any distribution made by the company is deemed not to have been authorised. 140

141 (4) In applying the solvency test for the purposes of this Act (a) debts includes fixed preferential returns on shares ranking ahead of those in respect of which a distribution is made except where that fixed preferential return is expressed in the constitution as being subject to the power of the directors to make distributions, but does not include debts arising by reason of the authorisation; and (b) liabilities includes the amount that would be required, if the company were to be removed from the register after the distribution, to repay all fixed preferential amounts payable by the company to shareholders, at that time, or on earlier redemption except where such fixed preferential amounts are expressed in the articles as being subject to the power of directors to make distributions; but, subject to paragraph (a), 141

142 does not include dividends payable in the future. (5) Every director who fails to comply with subsection (2) commits an offence and is liable on conviction to the penalty set out in this Act. Dividends 137. (1) A dividend is a distribution other than a distribution to which section one hundred and thirty-three or section one hundred and thirty four applies. (2) The board of a company shall not authorise a dividend (a) in respect of some but not all the shares in a class; or (b) that is of a greater value per share in respect of some shares of a class than it is in respect of other shares of that class unless the amount of the dividend in respect of a share of that class is in proportion to the amount paid to the company in satisfaction of the liability of the shareholder under the constitution of the company or under the terms of issue of the share. (3) Notwithstanding subsection (2), a shareholder may waive their entitlement to receive a dividend by notice in writing to the 142

143 company signed by or on behalf of the shareholder. Shares in lieu of dividends 138. Subject to the articles of the company, the board of a company may issue shares to any shareholders who have agreed to accept the issue of shares, wholly or partly, in lieu of a proposed dividend or proposed future dividends if (a) the right to receive shares, wholly or partly, in lieu of the proposed dividend or proposed future dividends has been offered to all shareholders of the same class on the same terms; and (b) if all shareholders elected to receive the shares in lieu of the proposed dividend, relative voting or distribution rights, or both, would be maintained; and (c) the shareholders to whom the right is offered are afforded a reasonable opportunity of accepting it; and (d) the shares issued to each shareholder are issued on the same terms and subject to the 143

144 same rights as the shares issued to all shareholders in that class who agree to receive the shares; and (e) the provisions governing issue of shares are complied with by the board. Recovery of distributions 139. (1) A distribution made to a shareholder at a time when the company did not, immediately after the distribution, satisfy the solvency test may be recovered by the company from the shareholder unless (a) the shareholder received the distribution in good faith and without knowledge of the company's failure to satisfy the solvency test; and (b) the shareholder has altered the shareholder's position in reliance on the validity of the distribution; and (c) it would be unfair to require repayment in full or at all. (2) If, in relation to a distribution made to shareholders, 144

145 (a) the procedure set out in this Act as the case may be, has not been followed; or (b) reasonable grounds for believing that the company would satisfy the solvency test in accordance with this Act, did not exist at the time the certificate was signed, a director who (c) failed to take reasonable steps to ensure the procedure was followed; or (d) signed the certificate, as the case may be, shall be personally liable to the company to repay to the company so much of the distribution as is not able to be recovered from shareholders. (3) If, by virtue of this Act, a distribution is deemed not to have been authorised, to a director who (a) ceased after authorisation but before the making of the distribution to be satisfied on reasonable grounds for believing that the company would satisfy the solvency test immediately after the distribution is made; and 145

146 (b) failed to take reasonable steps to prevent the distribution being made, shall be personally liable to the company to repay to the company so much of the distribution as is not able to be recovered from shareholders. (4) If, by virtue of this Act, a distribution is deemed not to have been authorised, a director who failed to take reasonable steps to prevent the distribution being made shall be personally liable to the company to repay to the company so much of the distribution as is not able to be recovered from shareholders. (5) If, in an action brought against a director or shareholder under this section, the court is satisfied that the company could, by making a distribution of a lesser amount, have satisfied the solvency test, the court may (a) permit the shareholder to retain; or (b) relieve the director from liability in respect of an amount equal to the value of any distribution that could properly have been made. Reduction of shareholder liability and distribution 140. (1) If a company proposes to alter its articles, or to acquire shares issued by it, or 146

147 redeem shares, in a manner which would cancel or reduce the liability of a shareholder to the company in relation to a share held prior to that alteration, acquisition, or redemption, the proposed cancellation or reduction of liability shall be treated, (a) for the purposes of section one hundred and thirty four, as if it were a distribution; and (b) for the purposes of subsections (2) and (3) of section one hundred and thirty-three, as if it were a dividend. (2) If a company has altered its articles, or acquired shares, or redeemed shares under section one hundred and twenty six, as the case may be, in a manner which cancels or reduces the liability of a shareholder to the company in relation to a share held prior to that alteration, acquisition, or redemption, that cancellation or reduction of liability is to be treated for the purposes of section one hundred and thirty four as a distribution of the amount by which that liability was reduced. (3) If the liability of a shareholder of an amalgamating company to that company in 147

148 relation to a share held before the amalgamation is (a) greater than the liability of that shareholder to the amalgamated company in relation to a share or shares into which that share is converted; or (b) cancelled by the cancellation of that share in the amalgamation, the reduction of liability effected by the amalgamation is to be treated for the purposes of this Act as a distribution by the amalgamated company to that shareholder, whether or not that shareholder becomes a shareholder of the amalgamated company of the amount by which that liability was reduced. Division Company acquiring its own shares Company may acquire its own shares 141. (1) A company may, as provided for under this Act, but not otherwise, acquire its own shares. (2) Shares acquired by a company otherwise than in accordance with sub- section (1) are deemed to be cancelled immediately on acquisition. (3) Within ten working days of the purchase or acquisition of the shares, the board 148

149 of the company shall ensure that notice in the prescribed form of the purchase or acquisition is delivered to the Registrar for registration. (4) If the board of a company fails to comply with subsection (3), every director of the company commits an offence and is liable to the penalty set out in this Act. Acquisition of company s own shares 142. (1) Subject to section one hundred and forty one a company may purchase or otherwise acquire shares issued by it if it is expressly permitted to do so by its articles. (2) The purchase or acquisition of the shares shall be made in accordance with this Act. (3) Nothing under this Act limits or affects (a) an order of the court that requires a company to purchase or acquire its own shares; or (b) any sections which relate to the right of a shareholder to require a company to purchase shares. Board may make offer to acquire shares 143. (1) The board of a company may make an offer to acquire shares issued by the company if the offer is 149

150 (a) an offer to all shareholders to acquire a proportion of their shares, that (i) would, if accepted, leave unaffected relative voting and distribution rights; and (ii) affords a reasonable opportunity to accept the offer; or (b) an offer to one or more shareholders to acquire shares (i) to which all shareholders have consented in writing; or (ii) that is expressly permitted by the articles, and is made in accordance with the procedure set out in this Act. (2) Where an offer is made in accordance with subsection (1) (a), (a) the offer may also permit the company to acquire additional shares from a shareholder to the extent that another shareholder does not accept the offer or 150

151 accepts the offer only in part; and (b) if the number of additional shares exceeds the number of shares that the company is entitled to acquire, the number of additional shares shall be reduced rateably. (3) The board may make an offer under subsection (1) only if it has previously resolved (a) that the acquisition in question is in the best interests of the company; and (b) that the terms of the offer and the consideration offered for the shares are fair and reasonable to the company; and (c) that it is not aware of any information that will not be disclosed to shareholders (i) which is material to an assessment of the value of the shares; and (ii) as a result of which the terms of the offer and consideration offered for the shares are unfair to 151

152 shareholders accepting the offer. (4) The resolution shall set out in full the reasons for the director's conclusions. (5) The directors who vote in favour of a resolution required by subsection (3) shall sign a certificate as to the matters set out in that subsection. (6) The board of a company shall not make an offer under subsection (1) if, after the passing of a resolution under subsection (3) and before the making of the offer to acquire the shares, (a) the board ceases to be satisfied that the acquisition in question is in the best interests of the company; or (b) the board ceases to be satisfied that the terms of the offer and the consideration offered for the shares are fair and reasonable to the company; or (c) the board becomes aware of any information that will not be disclosed to shareholders (i) which is material to an assessment of the value of the shares; or 152

153 (ii) as a result of which the terms of the offer and consideration offered for the shares would be unfair to shareholders accepting the offer. (7) Every director who fails to comply with subsection (5) commits an offence and is liable to the penalty set out in this Act. Special offers to acquire shares 144. (1) The board may make an offer to acquire shares under this Act only if it has previously resolved (a) that the acquisition is of benefit to the remaining shareholders; and (b) that the terms of the offer and the consideration offered for the shares are fair and reasonable to the remaining shareholders. (2) The resolution shall set out in full the reasons for the directors' conclusions. (3) The directors who vote in favour of a resolution required by subsection (1) shall sign a certificate as to the matters set out in that subsection. (4) A board shall not make an offer 153

154 provided for under subsection (1), if, after the passing of a resolution under subsection (1) of this section and before the making of the offer to acquire the shares, the board ceases to be satisfied that (a) the acquisition is of benefit to the remaining shareholders; or (b) the terms of the offer and the consideration offered for the shares are fair and reasonable to the remaining shareholders. (5) Before an offer is made pursuant to a resolution under subsection (1), the company shall send to each shareholder a disclosure document that complies with section one hundred and fifty-one. (6) The offer shall be made not less than ten working days and not more than twelve months after the disclosure document has been sent to each shareholder. (7) Nothing in subsections (5) and (6) shall apply to an offer to a shareholder by a company if (a) the offer is to acquire fewer of the shares quoted on the registered exchange's securities market than is the minimum 154

155 holding of shares in the company determined by that exchange. (8) A shareholder or the company may apply to the court for an order restraining the proposed acquisition on the grounds that (a) it is not in the best interests of the company and of benefit to remaining shareholders; or (b) the terms of the offer and the consideration offered for the shares are not fair and reasonable to the company and remaining shareholders. (9) Every director who fails to comply with subsection (3) commits an offence and is liable to the penalty set out in this Act. (10) If a company fails to comply with subsection (5), (a) the company commits an offence and is liable to the penalty set out in this Act; and (b) every director of the company commits an offence and is liable to the penalty set out in this Act. Disclosure document 155

156 145. For the purposes of this Part, a disclosure document is a document that sets out (a) the nature and terms of the offer, and if made to specified shareholders, to whom it will be made; and (b) the nature and extent of any relevant interest of any director of the company in any shares the subject of the offer; and (c) the text of the resolution required by section..., together with such further information and explanation as may be necessary to enable a reasonable shareholder to understand the nature and implications for the company and its shareholders of the proposed acquisition. Stock exchange acquisitions subject to prior notice to shareholders 146. (1) The board of a company may make offers on one or more stock exchanges to all shareholders to acquire shares only if it has previously resolved (a) to acquire, by means of offers on one or more stock exchanges 156

157 to all shareholders, not more than a specified number of shares; and (b) that the acquisition is in the best interests of the company and its shareholders; and (c) that the terms of the offer and the consideration offered for the shares are fair and reasonable to the company and its shareholders; and (d) that it is not aware of any information that will not be disclosed to shareholders (i) which is material to an assessment of the value of the shares; and (ii) as a result of which the terms of the offer and consideration offered for the shares are unfair to shareholders accepting the offer. (2) The resolution shall set out in full the reasons for the directors' conclusions. (3) The directors who vote in favour of a resolution required by subsection (1) shall make 157

158 a declaration as to the matters set out in that subsection and may combine it with the certificate required by section... (4) Offers may be made under subsection (1) by any director or employee of the company who is authorised to do so by the resolution of the board under that subsection. (5) An offer shall not be made under subsection (1) if the number of shares to be acquired together with any shares already acquired would exceed the maximum number of shares the board has resolved to acquire under that subsection. (6) An offer shall not be made under subsection (1) if, after the passing of a resolution under that subsection and before the making of the offer to acquire the shares, (a) the board ceases to be satisfied that the acquisition is in the best interests of the company and its shareholders; or (b) the board ceases to be satisfied that the terms of the offer and the consideration offered for the shares are fair and reasonable to the company and its shareholders; or 158

159 (c) the board becomes aware of any information that will not be disclosed to shareholders (i) which is material to an assessment of the value of the shares; or (ii) as a result of which the terms of the offer and consideration offered for the shares would be unfair to shareholders accepting the offer. (7) Before an offer is made pursuant to a resolution under subsection (1), the company shall send to each shareholder a disclosure document that complies with section one hundred and forty nine. (8) The offer shall be made not less than ten working days and not more than twelve months after the disclosure document has been sent to each shareholder. (9) A shareholder or the company may apply to the court for an order restraining the proposed acquisition on the grounds that (a) it is not in the best interests of the company or the shareholders; or 159

160 (b) the terms of the offer and, if it is disclosed, the consideration offered for the shares are not fair and reasonable to the company or the shareholders. (10) Every director who fails to comply with subsection (3) commits an offence and is liable on conviction to the penalty set out in this Act. (11) If the board of a company fails to comply with subsection (5), every director of the company commits an offence and is liable to the penalty set out in this Act. Disclosure document for stock exchange acquisitions 147. (1) For the purposes of section one hundred and forty nine a disclosure document is a document that sets out (a) the maximum number of shares that the board has resolved to acquire under section...; and (b) the nature and terms of the offer; and (c) the nature and extent of any relevant interest of any director of the company in any shares that may be acquired; and 160

161 (d) the text of the resolution required by section..., together with such further information and explanation as may be necessary to enable a reasonable shareholder to understand the nature and implications for the company and its shareholders of the proposed acquisition. (2) Nothing in subsection (1) requires the disclosure of the consideration the board proposes to offer to acquire the shares. Stock exchange acquisitions not subject to prior notice to shareholders 148. (1) The board of a company may acquire shares on a stock exchange from its shareholders if the following conditions are satisfied: (a) that, prior to the acquisition, the board of the company has resolved (i) that the acquisition in question is in the best interests of the company and the shareholders; and (ii) that the terms of and consideration for the 161

162 acquisition are fair and reasonable to the company; and (iii) that it is not aware of any information that is not available to shareholders (iv) that is material to an assessment of the value of the shares; and (v) as a result of which the terms of and consideration for the acquisition are unfair to shareholders from whom any shares are acquired; and (vi) that the number of shares acquired together with any other shares acquired under this section in the preceding twelve months does not exceed five percent of the shares in the same class as at the date twelve months prior to the acquisition of the shares. (2) Within ten working days after the 162

163 shares are acquired, the company shall send to each stock exchange on which the shares of the company are listed a notice containing the following particulars: (a) the class of shares acquired: (b) the number of shares acquired: (c) the consideration paid or payable for the shares acquired: (d) if known to the company, the identity of the seller and, if the seller was not the beneficial owner, the beneficial owner. (3) Within three months after the shares are acquired, the company shall send to each shareholder a notice containing the particulars referred to in subsection (2). (4) Acquisitions may be made under subsection (1) by any director or employee of the company who is authorised to do so by the resolution of the board under that subsection. (5) If a company fails to comply with subsection (2) or subsection (3), (a) the company commits an offence and is liable to the penalty set out in this Act and (b) every director of the company commits an offence and is liable 163

164 to the penalty set out in this Act. Cancellation of shares repurchased 149. (1) Subject to this Act, shares that are acquired by a company shall be deemed to be cancelled immediately on acquisition. (2) Shares shall be acquired for the purposes of subsection (1) on the date on which the company would, apart from this section, become entitled to exercise the rights attached to the shares. (3) On the cancellation of a share under this section, (a) the rights and privileges attached to that share expire; and (b) the share may be reissued in accordance with this Part. Enforceability of contract to repurchase shares 150. (1) A contract with a company providing for the acquisition by the company of its shares shall be specifically enforceable against the company except to the extent that the company would, by performance, be unable to satisfy the solvency test in accordance with section one hundred and forty five. 164

165 (2) The company shall have the burden of proving that performance of the contract would result in the company being unable to satisfy the solvency test in accordance with section one hundred and fifty six. (3) Until the company has fully performed a contract referred to in subsection (1), the other party to the contract shall retain the status of a claimant entitled to be paid as soon as the company is lawfully able to do so or, prior to the removal of the company from the register, to be ranked subordinate to the rights of creditors but in priority to the other shareholders. Division Treasury Stock Company may hold its own shares 151. (1) Shares acquired by a company shall not be deemed to be cancelled under section... if (a) the articles of the company expressly permits the company to hold its own shares; and (b) the board of the company resolves that the shares concerned shall not be cancelled on acquisition; and (c) the number of shares acquired, when aggregated with shares of the same class held by the 165

166 company pursuant to this section at the time of the acquisition, does not exceed five percent of the shares of that class previously issued by the company, excluding shares previously deemed to be cancelled under section... (2) Shares acquired by a company pursuant to section... or sections... to... that, pursuant to this section, are not deemed to be cancelled shall be held by the company in itself. (3) A share that a company holds in itself under subsection (2) may be cancelled by the board of the company resolving that the share is cancelled; and the share shall be deemed to be cancelled on the making of such a resolution. Rights and obligations of shares company holds in itself suspended 152. (1) The rights and obligations attaching to a share that a company holds in itself pursuant to this Act shall not be exercised by or against a company while it holds the share. (2) Without limiting subsection (1), while a company holds a share in itself pursuant to this Act, the company shall not 166

167 (a) exercise any voting rights attaching to the share; or (b) make or receive any distribution authorised or payable in respect of the share. Reissue of shares company holds in itself 153. (1) Section... shall apply to the transfer of a share held by a company in itself as if the transfer were the issue of the share under section...or section... (2) Subject to subsection (1), the transfer of a share by a company in itself shall not be subject to any provisions in this Act or the company's articles relating to the issue of shares, except to the extent the company's articles expressly apply to those provisions. Division Redemption of Shares Redeemable shares 154. For the purposes of this Act, a share is redeemable if (a) the articles of the company makes provision for the company to issue redeemable shares; and (b) the articles or the terms of issue of the share shall make 167

168 provision for the redemption of that share by the company (i) at the option of the company; or (ii) at the option of the holder of the share; or (iii) on a date specified in the articles or the terms of issue of the share for a consideration that shall be (iv) specified; or (v) calculated by reference to a formula; or (vi) required to be fixed by a suitably qualified person who is not associated with or interested in the company. Redemption at option of company 155. (1) A company shall not exercise an option to redeem shares unless (a) the option is exercised in relation to all shareholders of the same class and in a manner that will leave unaffected relative voting and distribution rights; or 168

169 (b) the option is exercised in relation to one or more shareholders and (i) all shareholders have consented in writing; or (ii) the option is expressly permitted by the articles and is exercised in accordance with the relevant procedure set out in this Act. (2) A company shall not exercise an option to redeem shares unless, before the exercise of the option, the board of the company has resolved (a) that the redemption of the shares is in the best interests of the company; and (b) the consideration for the redemption of the shares is fair and reasonable to the company. (3) The resolution shall set out in full the grounds for the director's conclusions. (4) The directors who vote in favour of a resolution required by subsection (2) shall sign a certificate as to the matters set out in that subsection and may combine it with the 169

170 certificate required by section...and any certificate required by section... (5) A company shall not exercise an option to redeem shares under subsection (1) if, after the passing of a resolution under that subsection and before the exercise of the option to redeem the shares, the board ceases to be satisfied that (a) the redemption of the shares is in the best interests of the company; or (b) the consideration for the exercise of the option is fair and reasonable to the company. (6) Every director who fails to comply with subsection (4) commits an offence and is liable to the penalty set out in this Act. Company shall satisfy solvency test 156. (1) A company shall not exercise an option to redeem a share unless the board of the company is satisfied on reasonable grounds that the company will, immediately after the share is redeemed, satisfy the solvency test in accordance with section... (2) The directors who vote in favour of exercising the option shall sign a certificate 170

171 stating that, in their opinion, the company will, immediately after the share is redeemed, satisfy the solvency test and the grounds for that opinion. (3) If, after a resolution is passed under subsection (1) and before the option is exercised, the board ceases to be satisfied on reasonable grounds that the company will, immediately after the share is redeemed, satisfy the solvency test in accordance with section, any redemption of the share shall be deemed not to have been authorised for the purpose of that section. (4) Every director who fails to comply with subsection (2) commits an offence and is liable on conviction to the penalty set out in this Act. (5) The provisions of section...apply in relation to the redemption of a share at the option of the company with such modifications as may be necessary. Special redemption of shares 157. (1) A company may exercise an option to redeem shares under section if the board has previously resolved 171

172 (a) that the redemption of the shares is of benefit to the remaining shareholders; and (b) that the consideration for the redemption of the shares is fair and reasonable to the remaining shareholders. (2) The resolution shall set out in full the grounds for the directors' conclusions. (3) The directors who vote in favour of a resolution required by subsection (1) shall sign a certificate as to the matters set out in that subsection. (4) A company shall not exercise an option to redeem shares under section.. if, after the passing of a resolution under subsection (1) and before the option is exercised, the board ceases to be satisfied that (a) the redemption of the shares is of benefit to the remaining shareholders; or (b) the consideration for the redemption of the shares is fair and reasonable to the remaining shareholders. (5) Before the option is exercised 172

173 pursuant to a resolution under subsection (1), the company shall send to each shareholder a disclosure document that complies with section one hundred and forty- three. (6) The option shall be exercised not less than ten and not more than thirty working days after the disclosure document has been sent to each shareholder. (7) A shareholder or the company may apply to the court for an order restraining the proposed exercise of the option on the grounds that (a) it is not in the best interests of the company or of benefit to remaining shareholders; or (b) the consideration for the redemption is not fair or reasonable to the company or remaining shareholders. (8) Every director who fails to comply with subsection (3) commits an offence and is liable to the penalty set out in this Act. (9) If a company fails to comply with subsection (5), (a) the company commits an offence and is liable to the penalty set out in this Act and 173

174 (b) every director of the company commits an offence and is liable on conviction to the penalty set out in this Act. Disclosure document 158. For the purposes of section, a disclosure document is a document that sets out (a) the nature and terms of the redemption of the shares, and if the option to redeem the shares is to be exercised in relation to specified shareholders, the names of those shareholders; and (b) the text of the resolution required by section, together with such further information and explanation as may be necessary to enable a reasonable shareholder to understand the nature and implications for the company and its shareholders of the proposed redemption. Cancellation of shares redeemed 174

175 159. (1) Shares that are redeemed by a company shall be deemed to be cancelled immediately on redemption. (2) On the cancellation of a share under this section, (a) the rights and privileges attached to that share expire; and (b) the share may be reissued in accordance with this Part. Redemption at option of shareholder 160. (1) Subject to this section, if a share is redeemable at the option of the holder of the share, and the holder gives proper notice to the company requiring the company to redeem the share, (a) the company shall redeem the share on the date specified in the notice, or if no date is specified, on the date of receipt of the notice; and (b) the share is deemed to be cancelled on the date of redemption; and (c) from the date of redemption the former shareholder ranks as an unsecured creditor of the 175

176 company for the consideration payable on redemption. (2) A redemption under this section (a) is not a distribution for the purposes of sections.and.; and (b) is deemed to be a distribution for the purposes of subsections (1) and (5) of section one hundred and fifty-nine. Redemption on fixed date 161. (1) Subject to this section, if a share is redeemable on a specified date (a) the company shall redeem the share on that date; and (b) the share shall be deemed to be cancelled on that date; and (c) from that date the former shareholder ranks as an unsecured creditor of the company for the consideration payable on redemption. (2) A redemption under this section (a) is not a distribution for the purposes of sections one 176

177 hundred and forty-five and one hundred and forty-six; and (b) is deemed to be a distribution for the purposes of subsections (1) and (5) of section one hundred and forty nine. Division Assistance by a Company in the purchase of its own shares Financial assistance 162. (1) A company may give financial assistance to a person for the purpose of, or in connection with, the purchase of a share issued or to be issued by the company, or by its holding company, whether directly or indirectly, only if the financial assistance is given in accordance with subsection (2); and (a) all shareholders have consented in writing to the giving of the assistance; or (b) the procedure set out in section one-hundred and seventy four is followed; or (c) the financial assistance is given in accordance with section one hundred and seventy six. (2) A company may give financial assistance under subsection (1) if the board has previously resolved that 177

178 (a) the company should provide the assistance; and (b) giving the assistance is in the best interests of the company; and (c) the terms and conditions under which the assistance is given are fair and reasonable to the company. (3) The resolution shall set out in full the grounds for the directors' conclusions. (4) The directors who vote in favour of a resolution under subsection (2) shall sign a certificate as to the matters set out in that subsection and may combine that certificate with the certificate required under section one hundred and seventy-three and any certificate required under section one hundred and seventy four. (5) A company shall not give financial assistance under subsection (1) if, after the passing of a resolution under subsection (2) and before the assistance is given, the board ceases to be satisfied that (a) the giving of the assistance is in the best interests of the company; or 178

179 (b) the terms and conditions under which the assistance is proposed are fair and reasonable to the company. (6) For the purposes of this section, financial assistance includes a loan, a guarantee, and the provision of a security. (7) Every director who fails to comply with subsection (4) commits an offence and is liable on conviction. Company shall satisfy solvency test for financial assistance 163. (1) A company shall not give any financial assistance under section one hundred and sixty nine unless the board of the company is satisfied on reasonable grounds that the company will, immediately after the giving of the financial assistance, satisfy the solvency test. (2) The directors who vote in favour of the giving of the financial assistance must sign a certificate stating that, in their opinion, the company will, immediately after the financial assistance is given, satisfy the solvency test and the grounds for that opinion. (3) If, after a resolution is passed under subsection (1) and before the financial assistance is given, the board ceases to be satisfied on reasonable grounds that the 179

180 company will, immediately after the financial assistance is given, satisfy the solvency test, any financial assistance given by the company is deemed not to have been authorised. (4) Every director of a company who fails to comply with subsection (2) commits an offence. (5) The provisions of section one hundred and forty nine apply in relation to the giving of financial assistance by a company with such modifications as may be necessary. (6) In applying the solvency test for the purposes of this section, assets excludes amounts of financial assistance given by the company at any time under section one hundred and seventy-two or section... (1) (e). in the form of loans; and liabilities includes the face value of all outstanding liabilities, whether contingent or otherwise, incurred by the company at any time in connection with the giving of financial assistance under section one hundred and seventy-two or section... (1) (e). Special financial assistance 164. (1) Financial assistance may be given under section one hundred and seventy-seventy 180

181 two (1) (b) only if the board has previously resolved (a) that giving the assistance in question is of benefit to those shareholders not receiving the assistance; and (b) that the terms and conditions under which the assistance is given are fair and reasonable to those shareholders not receiving the assistance. (2) The resolution shall set out in full the reasons for the directors' conclusions. (3) The directors who vote in favour of a resolution required by subsection (1) shall sign a certificate as to the matters set out in that subsection. (4) A company shall not give financial assistance under section one hundred and sixty if, after the passing of a resolution under subsection (1) and before the financial assistance is given, the board ceases to be satisfied that (a) the giving of the financial assistance is of benefit to those shareholders not receiving the assistance; or 181

182 (b) the terms and conditions under which the assistance is given are fair and reasonable to those shareholders not receiving it. (5) Before the financial assistance is given under section one hundred and sixty-six, the company shall send to each shareholder a disclosure document that complies with section one hundred and seventy five. (6) The assistance may be given not less than ten working days and not more than twelve months after the disclosure document has been sent to each shareholder. (7) A shareholder or the company may apply to the court for an order restraining the proposed assistance being given on the ground that (a) it is not in the best interests of the company and of benefit to those shareholders not receiving the assistance; or (b) the terms and conditions under which the assistance is to be given are not fair and reasonable to the company and to those shareholders not receiving the assistance. 182

183 (8) Every director who fails to comply with subsection (3) commits an offence. (9) If a company fails to comply with subsection (5), (a) the company commits an offence; and (b) every director of the company commits an offence. Disclosure document for special financial assistance 165. For the purposes of section., a disclosure document is a document that sets out (a) the nature and terms of the financial assistance to be given, and to whom it will be given; and (b) if the financial assistance is to be given to a nominee for another person, the name of that other person; and (c) the text of the resolution required by section, together with such further information and explanation as may be necessary to enable a reasonable shareholder to understand the nature and implications for the company 183

184 and its shareholders of the proposed transaction. Financial assistance not exceeding five percent of shareholders funds 166. (1) Financial assistance may be given under section one hundred and seventy-two (1) (c), only if (a) the amount of the financial assistance, together with any other financial assistance given by the company pursuant to this paragraph, repayment of which remains outstanding, would not exceed five percent of the aggregate of amounts received by the company in respect of the issue of shares and reserves as disclosed in the most recent financial statements of the company, and the company receives fair value in connection with the assistance; and (b) within ten working days of providing the financial assistance, the company sends to each shareholder a notice containing the following particulars: 184

185 (i) the class and number of shares in respect of which the financial assistance has been provided: (ii) the consideration paid or payable for the shares in respect of which the financial assistance has been provided: (iii) the identity of the person receiving the financial assistance and, if that person is not the beneficial owner of the shares in respect of which the financial assistance has been provided, the identity of that beneficial owner: (iv) the nature and, if quantifiable, the amount of the financial assistance. (2) If a company fails to comply with subsection (1) (b), (a) the company commits an offence; and (b) every director of the company commits an offence. 185

186 Enforceability of transactions 167. (1) Failure to comply with section one hundred and seventy-two or section one hundred and seventy four or section one hundred and seventy five or section one hundred and seventy six does not affect the validity of a transaction. (2) This section shall not affect the liability of a director or any other person for breach of a duty, or as a constructive assignee, or otherwise. Division Cross-Holdings Subsidiary may not hold shares in holding company 168. (1) Subject to this section, a subsidiary shall not hold shares in its holding company. (2) An issue of shares by a holding company to its subsidiary shall be void and of no effect. (3) A transfer of shares in a holding company to its subsidiary shall be void and of no effect. (4) Where a company that holds shares in another company becomes a subsidiary of that other company 186

187 (a) the company may, notwithstanding subsection (1), continue to hold those shares; and (b) the exercise of any voting rights attaching to those shares shall be of no effect. (5) Where a company on re-registration in accordance with this Act held shares in another company and was a subsidiary of that other company, (a) the company may, notwithstanding subsection (1), continue to hold those shares; and (b) the exercise of any voting rights attaching to those shares shall be of no effect. (6) Nothing in this section prevents a subsidiary holding shares in its holding company in its capacity as a personal representative or a assignee unless the holding company or another subsidiary has a beneficial interest under the trust other than an interest that arises by way of security for the purposes of a transaction made in the ordinary course of the business of lending money. 187

188 (7) This section shall apply to a nominee for a subsidiary in the same way it shall apply to the subsidiary. Division Statement of Shareholder Rights Statement of shareholders rights 169. (1) Every company shall issue to a shareholder, on request, a statement that sets out (a) the class of shares held by the shareholder, the total number of shares of that class issued by the company, and the number of shares of that class held by the shareholder; and (b) the rights, privileges, conditions, and limitations, including restrictions on transfer, attaching to the shares held by the shareholder; and (c) the relationship of the shares held by the shareholder to other classes of shares. (2) The company shall not be obliged to provide a shareholder with a statement if (a) a statement has been provided within the previous six months; and 188

189 (b) the shareholder has not acquired or disposed of shares since the previous statement was provided; and (c) the rights attached to shares of the company have not been altered since the previous statement was provided; and (d) there are special circumstances that make it reasonable for the company to refuse the request. (3) The statement shall not be evidence of title to the shares or of any of the matters set out in it. (4) The statement shall state in a prominent place that it shall not be evidence of title to the shares or of the matters set out in it. (5) If a company fails to comply with subsection (1), (a) the company commits an offence; and (b) every director of the company commits an offence and is liable on conviction to the penalties set out in section.. Division Transfer of Shares 189

190 Transfer of shares 170. (1) Subject to the articles of the company, shares in a company may be transferred by entry of the name of the transferee on the share register. (2) For the purpose of transferring shares, a form of transfer signed by the present holder of the shares or by that holders personal representative shall be delivered to (a) the company; or (b) an agent of the company who maintains the share register under section one hundred and eighty-two (3). (3) The form of transfer shall be signed by the transferee if registration as holder of the shares imposes a liability to the company on the transferee. (4) On receipt of a form of transfer in accordance with subsection (2) and, if applicable, subsection (3), the company shall forthwith enter or cause to be entered the name of the transferee on the share register as holder of the shares, unless (a) the board resolves within thirty working days of receipt of the transfer to refuse or delay the registration of the transfer, and 190

191 the resolution sets out in full the reasons for doing so; and (b) notice of the resolution, including those reasons, is sent to the transferor and to the transferee within five working days of the resolution being passed by the board; and (c) the Act or the articles expressly permits the board to refuse or delay registration for the reasons stated. (5) Subject to the articles of a company, the board may refuse or delay the registration of a transfer of shares if the holder of the shares has failed to pay to the company an amount due in respect of those shares, whether by way of consideration for the issue of the shares or in respect of sums payable by the holder of the shares in accordance with the constitution. (6) If a company fails to comply with subsection (4), (a) the company commits an offence; and (b) every director of the company commits an offence. 191

192 (7) A person who acquires shares in a private company shall within 14 days of the transfer notify the Registrar in the prescribed form. Transfer of shares by operation of law 171. (1) Shares in a company may pass by operation of law notwithstanding the constitution of the company. (2) In the case of the death of a shareholder of a company, the survivor or survivors where the deceased was a joint holder, and the legal personal or representative of the deceased where he was a sole holder or last survivor of joint holders, shall be the only persons recognised by the company as shareholders. (3) A person (in this section called "the representative") upon whom the ownership of a share devolves by reason of his being the legal personal representative, receiver, or assignee in bankruptcy of the holder, or by operation of law may, upon such evidence being produced as the company may reasonably require- (a) be registered himself as the holder of the share; or (b) transfer the share to some other person without first registering himself as the holder of the share. 192

193 (4) A company shall have the same right, if any, to decline registration of a transfer by the representative as it would have had in the case of a transfer by the registered holder, but shall have no right to refuse registration of the representative himself. (5) The representative shall, prior to registration of himself or a transferee, be entitled to the same dividends and other advantages as if he were the registered holder and to the same rights and remedies as if he were a member of the company, except that he shall not, subject to any order by the court under section one hundred and forty-four, before being registered as a member in respect of the share, be entitled to vote at any meeting of the company. (6) The company may at any time give notice requiring the representative to elect either to be registered himself or to transfer the share, and, if the notice is not complied with within three months, the company may thereafter suspend payment of all dividends or other moneys payable in respect of the share until the notice has been complied with. Division Share Register 193

194 Company to maintain share register 172. (1) A company shall maintain a share register in any form and manner that records the shares issued by the company and states (a) whether, under the articles of the company or the terms of issue of the shares, there are any restrictions or limitations on their transfer; and (b) where any document that contains the restrictions or limitations may be inspected. (2) The share register shall state, with respect to each class of shares, (a) the names, alphabetically arranged, and the latest known address of each person who is, or has within the last ten years been, a shareholder; and (b) the number of shares of that class held by each shareholder within the last ten years; and (c) (i) (ii) the date of any issue of shares to; or repurchase or redemption of shares from; or 194

195 (iii) transfer of shares by or to each shareholder within the last ten years, and in relation to the transfer, the name of the person to or from whom the shares were transferred. (3) An agent may maintain the share register of the company. (4) If a company fails to comply with subsection (1) or subsection (2), (a) the company commits an offence; and (b) every director of the company commits an offence. Place of share register 173. (1) The share register may, if expressly permitted by the articles, be divided into two or more registers kept in different places. (2) The principal register shall be kept at the company s registered office. (3) If a share register is divided into two or more registers kept in different places, (a) notice of the place where each register is kept shall be delivered to the Registrar for registration within ten working days after the share register is divided or any 195

196 place where a register is kept is altered; and (b) a copy of every register shall be kept at the same place as the principal register; and (c) if an entry is made in a register other than the principal register, a corresponding entry must be made within ten working days in the copy of that register kept with the principal register. (4) In this section, principal register, in relation to a company, means (a) if the share register is not divided into two or more registers, the share register: (b) if the share register is divided into two or more registers, the register described as the principal register in the last notice sent to the Registrar. (5) If a company fails to comply with subsection (2) or subsection (3), (a) the company commits an offence; and (b) every director of the company commits an offence. 196

197 Evidence of legal title to shares 174. (1) Subject to section one hundred and eighty six, the entry of the name of a person in the share register and in the Registrar s register of shares as shareholder shall be prima facie evidence that legal title to the shares vests in that person. (2) A company may treat the registered holder of a share as the only person entitled to (a) exercise the right to vote attaching to the share; and (b) (c) receive notices; and receive a distribution in respect of the share; and (d) exercise the other rights and powers attaching to the share. Directors duty to supervise share register 175. (1) It shall be the duty of each director to take reasonable steps to ensure that the share register is properly kept and that share transfers are promptly entered on it in accordance with section one hundred and eighty. (2) A director who fails to comply with subsection (1) commits an offence. Power of court to rectify share register 197

198 176. (1) If the name of a person is wrongly entered in, or omitted from, the share register of a company, the person aggrieved, or a shareholder, shall apply to the court (a) for rectification of the share register; (b) for compensation for loss sustained; or (c) for both rectification and compensation. (2) On an application under this section the court shall order (a) rectification of the register; or (b) payment of compensation by the company or a director of the company for any loss sustained; or (c) rectification and payment of compensation. (3) On an application under this section, the court may decide (a) a question relating to the entitlement of a person who is a party to the application to have the applicants name entered in, or omitted from, the register; and 198

199 (b) a question necessary or expedient to be decided for rectification of the register. Trusts not to be entered on register 177. No notice of a trust, whether express, implied, or constructive, shall be entered on the share register. Personal representative shall be registered 178. (1) Notwithstanding section one hundred and eighty seven a personal representative of a deceased person whose name is registered in a share register of a company as the holder of a share in that company is entitled to be registered as the holder of that share as personal representative. (2) Notwithstanding section one hundred and eighty seven, a personal representative of a deceased person beneficially entitled to a share in a company, being a share registered in a share register of that company, is with the consent of the company and the registered holder of that share, shall be entitled to be registered as the holder of that share as personal representative. (3) The registration of an assignee, executor, or administrator pursuant to this 199

200 section does not constitute notice of a trust. Assignee of bankrupt shall be registered 179. (1) Notwithstanding section one hundred and eighty seven, the assignee of the property of a bankrupt registered in a share register of a company as the holder of a share in that company is entitled to be registered as the holder of that share as the assignee of the property of the bankrupt. (2) Notwithstanding section one hundred and eighty seven, the assignee of the property of a bankrupt beneficially entitled to a share in a company, being a share registered in a register of that company, shall, with the consent of the company and the registered holder of that share, be entitled to be registered as the holder of that share as the assignee of the property of the bankrupt. Division Share Certificates Share certificates 180. (1) Subject to subsection (2), a company whose shares are subject to a listing agreement with a stock exchange shall, within twenty working days after the issue, or registration of a transfer, of shares in the company, as the case may be, send a share 200

201 certificate to every holder of those shares stating (a) the name of the company; (b) the class of shares held by that person; and (c) the number of shares held by that person. (2) A shareholder in a company, may apply to the company for a certificate relating to some or all of the shareholder's shares in the company. (3) On receipt of an application for a share certificate under subsection (2), the company shall, within twenty working days after receiving the application, (a) if the application relates to some but not all of the shares, separate the shares shown in the register as owned by the applicant into separate parcels; one parcel being the shares to which the share certificate relates, and the other parcel being any remaining shares; and (b) in all cases send to the shareholder a certificate stating 201

202 (i) the name of the company; and (ii) the class of shares held by the shareholder; and (iii) the number of shares held by the shareholder to which the certificate relates. (4) Notwithstanding section, where a share certificate has been issued, a transfer of the shares to which it relates shall not be registered by the company unless the form of transfer required by that section is accompanied by the share certificate relating to the share, or by evidence as to its loss or destruction and, if required, an indemnity in a form required by the board. (5) Subject to subsection (1), where shares to which a share certificate relates are to be transferred, and the share certificate is sent to the company to enable the registration of the transfer, the share certificate shall be cancelled and no further share certificate issued except at the request of the transferee. (6) If a company fails to comply with subsection (1) or subsection (2), 202

203 (a) the company commits an offence. (b) every director of the company commits an offence. Division Debentures Perpetual debentures 181. A term that is expressed in a debenture or in a deed securing a debenture, issued or executed by a company, shall not be invalid by reason only that it provides that the debenture is (a) irredeemable; or (b) redeemable only on the happening of a contingency, however remote, or on the expiration of a period, however long. Power to reissue redeemed debentures 182. (1) A company that has redeemed debentures previously issued by it shall (a) reissue the debentures; or (b) issue other debentures in their place. (2) Subsection (1) applies (a) unless 203

204 (i) the company's articles or a contract entered into by the company contains a provision whether express or implied to the contrary; or (ii) the company has, by passing a resolution or by some other act, indicated its intention that the debentures are cancelled. (3) On a reissue of redeemed debentures or of other debentures in their place, the debentures are to be treated as having, and as always having had, the same priority as the redeemed debentures. (4) Debentures of a company deposited to secure advances from time to time whether on current account or otherwise are not to be treated as redeemed because the company's account ceases to be in debit while the debentures are deposited. (5) The reissue of a debenture or the issue of another debenture in its place under this section (a) is to be treated as the issue of a new debenture for the purposes 204

205 of stamp duty payable if any; and (b) is not to be treated as the issue of a new debenture for the purposes of any provision limiting the amount or number of debentures to be issued. Specific performance of contracts to subscribe for debentures 183. (1) A court shall order the specific performance of a contract with a company to take up and pay for any debentures of the company. (2) The court shall not refuse to order the specific performance of a contract of that kind on the ground that the contract is one to lend money. PART X PUBLIC ISSUE OF SHARES Division Interpretation Interpretation 184. (1) In this Part, an "invitation to the public" to acquire shares or debentures of a company means an offer of, or invitation to make an offer for, shares or debentures of a company other than one- Meaning of "invitation to the public" (a) made to fifteen or fewer persons; or (b) made 205

206 (i) to fifty or fewer persons; or (ii) of the company exclusively to its existing shareholders, debenture holders or employees; on the basis that a person who accepts the invitation may not renounce or assign the benefit of any shares or debentures to be obtained there under in favour of any other person. (2) For the purpose of this Part, the issue of any kind of application form for shares or debentures of a company shall be deemed to be an invitation to acquire those shares or debentures. Offer of sale deemed to be made by the company 185. (1) Where a company allots or agrees to allot any of its shares or debentures to a person with a view to the public's being invited to acquire any of those shares or debentures, then, for the purposes of this Act- (a) an invitation to the public so made shall be deemed to be made by the company as well as by the person who in fact made it; and (b) a person who acquires any of the shares or debentures in response to the invitation shall be deemed to be 206

207 an allottee from the company of those shares or debentures. (2) Where a company allots or agrees to allot any of its shares or debentures to a person and an invitation to the public is made in respect of any of the shares or debentures (a) within six months after the allotment or agreement to allot; or (b) before the company has received the whole of the consideration in respect of the shares or debentures; it shall be presumed that the allotment or agreement to allot was made by the company with a view to an invitation to the public being made in respect of those shares or debentures. First publication of a prospectus 186. (1) The first publication of the prospectus shall be presumed to be o the date of registration thereof. (2) Where the shares or debentures to which the invitation relates are dealt in on a stock exchange or where the prospectus states that application has been or will be made for permission to deal therein on any stock exchange, and it is necessary to advertise the prospectus in one or more newspapers to comply with the requirements of that stock 207

208 exchange, the first publication of the prospectus shall be deemed to occur when the prospectus is first so advertised. Division 10.2 Invitations to the public and prospectuses Invitations to the public and prospectuses 187. (1) In this section, "company" includes a company proposed to be formed. Restrictions on invitations to the public to acquire shares and debentures (2) A person shall not make an invitation to the public to acquire shares in a company unless (a) (b) the company is a public company and the invitation complies with this Division; or the invitation is supervised by the court. (3) A person shall not make an invitation to the public to acquire debentures in a company unless (a) all of the following conditions are satisfied: (i) the company is a public (ii) company; the debentures are created by deed under the common seal of the company in favour of assignees for the debenture 208

209 holders; and (iii) the invitation complies with this Division; or (b) the invitation is supervised by the court. (4) A person shall not make an invitation to the public to acquire equity shares in a company unless all the equity shares in the company already issued and all those to which the invitation relates carry an unrestricted right to vote at general meetings of the company and, on a poll, a constant number of votes which, in proportion to nominal value, is the same in the case of every share. (5) Subsection (4) shall not prohibit an invitation to acquire equity shares that do not comply with that subsection if (a) the rights making them equity shares are expressed by the terms of issue to be conditional upon the exercise by the holder of an option; and (b) the shares will comply with that subsection if the option is exercised. (6) Subsection (4) shall not prohibit an invitation to acquire equity shares that do not comply with that subsection if the shares are issued, and the invitation made, in fulfillment of an obligation 209

210 entered into by the company before the commencement of this Act. (7) If a person acquires shares or debentures in a company as a result of any invitation to the public in contravention of this section, that person shall be entitled to recover compensation for any loss sustained by that person from any person making the invitation, and where a person making the invitation was a body corporate, from any officer in default. (8) If an invitation to the public is made in contravention of this section, each person making the invitation and, where such a person is a body corporate, each officer in default, shall be guilty of an offence, and shall be liable to a fine not exceeding two hundred and twenty thousand penalty units or to imprisonment for a period not exceeding two years, or to both. Prospectus required for invitations to the public to purchase share or debentures 188. (1) Subject to this section, a person may invite the public to acquire shares or debentures of a public company or of a public company proposed to be formed only if (a) within six months prior to the making of the invitation there was registered by the Registrar a prospectus relating to the shares or 210

211 debentures that complies with this Division; (b) every person to whom the invitation is made is supplied with a true copy of the prospectus at the time when the invitation is first made to that person; and (c) every copy of the prospectus states on its face that it has been registered by the Registrar and the date of registration. (2) An invitation published in a newspaper or magazine advertisement that summarises the contents of a prospectus shall be deemed to satisfy paragraph (b) of subsection (1) if the advertisement (a) does not contain or accompany any kind of application form for shares or debentures; (b) states with reasonable prominence where copies of the full prospectus may be obtained, the fact that it has been registered and the date of registration; and (c) is in terms previously approved in writing by the Registrar. Contents of prospectus 189. (1) A prospectus shall not be lodged with 211

212 the Registrar unless (a) it does not contain any untrue or misleading statement; (b) it contains all information that prospective purchasers of the shares or debentures and their advisors would reasonably expect to be provided in order to make a decision on purchase; and (c) either (i) it deals with matters and provides for reports; or (ii) the invitation concerned is an invitation made only to existing members or debenture holders of the company whether or not an applicant for shares or debentures will have the right to renounce in favour of other persons. Expert's consent 190. (1) This section applies to a prospectus that includes a statement purporting to be made by an expert. (2) The prospectus shall not be lodged with the Registrar unless it is accompanied by the written 212

213 consent of the expert to the publication of the prospectus with the inclusion of the statement in the form and context in which it is included. (3) The prospectus shall include a statement that the expert has given his consent to the inclusion of the statement and has not withdrawn his consent. (4) If the expert withdraws consent to the inclusion of the statement, the expert shall immediately notify the Registrar and the persons responsible for issuing the prospectus. (5) A person responsible for issuing a prospectus shall cease to issue the prospectus after receiving a notice from an expert under subsection (4). (6) A person who contravenes subsection (5), and, if that person is a body corporate, each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding two and twenty thousand penalty units. Registration of prospectuses 191. (1) The Registrar shall not register a prospectus for shares or debentures in a company or in a company proposed to be formed unless the copy lodged conforms with this section. (2) The copy shall be signed by (a) each individual named therein as a director or proposed director of the 213

214 company or by his agent authorised in writing; and (b) each other person making the invitation, or his agent authorised in writing. (3) For the purpose of paragraph (b) of subsection (2), where the invitation is made by a body corporate or members of a firm, it shall be sufficient if the copy is signed on behalf of the body corporate by not fewer than two directors or on behalf of the firm by not fewer than half the partners, and any such director or partners may sign by his agent authorised in writing. (4) The copy shall have endorsed thereon or attached thereto (a) the consent of any expert required by section one hundred and ninety four and a certified copy or translation of each of the documents required to be available for inspection. (5) If a copy or translation referred to in paragraph (b) of subsection (4) has already been lodged with the Registrar by the company, the Registrar may waive the requirement that it be attached or endorsed if he is satisfied that the copy originally delivered is readily identifiable and 214

215 accessible. (6) The prospectus shall state at its head that a copy has been registered by the Registrar and also state immediately after that statement that the Registrar assumes no responsibility as to its contents. (7) The copy shall be accompanied by a statutory declaration by a director and the secretary of the company stating that the prospectus conforms to the requirements of this Division. (8) On registering the prospectus, the Registrar shall issue a certificate stating that the prospectus has been registered. Over subscription in debenture issue 192. (1) A company shall not accept or retain subscriptions to a debentures issue in excess of the amount of the issue disclosed in the prospectus unless the prospectus specifies (a) that the company expressly reserves the right to accept or retain oversubscriptions; and (b) a limit, expressed as a specific sum or money, on the amount of oversubscriptions that may be accepted or retained, being an amount not exceeding twenty-five per centum 215

216 above the amount of the issue as disclosed in the prospectus. (2) Subject to this Act, where a company specifies in a prospectus relating to a debenture issue that it reserves the right to accept or retain over-subscriptions (a) the prospectus shall not contain any statement of, or reference to, the asset backing for the issue, other than a statement or reference to the total tangible assets and the total liabilities of the company and of its guarantor companies; and (b) the prospectus shall contain a statement or reference as to what the total assets and total liabilities of the company would be if oversubscriptions to the limit specified in the prospectus were accepted or retained. Reference to stock exchange listing in prospectusallotment of shares 193. (1) Where a prospectus states or implies that application has been or will be made for permission for the shares or debentures offered in the prospectus to be listed for quotation on the official list of a stock exchange, then, subject to subsection (8), no allotment of shares or debentures 216

217 shall be made on an application made pursuant to the prospectus except in accordance with this section. (2) An allotment may be made (a) if the permission has been applied for in the form required by the stock exchange before the third day on which the stock exchange is open after the date of issue of the prospectus; or (b) if the permission has been granted before the determination day. (3) If, on the determination day, the conditions of subsection (2) are not satisfied, the company shall, within fourteen days after the determination day, repay without interest any money received from any applicant in pursuance of the prospectus. (4) If the company fails to repay money in accordance with subsection (3), the directors shall, in addition to the liability of the company but subject to subsection (5), be jointly and severally liable to repay that money with interest at the ruling bank rate from the end of that period of fourteen days. (5) A director shall not be liable under subsection (4) if he proves that the default in the repayment of the money was not due to any 217

218 misconduct or negligence on his part. (6) The company shall, for so long as the conditions of subsection (2) are not satisfied, keep in a separate bank account all money received in pursuance of a prospectus. (7) A condition purporting to require or bind an applicant for shares or debentures to waive compliance with any requirement of this section shall be void. (8) The Registrar may, on the application of the company made before the determination day, by notice in the Gazette provide that this section shall not apply to the allotment of the shares or debentures. (9) For the purposes of this section, a statement in a prospectus to the effect that the articles comply with, or have been drawn up so as to comply with, a condition imposed by a stock exchange shall, unless the contrary intention appears, be deemed to imply that application has been, or will be, made for permission for the shares or debentures offered by the prospectus to be listed for quotation on the official list of the stock exchange. (10) For the purposes of this section, where a stock exchange grants the permission subject to a condition, the permission shall be deemed to be granted if and when the directors of the company 218

219 give to the stock exchange a written undertaking to comply with the condition. (11) For the purposes of this section, the determination day is, subject to subsection (12), the day forty-two days after the day of issue of the prospectus. (12) If, before the day referred to in subsection (11), the stock exchange notifies the applicant for the permission that a later day, being a day not more than three months after the day of issue of the prospectus, will be the determination day, the determination day is that later day. Civil liability for misstatements or omissions in prospectus 194. (1) Where a prospectus- (a) contains a statement which is untrue or, in the context, misleading; (b) omits any matter which is material; or (c) omits to state any of the particulars or to set out any of the reports which, under this Act, it is required to state or set out; then, subject to this section, the persons specified in subsection (2) shall be liable to pay compensation to any persons who acquire any shares or debentures on the 219

220 faith of the prospectus for any loss they may have sustained by reason of the untrue statement or omission. (2) The persons liable to pay compensation under subsection (1) are the following: (a) every person making the invitation to which the prospectus relates; (b) every person who was a director of a body corporate making the invitation at the time when the prospectus was published; (c) where the invitation was made by the company to whose shares or debentures the invitation relates (i) every person who has authorised himself to be named in the prospectus as a director or as having agreed to become a director, either immediately or after an interval of time; and (ii) every promoter of the company who was a party to the preparation of the prospectus; (d) the expert, if the untrue statement or omission occurs in a statement by an expert who has consented to the 220

221 publication of the prospectus in accordance with section one hundred and twenty-five. (3) A person shall not be liable under this section if he proves (a) that as regards any untrue statement, not purporting to be (i) a statement or report made by an expert (other than himself); (ii) a public official document or statement; (iii) an extract from a document referred to in paragraph (i) or (ii); or (iv) he had reasonable ground to believe and did believe up to the time of the publication of the prospectus or, where the waiting period applies, up to the expiration of the waiting period, that the statement was true; (b) that as regards any untrue statement purporting to be a statement or report by an expert (other than himself) or an extract there from 221

222 (i) it was a correct and fair copy of the statement, report or extract; and (ii) he had reasonable ground to believe and did believe up to the time of the publication of the prospectus that the person making the statement was competent to make it and had given the consent required by section one hundred and twenty-five and had not withdrawn that consent before the date of registration of the prospectus; (c) that as regards any untrue statement purporting to be a copy of or extract from a public official document or a statement made by an official person, it was a correct and fair copy of or extract from the document or statement; (d) that as regards any omission, he was not aware of the matter omitted, or that the matter omitted was material, up to the time of the publication of the prospectus or, 222

223 where the waiting period applies, up to the expiration of the waiting period; (e) that after the publication of the prospectus but before the expiration of the waiting period he, on becoming aware of any untrue statement therein or omission there from, withdrew his consent thereto and gave reasonable public notice of the withdrawal and of the reason therefor; or (f) that the prospectus was published without his knowledge and that, on becoming aware of its publication, he forthwith gave reasonable public notice that it was published without his knowledge. (4) A person shall not be liable under this section by reason that subparagraph (c) (i) of subsection (2) applies to him if he proves that, having consented to being named as a director or as having agreed to become a director, he withdrew his consent before the registration of the prospectus and that it was published without his authority or consent. (5) A person shall not be liable under this section by reason that paragraph (d) of subsection (2) 223

224 applies to him if he proves (a) that as regards any untrue statement made by him, he was competent to make the statement and that he had reasonable ground to believe and did believe, up to the date of publication of the prospectus or, where the waiting period applies, up to the expiration of the waiting period, that the statement was true; or (b) that, after the lodgement of the prospectus with the Registrar but before publication thereof, or, where the waiting period applies, before the expiration of the waiting period, on his becoming aware of the untrue statement or omission, he withdrew his consent in writing and gave reasonable public notice of the withdrawal and of the reason therefor. (6) Where (a) a person is named in a prospectus as a director of a company or as having agreed to become a director of a company and that person has 224

225 (b) (c) not consented to become a director or has withdrawn consent before the publication of the prospectus and has not authorised or consented to the publication thereof; or the consent of a person is required under section to the publication of the prospectus and he either has not given that consent or has withdrawn it before the publication of the prospectus; every person making the invitation to which the prospectus relates and every person who was a director of anybody corporate making the invitation at the time when the prospectus was published except any person without whose knowledge or consent the prospectus was published) shall be liable to indemnify the person referred to in paragraph (a) or (b) against all damages, costs, and expenses to which he may be made liable by reason of his name having been inserted in the prospectus or of the inclusion therein of a statement 225

226 purporting to be made by him as an expert, or in defending himself against any legal proceeding brought against him in respect thereof. Offence of misstatement or omission in prospectus 195. (1) Where any prospectus, advertisement or circular published in relation to any invitation to the public to acquire shares or debentures of a company contains any untrue statement or omits truthfully to state any of the matters which, under this Act, it is required to state, any person who authorised the publication of the prospectus, advertisement or circular shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding two hundred and twenty thousand penalty units or to imprisonment for a period not exceeding seven years, or to both. (2) It is a defence to a charge under subsection (1) that (a) the untrue or omitted statement was immaterial; or (b) the person had reasonable ground to believe and did believe, up to the time of publication of the prospectus, that the statement was true. 226

227 (3) For the purposes of this section, a person shall not be regarded as having authorised the publication of a prospectus by reason only of his having given the consent required by section two hundred and the Registrar shall not be regarded as having authorised the publication of an advertisement or circular by reason of his having given the certificate referred to in section.. Stop trading order 196. (1) Where a prospectus has been registered and it appears to the Registrar that it (a) contains a statement, promise, estimate or forecast that is false or (b) misleading, whether or not the statement or other particular was false or misleading at the time the prospectus was lodged; (c) fails to comply in any material respect with this Division; or conceals or omits to state a material fact so that a statement in the prospectus is rendered misleading in the context in which it appears; (d) the Registrar may apply to the court for an order under subsection (2). (2) If the court is satisfied that the ground for 227

228 the application is established, it may make an order (a) cancelling the registration of the prospectus and directing the persons making the invitation to the public to which the prospectus relates (i) to withdraw the prospectus; (ii) to cease to accept further subscriptions or purchases of shares or debentures offered in the prospectus; and (iii) to repay with interest any money received from applicants in pursuance of the prospectus; (b) declaring any contract for the subscription or purchase of shares or debentures offered in the prospectus to be voidable; (c) directing the persons making the invitation to the public to which the prospectus relates to reissue forthwith the prospectus amended in such terms as the court directs; or (d) protecting the rights of persons injuriously affected by the issue of 228

229 the prospectus, in such terms as it thinks fit. (3) In exercising its powers under this section, the court may, on the application of the Registrar and on being satisfied of the existence of a prima facie case, make such interim orders as it considers necessary to apply for a period of not more than fourteen days after the date of the order. Waiting period 197. Where an invitation is made to the public to acquire shares or debentures of a public company or of a public company proposed to be formed, an agreement for the acquisition of the shares or debentures made before the end of the waiting period, other than a bona fide underwriting agreement, shall not be enforceable by the company or the promoters. Withdraw of application after waiting period 198. Where an invitation is made to the public in respect of any shares or debentures of a public company, an application for such shares or debentures shall not be revocable during a period of seven days commencing on the expiry of the waiting period unless, before the expiry of that period of seven days, some person responsible for the prospectus has given a notice to the public which has the effect under section one hundred and twenty- 229

230 nine of excluding or limiting the responsibility of the person giving it for any misstatement or omission in the prospectus. Allotment and minimum subscription 199. (1) No allotment of shares offered to the public shall be made unless- (a) the minimum subscription has been subscribed as required by section fifteen; and (b) the sum payable on application for the shares so subscribed has been received by the company. (2) Where a cheque is given in payment of a sum under subsection (1), the sum shall not be regarded as having been received by the company until the cheque is paid by the bank on which it is drawn. (3) The minimum subscription shall be calculated (a) on the nominal value of each share, if the shares are not issued at a premium; or (b) on the nominal value of each share plus the premium payable, if the shares are issued at a premium. (4) The amount payable on application on each share offered to the public shall not be less than 230

231 five per centum of the nominal amount of the share. (5) If the conditions of subsection (1) have not been satisfied after the expiry of four months from the first issue of the prospectus, any money received from applicants for shares shall forthwith be repaid to them without interest. (6) Subject to subsection (7), if any money received under subsection (5) is not repaid within five months after the issue of the prospectus, the directors of the company shall be jointly and severally liable to repay that money with interest at the ruling bank rate from the expiry of the period of five months. (7) A director shall not be liable under subsection (6) if he proves that the default in the repayment of the money was not due to any misconduct or negligence on his part. (8) An allotment made by a company to an applicant in contravention of this section shall, notwithstanding that the company is in the course of being wound-up, be voidable at the option of the applicant by written notice given to the company within one month after the date of the allotment. (9) A director who wilfully contravenes, or wilfully authorises or permits the contravention of, this section shall be liable to compensate the company and the allottee for any loss, damages or 231

232 costs which the company or the allottee has sustained or incurred thereby. (10) Proceedings for the recovery of any compensation under subsection (9) shall not be commenced more than two years after the date of the allotment. (11) A condition purporting to require or bind an applicant for shares to waive compliance with any requirement of this section shall be void. (12) A company shall not allot, and an officer or promoter of a company or a proposed company shall not authorise or permit the allotment of, shares or debentures to the public on the basis of a prospectus more than six months after the publication of the prospectus. (13) An allotment of shares or debentures shall not be voidable or void by reason only that it was made in contravention of subsection (12). Statement in lieu of prospectus 200. (1) A public company that does not issue a prospectus on, or with reference to, its formation shall not allot any of its shares or debentures unless it has, not later than three days before the first allotment of the shares or debentures, lodged with the Registrar a statement in lieu of a prospectus. (2) The statement in lieu of a prospectus 232

233 shall (a) be signed by every person who is named therein as a director or a proposed director of the company or by his agent authorised in writing; and (b) be in the form of a prospectus and deal with such matters specified in Part A of the Fourth Schedule as apply to the formation of a company. Prohibition of waiver and notice clauses 201. A condition purporting to require or bind any person to waive compliance with this Part or purporting to attribute to him notice of any contract document or other matter not specifically referred to in any prospectus advertisement or circular, shall be void. PART XI SHAREHOLDERS AND THEIR RIGHTS AND OBLIGATIONS Liability of Shareholders Liability of shareholders 202. (1) Except where the articles of a company provide that the liability of the 233

234 shareholders of the company is unlimited, a shareholder shall not be liable for an obligation of the company by reason only of being a shareholder. (2) Except where the articles of a company provide that the liability of the shareholders of the company is unlimited, the liability of a shareholder to the company shall be limited to (a) any amount unpaid on a share held by the shareholder: (b) any liability expressly provided for in the articles of the company: (c) any liability that arises by reasons under this Act: (d) any liability to repay a distribution received by the shareholder to the extent that the distribution is recoverable under section (e) any liability under section. (3) Nothing in this section affects the liability of a shareholder to a company under a contract, including a contract for the issue of shares, or for any tort, or breach of a fiduciary 234

235 duty, or other actionable wrong committed by the shareholder. Liability of former shareholders 203. (1) A former shareholder who ceased to be a shareholder during the specified period is liable to the company in respect of any amount unpaid on the shares held by that former shareholder or any liability provided for in the articles of the company for which that former shareholder was liable to the company if the court is satisfied that the shareholders of the company are unable to discharge any liability (a) for any amount unpaid on shares held by them; or (b) expressly provided for in the articles of the company. (2) A former shareholder shall not be liable under subsection (1) for any debt or liability of the company contracted after ceasing to be a shareholder. (3) Where a person ceased to be a shareholder of a company before the liability of the shareholders of the company ceased to be limited and became unlimited and that person has not since become a shareholder of the company, that person is liable to the company only to the same extent as if the liability of the 235

236 shareholders had remained limited. (4) For the purposes of subsection (1), specified period means (a) a period of one year before the date of commencement of the liquidation of the company together with the period commencing on that date and ending at the time at which the liquidator is appointed; and (b) in the case of a company that has been put into liquidation by the court, the period of one year before the making of the application to the court together with the period commencing on the date of the making of that application and ending on the date on which, and at the time at which, the order was made; and the period of one year before the making of the application to the court together with the period commencing on the date of the making of that application and ending on the date and at the time of the commencement of the liquidation. Additional provisions relating to liability of shareholders 236

237 204. (1) If (a) a shareholder or former shareholder of a company was, at any time, liable to the company in respect of a share held by that person; and (b) that liability was cancelled or reduced by (i) an alteration of the articles, repurchase or redemption of the share, or amalgamation; or (c) the company is, at the commencement of its liquidation, subject to liabilities incurred prior to the alteration of the articles, repurchase or redemption of the share, amalgamation, re-registration, or change of registration, as the case may be; and (d) the assets of the company are not sufficient to discharge those liabilities in full, that person is liable to the company for the amount specified in subsection (2). (2) A person is liable under subsection (1) 237

238 for the lesser of (a) the amount by which the liability in respect of that share was reduced: (b) the amount required to be contributed in respect of each such share in order to discharge those liabilities. (3) The liability of a person under subsection (1) is reduced by an amount received by that person as a distribution under section one hundred and thirty three and recovered from that person by the company. (4) The amount received by a person as a distribution under section one hundred and thirty-three is reduced by any amount recovered from that person pursuant to subsection (1). (5) For the purposes of this section, (a) the term company includes an amalgamating company which amalgamated with one or more other amalgamating companies to continue as that company: (b) a member of a company limited by guarantee is to be treated as if the member was, prior to reregistration of that company, the 238

239 holder of a share which rendered the member liable to calls not exceeding the amount of contribution specified in the memorandum of association as the amount undertaken to be contributed by that member in a winding up: (c) a member of an unlimited company registered is to be treated as if the member was, prior to re-registration of that company, the holder of a share which rendered the member liable to unlimited calls. Liability for calls 205. (1) Where a share renders its holder liable to calls, or otherwise imposes a liability on its holder, that liability attaches to the holder of the share for the time being, and not to a prior holder of the share, whether or not the liability became enforceable before the share was registered in the name of the current holder. (2) Where (a) all or part of the consideration payable in respect of the issue of a share remains unsatisfied; and 239

240 (b) the person to whom the share was issued no longer holds that share, liability in respect of that unsatisfied consideration does not attach to subsequent holders of the share, but remains the liability of the person to whom the share was issued, or of any other person who assumed that liability at the time of issue. Shareholders not required to acquire shares by alteration to articles 206. Notwithstanding anything in the articles of the company, a shareholder is not bound by an alteration of the articles of a company that (a) requires the shareholder to acquire or hold more shares in the company than the number held on the date the alteration is made; or (b) increases the liability of the shareholder to the company unless the shareholder agrees in writing to be bound by the alteration either before, on, or after it is made. Liability of personal representative 207. (1) The liability of the personal representative of the estate of a deceased person, who is registered as the holder of a share comprised in the estate, shall not, in respect of 240

241 that share, exceed the proportional amount available from the assets of the estate, after satisfaction of prior claims, for distribution among creditors of the estate, being assets which, at the time when any demand is made for the satisfaction of the liability, are held by that personal representative on the same trusts as apply to that share. (2) For the purposes of this section, trust extends to the duties of a personal representative. Liability of assignee 208. (1) The liability of the assignee of the property of a bankrupt, who is registered as the holder of a share which is comprised in the property of the bankrupt, does not, in respect of that share, exceed the proportional amount available from the property of the estate of the bankrupt, after satisfaction of prior claims, for distribution among creditors of the estate, being property of the bankrupt which, at the time when demand is made for the satisfaction of the liability, is vested in the assignee. (2) In this section, assignee means the assignee in whom the property of a bankrupt is vested pursuant to the Bankruptcy, Insolvency, Receivership and Winding up Act

242 Division Powers of Shareholders Exercise of powers reserved to shareholders 209. (1) Powers reserved to the shareholders of a company by this Act may be exercised only (a) at an annual general meeting of shareholders ; or (b) by a resolution in lieu of a meeting pursuant to section.. (2) Powers reserved to the shareholders of a company by the articles of the company may, subject to the articles, be exercised (a) (b) at a meeting of shareholders; or by a resolution in lieu of a meeting pursuant to section.. Exercise of powers by ordinary resolution 210. (1) Unless otherwise specified in this Act or the article of a company, a power reserved to shareholders shall be exercised by an ordinary resolution. (2) An ordinary resolution is a resolution that is approved by a simple majority of the votes of those shareholders entitled to vote and voting on the question. Powers exercised by special resolution 242

243 211. (1) Notwithstanding the articles of a company, when shareholders exercise a power to (a) adopt articles or, if it has one, alter or revoke the company's articles: (b) (c) approve a major transaction: approve an amalgamation of the company: d) alter the share capital the power shall be exercised by special resolution. (2) A special resolution pursuant to paragraph (a) or paragraph (b) or paragraph (c) of subsection (1) shall not be rescinded by a special resolution. (3) A special resolution pursuant to paragraph (d) of subsection (1) shall not be rescinded in any circumstances. Unanimous assent to certain types of action 212. (1) Notwithstanding section. but subject to section., if all entitled persons have agreed or concur, (a) a dividend may be authorised otherwise than in accordance with section one hundred and thirty four; 243

244 (b) a discount scheme may be approved otherwise than in accordance with section one hundred and thirty six: (c) shares in a company may be acquired otherwise than is provided for in this Act. (d) shares in a company may be redeemed otherwise than in accordance with sections one hundred. (e) financial assistance may be given for the purpose of, or in connection with, the purchase of shares otherwise than in accordance with Section.: (2) If all entitled persons have agreed or concur, shares may be issued otherwise than in accordance with section..or section... (3) If all entitled persons have agreed to or concur in a company entering into a transaction in which a director is interested. (4) For the purposes of this section, no agreement or concurrence of the entitled persons shall be valid or enforceable unless the 244

245 agreement or concurrence is in writing. (5) An agreement or concurrence may be (a) a separate agreement to, or concurrence in, the particular exercise of the power referred to; or (b) an agreement to, or concurrence in, the exercise of the power generally or from time to time. (6) An entitled person may at any time, by notice in writing to the company, withdraw from any agreement or concurrence referred to in subsection (5) (b) and any such notice shall have effect accordingly. (7) Where a power is exercised pursuant to an agreement or concurrence referred to in subsection (5) (b), the board of the company shall, within ten working days of the exercise of the power, send to every entitled person a notice in writing containing details of the exercise of the power. (8) If the board of a company fails to comply with subsection (7), every director of the company commits an offence and is liable to the penalty set out in this Act. 245

246 Company to satisfy solvency test 213. (1) A power referred to in subsection (1) of section shall not be exercised unless the board of the company is satisfied on reasonable grounds that the company will, immediately after the exercise of the power, satisfy the solvency test. (2) The directors who vote in favour of the exercise of the power shall sign a certificate stating that, in their opinion, the company will, after the exercise of the power, satisfy the solvency test. (3) If, after a resolution is passed under subsection (1) and before the power is exercised, the board ceases to be satisfied on reasonable grounds that the company will, immediately after the power is exercised, satisfy the solvency test, any exercise of the power is deemed not to have been authorised. (4) The provisions of section.apply in relation to the exercise of a power referred to in subsection (1) of section, with such modifications as may be necessary. (5) In applying the solvency test for the purposes of section., (a) assets excludes all amounts of financial assistance given by the 246

247 company at any time under section. or section.. in the form of loans; and (b) liabilities includes the face value of all outstanding liabilities, whether contingent or otherwise, incurred by the company at any time in connection with the giving of financial assistance under section one hundred. Every director who fails to comply with subsection (2) commits an offence and is liable on conviction to the penalty set out in this Act. Management review by shareholders 214. (1) Notwithstanding anything in this Act or the articles of the company, the chairperson of a meeting of shareholders of a company shall allow a reasonable opportunity for shareholders at the meeting to question, discuss, or comment on the management of the company. (2) Notwithstanding anything in this Act or the articles of the company, but subject to subsections (3) and (4), a meeting of 247

248 shareholders may pass a resolution under this section relating to the management of a company. (3) Unless the articles provide that the resolution is binding, a resolution passed pursuant to subsection (2) is not binding on the board. Division Minority Buy-Out Rights Shareholder shall require company to purchase shares 215. Where (a) a shareholder is entitled to vote on the exercise of one or more of the powers set out in (i) section and the proposed alteration imposes or removes a restriction on the activities of the company; or (ii) section.; and (b) the shareholders resolved, pursuant to section.. to exercise the power; and 248

249 (c) the shareholder cast all the votes attached to shares registered in the shareholder's name and having the same beneficial owner against the exercise of the power; or (d) where the resolution to exercise the power was passed under section, the shareholder shall not sign the resolution, that shareholder shall be entitled to require the company to purchase those shares in accordance with section Notice requiring purchase 216. (1) A shareholder of a company who is entitled to require the company to purchase shares by virtue of section or section.. shall, (a) within ten working days of the passing of the resolution at a meeting of shareholders; or (b) where the resolution was passed under section two hundred and forty-six, before the expiration of ten working days after the date on which notice of the passing of 249

250 the resolution is given to the shareholder, give a written notice to the company requiring the company to purchase those shares. (2) Within twenty working days of receiving a notice under subsection (1), the board shall (a) agree to the purchase of the shares by the company; (b) arrange for some other person to agree to purchase the shares; (c) apply to the court for an order under section.. or section ; (d) arrange, before taking the action concerned, for the resolution to be rescinded in accordance with section or decide in the appropriate manner not to take the action concerned, as the case may be; and (e) give written notice to the shareholder of the board's decision under this subsection. Price for shares to be purchased by company determined 250

251 217. (1) Within five working days of giving notice under section. that the board agrees to the purchase of shares by the company, the board shall give to the holder of the shares written notice of (a) the price it offers to pay for those shares; and (b) how (i) the matters in subsection (2) were calculated; or (ii) the price was calculated under subsection (3) and why calculating the price using the methodology set out in paragraphs (a) to (c) of subsection (2) would be clearly unfair. (2) That price shall be a fair and reasonable price (as at the close of business on the day before the date on which the resolution was passed) for the shares held by the shareholder, calculated as follows: (a) first, the fair and reasonable value of the total shares in each class to which the shares belong shall be calculated: 251

252 (b) secondly, each class value shall be adjusted to exclude any fluctuation whether positive or negative in the class value that has occurred whether before or after the resolution was passed that was due to, or in expectation of, the event proposed or authorised by the resolution: (c) thirdly, a portion of each adjusted class value shall be allocated to the shareholder in proportion to the number of shares the shareholder, holds in the relevant class. (3) However, a different methodology from that set out in paragraphs (a) to (c) of subsection (2) may be used to calculate the fair and reasonable price for the shares if using the methodology set out in those paragraphs would be clearly unfair to the shareholder or the company. (4) The shareholder may object to the price offered by the board for the shares by giving written notice to the company no later than ten working days after the date on which 252

253 the board gave written notice to the shareholder under subsection (1). (5) If the company does not receive an objection to the price in accordance with subsection (4), the company shall purchase all the shares at the nominated price no later than ten working days after (a) the date on which the board s offer under subsection (1) is accepted; or (b) if the board has not received an acceptance, the date that is ten working days after the date on which the board gave written notice to the shareholder under subsection (1). (6) The time periods in subsection (5) do not apply if there is a written agreement between the board and the shareholder that specifically sets a different date for purchase of the shares. (7) In this section, resolution means the resolution referred to in section..that, due to it having been passed, entitles the shareholder to require the company to purchase the shareholder s shares in accordance with section two hundred and twenty seven. 253

254 Interest payable on outstanding payments 218. (1) Interest is payable on any sum that shall be paid under Section.that is outstanding after the date on which it falls due on the basis and at the rate that the arbitral tribunal thinks fit having regard to all of the circumstances. (2) The sum on which interest is payable under subsection (1) includes any interest or damages for loss awarded under section. Timing of transfer of shares 219. (1) On the day on which a board gives notice under section.. that the board agrees to the purchase of shares by the company, (a) the legal title to those shares passes to the company; and (b) the rights of the shareholder in relation to those shares end. (2) However, for the purposes of sections.. and.., shareholder and holder of the shares means the person who held the legal title to the shares immediately before the board gave notice under section that the board agrees to the purchase of those shares by the company. 254

255 (3) Subsection (2) applies despite subsection (1). Purchase of shares by third party 220. (1) Sections. to.. shall apply to the purchase of shares by a person with whom the company has entered into an arrangement for purchase in accordance with section subject to such modifications as may be necessary, and, in particular, as if references in that section to the board and the company were references to that person. (2) Every holder of shares that are to be purchased in accordance with the arrangement is indemnified by the company in respect of loss suffered by reason of the failure by the person who has agreed to purchase the shares to purchase them at the price nominated or fixed by arbitration, as the case may be. Court may grant exemption 221. (1) A company to which a notice has been given under section.. may apply to the court for an order exempting it from the obligation to purchase the shares to which the notice relates on the grounds that 255

256 (a) the purchase would be disproportionately damaging to the company; or (b) the company cannot reasonably be required to finance the purchase; or (c) it would not be just and equitable to require the company to purchase the shares. (2) On an application under this section, the court shall make an order exempting the company from the obligation to purchase the shares, and shall make any other order it thinks fit, including an order (a) setting aside a resolution of the shareholders: (b) directing the company to take, or refrain from taking, any action specified in the order: (c) requiring the company to pay compensation to the shareholders affected: (d) that the company be put into liquidation. (3) The court shall not make an order under subsection (2) on either of the grounds set out in paragraph (a) or paragraph (b) of 256

257 subsection (1) unless it is satisfied that the company has made reasonable efforts to arrange for another person to purchase the shares in accordance with section. Court may grant exemption if company solvent 222. (1) If (a) a notice is given to a company under section ; and (b) the board has resolved that the purchase by the company of the shares to which the notice relates would result in it failing to satisfy the solvency test; and (c) the company has, having made reasonable efforts to do so, been unable to arrange for the shares to be purchased by another person in accordance with section, the company shall apply to the court for an order exempting it from the obligation to purchase the shares. (2) The court may, on an application under subsection (1), if it is satisfied that (a) the purchase of the shares would result in the company 257

258 failing to satisfy the solvency test; and (b) the company has made reasonable efforts to arrange for the shares to be purchased by another person in accordance with section make.., (c) an order exempting the company from the obligation to purchase the shares: (d) an order suspending the obligation to purchase the shares: (e) such other order as it thinks fit, including any order referred to in section. Division Interest Groups Classes and interest groups 223. (1) In this Act, unless the context otherwise requires, class means a class of shares having attached to them identical rights, privileges, limitations, 258

259 and conditions interest group, in relation to any action or proposal affecting rights attached to shares, means a group of shareholders (a) whose affected rights are identical; and (b) whose rights are affected by the action or proposal in the same way; and (c) subject to subsection (2) (b), who comprise the holders of one or more classes of shares in the company. (2) For the purposes of this Act and the definition of the term interest group, (a) one or more interest groups may exist in relation to any action or proposal; and (b) if (i) action is taken in relation to some holders of shares in a class and not others; or (ii) a proposal expressly distinguishes between some holders of shares in a class and other holders of shares of that class, 259

260 holders of shares in the same class may fall into two or more interest groups. Alteration of shareholder rights 224. (1) A company shall not take action that affects the rights attached to shares unless that action has been approved by a special resolution of each interest group. (2) For the purposes of subsection (1), the rights attached to a share include (a) the rights, privileges, limitations, and conditions attached to the share by this Act or the articles, including voting rights and rights to distributions: (b) pre-emptive rights arising under section one hundred and thirty eight: (c) the right to have the procedure set out in this section, and any further procedure required by the articles for the amendment or alteration of rights, observed by the company: (d) the right that a procedure required by the articles for the amendment or alteration of 260

261 rights not be amended or altered. (3) For the purposes of subsection (1), the issue of further shares ranking equally with, or in priority to, existing shares, whether as to voting rights or distributions, is deemed to be action affecting the rights attached to the existing shares, unless (a) the articles of the company expressly permits the issue of further shares ranking equally with, or in priority to, those shares; or (b) the issue is made in accordance with the pre-emptive rights of shareholders under section one hundred and thirty eight or under the articles of the company. Shareholder may require company to purchase shares 225. Where (a) an interest group has, under section two hundred and thirty six, approved, by special resolution, the taking of action that affects the rights attached to shares; and 261

262 (b) the company becomes entitled to take the action; and (c) a shareholder who was a member of the interest group cast all the votes attached to the shares registered in that shareholder's name and having the same beneficial owner against approving the action; or (d) where the resolution approving the taking of the action was passed under section two hundred and forty-three, a shareholder who was a member of the interest group did not sign the resolution, that shareholder shall be entitled to require the company to purchase those shares in accordance with section two hundred and twenty seven. Actions not invalid 226. The taking of action by a company affecting the rights attached to shares is not invalid by reason only that the action was not approved in accordance with section two hundred and thirty six. Division Meetings of Shareholders 262

263 Annual Annual general general meeting meeting and of extraordinary general shareholders meeting 227. (1) The Board of Directors shall call an annual meeting of shareholders to be held - (a) not more than once in each year; (b) not later than six months after the financial year end date of the company; (2) A company shall hold its first annual general meeting in the calendar year of its incorporation within six months of its incorporation. (3) The company shall hold the meeting on the date on which it is called to be held. Business to be transacted at annual general meeting 228. The business to be transacted at an annual meeting shall deal with (a) the consideration and approval of the financial statements; (b) the receiving of any auditor s report; (c) the consideration and approval of the annual report; (d) the appointment of any directors; (e) the appointment of any auditor; and (f) other issues as may be considered necessary by the annual general meeting. Non approval of financial statements at annual general meeting 229. Where the financial statements are not 263

264 approved at an annual general meeting, they shall be presented at a special meeting called by the Board of Directors within ninety days. Special meetings of shareholders 230. A special meeting of shareholders entitled to vote on an issue (a) may be called at any time by (i) (ii) the board; or a person who is authorised by the constitution to call the meeting: (b) shall be called by the board on the written request of shareholders holding shares carrying together not less than five percent of the voting rights entitled to be exercised on the issue. Resolution in lieu of meeting 231. (1) Subject to subsections (2) and (3), a resolution in writing signed by not less than (a) (b) seventy-five percent; or such other percentage as the articles may require for passing a special resolution, whichever is the greater, of the shareholders who 264

265 would be entitled to vote on that resolution at a meeting of shareholders who together hold not less than seventy-five or, if a higher percentage is required by the articles, that higher percentage, of the votes entitled to be cast on that resolution, is as valid as if it had been passed at a meeting of those shareholders. (2) A resolution in writing that (a) relates to a matter that is required by this Act or by the articles to be decided at a meeting of the shareholders of a company; and (b) is signed by the shareholders specified in subsection (3) is made in accordance with this Act or the constitution of the company. (3) For the purposes of subsection (2) (b), the shareholders are, (a) in the case of a resolution under section two hundred and eighty eight, all the shareholders who are entitled to vote on the resolution: (b) in any other case, the shareholders referred to in subsection (1). 265

266 (4) Any resolution in writing under this section may consist of one or more documents in similar form (including letters, telegrams, cables, facsimiles, telex messages, electronic mail, or other similar means of communication) each signed or assented to by or on behalf of one or more of the shareholders specified in subsection (3). (5) It shall not be necessary for a company to hold an annual meeting of shareholders under section if everything required to be done at that meeting (by resolution or otherwise) is done by resolution in accordance with subsections (2) and (3). (6) Within five working days of a resolution being passed under this section, the company must send to every shareholder who did not sign the resolution or on whose behalf the resolution was not signed, (a) a copy of the resolution; and (b) if the resolution was a special resolution required by section., a statement setting out the rights of shareholders under section. 266

267 (7) A resolution may be signed under subsection (1) or subsection (2) without any prior notice being given to shareholders. (8) If a company fails to comply with subsection (5), (a) the company commits an offence and is liable to the penalty set out in this Act. (b) every director of the company commits an offence and is liable on conviction to the penalty set out in this Act. Court may call meeting of shareholders 232. (1) If the court is satisfied that (a) it is impracticable to call or conduct a meeting of shareholders in the manner prescribed by this Act or the articles; or (b) it is in the interests of a company that a meeting of shareholders be held, the court may order a meeting of shareholders to be held or conducted in such manner as the court directs. (2) Application to the court may be made by a director, or a shareholder, or a creditor of the 267

268 company. (3) The court may make the order on such terms as to the costs of conducting the meeting and as to security for those costs as the court thinks fit. PART XII MEETINGS AND RESOLUTIONS Proceedings at meetings 233. (1) In this Part, unless the context otherwise requires, "meeting" means any of the following meetings of a company: Interpretation (a) (b) (c) an annual general meeting; an extraordinary general meeting; and a class meeting. Annual general meeting 234. (1) Subject to this section, a company shall hold, within three months after the end of each financial year of the company, a meeting to be called the annual general meeting of the company. (2) If, after any financial year, no annual general meeting is held in accordance with subsection (1), the Registrar may, on the application of any member of the company, convene, or direct the convening of, an 268

269 annual general meeting of the company and give such ancillary or consequential directions as the Registrar thinks expedient, including directions modifying or supplementing, in relation to the convening, holding and conducting of the meeting, the operation of the company's articles, or a direction that one member of the company present in person or by proxy shall be deemed to constitute a meeting. (3) If the company fails to comply with subsection (1), or with any direction of the Registrar under subsection (2), the company, and each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding one thousand monetary units. (4) If the company is a private company, the annual general meeting in relation to a financial year, other than the first financial year, may be dispensed with if all the members of the company entitled to attend and vote at any annual general meeting so agree in writing before the end of the financial year. Extraordinary general meetings 269

270 235. (1) An extraordinary general meeting of a company may be convened in accordance with other provisions of this Act, or- (a) by the directors whenever they think fit; or (b) if the articles so provide, by any other person in accordance with those provisions. Class meetings 236. (1) Unless the articles provide otherwise, a meeting of members of a particular class may be convened- (a) by the directors whenever they think fit; or (b) by two or more members of that class, holding, at the time that notice of the meeting is sent out, not less than onetwentieth of the total voting rights of all the members having a right to vote at meetings of that class. Requisition of a general meeting 237. (1) A member or members of the company may make a requisition for a general meeting to be held under this section if they hold, at the time when the 270

271 requisition is made, not less than onetwentieth of the total voting rights of all the members having a right to vote at general meetings of the company. (2) The requisition shall state the nature of the business to be transacted at the meeting, and shall be signed by the requisitionists and deposited at the registered office of the company or posted to its registered postal address, and may consist of several documents in like form each signed by one or more requisitionists. (3) Where a requisition is made in accordance with this section, the directors shall proceed duly to convene a general meeting of the company. (4) If the directors do not proceed duly to convene a meeting to be held within the requisition period, the requisitionists or any of them may themselves convene a meeting, but any meeting so convened shall not be held more than three months after the receipt of the requisition by the company. (5) A meeting convened under this section by the requisitionists shall be convened in the same manner, as nearly as possible, as 271

272 that in which meetings are to be convened by directors. (6) Notwithstanding anything in the articles, the notice period for a meeting convened under this section shall be the period set out in section one hundred and forty-three for the type of meeting concerned. (7) Any reasonable expenses incurred by the requisitionists by reason of the failure of the directors duly to convene a meeting shall be repaid to the requisitionists by the company, and the sum so repaid shall be retained by the company out of any sums due or to become due from the company by way of fees or other remuneration in respect of their services to such of the directors as wilfully authorised or permitted the failure. (8) For the purposes of this section, the requisition period is the period of- (a) twenty-eight days, if the meeting is to be an annual general meeting or a meeting for the passing of a special resolution; or (b) twenty-one days, in any other case; 272

273 beginning on the date of receipt by the company of the requisition. (9) For the purposes of this section, the directors fail duly to convene a meeting if- (a) they do not convene it within the requisition period; or (b) they do not give such notice thereof as is required by section one hundred and forty-three for a meeting at which a special resolution is to be proposed, if the requisition states that a resolution is to be proposed as a special resolution at the meeting. Entitlement to receive notice of meetings 238. (1) Where a meeting of a company is to be convened, any person who is, on the day before the latest day on which notice of the meeting may be given under this Act- (a) a registered member having the right to vote at a meeting of that kind; (b) a person upon whom the ownership of a share devolves by reason of his being a 273

274 legal personal representative, receiver or assignee in bankruptcy of such a member and of whom the company has received notice; (c) (d) (e) a director of the company; an auditor of the company; or a person entitled under the articles to receive such notice; shall be entitled to receive notice of the meeting. (2) The proceedings of a meeting shall not be invalid by reason only of- (a) the accidental omission to give notice of a meeting to a person entitled to receive notice; or (b) the non-receipt of notice of a meeting duly sent to such a person. Length of notice for convening a meeting 239. (1) Subject to this section, notice of a meeting of a company shall be given in writing served in accordance with this Act on each person entitled to receive such notice and shall be given not less than- (a) twenty-one days, in the case of an annual general meeting; 274

275 (b) twenty-one days, in the case of a meeting at which a special resolution will be proposed; or (c) fourteen days, in any other case; and not more than fifty days before the meeting is to be held. (2) The articles may substitute for the minimum periods of notice provided in subsection (1) longer periods, being periods of not more than thirty days. (3) Where a meeting of the company is convened with a shorter period of notice than that required under this section, full notice shall be deemed to have been given if it is so agreed- (a) by all the members entitled to attend and vote at the meeting, in the case of a meeting convened as the annual general meeting; (b) by a majority in number of the members having a right to attend the meeting and vote on the resolution concerned, being a majority holding not less than ninety-five per centum of the total of such voting rights, in the case of a meeting 275

276 convened as a meeting at which a special resolution will be moved, and in relation to that resolution; and (c) by a majority in number of the members having a right to attend and vote at the meeting, being a majority holding not less than ninety-five per centum of the total of such voting rights, in the case of any other meeting. Power of court to order meeting 240. (1) If for any reason it is impracticable to convene or to conduct a meeting of a company in compliance with this Act and the articles, the court may, either of its own motion or on the application of any director of the company or of any member of the company who would be entitled to vote at the meeting, order a meeting of the company to be convened, held and conducted in such a manner as the court thinks fit, and, where any such order is made, may give such ancillary or consequential directions as it thinks expedient, including a direction that one member of the company present in person or by proxy shall be deemed to constitute a meeting. 276

277 (2) A meeting convened, held and conducted in accordance with an order under this section shall for all purposes be deemed to be a meeting of the company duly convened, held and conducted. Place of meetings 241. Unless the articles provide otherwise, or all the members entitled to vote at that meeting agree in writing to a meeting at a place outside Zambia, a meeting of a company shall be held in Zambia. Attendance at meetings 242. The following persons shall be entitled to attend and to speak at a meeting of a company: (a) each member of the company having the right to vote at the meeting; (b) each person upon whom the ownership of a share devolves by reason of his being a legal personal representative, receiver or assignee in bankruptcy of such a member; (c) (d) (e) each director of the company; the secretary of the company; each auditor of the company; 277

278 (f) each person entitled under the articles to do so; (g) any other person permitted to do so by the chairman. Conduct of meetings and voting 243. (1) Unless the articles of a company provide otherwise, members shall have votes at any meeting of the company as follows: (a) a member of a company with share capital shall have one vote for- (i) (ii) each share; and each whole unit of stock; that he is registered as holding; (b) each member of a company limited by guarantee shall have one vote. (2) The articles may provide that a member shall have rights in respect of shares not registered in respect of the person, but a person who is not a member of the company shall not be entitled to vote at a meeting of the company. (3) Unless the articles provide otherwise, the quorum for a meeting of the company shall be two members of the company holding not less than one-third of the total voting rights in relation to the meeting. (4) Unless the articles provide otherwise- 278

279 (a) a meeting of the company may elect a chairman; and (b) on matters not provided for in this Act or in the articles, the meeting may provide for the conduct of its business. (5) The articles may provide that a member shall not be entitled to attend a meeting of the company unless all sums presently payable by him in respect of shares in the company have been paid. (6) For the purposes of this section, a "unit of stock" of a company is the amount of stock having the nominal value arrived at by adding together the nominal values of all the shares of the company other than stock, and dividing the sum by the number of those shares. Chairman's declaration as to result of a vote 244. Unless the articles of a company provide otherwise, a statement by the chairman of a meeting of the company that a motion or resolution at a meeting was passed by a specified majority shall be conclusive evidence that it was so passed unless a poll was demanded on the motion or resolution. Right to demand a poll 279

280 245. A poll may be demanded at a meeting of a company on any question other than the election of the chairman of the meeting or the adjournment of the meeting by- (a) not fewer than three members having the right to vote on the question, representing not less than one-twentieth of the total voting rights of all members having the right to vote on the question, where there are more than eight such members present; or (b) not fewer than one third of the members present having the right to vote on the question, where there are eight or fewer such members present. Voting on a poll 246. On a poll taken at a meeting of company or a meeting of any class of members of a company, a member entitled to more than one vote need not, if he votes, use all his votes or cast all the votes he uses in the same way. Proxies 247. (1) A member of a company entitled to attend and vote at a meeting of the company shall be entitled to appoint another person 280

281 as his proxy to attend and vote instead of him. (2) An appointment as proxy shall be in writing under the hand of the appointer or his agent duly authorised in writing or, if the appointer is a body corporate, either under seal or under the hand of an officer or agent duly authorised. (3) A proxy appointed under this section shall have, subject to any instructions from the member in the instrument of appointment, all the rights and powers of the member in relation to the meeting. (4) If voting rights attach to shares in a company having share capital, a shareholder may appoint separate proxies to represent respectively such of the shares held by him as may be specified in their instruments of appointment. (5) An appointment of a director as a proxy shall not authorise the director to vote as proxy on the following business transacted at an annual general meeting: (a) the declaration of a dividend; 281

282 (b) the consideration of the accounts and the directors' and auditors' reports; (c) the election of directors in place of those retiring; (d) the fixing of the remuneration of the directors; and (e) the appointment of the auditors and the fixing of their remuneration. (6) In every notice convening a meeting of a company there shall appear with reasonable prominence a statement that a member entitled to attend and vote is entitled to appoint one or more proxies to attend and vote instead of him, and, unless the articles provide otherwise, that a proxy need not also be a member. (7) A company shall not provide a member with a form for the appointment of a proxy unless the form permits the member to direct the proxy as to how to use his vote on different matters. (8) A company's articles shall not have the effect of requiring the instrument appointing a proxy, or any other document necessary to show the validity of appointment of a proxy, to be received by the company or any other 282

283 person more than forty-eight hours before a meeting or adjourned meeting in order that the appointment may be effective thereat. (9) If a company fails to comply with subsection (6) or (7), the company, and each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding two hundred and fifty monetary units. (10) If a company, for the purpose of any meeting of the company, issues invitations to appoint as proxy a person specified or listed in the invitation, and issues the invitations to some only of the members entitled to be sent a notice of the meeting and to vote thereat, the company, and every officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding two hundred and fifty monetary units. (11) A company shall not be regarded as issuing an invitation for the purposes of subsection (10) if the name or list is available on request to every member entitled to vote at the meeting, and is not Representation of bodies corporate and 283

284 sent to any such member except on request (1) A body corporate or an unincorporated association may, if it is a member of a company, by resolution of its directors or other governing body, authorise any person as it thinks fit to act as its representative at any meeting of the company. (2) A person so authorised may exercise the same powers on behalf of the body corporate or unincorporated association which he represents as it could exercise if it were an individual member of the company. Circulation of members' resolutions and supporting circulars 249. (1) A member of a company entitled to attend and vote at a meeting may, in accordance with this section, require the company to circulate, at the company's expense- (a) notice of any resolution which may properly be moved and is intend to be moved at the meeting; and (b) a statement of not more than five hundred words with respect to the matter 284

285 referred to in the proposed resolution or any other business to be dealt with at the meeting. (2) A requisition for the purposes of this section shall be in writing and posted to the company's registered postal address or deposited at the company's registered office. (3) If a meeting of the company is proposed and the company receives a requisition- (a) not less than seven days before the end of the period during which notice of the meeting is required to be given; or (b) at a time when it is practicable to include the notice and statement required with the notice of the meeting; the company shall send the notice and statement to each person entitled to receive notice of the meeting before the end of period during which notice of the meeting is required to be given. (4) If the company receives a requisition and subsection (3) does not apply, the company shall include the notice and statement required with the notice of the 285

286 next meeting of the company for which it is practicable to do so. (5) If a requisition is made under this section and the resolution is not passed, a requisition shall not be made in relation to the same resolution, or one substantially to the same effect, to be moved at a meeting within three months after the meeting at which the resolution was moved unless- (a) (b) the directors otherwise agree; or the requisition is supported in writing by members of the company representing between them not less than one-twentieth of the total voting rights of all the members having at the date of the request a right to vote on the resolution to which the request relates. Circulation of members' circulars 250. (1) A company shall, at the written request of any member entitled to attend and vote at a meeting, circulate to members of the company a statement of not more than one thousand words with respect to 286

287 any business to be dealt with at that meeting. (2) Unless the company otherwise resolves, the circulation of the statement shall be at the expense of that member. (3) The statement shall be circulated to members of the company in any manner permitted for service of notice of the meeting and at the same time as notice of the meeting or as soon as practicable thereafter. (4) A company shall not be bound to circulate the statement unless- (a) the request, signed by the member concerned, together with the statement, is received at the registered postal address of the company or deposited at the registered office of the company not less than ten days before the meeting; and (b) there is also deposited with the request a sum reasonably sufficient to meet the company's expenses in giving effect thereto. General provisions in regard to members' circulars 251. (1) A company shall not be bound under section one hundred and fifty-three or one hundred and fifty-four to circulate any 287

288 resolution or statement if, on the application either of the company or of any other person who claims to be aggrieved, the court is satisfied that the rights conferred by those sections are being abused to secure publicity for defamatory matter. (2) On hearing an application under subsection (1), the court may order the company's costs to be paid in whole or in part by the member making the request, notwithstanding that he is not a party to the application. (3) A company shall not incur liability to any person by reason only that it has circulated a resolution or statement in compliance with section one hundred and fifty-three or one hundred and fifty-four. (4) If a company fails to comply with section one hundred and fifty-three or one hundred and fifty-four, the company, and each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding five hundred monetary units. Ordinary extraordinary and special resolutions 252. (1) A resolution shall be an ordinary resolution if it is passed by a simple majority of votes cast by such members of 288

289 the company as, being entitled so to do, vote in person or by proxy at a meeting duly convened and held. (2) A resolution shall be an extraordinary resolution if it is passed by a majority of not less than three-fourths of the votes cast by such members of the company as, being entitled so to do, vote in person or by proxy at a meeting duly convened and held. (3) A resolution shall be a special resolution if it is passed by a majority of not less than three-fourths of the votes cast by such members of the company as, being entitled so to do, vote in person or by proxy at a meeting duly convened as a meeting at which the resolution will be moved as a special resolution, and duly held. (4) Any reference in- (a) this Act; (b) the articles of a company; (c) any debentures or debenture trust deed; to an ordinary, extraordinary or special resolution of a meeting of creditors or debenture holders or of any class of creditors or debenture holders shall, unless 289

290 the context otherwise requires, bear a like meaning to that specified in this section, with the necessary modifications. Written resolutions for private companies 253. (1) The members of a private company may, in accordance with this section, pass a resolution in writing without holding a meeting, and such a resolution shall be as valid and effective for all purposes as if it had been passed at a meeting of the appropriate kind duly convened, held and conducted. (2) The resolution shall be signed by each member who would be entitled to vote on the resolution if it were moved at a meeting of the company, or by his duly authorised representative. (3) The resolution shall be passed when signed by the last member referred to in subsection (2), whether or not he was a member when other members signed. (4) If the resolution is described in the writing as a special resolution, it shall be deemed to be a special resolution for the purposes of this Act. (5) If the resolution states a date as being the date of the signature thereof by any 290

291 member, the statement shall be prima facie evidence that it was signed by the member on that date. (6) This section shall not apply to a resolution to remove an auditor or to remove a director. Registration of copies of certain resolutions 254. (1) A certified copy of every special resolution made by a company, or by a class of members of a company, shall, within fifteen days after the making thereof, be lodged with the Registrar. (2) Subject to this section, every copy of the articles of a company issued by it shall have embodied in it or attached to it a copy of every special resolution of the company in force at the time of issue. (3) For the purposes of subsection (2), where the sole effect of a special resolution is to amend the articles, a copy of the articles that embodies the effect of the passing of the special resolution embodies the resolution. (4) If a company fails to comply with subsection (1), the company, and each officer in default, shall be guilty of an 291

292 offence, and shall be liable on conviction to a fine not exceeding ten monetary units for each day that the failure continues. (5) If a copy of the articles is issued that fails to comply with subsection (2), the company, and each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding three monetary units in respect of each copy. Date of certain resolutions 255. (1) Where a resolution is passed on a poll, it shall for all purposes be deemed to have been passed on the day on which the result of the poll is declared. (2) Subject to subsection (1), where a resolution is passed at an adjourned meeting of a company or of the directors be deemed to have been passed on the date of the adjourned meeting. Minutes of proceedings of meetings of company and of creditors 256. (1) A company shall cause minutes of all proceedings of- (a) meetings of the company; (b) meetings of its directors and of any committee of directors; (c) meetings of its debenture holders or other creditors; 292

293 to be entered in books kept for that purpose. (2) Any such minute, if purporting to be signed by the Chairman of the meeting at which the proceedings took place or of the subsequent meeting, shall be prima facie evidence of the facts stated in the minute in relation to the proceedings. (3) Where minutes have been made in accordance with this section, the meeting shall be presumed to have been duly convened, held and conducted and all appointments of directors, officers, auditors and liquidators shall be presumed to be valid. (4) If the company fails to comply with subsection (1), the company, and each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding five hundred monetary units. Inspection of minute books 257. The books containing the minutes of proceedings of any meeting referred to in section one hundred and sixty shall be kept at the registered records office of the 293

294 company and shall be open to inspection by any member, officer, auditor, receiver or liquidator of the company, and by the Registrar or his delegate. Shareholders entitled to receive distributions, attend meetings and exercise rights 258. (1) The shareholders who are (a) entitled to receive distributions; (b) entitled to exercise pre-emptive rights to acquire shares in accordance with section.. (c) entitled to exercise any other right or receive any other benefit under this Act or the articles or pursuant to the terms of issue of shares are, (d) if the board fixes a date for the purpose, those shareholders whose names are registered in the share register on that date: or (e) if the board does not fix a date for the purpose, those shareholders whose names are registered in the share register on the day on which the board 294

295 or the shareholders, as the case may be, pass the resolution concerned. (2) A date shall not be fixed under subsection (1) that precedes by more than twenty working days the date on which the proposed action will be taken. (3) The shareholders who are entitled to receive notice of a meeting of shareholders are, (a) if the board fixes a date for the purpose, those shareholders whose names are registered in the share register on that date: (b) if the board does not fix a date for the purpose, those shareholders whose names are registered in the share register at the close of business on the day immediately preceding the day on which the notice is given. (4) A date shall not be fixed under subsection (3) that precedes by more than thirty working days or less than ten working days the date on which the meeting is to be held. PART XIII 295

296 DEBENTURES AND CHARGES Issue of debentures 259. (1) A company may raise loans by the issue of a debenture or of a series of debentures. (2) Debentures may either be secured by a charge over property of the company or be unsecured by any charge. (3) All debentures which by their terms, or by the terms of any resolution authorising their creation, or by the terms of any trust deed, are declared to be of the same series shall rank equally in all respects notwithstanding that they may be issued on different dates. (4) Any debenture stock shall be created (a) by deed under the common seal of the company in favour of assignees for the debenture stockholders; and (b) as stock of a specified total amount, parts of which, represented by debenture stock certificates, are issued to separate holders. (5) A contract with a company to take up and pay for any debenture of the company may be enforced by an order for specific performance. (6) A condition contained in a debenture or in a trust deed for securing a debenture shall not be invalid by reason only of the fact that the debenture 296

297 is hereby made irredeemable or redeemable only on the happening of a contingency, however remote, or on the expiration of a period, however long. Documents of title to debentures 260. (1) A company shall, within two months after the allotment of any of its debentures or after the registration of the transfer of any debentures, deliver to the registered holder thereof the debentures or a certificate of the debenture stock under the common seal of the company. (2) Section.. and shall apply, with the necessary modifications, in relation to debentures and debenture holders. (3) If any restriction is imposed on the right to transfer any debentures, notice of the restriction shall be endorsed on the face of the debenture or debenture stock certificate and, in the absence of such endorsement, the restriction shall be ineffective as regards any transferee for value whether or not he has notice of the restriction. (4) If a company fails to comply with subsection (1), the company, and each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding three monetary units for each day that the failure continues. Assignees for debenture holders 297

298 261. (1) A company shall not (a) indemnify a person who is a assignee for debenture holders of the company or a related company against any liability which under law would otherwise attach to the assignee in respect of any breach of trust or failure to show the degree of care and diligence required of the assignee as assignee having regard to the powers, authorities or discretion conferred on the assignee by the trust deed; or (b) compensate such a person for the cost of meeting any such liability. (2) A provision of a contract between the company and such an assignee shall be void if it purports to indemnify or compensate him in contravention of subsection (1). (3) A release in respect of anything done or omitted to be done by an assignee may be made by a special resolution of the debenture holders. (4) The court may remove a assignee for the holders of any debentures and appoint another in his place if, on the application of any debenture holder, it is satisfied that the assignee has interests which conflict or may conflict with those of the debenture 298

299 holders or that for any other reason it is undesirable that the assignee should continue to act. (5) Upon such an application the court may order the applicant to give security for the payment of the costs of the assignee. Eligibility for appointment as assignee for debenture holders 262. (1) The following persons shall not be eligible for appointment or competent to act as assignee for the holders of debentures of a company: (a) an individual under the age of eighteen years; (b) a person under any legal disability; (c) a person prohibited or disqualified from so acting by order of a court of competent jurisdiction; (d) an undischarged bankrupt; (e) a person who is an officer or auditor of the company or a related company or who has been such an officer or auditor within the preceding two years, save with the leave of the court; (f) a person who has been convicted within the preceding five years of an offence involving fraud or dishonesty; 299

300 (g) a person who has been removed within the preceding five years from an offence of trust by order of a court of competent jurisdiction. (2) A person who, in contravention of this section, acts or continues to act as an assignee for debenture holders shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding ten monetary units for each day that the contravention continues. Right to copies of trust deed 263. (1) A copy of any trust deed for securing an issue of debentures shall be provided to a holder of those debentures at his request and on payment of the sum of one monetary unit, or such lesser sum as may be required by the company, within seven days after the receipt of the request. (2) If the company fails to comply with this section, the company, and each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding three monetary units for each day that the failure continues. Unsecured debentures to be so described 264. (1) No unsecured debenture or debenture stock certificate, or prospectus relating to unsecured debentures, shall be issued by a company unless the term "debenture", or such other term as is used to 300

301 denote the debenture, is qualified by the word" unsecured". (2) If the company fails to comply with this section, the company, and each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding five hundred monetary units. Register of debenture holders 265. (1) A company which issues or has issued debentures shall maintain a register of debenture holders. (2) Sections shall apply, with the necessary modifications, in relation to the register. (3) A company shall, on the demand of any assignee for its debenture holders, within seven days furnish to him the names, addresses and other registered particulars of the debenture holders for which he is an assignee. (4) If the company fails to comply with this section, the company, and each officer in default, shall be guilty of an offence, and shall be liable to a fine not exceeding two hundred and twenty thousand penalty units for each day for which the failure continues. Meetings of holders of debentures secured by a trust deed 266. (1) Subject to this section, sections 301

302 .. to.. shall apply, with the necessary modifications, in relation to the holders of debentures of a company that are secured by a trust deed. (2) Unless the trust deed provides otherwise, the registered debenture holders shall have votes in proportion to the value of the debentures they hold. Meetings of other debenture holders 267. (1) The terms of any debentures not secured by a trust deed may provide for the convening of general meetings of the debenture holders or of classes of debenture holders, and for the passing at such meetings of resolutions binding on all the debenture holders or on all the debenture holders of those classes. (2) Whether or not provision for meetings is made under the debentures, the court may at any time direct a meeting of the debenture holders of any class to be held and conducted in such manner as it thinks fit to consider such matters as it may direct, and may give such ancillary or consequential directions as it thinks fit. (3) Subject to subsection (4) and unless the debentures provide otherwise, sections one hundred and forty-six to one hundred and fifty-two shall apply, with the necessary modifications, to a meeting held in accordance with this section. 302

303 (4) Unless the terms of the debentures provide otherwise, the registered debenture holders shall have votes in proportion to the value of the debentures they hold. Re-issue of redeemed debentures 268. (1) A company shall not re-issue any debenture which has been redeemed. (2) A company shall not issue a new debenture in place of a redeemed debenture on terms that the new debenture shall have the same priorities as the redeemed debenture. (3) The issue of a new debenture in place of a redeemed debenture shall not be treated as the issue of a new debenture for the purposes of any provision limiting the amount or number of debentures which may be issued. (4) A purported issue or re-issue of debentures that contravenes this section shall be void. Charge to secure fluctuating amount 269. Where a charge is expressed to be made to secure an indeterminate amount, or a fluctuating amount advanced on current account by, or due and owing to, the person entitled to the charge, the charge shall not be considered to be redeemed by reason only that the current account ceases to be in debit or by reason only that no amount is due or 303

304 owing, as the case may be. Company' s register of charges 270. (1) This section applies to any charge on property of the company, whether or not it is required to be registered under section... (2) A company which has any property subject to a charge shall open and maintain a register of charges over its property in which it shall, on the creation of a charge over property of the company, or on the acquisition of property subject to a charge, enter the following particulars of each charge: (a) the date of creation of the charge or the date of acquisition of the property, as the case may be; (b) a short description of the liability whether present or prospective secured by the charge; (c) a short description of the property charged; (d) the name of the assignee, if the charge secures debentures under a trust deed; (e) if the charge does not secure debentures under a trust deed (i) the name of the chargee; and (ii) the name of the person whom 304

305 the company believes to be the holder of the charge. (3) The register shall be open for inspection (a) by any member or creditor of the company or by the Registrar or his agent, without charge; and (b) by any other person on payment of an amount required by the company, not exceeding ten monetary units or such higher amount as may be prescribed. (4) If the company fails to comply with this section, the company, and each officer in default, shall be guilty of an offence, and shall be liable to a fine not exceeding two hundred and twenty-thousand penalty units. Registrar's register of charges 271. (1) The Registrar shall maintain a register containing, with respect to each company, the particulars of the charges of the company that are lodged in accordance with this Part. (2) The register shall include, with respect to each company, a chronological index of the charges of the company. Registration of charges by companies 272. (1) This section applies to the following charges over the property or undertaking of a 305

306 Cap. 415 company: (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) a charge for the purpose of securing any issue of a series of debentures; a charge on uncalled share capital of the company; a charge to which the Trade Charges Act applies; a floating charge on the whole or part of the undertaking or property of the company; a charge on land, wherever situated, or any interest therein; a charge on any present or future book debts of a company; a charge on calls made but not paid; a charge on a ship or aircraft or any share in a ship or aircraft; charge on goodwill, on a patent or a licence under a patent, on a trade mark, or on a copyright or a licence under a copyright; a charge over shares in another body corporate, not being (i) a charge in favour of a broker who has paid for a share purchased or applied for on behalf of the company; or 306

307 (ii) a charge created by or accompanied by delivery of the certificates for such shares. (2) Subject to this section, if a company (a) creates any charge to which this section applies; or (b) acquires property that is subject to a charge to which this section applies; the company shall, within twenty-one days after the date of the creation of the charge, or after the acquisition of the property, as the case may be, lodge with the Registrar in the prescribed form the particulars referred to in subsection (3) together with (i) particulars of the instrument by which the charge is created or evidenced sufficient to identify the instrument, if the charge is created or evidenced by an instrument by which it is already registered under this or any other Act; or (ii) a certified copy of the instrument, if any, by which the charge is created or evidenced, in any other case. (3) The particulars required for the purposes 307

308 of subsection (2) are (a) the date of creation of the charge; (b) the date of acquisition of the property by the company, where the property was subject to the charge when acquired by the company; (c) the amount secured by the charge; (d) short particulars of the property charged; (e) the names of the charges; and (f) any other prescribed particulars of the charge. (4) Where the property subject to a charge includes property outside Zambia, this section applies in relation to any instrument creating or evidencing or purporting to create or evidence the charge, notwithstanding that further proceedings may be necessary to make the charge valid or effectual according to the law of the country in which the property is situated. (5) Where a negotiable instrument has been given to a company to secure the payment of any debts owed to the company, the deposit of the instrument for the purposes of securing an advance to the company shall for the purposes of this section be deemed not to be a charge on those debts owed to the company. 308

309 (6) Debentures entitling the holder to a charge on land shall for the purposes of this section be deemed not to be an interest in land. (7) Where a series of debentures is created by a company and contains, or gives by reference to any other instrument, any charge to the benefit of which the debenture holders of that series are entitled in all respects equally, subsection (3) shall be satisfied by the lodgement of the following particulars: (a) the total amount secured by the whole series; (b) the date of the resolution authorising the issue of the series and the date of the document, if any, by which the security is created or defined; (c) a general description of the property charged; and (d) the names of the assignees, if any, for the debenture holders, together with a certified copy of the document containing the charge, or, if there is no such document, a certified copy of one of the debentures of the series; (e) together with, where more than one issue is made of debentures in the 309

310 series, the lodgement, within twenty-one days after any issue, of particulars of the date and amount of the issue. (8) Where any commission, allowance, or discount has been paid or made either directly or indirectly by a company to any person in consideration of that person subscribing or agreeing to subscribe, whether absolutely or conditionally, for any debentures of the company, or procuring or agreeing to procure subscriptions, whether absolute or conditional, for any such debentures, the particulars required to be lodged under this section shall include particulars as to the amount or rate per centum of the commission, discount, or allowance to be paid or made. (9) The deposit of any debentures as security for any debt of the company shall not for the purposes of this section be regarded as the issue of such debentures at a discount. (10) Lodgement of documents for the purposes of this section may be effected on the application of any person interested in the charge concerned, and if lodgement is effected by a person other than the company, that person shall be entitled to recover from the company the amount of any fees properly paid by that person to the Registrar on the 310

311 lodgement. (11) If the particulars and documents relating to a charge that are required by this section to be lodged with the Registrar are not lodged within the time required- (a) the charge shall be void against the liquidator and any creditor of the company; and (b) the full debt secured by the charge hall become payable immediately by the company. (12) Nothing in this section shall affect the provisions of any other written law relating to the registration of charges. Certificate to be issued by Registrar 273. If the particulars and documents relating to a charge that are required by this Part to be lodged with the Registrar are lodged within the time required, the Registrar shall issue a certificate of the registration of the charge stating the date of lodgement and, if applicable, the amount thereby secured, and the certificate shall be conclusive evidence that the requirements of this Part as to registration have been complied with. Priorities 274. (1) Subject to any consent express or implied given by the person who would otherwise be 311

312 entitled to priority, charges required by this Part to be registered shall have priority in relation to one another in accordance with the times at which they were lodged. (2) Where another written law by its terms accords priority as between successive charges affecting the same property, subsection (1) shall not affect the priorities between those charges set by that written law. (3) Subject to subsection (2), where a charge (other than a floating charge) gives security over property of such a kind that this Part would require its registration, and also over other property, subsection (1) shall apply in respect of the firstmentioned property, but not in respect of the other property. Entries of satisfaction and release of property from charge 275. (1) If there is lodged with the Registrar a statement in the prescribed form, signed on behalf of a company and by the person entitled to charge, to the effect that (a) the debt for which the charge was given has been paid or satisfied in whole or in part; or (b) part of the property or undertaking charged has been released from the 312

313 charge or has ceased to form part of the company's property or undertaking; then (i) the Registrar shall enter the fact in the register of charges; (ii) the statement shall, in favour of the liquidator and any creditor of the company, be binding on the person entitled to the charge who signed the statement and on any other person claiming through that person. Variation of registered charge 276. (1) If a variation is made in the terms of a charge registered under this Part, other than a satisfaction or release to which section one hundred and two applies, particulars after the variation in the prescribed form shall be lodged with the Registrar within twenty-one days of the making of the variation. (2) The particulars shall identify the terms of the original charge that have been varied and shall indicate the nature of the variation made in each such term. (3) Where the effect of the variation is to 313

314 increase the extent of the security or the amount for which security is available, the increase shall, for the purposes of priorities, be treated as if it were a charge, being a charge for an amount which is the amount of the increase and whose particulars were lodged at the time that the particulars of the variation were lodged. (4) Whereby its terms a registered charge secures a fluctuating amount, or an initial sum together with the words "further advances", the making of a further advance to the company shall not, for the purposes of this section, constitute a variation in the terms of the charge. (5) Lodgement of documents for the purposes of this section may be effected on the application of any person interested in the charge concerned, and if lodgement is effected by a person other than the company, that person shall be entitled to recover from the company the amount of any fees properly paid by that person to the Registrar on the lodgement. (6) If the particulars and documents relating to a charge that are required by this section to be lodged with the Registrar are not lodged within the time required- 314

315 (a) the charge shall be void against the liquidator and any creditor of the company; and (b) the full debt secured by the charge shall become payable immediately by the company. Registration of enforcement of security by mortgagee 277. (1) If a person enters into possession of any of the property of a company as mortgagee under any powers contained in a charge, he shall, within seven days after so doing, lodge a notice to that effect in the prescribed form with the Registrar. (2) Where a person who is in possession as mortgagee of property of a company goes out of possession, he shall, within fourteen days thereafter, lodge a notice to that effect in the prescribed form with the Registrar. (3) A person who fails to comply with this section shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding two hundred and twenty thousand penalty units for each day that the failure continues. Endorsement of registration on debentures of a series 278. (1) Where a company issues a debentures forming one of a series of debentures, or a certificate of debenture stock, and the payment of the debenture is secured by a charge registered under 315

316 this Part, the company shall endorse on the debenture or certificate of debenture stock a statement that registration has been effected and the date of registration. (2) If the company fails to comply with subsection (1), the company, and each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding two hundred and twenty thousand penalty units. (3) A person who (a) causes to be endorsed on any debenture or certificate of debenture stock a statement that registration has been effected, which he knows to be false in any particular, or (b) authorises or permits the delivery of any debenture or certificate of debenture stock bearing an endorsed statement that registration has been (c) effected, which that person knows to be false in any particular; shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding two hundred and fifty monetary units or to imprisonment for a period not exceeding three months, or to both. 316

317 PART XIV ENFORCEMENT Meaning of an entitled person, former shareholder, etc 279. In this Part, entitled person, former shareholder, or shareholder include a reference to a curator and heir of an entitled person, former shareholder, or shareholder and a person to whom shares of any of those persons have passed by operation of law. Restraining Order 280. (1) A company, a member of the board of directors, a shareholder or any other person with an interest to protect may request a court to restrain, by Order, any person whose conduct is, or is likely to be, a hindrance to a company, to a company s transactions, or that would contravene the articles of the company. (2) An Order may not be made under this section in relation to conduct or a course of conduct that has been completed. Filing a claim on behalf of company 281. (1) A company, a member of the Board of directors or a shareholder may request the court to file a claim on behalf of the company or its subsidiary 317

318 or to intervene in a matter. (2) A company, member of the Board of directors or shareholder filing a claim or intervening in a matter shall take into consideration the following: (a) the likelihood of proceedings that may follow; (b) the costs of the proceedings in relation to the decision to be taken; (c) the nature of any action already taken by the company or its subsidiary; and (d) the interests of the company or its subsidiary in the proceedings being commenced, continued, defended or discontinued. Filing claim by shareholders 282. (1) A shareholder or former shareholder may bring claim against a company, its Board members or a director or an officer, for breach of a duty owed to any person as a shareholder. (2) An action may not be brought to recover any loss in the form of a reduction in the value of shares in the company or a failure to increase the shares in value by reason only of a loss suffered, or a gain foregone, by the company. 318

319 Shareholder s rights 283. Any shareholder of a company may bring an action against the company for the breach of a duty owed by the company to the shareholder. Approving decisions made 284. (1) The purported exercise by a director or the Board of directors of a company of a power vested in the shareholders may be approved by those shareholders as if it was done by them. (2) An exercise of power under subsection (1) shall not be against the interests of the company. (3) The purported exercise of a power that is ratified shall be deemed to be a proper and valid exercise of that power. PART XV ACCOUNTING RECORDS AND AUDIT Accounting records 285. (1) The board of a company shall cause accounting records to be kept that (a) correctly record and explain the transactions of the company; (b) will at any time enable the financial position of the company to be determined with reasonable accuracy; 319

320 (c) will enable the financial statements of the company to be readily and properly audited. (2) Without limiting subsection (1), the accounting records shall include (a) entries of money received and spent each day and the matters to which it relates: (b) a record of the assets and liabilities of the company: (c) if the company's business involves dealing in goods (i) a record of goods bought and sold, except goods sold for cash in the ordinary course of carrying on a retail business, that identifies both the goods and buyers and sellers and relevant invoices: (ii) a record of stock held at the end of the financial year together with records of any stocktakings during the year: (d) if the company's business involves providing services, a 320

321 record of services provided and relevant invoices. (3) The accounting records must be kept in written form and in English;. (4) If the board of a company fails to comply with the requirements of this section, every director of the company commits an offence and shall be liable to a fine of two hundred and twenty-two thousand penalty units. Place accounting records to be kept 286. (1) Notice of the place where (a) the accounting records; and (b) the accounts and returns; are kept, shall be given to the Registrar. (2) If a company fails to comply with subsection (1), (a) the company commits an offence and shall be liable to a fine of two hundred and twenty-two thousand penalty units: (b) every director of the company commits an offence and shall be liable to a fine under this Act. Auditors 321

322 Appointment of auditors 287. (1) A company shall (except if exempted by this act), at each annual general meeting, appoint an auditor to- (a) audit the financial statements of the company; and (b) hold office from the conclusion of the meeting until the conclusion of the next annual general meeting. (2) the first auditor of a company may be appointed by the directors of the company before the first annual general meeting, and, if so appointed, hold office until the conclusion of that meeting. if the directors do not appoint an auditor under this subsection, the company shall appoint the first auditor at the annual general meeting of the company. (3) Notwithstanding any agreement between a company and an auditor, the company may, by ordinary resolution, remove the auditor before the expiration of the auditor s term of office. Provided that auditor shall be remunerated for the work done. Auditor s resignation 322

323 288. An auditor may resign at any time by giving written notice to the board of the company. (2) The company shall after receiving the notification thereof, invite the board of directors to a special meeting to receive the auditor s notice of resignation. (3) The Auditor shall provide a written report explaining the resignation. (4) The board of directors or the meeting of shareholders shall appoint another auditor. (5) If a company (a) appoints an auditor; (b) removes an auditor from office; (c) fails to appoint an auditor at an annual general meeting; or (d) for any reason ceases to have an auditor; the company shall within fourteen days after the event lodge a notice of that fact in the prescribed form with the Registrar. (6) If a company does not have an auditor for a period of three months, the Registrar may appoint an auditor of the company. (7) A company shall within five working days of the power becoming exercisable give written notice to the Registrar of the fact that the Registrar 323

324 is entitled to appoint an auditor under subsection (6). Auditor s fees and expenses 289. (1) The fees and expenses for the auditor shall be determined by senior management and approved by the Board. (2) The approval by the board shall be subject to authorization granted by shareholders. Auditing firm 290. (1) An auditing firm may be appointed to be the correspondent auditor of a company where - (a) at least one partner of the firm is ordinarily resident in Zambia; (b) all or some of the partners including the partner who is ordinarily resident in Zambia is qualified for appointment as an auditor; (c) (d) not indebted to the company; the firm is not one of the company s shareholders, members of the Board of directors and does not work for the company or for its subsidiary. (2) The provisions of this section shall not apply to small private companies. Signing of auditor s report 291. An auditor s report shall be signed on 324

325 behalf of a firm appointed as the auditor, of a company, by a partner of the firm who is a qualified auditor. Qualifications of auditors 292. A person shall be not be appointed or act as auditor of a company, other than a small private company, unless that person possesses qualifications of, or equivalent to those of, an institution or association of chartered accountants. Automatic reappointment of auditor 293. (1) An auditor of a company shall, be automatically reappointed at an annual general meeting unless - (a) the company passes a resolution at the annual general meeting appointing another person to replace the auditor; (b) a small private company passes a resolution that no auditor shall be appointed; or (c) the auditor has given notice to the company that the auditor does not wish to be reappointed. (2) Notwithstanding subsection (1), where an auditor has audited a company for five continuous years the automatic appointment shall not apply. Auditor not wanting to be reappointed 325

326 294. Where an auditor gives the Board of directors of a company written notice that the auditor does not wish to be reappointed, the Board shall, if requested to do so by that auditor - (a) distribute to all shareholders, at the expense of the company, a written statement of the auditor s reasons for the wish not to be reappointed; and (b) permit the auditor or the auditor s representative to explain at a shareholders meeting the reasons for the wish not to be reappointed. Payment to auditor who resigns or completes duties 295. An auditor who resigns from duty or completes an audit shall be entitled to be paid, by the company, reasonable fees and expenses for the work done. Replacement of auditor 296. (1) A company shall not appoint a new auditor in the place of an auditor who is qualified for reappointment, unless (a) at least twenty working days' written notice of a proposal to do so has been given to the auditor; and 326

327 (b) the auditor has been given a reasonable opportunity to make representations to the board on the appointment of another person either in writing or by the auditor or his or her representative speaking at a shareholders' meeting whichever the auditor may choose. (2) An auditor is entitled to be paid by the company reasonable expenses for making the representations to board. Auditor to avoid conflict of interest 297. An auditor of a company shall ensure, in carrying out the duties of an auditor under this Part, that the auditors judgment is not impaired by reason of any relationship with or interest in the company or any of its subsidiaries. Auditor s report 298. (1) The auditor of a company shall prepare an audit report and present it in a shareholders meeting. following: (2) The auditor s report shall state the (a) (b) the work done by the auditor; the scope and limitations of the 327

328 audit; (c) that there is no relationship, no interest or debt which the auditor has in the company and show proof thereof; (d) whether the auditor has obtained all information and explanations required by the auditor; (e) whether, proper accounting records are well kept by the company; (f) whether, in the auditor s opinion, the financial statements give a true and fair view of the matters to which they relate, and where they do not, identifies shortcomings; (g) whether, the financial statements comply with international accounting standards; (h) the auditor s opinion and problems that are linked with the company s management; and (i) recommendations, made by the auditor, with regard to the identified problems. (3) An auditor who violates this section shall be liable for professional negligence and incompetence. 328

329 Access to information 299. (1) The Board of directors of a company shall ensure that an auditor of the company has access to the accounting records and other documents of the company. (2) An auditor of a company is entitled to receive from directors or management of the company such information and explanations as the auditor, considers necessary for the performance of the auditor s duties. (3) Notwithstanding subsection (2), an employee who is asked to provide information may indicate, in writing, that the employee does not have the information required or cannot disclose such information or provide the required opinion. Auditor s attendance at meeting of shareholders 300. The Board of directors of a company shall ensure that an auditor of the company - (a) is permitted to attend a meeting of shareholders of the company; (b) receives the notices and communications that shareholders are entitled to receive relating to a meeting of the shareholders; and (c) may be heard at a meeting of the shareholders which the auditor attends on any part of the business of the meeting which concerns the 329

330 Furnishing auditor s report auditor, in that capacity Where the auditor of a company completes a report, the auditor shall submit it to the company within a period not exceeding seven days and reserve a copy of the same for the debenture holders or their representatives. Small private companies 302. (1) A small private company may not appoint an auditor. (2) Where a small private company appoints an auditor, the provisions of this Act shall apply. Appointment of auditor for small private company 303. (1) Notwithstanding section., where, at or before the time required for the holding of an annual meeting of a small private company, notice of a request to appoint an auditor is given to the Board of directors of the company, signed by a shareholder who holds at least five percent of the shares of the company, the company shall appoint an auditor. (2) A resolution to appoint an auditor shall cease to have effect at the next annual meeting, and an auditor shall thereupon be re-appointed unless the shareholders by unanimous resolution agree not to appoint the auditor. Financial statement preparation 304. (1) The Board of directors of every 330

331 company shall ensure that, within three months following the end of the financial year, an audit is conducted, in accordance with subsection (2), and the report signed by at least one representative of the board of the company. (2) The annual financial statements shall be audited, in the case of a public company; or in the case of any other company (a) be audited, if so required by the regulations made in terms of subsection (7) taking into account whether it is desirable in the public interest, having regard to the economic or social significance of the company, as indicated by (i) (ii) (iii) its annual turnover; the size of its workforce; or the nature and extent of its activities; or ii) be either (b) audited voluntarily at the option of the company; or (i) independently reviewed in a manner that satisfies the 331

332 regulations made in terms of subsection (7) unless exempted if it is a private company and (ii) (iii) one person holds, or has all of the beneficial interest in, all of the securities issued by the company; or every person who is a holder of, or has a beneficial interest in, any securities issued by the company is also a director of the company unless the company has only one director, and that director is a person contemplated in section one hundred and seventy (12). (3) The annual financial statements of a company shall (a) include an auditor s report, if the statements are audited; (b) include a report by the directors with respect to the state of affairs, the business and profit or loss of the company, or of the group of companies, if the company is part of a group, including 332

333 (i) (ii) any matter material for the shareholders to appreciate the company s state of affairs; and any prescribed information; (c) be approved by the board and signed by an authorised director; and (d) be presented to the first shareholders meeting after the statements have been approved by the board. (4) The annual financial statements of each company that is required in terms of this Act to have its annual financial statements audited, must include particulars showing (a) the remuneration, as defined in subsection (6), and benefits received by each director, or individual holding any prescribed office in the company; (b) the amount of (i) any pensions paid by the company to or receivable by current or past directors or individuals who hold or have held any prescribed office in the company; (ii) any amount paid or payable by the 333

334 company to a pension scheme with respect to current or past directors or individuals who hold or have held any prescribed office in the company; (c) the amount of any compensation paid in respect of loss of office to current or past directors or individuals who hold or have held any prescribed office in the company; (d) the number and class of any securities issued to a director or person holding any prescribed office in the company, or to any person related to any of them, and the consideration received by the company for those securities; and (e) details of service contracts of current directors and individuals who hold any prescribed office in the company. (5) The information to be disclosed under subsection (4) shall satisfy the prescribed standards, and must show the amount of any remuneration or benefits paid to or receivable by persons in respect of (a) services rendered as directors or 334

335 prescribed officers of the company; or (b) services rendered while being directors or prescribed officers of the company (i) as directors or prescribed officers of any other company within the same group of companies; or (ii) otherwise in connection with the carrying on of the affairs of the company or any other company within the same group of companies. (6) For the purposes of subsections (4) and (5), remuneration includes (a) fees paid to directors for services rendered by them to or on behalf of the company, including any amount paid to a person in respect of the person s accepting the office of director; (b) salary, bonuses and performancerelated payments; (c) expense allowances, to the extent that the director is not required to 335

336 account for the allowance; (d) contributions paid under any pension scheme not otherwise required to be disclosed in terms of subsection (4)(b); (e) the value of any option or right given directly or indirectly to a director, past director or future director, or person related to any of them, as contemplated in section ; (f) financial assistance to a director, past director or future director, or person related to any of them, for the subscription of shares, as contemplated in section one hundred and forty; and (g) with respect to any loan or other financial assistance by the company to a director, past director or future director, or a person related to any of them, or any loan made by a third party to any such person, as contemplated in section one hundred and forty-two if the company is a guarantor of that loan, the value of 336

337 (i) any interest deferred, waived or forgiven; or (ii) the difference in value between (a) the interest that would reasonably be charged in comparable circumstances at fair market rates in an arm s length transaction; and (b) the interest actually charged to the borrower, if less. (7) The Minister may make regulations, including different requirements for different categories of companies, prescribing (a) the categories of any private companies that are required to have their respective annual financial statements audited, as contemplated in subsection ; and (b) the manner, form and procedures for the conduct of an independent review other than an audit, as contemplated in subsection, as well as the professional qualifications, if any, of 337

338 persons who may conduct such reviews. (8) The audited financial statements under subsection (1), shall be submitted to the Registrar. Standards for financial statement preparation 305. (1) The financial statements of a company shall comply with standards prescribed by the Zambia institute of chartered accountants.. (2) The Board of directors shall provide such information and explanations as are necessary for auditing processes to be conducted. Obligation to provide consolidated financial statement 306. (1) The Board of directors of a company that has one or more subsidiaries, shall, ensure that, within six months after the financial year, consolidated financial statements are prepared. (2) A consolidated financial statement shall be signed by at least one of the parent company s shareholders. (3) The consolidated financial statements shall not be required in the case of a subsidiary of any company incorporated in Zambia. Profit and loss statement when company becomes a subsidiary 307. Where a company becomes a subsidiary of a company during the accounting period to which the group financial statements relate, the 338

339 consolidated profit and loss statement or the consolidated income and expenditure statement for the group shall relate to the profit or loss of the subsidiary for each part of that accounting period during which it was a subsidiary, and not to any other part of that accounting period. Date for financial statement of subsidiary company 308. Where the date of a financial statement of a subsidiary of a company is not the same as that of the company, the group financial statements shall - (a) where the date of the balance sheet of the subsidiary does not precede that of the company by more than three months, incorporate the financial statements of the subsidiary for the accounting period ending on that date, or incorporate interim financial statements of the subsidiary completed in respect of a period that is the same as the accounting period of the company; (b) in any other case, incorporate interim financial statements of the subsidiary completed in respect of a period that is the same as the accounting period of the company. Annual return to be made to the Registrar 339

340 309. (1) A company shall, after the end of each financial year of the company, lodge with the Registrar a return (in this Act called the "annual return") in the prescribed form within three months after the end of the financial year. (2) An annual return that is not filed within three months of the financial year end shall attract a penalty as may be prescribed and may result in the deregistration of the company. (3) The annual return shall be signed by a director and by the secretary of the company and shall include annual audited financial statements where applicable. (3) The annual return shall state the position of a company as the date of its financial year end. (4) The Registrar may cause to be published from time to time, in the Gazette or in any newspaper, a list of companies whose annual returns are overdue. (5) No liability shall attach to the Registrar for any publication made in good faith under subsection (4). (6) For the purposes of this Act, the "financial year" of a company is the period, whether or not a period of twelve months, that begins on one accounting date of the company and ends on the day before the next. 340

341 (7) The first "accounting date" of a company is the date of its incorporation. (8) Subject to this section, the subsequent accounting dates of a company are- (a) the date specified in the application for its incorporation as the date on which the second financial year of the company will begin, and anniversaries of that date, if the application for incorporation specified such a date; or (b) the anniversaries of the date of its incorporation, if the application for incorporation did not specify such a date. (9) A company may change an accounting date by lodging a notice of the change in the prescribed form with the Registrar, provided that- (a) the notice is lodged with the Registrar and notice of the change is given to each registered member and to the auditors (if any) of the company not later than the accounting date previous to the one to be changed; and (b) the change does not result in a financial year's being longer than fifteen months. (10) Where a company changes an accounting date under this section, the subsequent accounting dates of the company are, unless changed under this section, the anniversaries of that changed date. 341

342 Annual return to be made by a public company Documents to be annexed to annual return of a public company 310. The annual return of a public company shall be in the prescribed form or as near thereto as circumstances admit A public company shall lodge with its annual return a certified copy, certified by both a director and the secretary of the company, of every balance sheet, profit and loss account, group accounts, directors' report and auditors' report sent to members and debenture holders of the company in since the last annual return was made. Offence relating to annual return 312. If a company fails to lodge an annual return and the other documents in accordance with this Division, or lodges documents which do not comply with this Division, the company, and each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding one thousand monetary units. Notice of adopted date to be given to Registrar 313. Where a company adopts a date other than the one recognized for the financial year, it shall give notice of the adopted date to the Registrar by ordinary resolution. Date of financial statement of subsidiary company 314. The Board of directors of a company shall 342

343 ensure that, unless in the Board s opinion there are good reasons, the date of the financial statement of each subsidiary of the company is the same as the date of the balance sheet of the company. Date of group financial statements 315. Where the financial statements date of a subsidiary of a company is not the same as that of the company, the date of the financial statement of the subsidiary, for the purposes of any particular group financial statements, shall be that preceding the date of the financial statement of the company. Financial statements of company and financial statements of group of companies 316. In this Act, the term financial statements in relation to a company and its date means - a financial statement for the company as at the date of the financial statement; an income statement which shall - (i) in the case of a company trading for profit, be a profit and loss statement for the company in relation to the accounting period ending as at the date of the balance sheet; or (ii) in the case of a company not trading for profit, be an income and expenditure statement for the company in relation to the accounting period ending as at the date of the financial statement; together with any notes or documents giving information relating to the financial statement or 343

344 statement of income, including a statement of accounting policies. Content of financial statements 317. The financial statements shall, in the case of companies which are required to comply with the International Accounting Standards, also include: (a) a statement of changes in equity between its last two balance sheet dates; and (b) a cash flow statement. Content of consolidated financial statement 318. The consolidated financial statement shall, in the case of companies which are required to comply with International Accounting Standards, contain a consolidated - (a) balance sheet for the group as at the date of that balance sheet; and (b) statement of income. Obligation to prepare annual report 319. The Board of directors of every company shall, within six months after the date of company s financial statement, prepare an annual report on the affairs of the company during the accounting period ending on that date. Sending copy of annual report to company s shareholders 320. The Board of directors of a company shall cause a copy of the annual report to be sent to every 344

345 shareholder of the company not less than fifteen days before the date fixed for the annual meeting of the shareholders. Content of annual report 321. (1) Every annual report of a company shall be in writing, be dated and shall - (a) describe, so far as the Board of directors believes is material for the shareholders to have an appreciation of the state of the company s affairs and is not harmful to the business of the company or to any of its subsidiaries, especially any change during the accounting period - (i) the nature of the business of the company or any of its subsidiaries; (ii) the classes of business in which the company has an interest, whether as a shareholder of another company or otherwise; (b) include financial statements for the accounting period and any group financial statements for the accounting period completed and 345

346 (c) (d) (e) (f) signed in accordance with this Act; where an auditor s report is required in relation to the financial statements or group financial statements, included in the report, include that auditor s report; state particulars of entries in the interests register made during the accounting period; state the amount which represents the total of the remuneration and benefits received by or due and receivable from the company and any related company, corporation or institution by - (i) executive directors of a company engaged in the full time employment of the company and its related companies, corporations, or institutions, including all bonuses and commissions received by them as employees; and (ii) the non-executive directors of the company; state the total amount of donations 346

347 (g) (h) (i) (j) (k) made by the company and other subsidiaries during the accounting period; state the names of the persons holding office as directors of the company as at the end of the accounting period and the names of any persons who ceased to hold office as directors of the company during the accounting period; state the amounts payable by the company to the person or firm holding office as auditor of the company as audit fees and, as a separate item, fees payable by the company for other services provided by that person or firm; be signed on behalf of the Board of directors by two directors of the company or, where the company has only one director, by that director; disclose related party transactions and full information about the nature and extent of the conflict of interest; and any other details that are necessary for the report to be well 347

348 understood. (2) A company whose subsidiary company is located outside Zambia shall also comply with the provisions of this section within eight weeks after the dates contained herein. Inspection of company s documents by shareholders 322. (1) A company shall make available for inspection by a shareholder of the company or by a person authorised in writing by a shareholder any documents of the company, except those documents regarded as confidential, if they suspect any misdeeds by directors or managers. (2) A written notice of intention to inspect the records shall be served on the company. Records to be made available for inspection 323. The records to be made available for inspection include - (a) minutes of all meetings and resolutions of shareholders; (b) copies of written communications to all shareholders or to all holders of a class of shares during the preceding five years, including annual reports, financial statements, and group financial statements; (c) certificates given by directors; 348

349 (d) financial statements and financial reports; and (e) the company s directors; and (f) the interests register, where applicable. Manner of inspection 324. Documents that are to be inspected shall be available for inspection at the place at which the company s records are kept during working hours for such inspection period, as may be required. Commencement of inspection 325. (1) An inspection period is the period commencing on the third working day after the day on which notice of intention to inspect is served on a company by the Registrar, a concerned shareholder, a shareholder s representative or other stakeholder; ending on the eighth working day after the notice is received. (2) A shareholder or the shareholder s representative may, upon a written request and after payment of a reasonable copying fee thereof, require a copy of, or extract from, a document which is available for inspection, within seven days of the request. PART XVI AMALGAMATION 349

350 Amalgamation 326. (1) Two or more companies may amalgamate and continue as one of the amalgamating companies or as one new company. (2) The competition and consumer protection Act, shall apply in addition to the provisions of this Act. Amalgamation proposal 327. An amalgamation proposal shall set out the terms of the amalgamation, and in particular - (a) the name of the amalgamated company; (b) the registered office of the amalgamated company; (c) the full names and residential addresses of directors of the amalgamated company; (d) the address for the registered office of the amalgamated company; (e) the share structure of the amalgamated company, specifying - (i) the number of shares of the company; (ii) the rights, privileges, limitations and conditions attached to each share of the company; 350

351 (f) the manner in which the shares of each amalgamating company are to be converted into shares of the amalgamated company; (g) the consideration that the holders of those shares are to receive; (h) any payment to be made to a shareholder or a director of the new amalgamated company; (i) details of any arrangement necessary to complete the amalgamation, subsequent management and operation of the amalgamated company; (j) a copy of the proposed memorandum of association and articles of the amalgamated company; and (k) the date on which the amalgamation proposal will be effective. Amalgamation resolution 328. (1) The Board of directors of each amalgamated company shall resolve that in its opinion, the amalgamation is in the best interest of the company and that it is satisfied on reasonable grounds that the amalgamated company shall, immediately after the amalgamation, satisfy the 351

352 solvency test. (2) The directors who vote in favour of a resolution of amalgamation under this section shall make a declaration stating that the amalgamation will benefit the company and satisfy the solvency test. Documents forwarded to shareholders of amalgamating company 329. The Board of directors of each amalgamating company shall send to each shareholder of the company, not less than thirty days before the amalgamation is proposed to take effect - (a) a copy of the amalgamation proposal; (b) copies of the declarations made by the directors of each Board; (c) a summary of the principal provisions of the articles of association of the amalgamating company; (d) a statement that a copy of the articles of the amalgamated company shall be supplied to any shareholder who requests it; (e) a statement setting out the rights of shareholders of each company; (f) a statement of any material interests of the directors, whether in that 352

353 capacity or otherwise; and (g) such further information and explanation as may be necessary to enable a reasonable shareholder to understand the nature and implications for the company and its shareholders of the proposed amalgamation. Procedures before amalgamation 330. The Board of directors of each amalgamating company shall, not less than thirty days before the amalgamation is proposed to take effect (a) send a copy of the amalgamation proposal to every secured creditor of the company; (b) give public notice of the proposed amalgamation, including a statement that: (i) copies of the amalgamation proposal are available at the registered offices of the amalgamating companies and at such other places as may be specified for inspection during normal business hours; by any shareholder or creditor of an 353

354 (ii) amalgamated company or any person to whom an amalgamated company is under an obligation a shareholder or creditor of an amalgamating company or any person to whom an amalgamating company is under an obligation is entitled to be supplied free of charge with a copy of the amalgamation proposal upon request. Approving amalgamation proposal 331. The amalgamation proposal shall be approved by the shareholders of each amalgamating company and any other interested parties, by special resolution. Filing notice of amalgamation 332. The Board of directors of each amalgamating company shall, not less than thirty days before the amalgamation is proposed to take effect, give written notice of the proposed amalgamation to every creditor of the company. Registration of amalgamation proposal 354

355 333. For the purpose of effecting an amalgamation, the following documents shall be delivered to the Registrar for registration: (a) the approved amalgamation proposal; (b) a certificate that is signed by the Board of directors of each amalgamating company; (c) a certificate signed by the Board of directors of the new company resulting from the amalgamation; (d) proof that the amalgamation will not jeopardize the interest of the creditors of the amalgamating companies; and (e) a document in the prescribed form, signed by each of the persons whose name is indicated in the amalgamation proposal as a director or employee of the amalgamated company consenting to act as a director or employee of the company. Certificate of amalgamation 334. On receipt of the application for amalgamation, the Registrar shall forthwith - (a) enter the particulars of the company 355

356 on the register; and, (b) issue a certificate of amalgamation. Effect of certificate of amalgamation 335. An amalgamation shall be effective on the date shown in the certificate of amalgamation. Removing amalgamating companies from register 336. The Registrar shall remove from the register the names of the amalgamating companies and retain only the name of the amalgamated company. Property, rights, powers and privileges of amalgamated companies 337. The property, rights, powers and privileges of each of the amalgamated companies which have been removed from the register shall continue to be the property, rights, powers and privileges of the amalgamated company. Liabilities and obligations of amalgamated companies 338. The amalgamated company shall continue to be liable for all the liabilities and obligations of each of the amalgamated companies and all pending proceedings by or against an amalgamating company shall be continued by or against the amalgamated company. Enforcement of court ruling by new company 339. A court s decision in favour of, or against, an amalgamating company may be enforced by, or against, the amalgamated company. 356

357 Opposing amalgamation 340. Any shareholder, debenture holder, creditor or other interested person may oppose an amalgamation before Court. Respecting provisions of amalgamation proposal 341. Any provisions of an amalgamation proposal that provide for the conversion of shares and rights of shareholders in the amalgamating companies have effect according to their tenor. PART XVII FOREIGN COMPANY Definition of foreign company 342. (1) A foreign company shall be a company that is incorporated outside Zambia and is registered as a branch under this Act. Registration of foreign company 343. (1) Every foreign company that is not incorporated in Zambia shall, before starting business in Zambia, file the following with the Registrar: (a) a duly authenticated copy of its certificate of incorporation, articles of association, memorandum of association depending on where it was established and any other instrument constituting or defining its 357

358 being established; (b) a list of its directors residing in Zambia; (c) a memorandum of or power of attorney to represent the company in Zambia; (d) notice of its registered office in Zambia; and (e) a declaration made by the authorised agents of the company, to the effect that- (i) the company is incorporated under the name stated in the instrument in accordance with the law of the country in which it is so incorporated, the name of which is stated in the declaration; (ii) the instrument has been executed, the powers appearing to be conferred on the authorised agent are authorised to be conferred under the articles of the company, or under the Act or instrument under which the company was incorporated, or by any other instrument constituting or defining the articles of the company; and (iii) the person making the declaration is an authorised agent of the company will be conclusive evidence of those facts. (2) Where a foreign company has complied with the provisions of this section, the Registrar shall register the company and shall issue a certificate thereof in the prescribed form. (3) Where it is established that a foreign 358

359 company has a name that is similar to an existing company name or is confusing as far as companies inside the country are concerned, the Registrar may require the company to apply for a different name. Foreign company that shall not be registered 344. (1) A foreign company Zambia shall not be registered under this Act if (a) the company is in liquidation; or (b) a receiver or manager has been appointed, whether by a court or not, in relation to the property of the company; or (c) the company has entered into a compromise or arrangement with a creditor that is in force; or (d) an application has been made to a court, whether in Zambia or in another country, (i) to put the company into liquidation or wind it up; or (ii) for the approval of a compromise or arrangement between the company and a creditor and has not been dealt with. (2) A foreign company shall not be registered as a company under this Act unless the foreign company would, immediately after becoming registered under this Act, satisfy the solvency test. Filing notice of change of companies authorised agent 359

360 Ceasing to be authorised agent 345. The authorised agent in respect of whom the notice has been filed shall cease to be an authorised agent - (a) on the expiry of a period of twenty one days after the date of filing of the notice or on the date of the appointment of another; (b) where the time specified in the notice filed with the Registrar is beyond twenty one days, the date indicated in the document forwarded to the Registrar shall apply. Deadline for replacement of authorised agent 346. Where an authorised agent ceases to be the authorised agent and the company is without an authorised agent in Zambia, the company shall, where it continues to carry on business or has a place of business in Zambia, within twenty one days after the authorised agent ceases to be one, appoint another authorised agent. Change in Particulars Where any change or alteration is made in (a) the articles of association, the memorandum of association or any other document filed; (b) the composition of the Board of directors; (c) the authorised agents or the address of an authorised agent; (d) the situation of the registered office in 360

361 Zambia or of the days and hours during which it is open and accessible to the public; (e) the address of the registered office and the place of its incorporation or origin; (f) the name of the company; or (g) the powers of any directors resident in Zambia who are members of the local Board of Directors; the foreign company shall file with the Registrar particulars of the change or alteration within thirty days. Filing of court order with Registrar 348. Where an Order is made by a court under any act in force in the country in which a foreign company is incorporated which corresponds to orders made in relation to an amalgamation, compromise with creditors or approval of arrangements, the company shall, within one month, file with the Registrar a copy of the Order. Balance Sheet 349. A foreign company shall, within three months of its annual meeting of shareholders, file with the Registrar - (a) a copy of its balance sheet made up to the end of its last preceding accounting period in such form and containing such particulars and 361

362 accompanied by copies of such documents as the company is required to annex, attach or send with its balance sheet by the Act for the time being applicable to that company in the place of its incorporation or origin; (b) a declaration certifying that the copies are true copies of the documents so required; and (c) where the Registrar is of the opinion that the balance sheet and other documents do not sufficiently disclose the company's financial position, the Registrar may, by written notice to the company, require the company to file a balance sheet within such period and in such form as the Registrar may require. Obligation of foreign company to comply with requirements applicable to local companies 350. Where a foreign company is not required by the Laws of the place of its incorporation or origin to hold an annual meeting of shareholders and prepare a balance sheet, the company shall prepare and file with the Registrar a balance sheet within such period and in such form as required and annex thereto a document providing particulars of the directors. Obligation to comply with International Accounting Standards 351. A foreign company that is not incorporated in Zambia shall, in addition to the balance sheet and other documents required to be 362

363 filed, comply with International Accounting Standards, fairly showing the assets employed in, and liabilities arising out of, and its profit or loss arising out of, its operations conducted in or from Zambia. Foreign company to file notice of particulars of its business in Zambia with balance sheet 352. A foreign company that is not incorporated in Zambia shall file with the Registrar in each year at the time a copy of its balance sheet is filed, a notice containing particulars with respect to the business being carried out by the company in Zambia in a prescribed form and manner. Branch registers 353. A foreign company which has a share capital and shareholders resident in Zambia shall keep at its registered office in Zambia or at some other place in Zambia a branch register for the purpose of registering shares of shareholders resident in Zambia who apply to have the shares registered therein. Notice of place where register is kept 354. Where a foreign company opens a register of shares, it shall, within fifteen days of the date the register is opened, file with the Registrar a notice to that effect specifying the place where the register is kept. 363

364 Notice of any change in register 355. Where any change is made in the place where the register is kept or where the register is discontinued, the company shall, within fifteen days of the date of the change, file with the Registrar a notice to that effect. Certificate prima facie evidence of registration of shares 356. A certificate under the seal of a foreign company signed by a director of the company specifying any shares held by any shareholder of that company and registered in the branch register shall be prima facie evidence of the title of the shareholder to the shares and the registration of the shares in the branch register. Financial requirements before certificate issued 357. A certificate of share capital shall, in the case of a foreign company, only be issued upon proof of the laid out financial requirements, applicable to foreign companies, under this Act or any other law being met. Cessation of business in Zambia 358. (1) Where a foreign company ceases to have a place of business or to carry on business in Zambia, it shall, within seven days of the date of the cessation, file with the Registrar a notice to that effect, and as from the day on which the notice is filed, its obligation to file any document other than a 364

365 document that ought to have been filed earlier shall cease, and the Registrar shall within three months after the filing of the notice remove the name of the company from the register. (2) The cessation of operations by a foreign company or removal from the register shall not affect its accrued liabilities and other obligations. De-registration of foreign company 359. Where the Registrar has reasonable cause to believe that a foreign company has ceased to carry on business in Zambia, the Registrar shall de-register it in accordance with this Act. Registration of foreign company and continuation of business 360. A company incorporated under the Laws of any country other than Zambia, may, where it is authorised by the Laws of that country, apply to the Registrar to be registered as, and continue as, a company in Zambia as if it had been incorporated in Zambia under this Act. Prohibition to conduct business in some sectors 361. (1) A foreign company or foreign owned company shall not conduct business in such sectors as the Minister may, by Regulation, prescribe. (2) Foreign nationals shall not incorporate companies for the purpose of conducting business in 365

366 the sectors prescribed under subsection (1). (3) The sectors prescribed pursuant to subsection (1) shall be reserved for businesses operated by Zambian nationals or companies that are wholly owned by Zambian shareholders. Funds invested by foreign company And Capital Lock-In Period 362. (1) A foreign company or foreign owned company investing funds in Zambia shall remit the initial investment to the Bank of Zambia into an account designated for investment purpose. (2) The Bank of Zambia shall then channel the money remitted to it under subsection (1) into an account in such commercial bank as the foreign company may appoint. (3) The capital of a foreign company shall only be externalized upon completion of a lock-in-period of ten (10) years. (4) Remittances of profits and externalization of capital shall be based on the initial and subsequent subscription remitted through the Bank of Zambia. (5) A foreign company of foreign owned company that contravenes subsection (1) commits an offence. Prohibition of borrowing and lending funds locally for initial investment 363. (1) A foreign company shall not borrow the initial investment capital from a local bank or 366

367 financial institution but shall fulfill the pledge it makes as incorporated, in the Investment Promotion and Protection Agreement (IPPA) signed with the investment agency. (2) A bank or financial institution shall not lend initial investment capital to foreign company. (3) A foreign company, foreign owned company, bank or financial institution that violates this section shall commit an offence. PART XVIII DORMANT COMPANIES Definition of dormant company 364. A company shall be a dormant company for any period during which a significant accounting transaction does not occur in relation to the company. A company which may be registered as dormant company 365. Where a company has been dormant - (a) from the time of its formation; or (b) since the end of its previous accounting period; and (c) is not required to prepare accounts for that period, by a special resolution passed at a meeting of shareholders. 367

368 Such company shall declare itself a dormant company. Banking or insurance companies prohibited from self declaration as dormant 366. A company shall not declare itself to be a dormant company where it is a company formed for the business of banking or insurance. Notice by dormant company 367. The company shall, within fifteen days of the passing of a special resolution declaring itself to be a dormant company, give notice to the Registrar of that resolution in a prescribed form and manner. Notice by company which ceases to be dormant 368. Where a company which has declared itself to be a dormant company ceases to be dormant, a notice to that effect shall be given to the Registrar by that company in a prescribed form and manner. Exemption for dormant companies 369. (1) Any company, which is registered as being a dormant company, shall be exempted from the requirement to have its accounts audited and from the payment of any prescribed fee with the exception of the requirement to file annual returns. (2) It shall be an offence for a dormant company to engage in any business transaction 368

369 PART XIX ADMINISTRATION OF THE ACT Administration of Act Agency This Act shall be administered by the Establishment of Companies Office 371. There shall be established under the Agency an office to be called the Companies Office. Powers of The Registrar 372. The Registrar shall exercise the powers and perform the functions assigned to him by this Act and the Patents and Companies Registration Agency Act: Provided that any power conferred or duty imposed on the Registrar by this Act may be exercised or performed by the Registrar personally or by an officer acting under a delegation from or under the control or direction of the Registrar. Appointment of Officers 373. The Agency may appoint, on such terms and conditions as it may determine such officers as it considers necessary for the carrying out of its functions under this Act. Seal 374. (1) The seal of the Agency kept in terms of the Patents and Companies Registration Act, 2010, 369

370 shall be used for the purposes of this Act and the impression thereof, made for such purposes shall be judiciary noticed. (2) On the commencement of this Act, any impression of a seal made for purposes of this Act before the commencement of this Act, shall be deemed to be an impression of the seal of the Agency. Register of Companies 375. (1) There shall be kept at the Agency a register of companies, in which shall be entered particulars of companies and any other registers that the Registrar thinks necessary or convenient for the purposes of this Act. Inspection of Register 376. (1) Subject to the provisions of this Act, the register or any document lodged at the Companies Office shall, on payment of the prescribed fees, be open to inspection by the public during the prescribed hours. (2) The register of companies shall be prima facie evidence of any matters required or authorised by or under this Act to be entered therein. Registrar to furnish information from register on request 377. Subject to the provisions of this Act, the Registrar shall, upon request of any person and on payment of the prescribed fee, furnish information relating to documents lodged at the Companies Office 370

371 and open to public inspection or particulars from the register. Immunity of Officers as regards official acts 378. Neither the Registrar nor any officer in the Companies Office shall incur any liability for any act or omission or otherwise by reason of or in connection with any action or investigation required or authorised by this Act or any such treaty or convention, or any report or other proceedings consequent on any such action or investigation. Registration of documents 379. (1) Where this Act requires any document or particulars to be lodged with the Registrar, the Registrar shall register them in the manner prescribed or, if no manner is prescribed for the document or particulars, as determined by the Registrar. (2) For the purposes of this Act, a document or particulars shall be deemed not to have been lodged with the Registrar until any fee prescribed under section three hundred and seventy-seven has been paid to the Registrar. (3) Subject to this Act, where this Act requires a document or particulars to be lodged under this Act, each company concerned shall lodge a separate document or set of particulars. (4) All documents and particulars which are 371

372 lodged with the Registrar shall be printed or typewritten to the satisfaction of the Registrar. (5) If the Registrar is of opinion that any document or particulars lodged with him- (a) contain matter or matters contrary to law; (b) by reason of any error, omission or misdescription have not been duly completed; (c) are insufficiently legible; (d) are written on paper insufficiently durable; or (e) otherwise do not comply with the requirements of this Act; he may refuse to register the document or particulars in that state and direct that they be amended or completed in a specified manner and re-submitted. (6) If the Registrar gives a direction under subsection (5), the document or particulars shall be deemed not to have been lodged. (7) The Registrar may require that a document or a fact stated in a document lodged with him shall be verified by statutory declaration. (8) Where the Registrar is required or permitted under this Act to cause a copy or particulars of a document lodged with him to be published in the 372

373 Gazette, he may require the lodgement with him of any such document in duplicate, or the provision of any such particulars, and may withhold registration of the document until the requirement has been complied with. (9) The Registrar may alter a document if so authorised by the person who lodged the document or his representative. Extension of time folodgement 380. (1) Where under this Act a document is required to be lodged with the Registrar within a specified period, the period shall be extended by twenty eight days in relation to a document executed or made in a place outside Zambia. (2) The Registrar may, before the end of any period fixed for the lodgement of a document or particulars, at the request of the person concerned, extend the period for lodgement by such a period, and on such terms, as he thinks reasonable in the circumstances. (3) Subject to this section, where any document or particulars are lodged with the Registrar after the end of the period fixed for its lodgement, the Registrar shall accept it for registration upon payment of such additional fee as may be prescribed. (4) The Registrar may reduce or waive any additional fee imposed under subsection (3) if he is 373

374 satisfied that the failure to lodge the document or particulars was caused or continued solely through administrative oversight and that no person is likely to have suffered damage or to have been prejudiced as a result of the failure. Documents to be in approved language 381. (1) Subject to this Act, where this Act requires a document or register to be prepared, kept, maintained or lodged, the document shall be in English. (2) Where the Registrar approves the lodgement of a document all or part of which is in a language other than English, he may require a certified translation into English to be annexed to it. Prescribed forms 382. (1) Where this Act provides that a document to be lodged shall be "in the prescribed form", the Registrar shall accept for lodgement and registration a document that contains all the information required and varies from the prescribed form in inessential respects only. (2) In the period of six months from the commencement of this Act, where this Act provides that a document to be lodged shall be "in the prescribed form" and no form has been prescribed by the regulations for the purposes of the provision, the document shall be in a form approved by the 374

375 Registrar. Evidentiary provisions 383. (1) A copy of, or extract from, any document registered by the Registrar, being a copy or extract certified by the Registrar to be a true copy or extract, shall be admitted in any proceedings as of equal validity to the original document. (2) In any proceedings, a court shall take judicial notice of the office of the Registrar. (3) A document purporting- (a) to be- (i) an order, certificate, licence or approval made or issued by the Registrar for the purposes of this Act; or (ii) a revocation of such an order, certificate, licence or approval; and (b) to be sealed with the seal of the Registrar or to be signed by him, or on his behalf by a Deputy Registrar or other authorised officer; shall be presumed to be such a document, or to be duly sealed or signed. (4) A certificate signed by the Registrar that an order made, certificate issued, or act done is the order, certificate, or act of the Registrar shall be conclusive evidence or the fact certified. 375

376 Inspections of records 384. (1) For the purpose of ascertaining whether a company or an officer is complying with this Act or any regulations made under this Act, the Registrar may, on giving fourteen days written notice to the company, call for the production of or inspect any book required to be kept by the company. (2) If a body corporate or any officer, receiver or liquidator of a body corporate; (a) fails to comply with any provision of this Act which requires it, or him, to lodge or deliver any return, account, or other document, or to give notice of any matter; (b) continues to fail to comply with the provision for the period of fourteen days after the service of a notice on it or him requiring him to do so; the court may, on an application by the Registrar or by any member or creditor of the body corporate, or by any other person claiming an interest which the court thinks sufficient, make an order directing the body corporate and any officer thereof, or the receiver or liquidator, to comply with the provision within such time as may be specified in the order, and may provide that all costs of and incidental to the application shall be borne by the body corporate or 376

377 by any officer, receiver or liquidator of the body corporate responsible for the failure. Waiver of Fees 385. (1) The regulations may prescribe fees in respect of- (a) the performance by the Registrar of his functions under this Act, including the receipt by him of any notice or other document which under this Act is required to be lodged with him; and (b) searches on documents kept by the Registrar under this Act. (2) the Registrar may in his discretion waive the whole or any part of the fee subject to policies set by the Board established under the Patents and Companies Registration Agency Act. Where a provision in this Act refers to a prescribed fee and no fee has been prescribed for the purposes of the provision, the provision shall be read as if the reference were omitted. Appeal against a decision of the Registrar 386. Subject to this Act, a person aggrieved by a decision of the Registrar may within fourteen days after the date on which he is notified of the decision, appeal to the court against the decision, 377

378 and the court may confirm, reverse or vary the decision or make such order or give such directions in the matter as it thinks fit. Collection of information and statistics from companies 387. (1) The Registrar may issue an order requiring companies generally, or any class of companies, to furnish, by the time specified in the order, specified information or statistics with regard to their constitutions or working, in relation to periods specified in the order. (2) The Registrar may issue an order requiring a person, being a company or a person who is, or has at any time been, an officer or employee of the company, to furnish, by the time specified in the order, specified information or statistics with regard to the company's constitution or working, in relation to periods specified in the order. (3) An order under this section shall not have the effect of requiring a person to furnish any information less than fourteen days after the date on which the person was notified of the order. (4) An order under subsection (1) shall be published in the Gazette and may, as the Registrar thinks fit, be published in a newspaper or newspapers circulating generally in Zambia or served on individual companies. 378

379 (5) An order under subsection (2) shall be served on the person subject to the order. (6) A person shall be deemed to have been notified of an order on the earliest of the following dates: (a) the date on which the order was served on the person; (b) the date on which the order was published in the Gazette; (c) the date on which the order was published in a newspaper circulating generally in Zambia. (7) For the purpose of satisfying himself that any information or statistics furnished in pursuance of an order under this section is correct and complete, the Registrar may require a person subject to the order- (a) to produce specified records or documents in his possession or under his control for inspection, before a specified officer and at a specified time; or 379

380 (b) to furnish specified further information or statistics within a specified time. (8) The Registrar may, in writing, authorise a person to make an inquiry- (a) for the purpose of obtaining any information or statistics which a company has failed to furnish as required of it by an order under subsection (1); or (b) for the purpose of- (i) satisfying the Registrar that any information or statistics furnished by a company in pursuance of an order made under subsection (ii) is correct and complete; and (ii) obtaining such information or statistics as may be necessary or make the information or statistics furnished correct and complete; and the person authorised shall, for the purposes of such an inquiry, have such powers as may be prescribed. 380

381 (9) If a company fails to comply with an order under this section to provide information and statistics about itself, or knowingly furnishes any information or statistics which is incorrect or incomplete in any material respect, the company, and each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine or imprisonment under this Act. (10) A person who wilfully fails to comply with an order under this section shall be guilty of an offence, and shall be liable on conviction to a fine or to imprisonment under this Act or to both. (11) For the purposes of this section, where a body corporate incorporated outside Zambia carries on business in Zambia having established an office within Zambia, a reference to a company in this section includes a reference to the body corporate in relation, and only in relation, to that business. Oaths and affirmations 388. Any person who is required under the provisions of this Act to take any oath or swear to the truth of any affidavit may, in lieu thereof, make an affirmation or declaration in accordance with the law relating to affirmations or declarations in Zambia. Evidence of entries and documents 381

382 389. (1) A certificate purporting to be signed by the Registrar and certifying that any entry which the Registrar is authorised by or under this Act to make, has or has not been made, or that any other thing which he is so authorised to do has or has not been done, shall be prima facie evidence of the matters so certified. (2) A copy of any entry in any register or of any document kept in the Companies Office or an extract from any such register or document, certified by the Registrar and sealed with the seal of the Agency shall be admitted in evidence without further proof and without production of the original. Power of Registrar to ward costs 390. In all proceedings before the Registrar under this Act, the Registrar shall have power to award to any party such costs as he may consider reasonable and to direct how and by what parties they are to be paid, and any costs so awarded shall be taxed by the Court and payment thereof may be enforced in the same manner as if they were costs allowed by the Court. Proceedings before Registrar 391. Evidence in any proceedings before the Registrar under this Act shall be given by affidavit, however, the Registrar may, if the Registrar thinks fit in any particular case, take oral evidence on oath in 382

383 lieu of or in addition to such evidence as aforesaid and may allow any witness to be cross-examined on his affidavit or oral evidence. Loss or Destruction of Certificate 392. Where the Registrar is satisfied that a certificate of incorporation under this Act has been lost or destroyed or cannot be produced, the Registrar may at any time cause a duplicate thereof to be sealed on payment of such fees as may be prescribed. Reference to High Court by Registrar 393. When any matter to be decided by the Registrar under this Act appears to him to involve a complex point of law or unusual importance, the Registrar may, after giving notice to the parties, refer such matter to the High Court for a decision and shall thereafter, in relation to such matter, act in accordance with the decision of the High Court or any decision substituted therefore on appeal to the Supreme Court. Registrar to appear in legal proceedings 394. (1) In any legal proceeding in which the relief sought includes alteration, revocation, rectification of the register, the Registrar shall have the right to appear and be heard, and shall appear if so directed by the Court. (2) Unless otherwise directed by the Court, the 383

384 Registrar, in lieu of appearing and being heard, may submit to the Court a statement in writing signed by the Registrar, giving particulars of the proceedings before the Registrar in relation to the matter in issue or of the grounds of any decision given by the Registrar affecting it or of the practice of the Companies Office in like cases or of such other matters relevant to the issues, and within his knowledge as Registrar, as the Registrar thinks fit, and the statement shall be deemed to form part of the evidence in the proceeding Costs of Registrar 395. In all proceedings before the Court under this Act, the costs of the Registrar shall be in the discretion of the Court, but the Registrar shall not be ordered to pay the costs of any other of the parties. Regulations 396. (1) The Minister may, by statutory instrument, make regulations for or with respect to any matter that by this Act is required or permitted to be prescribed, or that is necessary or convenient to be prescribed for carrying out or giving effect to this Act, other than a matter required or permitted to be prescribed by the Minister or any other person or body. (2) Without limiting the generality of subsection (1), such regulations may be made on the 384

385 following matters; (a) the conduct of the business of the Companies office; (b) the form and content of any application, notice, return, account, book, record, certificate, licence or other document required for the purposes of this Act; (c) the payment of fees and charges in respect of any matter or anything done or supplied under this Act; (d) the procedure to be followed in connection with any application or request to the Registrar or any proceeding before him; (e) (f) (g) the provision of copies of any documents under this Act, and the certification of such copies; the making of inspections and searches under this Act, including the times when they may be made; the conduct of any winding-up or other proceeding or transaction under this Act; 385

386 (h) the service of notices and other documents under this Act; (i) any matter necessary or convenient to be provided for in relation to the transition between the former Act and this Act. (3) The regulations may be made so as- (a) to make prescription vary depending on the circumstances; (b) to be of general or specifically limited application; or (c) to permit any matter to be determined from time to time by any person or body specified in the regulations. Electronic transactions Transactions PART XX MISCELLANEOUS PROVISIONS 397. (1) Any documents authorised or required to be filed with, or delivered to, the Registrar under this Act may be filed or delivered by means of a device or facility that records or stores information electronically or by other means; and permits the 386

387 information so recorded or stored to be readily inspected or reproduced in usable form. (2) Electronic means may be used for the registration, allotment, and transfer of shares and debentures. (3) An electronic register of shares and debentures of a company may be established and ownership of shares and debentures which are registered electronically shall be recognized by this Act. Failure to comply with this Act PART XXI OFFENCES AND PENALTIES 398. A company that fails to comply with this Act regarding the requirement to be registered in the register commits an offence and shall be liable to a fine of two hundred and twenty-two thousand penalty units. Failure to keep books 399. A company that fails to keep books as required to be kept under this Act commits an offence and shall be liable to a fine of two hundred and twenty-two thousand penalty units. Failure to provide documents 400. (1) Any company that fails or delays to provide the Registrar with documents, as required by this Act commits and offence and shall be liable to a fine of two hundred and twenty-two thousand 387

388 penalty units. (2) Where the documents referred to in the preceding subsection are fraudulent, a company that provides them willfully commits an offence and shall be liable to a fine under this Act. False or misleading notice Cap Notwithstanding the provisions of the Penal Code, any person who is required to provide a document and who - (a) makes, or authorises the making of, a statement that is false or misleading; or (b) deliberately omits or authorises the omission of, anything, the omission of which makes the document false or misleading on an important matter; commits an offence and shall be liable to a fine under this Act. Knowingly furnishing false document Cap Notwithstanding the provisions of the Penal Code, any director or employee of a company who knowingly makes, submits, or authorizes the making or submitting of, a false or misleading statement or report with regard to - (a) a director, employee, inspector, shareholder, debenture holder or 388

389 assignee for debenture holders of the company; (b) a liquidator, liquidation committee, or receiver or manager of property of the company; (c) where the company is a subsidiary, a director, employee or inspector of its holding company; (d) a stock exchange or an officer of a stock exchange; or (e) the property of the company; commits an offence and shall be liable to a fine under this Act. Fraudulent use or destruction of property Cap Notwithstanding the provisions of the Penal Code, any director, employee or shareholder of a company who - (a) fraudulently takes or applies property of the company for the director s employee s or shareholder s own use or benefit, as the case may be, or for a use or purpose other than the use or purpose of the company; or (b) fraudulently conceals or destroys any property of the company; commits an offence and shall be liable to 389

390 a fine under this Act. Falsification of records Cap Notwithstanding the provisions of the Penal Code, any director, employee, or shareholder of a company who, with intent to defraud or deceive a person - (a) destroys, displaces, mutilates, alters, falsifies, or is a party to the destruction, mutilation, alteration or falsification of any register, accounting records, book, paper or other document belonging or relating to the company; (b) makes, or is a party to the making of, a false entry in any register, accounting records, book, paper, or other document belonging or relating to the company; commits an offence and shall be liable to a fine under this Act. Using fraudulent document Cap Notwithstanding the provisions of the Penal Code, or any other law, any person who, in relation to a mechanical, electronic, or other device used in connection with the keeping or preparation of any register, accounting book, paper, or other document belonging to a company in accordance 390

391 with this Act - (a) records or makes available to a person false information on an important matter; (b) knowingly destroys, removes or falsifies any matter recorded or stored, or knowingly fails or omits to record or store any matter; commits an offence and shall be liable to a fine under this Act. Carrying on business fraudulently Cap Notwithstanding the provisions of the Penal Code, any person who knowingly is a party to a company carrying on business with intent to defraud creditors of the company or any other person, commits an offence and shall be liable to a fine under this section. Penalties for carrying on business fraudulently Cap Notwithstanding the provisions of the Penal Code, any director of a company who - (a) by false pretences or other fraud induces a person to give credit to the company; (b) with intent to defraud creditors of the company - (i) gives, transfers, or causes a charge to be given on property of the company to another 391

392 person; (ii) causes property to be given or transferred to any person; (iii) causes or was a party to an execution being levied against any property of the company; commits an offence and shall be liable to a fine under this section. Persons prohibited from managing companies Cap Notwithstanding the provisions of the Penal Code, where a person has been - (a) convicted of an offence in connection with the promotion, formation or management of a company; (b) convicted of an offence involving fraud; (c) convicted of a breach of professional secrecy; that person shall not, during the period of two years following the conviction or the judgment, be a director or promoter of or in any way, whether directly or indirectly, be concerned with, or take part in, the management of a company, unless that person first obtains leave of 392

393 Court which may be given on such terms and conditions as the Court thinks fit. Other offences Cap Notwithstanding the provisions of the Penal Code, any person who (a) issues or makes use of a document or certificate kept or given under this Act which does not comply with this Act; (b) fails to pay the registration fee prescribed by this Act; (c) fails to do any act within the time required by this Act; (d) fails to comply with a request, direction or order issued under this Act, by a Court, the Registrar or any other authorized person; (e) makes use of any name or title which the person is not, under this Act, authorised to use; (f) divulges or makes use of any information obtained under this Act which the person is not otherwise authorised to disclose; (g) impersonates a shareholder or debenture holder for the purpose of 393

394 obtaining an advantage; (h) uses the name and unique registration number or seal of a company or issues any letter, bill or document relating to a company otherwise than in accordance with this Act or any other law; (i) in the exercise of any powers or functions conferred upon that person by this Act or by any regulations made under this Act, fails to act in accordance with the instrument which confers the function or power; or (j) otherwise contravenes this Act or any regulations made under it; commits an offence and shall be liable to a fine under this Act. Liability of Directors and management 410. If a company is convicted of an offence against this Act or rules, regulations or an Order made under this Act, every person who is - (a) a director of that company; or (b) concerned in the management of the body company shall be deemed to have committed the same offence if the person knowingly authorised or 394

395 permitted the act or omission constituting the offence. General penalty 411. A person who commits an offence for which no penalty is provided shall be liable to a fine under this Act. Non compliant company excluded from incentives Act No. of , Act No. 11 of 2006, Cap 323 Cap 322, Cap A company that does not comply with the provisions of this Act shall not enjoy any incentive offered under this Act, the Citizens Economic Empowerment Commission Act, the Zambia Development Agency Act, the Income Tax Act, the Customs and Excise Act, the Value Added Tax Act or any other law. Penalty for false statements 413. (1) A person who, in any return, report, certificate, account or other document required by or for the purposes of this Act makes a statement that he knows to be false in any material particular shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding one hundred thousand penalty units or to imprisonment for a term not exceeding two years, or to both. (2) This section shall not affect the liability of a body corporate or other person under another section of this Act or any other written law, but the penalties 395

396 imposed by this section shall be alternative, and not additional, to any penalties imposed by the other section or written law. Penalty for improper use of "Incorporate d" or "Limited" 414. (1) A person who, not being a body corporate, trades or carries on business in Zambia under a name or title which includes the word "Limited ", "incorporated", "corporation" or any contraction or imitation thereof, or any equivalent in a language other than English shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding one hundred thousand penalty units. (2) A person who, not being a body corporate whose members have limited liability under the laws of the country of its incorporation, trades or carries on business in Zambia under a name or title the last word of which is "limited" or any contraction or imitation thereof, or any equivalent in a language other than English, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding ten monetary units for each day that he trades or carries on business under that name or title. Civil liability for fraudulent trading 415. (1) In the course of the winding-up of a company or any proceedings against a company, the court may, on the application of the liquidator or any 396

397 creditor or member of the company, if it is satisfied that a person was knowingly a party to the carrying on of any business of the company for a fraudulent purpose, make an order that the person shall be personally responsible, without any limitation of liability, for the debts or other liabilities of the company or for such of those debts or other liabilities as the court directs. (2) An order under this section may provide for measures to give effect to the liabilities of the person under the order, and in particular may provide that those liabilities shall be a charge on any debt or obligation due from the company to him or on any interest in the company of which he has, directly or indirectly, the benefit. (3) The court may make such further orders as it thinks necessary to enforce any charge imposed under this section. (4) This section shall apply whether or not the person concerned has been convicted of an offence against section or of any other offence in respect of the matters on the ground of which the order is made. Offence of fraudulent trading 416. A person who is knowingly a party to the carrying on of any business of the company for a fraudulent purpose shall be guilty of an offence, and 397

398 shall be liable on conviction to a fine not exceeding one hundred thousand penalty units or to imprisonment for a period not exceeding twelve months, or to both. Imprisonment for failure to pay fine 417. Where a court issues a warrant under section three hundred and eleven of the Criminal Procedure Code for the commitment of a person to prison for a failure by him to pay a fine imposed on him for an offence under this Act, the period of imprisonment specified in the warrant shall not exceed one day for every three monetary units of the fine that remain unpaid. Costs in action by limited companies 418. Where a body corporate with limited liability is a plaintiff in any legal proceedings, the court may, if the court is satisfied that there is reason to believe that the body corporate will be unable to pay the costs of the defendant if the defendant is successful in his defence, require sufficient security to be given for those costs, and may stay all proceedings until the security is given. Contributions between joint wrongdoers 419. Where more than one person is liable (whether as an officer of a body corporate or otherwise) to pay any damages, costs, compensation, debt or monetary penalty to an aggrieved party 398

399 under, or in respect of any breach of, any section of this Act- (a) the persons shall have a right of contribution amongst themselves; and (b) in any action to enforce liability or in an action to recover contribution, the court may- (i) award contribution on such terms as it considers equitable in all the circumstances; an (ii) exempt any person from liability to make contribution or direct that the contribution to be recovered from any other person shall amount to a complete indemnity. Power to grant relief from civil liability 420. (1) If the court is satisfied that a member, officer, receiver, liquidator, auditor, or assignee for debentures of a company might be civilly liable under this Act in respect of some matter, but that he had 399

400 acted honestly and reasonably in the matter and that, having regard to all the circumstances or the case, he ought fairly to be excused, the court may relieve him in whole or in part from his liability on such terms as the court thinks fit. (2) Relief of a person under this section may be granted- (a) in proceedings against the person in relation to the matter, or (b) on the application of the person, if he has reason to apprehend that such proceedings may be instituted. Exemption from liability for actions or omissions 421. No person shall be liable to any action in damages for anything done or omitted to be done by any person in the exercise or performance of any power or function conferred or imposed on him by or under this Act unless the act or omission was in bad faith or was due to a want of reasonable care of diligence. Falsification of entries in register 422. Any person who makes or causes to be made a false entry in a register established under this Act, or a writing falsely purporting to be a copy of an entry in the register, or who produces or tenders or causes to be produced or tendered in evidence any such writing, knowing the entry or 400

401 writing to be false, shall be guilty of an offence. Altering of documents 423. Any person who alters or defaces, makes any additions to it or partly removes, erases or obliterates any document issued by the Registrar is guilty of an offence. Deceiving or influencing the Registrar or an officer 424. (1) Any person who- (a) for the purpose of deceiving the Registrar or any other officer of the Companies Office in the execution of the provisions of this Act; or for the purpose of procuring or influencing the doing (b) or omission of anything in relation to this Act or any matter thereunder; makes or submits a false statement or representation, whether orally or in writing, knowing the same to be false, shall be guilty of an offence. (2) Any person who, having innocently made a false statement or representation, whether orally or in writing, for the purpose of procuring or influencing the doing or omission of anything in relation to this Act or any matter thereunder and who on becoming aware that such statement or representation was false, fails to advise the Registrar forthwith of such 401

402 falsity, shall be guilty of an offence. Witness giving false evidence 425. Any person who, under oath, willfully gives false evidence before the Registrar concerning the subject-matter of the proceeding in question, knowing such evidence to be false or not knowing or believing it to be true shall be guilty of an offence. Aiding and abetting offences 426. (1) A person commits an offence if the person: - (a) aids, abets, counsels or procures; or (b) is in any way, directly or indirectly, knowingly, or party to; the doing of an act outside Zambia which, if it were done in Zambia, would be an offence against this Act. (2) Subsection (1) does not affect the operation of provisions of the penal code. False representation about Companies Office 427. (1) A person who: (a) places, or allows to be placed, on the building in which his or her office is situated; or (b) uses when advertising his or her office or business; or (c) places on a document, as a 402

403 description of his or her office or business, the words Companies Office or Office for registering or incorporating of companies, or words of similar import (whether alone or together with other words); or (d) impersonates or falsely purports to be an employee or agent of the Agency; or (e) uses in any other way, in connection with his or her business, words or any other way that would reasonably lead other persons to believe that his or her office is, or is officially connected with, the Companies Office, commits an offence is on conviction to a fine not exceeding fifty thousand penalty units or imprisonment for a term not exceeding two years or both. (2) An offence under this section is an offence of strict liability. 403

404 Penalties 428. Save where otherwise provided in this Act, any person who is guilty of an offence under this Act shall be liable to a fine not exceeding one hundred thousand penalty units or to imprisonment for a period not exceeding two years, or to both. Rules of Court 429. The Chief Justice may make Rules of Court governing the practice and procedure for the winding-up of companies in Zambia and with respect to the procedure in any application to the court under this Act, and enabling all or any of the powers and duties conferred and imposed on the court in respect of the winding-up of companies to be exercised or performed by the Registrar or by the official receiver, or by the liquidator as an officer of the court and subject to the control of the court. PART XXII TRANSITIONAL PROVISIONS Registration of charges 430. Where an existing company has, immediately before the commencement of this Act, property which is subject to a charge of any kind, the company shall, within three months after the commencement of this Act- 404

405 (a) enter in the register referred to in section ninety-seven the particulars referred to in that section in relation to each such charge; and (b) lodge with the Registrar a statement containing the particulars referred to in section ninety-nine in relation to each such charge to which that section applies. Companies subject to other legislation 431. Nothing in this Act shall abrogate or affect any special legislation relating to companies carrying on the business of banking, insurance or any other business. Effect of this Act on those persons holding office at commencement of Act Act made under Cap 388 to continue 432. Any person holding office at the commencement of this Act shall remain in office as if that person has been appointed under this Act Any act made, executed, issued or passed under the repealed Act and in force and operative at the commencement of this Act shall have effect as if made, executed, issued or passed, under this Act. Effect of the existing companies articles of association and resolutions of shareholders at the commencement of Act 434. (1) The existing companies articles of association in force and operative at the commencement of this Act shall have effect as if made under this Act. 405

406 (2) Where a company formed prior to the commencement of this Act has, pursuant to its memorandum, articles of association, or a resolution of the meeting of shareholders, authorised the directors of the company to issue shares and some part of the authorised capital remains unissued, the directors shall have authority to issue shares under this Act on the terms and conditions and up to the limit expressed in the memorandum, articles of association, or resolution, without requiring the authority of a further resolution of the shareholders. Effect of the repeal of Cap 388 on judicial proceedings, etc 435. All proceedings, judicial or otherwise commenced before and pending before the commencement of this Act shall be continued as if commenced under this Act. Register, fund and account under Cap Any register, fund or account kept under the repealed Act, relating to organization of companies shall be deemed to be part of the register, fund or account kept under this Act. Company registration 437. A company registered under Chapter 388, shall be deemed to be registered under this Act and this Act shall extend and apply to the company accordingly and any reference to this Act, express or implied, to the date of registration of such a company 406

407 shall be construed as a reference to the date upon which the company was registered under the repealed Act. Fee, charge or sum paid or unpaid under repealed Act 438. Any fee, charge or any sum paid or unpaid under the repealed Act, on the date before this Act comes into force shall, in respect of the corresponding period, be deemed to be paid or unpaid under the provisions of this Act. Approval of acts and resolutions 439. Any approval given, or authorisation granted, and in force before the coming into operation of this Act or any act or thing done under the repealed Act, shall be deemed to have been given, granted or done under the relevant provisions of this Act and any such approval or authorisation shall remain valid for the period specified the repealed Act. Continuing the winding up process Cap A company registered under the Companies Act, 1994 and which is in the course of winding up shall continue to be wound up under the provisions of that Act which shall continue to apply for the purposes of the winding up and dissolution of the company as if it had not been repealed. Repeal of Cap 388 repealed The Companies Act, 1994, is hereby 407

408 Repeal of inconsistent provisions Cap (1) Sections ten, eleven, twelve, thirteen and fourteen of the Co-operative Societies Act are hereby repealed. (2) The Lands (Perpetual Succession Act) is hereby repealed. (3) All other legal provisions that are inconsistent with this Act are hereby repealed. SCHEDULE (Section 2) STANDARD ARTICLES REGULATIONS FOR MANAGEMENT OF A COMPANY LIMITED BY SHARES Table of Divisions 1. Interpretation 2. Share Capital and Variation of Rights 3. Calls on Shares 4. Lien 5. Forfeiture of Shares 6. Transfer of Shares 7. Transmission of Shares 8. Conversion of Shares into Stock 9. Alteration of Capital 10. General Meetings 11. Proceedings at General Meetings 12. Directors 13. Borrowing Powers 14. Proceedings of Directors 408

409 15. Managing Director 16. Associate Directors 17. Secretary 18. Seal 19. Inspection of Records 20. Dividends and Reserves 21. Capitalisation of Profits 22. Winding up 23. Indemnity 1-Interpretation 1. (1) In these regulations, unless the context otherwise requires: "Act" means the Companies Act; "prescribed rate of interest" means the rate of interest prescribed in regulations made under the Act for the purposes of the Standard Articles; "seal" means the common seal of the company and includes any official seal of the company; "resolution" means an ordinary resolution of the company; "secretary" means any person appointed to perform the duties of a secretary of the company. (2) Unless the context otherwise requires an expression, if used in a provision of these regulations that deals with a matter dealt with by a particular provision of the Act, has the same meaning as in that provisions of the Act. 2-Share Capital and Variation of Rights 2. Without prejudice to any special rights previously conferred on the holders of any existing shares or class of shares, but subject to the Act, shares in the company may be issued by the directors and any such share may be issued with such preferred deferred or other special rights or such restrictions, whether with regard to dividend, voting, return of capital or otherwise, as the director, subject to a resolution, determine. 409

410 3. The directors shall not issue any rights or options to shares in favour of any persons unless the issue has been authorised at a general meeting by a special resolution. 4. Subject to the Act, any preference shares may, with the sanction of a resolution, be issued on the terms that they are, or at the option of the company are liable to be redeemed. 5. (1) If at any time the share capital is divided into different classes of shares, the rights attached to any class (unless otherwise provided by the terms of issue of the shares of that class) may, whether or not the company is being wound-up, be varied with the consent in writing of the holders of three-quarters of the issued shares of that class, or with the sanction of a special resolution passed at a separate meeting of the holders of the shares of the class. (2) The provisions of the Act and these regulations relating to general meetings apply so far as they are capable of application and with the necessary modifications to every such class meeting except that- (a) where a class has only one member-that member shall constitute a meeting; (b) in any other case- a quorum shall be constituted by two persons who, between them, hold or represent by proxy one-third of the issued shares of the class; and (c) any holder of shares of the class, present in person or by proxy, may demand a poll. (3) The rights conferred upon the holders of the shares of any class issued with preferred or other rights shall, unless otherwise expressly provided by the terms of issue of the shares of that class, be varied by the creation or issue of further shares ranking equally with the first-mentioned shares. 6. (1) The Company may make payments by way of brokerage or commission on the issue of shares. (2) Such payments shall not exceed the rate of 10 per cent of the price at 410

411 which the shares are issued or an amount equal to 10 per cent of that price, as the case may be. (3) Such payments may be made in cash, by the allotment of fully or partly paid shares or partly by the payment of cash and partly by the allotment of fully or partly paid shares. 7. (1) Except as required by law, the company shall not recognise a person as holding a share upon any trust. (2) The company shall not be bound by or compelled in any way to recognise (whether or not it has notice of the interest or rights concerned) any equitable, contingent, future or partial interest in any share or unit of a share or (except as otherwise provided by these regulations or by law) any other right in respect of a share except an absolute right of ownership in the registered holder. 8. (1) A person whose name is entered as a member in the register of members shall be entitled without payment to receive a certificate in respect of the share under the seal of the company in accordance with the Act but, in respect of a share or shares held jointly by several persons, the company shall not be bound to issue more than one certificate. (2) Delivery of a certificate for a share to one of several joint holders shall be sufficient delivery to all such holders. (3) If a share certificate is defaced, lost or destroyed, it may be renewed on payment of the fee allowed by the Act, or such lesser sum, and on such terms (if any) as to evidence and the payment of costs to the company of investigating evidence as the directors decide. 3-Calls on Shares 9. (1) The directors may make calls upon the members in respect of any money unpaid on the shares of the members (whether on account of the nominal value of the shares or by way of premium) and not by the terms of issue of those shares payable at fixed times, except that no call shall exceed one-quarter of the sum of nominal values of the shares or be payable earlier 411

412 than one month from the date fixed for the payment of the last preceding call. (2) Each member shall, upon receiving at least fourteen days notice specifying the time or times and place of payment, pay to the company, at the time or times and place so specified the amount called on his shares. (3) The directors may revoke or postpone a call. 10. A call shall be deemed to have been made at the time when the resolution of the directors authorising the call was passed and may be required to be paid by instalments. 11. The joint holders of a share are jointly and severally liable to pay all calls in respect of the share. 12. If a sum called in respect of a share is not paid before or on the day appointed for payment of the sum, the person from whom the sum is due shall pay interest on the sum from the day appointed for payment of the sum to the time of actual payment at such rate not exceeding the prescribed rate of interest as the Directors determine, but the directors may waive payment of that interest wholly or in part. 13. Any sum that, by the terms of issue of a share, becomes payable on allotment or at a fixed date, whether on account of the nominal value of the share or by way of premium, shall for the purposes of these regulations be deemed to be a call duly made and payable on the date on which by the terms of issue the sum becomes payable, and, in case of non-payment, all the relevant provisions of these regulations as to payment of interest and expenses, forfeiture or otherwise apply as if the sum had become payable by virtue of a call duly made and notified. 14. The directors may, on the issue of shares, differentiate between the holders as to the amount of calls to be paid and the times of payment. 15. (1) The directors may accept from a member the whole or a part of the amount unpaid on a share although no part of that amount has been called up. 412

413 (2) The directors may authorise payment by the company of interest upon the whole or any part of an amount so accepted, until the amount becomes payable, at a rate agreed upon between the directors and the member paying the sum subject to sub-regulation (3). (3) For the purposes of sub-regulation (2), the rate of interest shall not be greater than- (a) if the company has, by resolution, fixed a rate-rate the so fixed; and (b) in any other case the prescribed rate of interest. 4-Lien 16. (1) The company has a first and paramount lien on every share (not being a fully paid share) for all money (whether presently payable or not) called or payable at a fixed time in respect of that share. (2) The company also has a first and paramount lien on all shares (other than fully paid shares) registered in the name of a sole holder for all money presently payable by him or his estate to the company. (3) The directors may at any time exempt a share wholly or in part from the provisions of this regulation. (4) The company's lien (if any) on a share extends to all dividends payable in respect of the share. 5-Forfeiture of Shares 17. (1) If a member fails to pay a call or instalment of a call on the day appointed for payment of the call or instalment, the directors may, at any time thereafter during such time as any part of the call or instalment remains unpaid, serve a notice on him requiring payment of so much of the call or instalment as is unpaid, together with any interest that has accrued. (2) The notice shall name a further day (not earlier than the expiration of fourteen days from the date of service of the notice) on or before which the payment required by the notice is to be made and shall state that, in the event of non-payment at or before the time appointed, the shares in respect of which the call was made will be liable to be forfeited. 413

414 18. (1) If the requirements of a notice served under regulation 17 are not complied with, any share in respect of which the notice has been given may at any time thereafter, before the payment required by the notice has been made, be forfeited by a resolution of the directors to that effect. (2) Such a forfeiture shall include all dividends declared in respect of the forfeited shares and not actually paid before the forfeiture. 19. A forfeited share may be sold or otherwise disposed of on such terms and in such manner as the directors think fit, and, at any time before a sale or disposition, the forfeiture may be cancelled on such terms as the directors think fit. 20. A person whose shares have been forfeited shall cease to be a member in respect of the forfeited shares, but shall remain liable to pay to the company all money that, at the date of forfeiture, was payable by him to the company in respect of the shares (including interest at the prescribed rate of interest from the date of forfeiture on the money for the time being unpaid if the directors think fit to enforce payment of the interest), but his liability shall cease if and when the company receives payment in full of all the money (including interest) so payable in respect of the shares. 21. A statement in writing declaring that the person making the statement is a director or a secretary of the company, and that a share in the company has been duly forfeited on a date stated in the statement, shall be prima facie evidence of the facts stated in the statement as against all persons claiming to be entitled to the share. 22. (1) The company may receive the consideration (if any) given for a forfeited share on any sale or disposition of the share and may execute a transfer of the share in favour of the person to whom the share is sold or disposed of. (2) Upon the execution of the transfer, the company shall register the transferee as the holder of the share. 414

415 (3) The transferee shall not be bound to see to the application of any money paid as consideration. (4) The title of the transferee to the share shall not be affected by any irregularity or invalidity in connection with the forfeiture, sale or disposal of the share. 23. The consideration referred in regulation 22 shall be applied by the company in payment of such part of the amount in respect of which the lien exists as is presently payable, and the residue (if any) shall (subject to any like lien for sums not presently payable that existed upon the shares before the sale) be paid to the person entitled to the shares immediately before the transfer. 24. The provisions of these regulations as to forfeiture shall apply in the case of non-payment of any sum that, by the terms of issue of a share, becomes payable at a fixed time, whether on account of the nominal value of the shares or by way of premium, as if that sum had been payable by virtue of a call duly made and notified. 6-Transfer of Shares 25. (1) Subject to these regulations, a member may transfer all or any of his shares by instrument in writing in a form prescribed for the purposes of section one hundred and thirty-nine of the Act or in any other form that the directors approve. (2) An instrument of transfer referred to in sub-regulation (1) shall be executed by or on behalf of both the transferor and the transferee. 26. The instrument of transfer shall be left for registration at the registered office of the company, together with such fee (if any) not exceeding two monetary units as the directors require, accompanied by the the certificate of the shares to which it relates and such other information as the directors properly require to show the right of the transferor to make the transfer, and thereupon the company shall subject to the powers vested 415

416 in the directors by these regulations, register the transferee as a shareholder. 27. The directors may decline to register a transfer of shares, not being fully paid shares, to a person of whom they do not approve and may also decline to register any transfer of shares on which the company has a lien. 28. The directors may refuse to register any transfer that is not accompanied by the appropriate share certificate, unless the company has not yet issued the share certificate or is bound to issue a renewal or copy of the share certificate. 29. The registration of transfers may be suspended at such times and for such periods as the directors from time to time determine, provided that the periods do not exceed in the aggregate thirty days in any year. 7-Transmission of Shares 30. In the case of the death of a member, the survivor where the deceased was a joint holder, and the legal personal representatives of the deceased where that person was a sole holder, shall be the only persons recognised by the company as having any title to his interest in the shares, but this regulation does not release the estate of a deceased joint holder from any liability in respect of a share that had been jointly held by him with other persons. 31. (1) Subject to any written law relating to bankruptcy, a person becoming entitled to a share in consequence of the death or bankruptcy of a member may, upon such information being produced as is properly required by the directors, elect either to be registered as a holder of the share or to have some other person nominated by that person registered as the transferee of the share. (2) If the person becoming entitled elects to be registered, that person shall deliver or send to the company a notice in writing signed by that person stating that that person so elects. 416

417 (3) If he elects to have another person registered, he shall execute a transfer of the share to that other person. (4) All the limitations, restrictions and provisions of these regulations relating to the right to transfer, and the registration of the transfer of share are applicable to any such notice or transfer as if the death or bankruptcy of the member had not occurred and the notice or transfer were a transfer signed by that member. 32. (1) Where the registered holder of a share dies or becomes bankrupt, his personal representatives or the assignee of his estate, as the case may be, shall be upon the production of such information as is properly required by the directors, entitled to the same dividends and other advantages, and to the same rights (whether in relation to meetings of the company, or to voting or otherwise), as the registered holder would have been entitled to if he had not died or become bankrupt. (2) Where two or more persons are jointly entitled to any share in consequence of the death of the registered holder, they shall, for the purposes of these regulations, be deemed to be joint holders of the shares. 8-Conversion of Shares into Stock 33. The company may, by resolution, convert all or any of its paid up shares into stock and reconvert any stock into paid up shares of any nominal value. 34. (1) Subject to sub-regulation (2), where shares have been converted into stock, the provisions of these rules relating to the transfer of shares apply, so far as they are capable of application, to the transfer of the stock or of any part of the stock. (2) The directors may fix the minimum amount of stock transferable and restrict or forbid the transfer of fractions of that minimum, but the minimum shall not exceed the aggregate of the nominal values of the shares from which the stock arose. 35. (1) The holders of stock shall have, according to the amount of the stock 417

418 held by them, the same rights, privileges and advantages as regards dividends, voting at meetings of the company and other matters as they would have if they held the shares from which the stock arose. (2) No privilege or advantage shall be conferred by any amount of stock that would not, if existing in shares, have conferred that privilege or advantage. 36. The provisions of these regulations that are applicable to paid up shares hall apply to stock, and references in those provisions to share and shareholder shall be read as including references to stock and stockholder, respectively. 9-Alteration of Capital 37. The company may by resolution- (a) increase its authorised share capital by the creation of new shares of such amount as is specified in the resolution; (b) consolidate and divide all or any of its authorised share capital into shares of larger amount than its existing shares; (c) subdivide all or any of its shares into shares of smaller amount than is fixed by the certificate of share capital, but so that in the subdivision the proportion between the amount paid and the amount (if any) unpaid on each such share of a smaller amount is the same as it was in the case of the share from which the share of a smaller amount is derived; and (d) cancel shares that, at the date of passing of the resolution, have notbeen taken or agreed to be taken by any person or have been forfeited, and reduce its authorised share capital by the amount of the shares so cancelled. 38. (1) Subject to any resolution to the contrary, all unissued shares shall, before issue, be offered to such persons as at the date of the offer are entitled to receive notices from the company of general meetings in proportion, as nearly as the circumstances allow, to the sum of the nominal values of the shares already held by them. (2) The offer shall be made by notice specifying the number of shares offered 418

419 and delimiting a period within which the offer, if not accepted, will be deemed to be declined. (3) After the expiration of that period or on being notified by the person to whom the offer is made that he declines to accept the shares offered, the directors may issue those shares in such manner as they think most beneficial to the company. (4) Where, by reason of the proportion that shares proposed to be issued bear to shares already held, some of the first-mentioned shares cannot be offered in accordance with sub-regulation (1), the directors may issue the shares that cannot be so offered in such manner as they think most beneficial to the company. 39. Subject to the Act, the company may, by special resolution, reduce its share capital, any capital redemption reserve fund or any share premium account. 10-General Meetings 40. (1) A director may, whenever he thinks, fit, convene a general meeting. (2) If no director is present within Zambia, any two members may convene a general meeting in the same manner, or as nearly as possible, as that in which such meetings may be convened by a director. (3) A general meeting shall be held in Zambia unless all the members entitled to vote at that meeting agree in writing to a meeting at a place outside Zambia. 41. (1) A notice of a general meeting shall specify the place, the day and the hour of meeting and, except as provided by sub-regulation (2), shall state the general nature of the business to be transacted at the meeting. (2) It shall not be necessary for a notice of an annual general meeting to state that the business to be transacted at the meeting includes the declaring of a dividend, the consideration of annual accounts and the reports of the directors and auditors, the election of directors in the place of those retiring or the appointment and fixing of the remuneration of the 419

420 auditors. 11-Proceedings at General Meetings 42. (1) No business shall be transacted at any general meeting unless a quorum of members is present at the time when the meeting proceeds to business. (2) For the purpose of determining whether a quorum is present, a person attending as a proxy, or as representing a body corporate or association that is a member, shall be deemed to be a member. 43. If a quorum is not present within half an hour after the time appointed for the meeting- (a) where the meeting was convened upon the requisition of members-the meeting shall be dissolved; or (b) in any other case- (i) the meeting shall stand adjourned to such day, and at such time and place, as the directors determine or, if no determination is made by the directors, to the same day in the next week at the same time and place; and (ii) if a quorum is not present at the adjourned meeting within half an hour after the time appointed for the meeting- (a) two members shall constitute a quorum; or (b) the meeting shall be dissolved, if two members are not present. 44. (1) If the directors have elected one of their number as chairman of their meetings, he shall preside as chairman at every general meeting. (2) Where a general meeting is held and- (a) a chairman has not been elected as provided by sub-regulation (1); or (b) the chairman is not present within fifteen minutes after the time appointed for the holding of the meeting or is unwilling to act; the member present shall elect one of their number to be chairman of the meeting. 45. (1) The chairman may with the consent of any meeting at which a quorum is present, and shall if so directed by the meeting, adjourn the 420

421 meeting from time to time and from place to place, but no business shall be transacted at any adjourned meeting other than the business left unfinished at the meeting from which the adjournment took place. (2) When a meeting is adjourned for thirty days or more, notice of the adjourned meeting shall be given as in the case of an original meeting. (3) Except as provided by sub-regulation (2), it shall not be necessary to give any notice of an adjournment or of the business to be transacted at an adjourned meeting. 46. (1) At any general meeting a resolution put to the vote of the meeting shall be decided on a show of hands unless a poll is (before or on the declaration of the result of the show of hands) demanded- (a) by the chairman; (b) by at least three members present in person or by proxy; (c) by a member or members present in person or by proxy and representing not less than one tenth of the total voting rights of all the members having the right to vote at the meeting; or (d) by a member or members holding shares in the company conferring a right to vote at the meeting being shares on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all the shares conferring that right. (2) The demand for a poll may be withdrawn. 47. (1) If a poll is duly demanded, it shall be taken in such manner and (subject to sub-regulation (2)) either at once or after an interval or adjournment or otherwise as the chairman directs, and the result of the poll shall be the resolution of the meeting at which the poll was demanded. (2) A poll demanded on the election of a chairman or on a question of adjournment shall be taken forthwith. 48. In the case of an equality of votes, whether on a show of hands or on a poll, the chairman of the meeting at which the show of hands takes place or 421

422 at which the poll is demanded, in addition to his deliberative vote (if any), shall have a casting vote. 49. (1) Subject to any rights or restrictions for the time being attached to any class or classes of shares at meetings of members or classes of members- (a) each- (i) registered member, or registered member of that class; (ii) person on whom the ownership of a share of such a registered member has evolved by operation of law; (iii) proxy or attorney of a person referred to in paragraph (i) or (ii), if the person is not present at the meeting; shall be entitled to vote; (b) on a show of hands, each person present who is entitled to vote shall have one vote; and (c) on a poll, every person present who is entitled to vote shall have votes. 50. In the case of joint holders, the vote of the senior who tenders a vote whether in person or by proxy or by attorney, shall be accepted to the exclusion of the votes of the other joint holders and, for this purpose, seniority shall be determined by the order in which the names stand in the register of members. 51. If a member is of unsound mind or is a person whose person or estate is liable to be dealt with in any way under the law relating to mental health, his committee or assignee or such other person as properly has the management of that persons estate may exercise any rights of the member in relation to a general meeting as if the committee, assignee or other person were the member. 52. A member shall not be entitled to vote at a general meeting unless all polls and other sums presently payable by him in respect of shares in the company have been paid. 53. (1) An objection may be raised to the qualification of a voter only at the meeting or adjourned meeting at which the vote objected to is given or 422

423 tendered (2) Any such objection shall be referred to the chairman of the meeting, whose decision shall be final. (3) A vote not disallowed pursuant to such an objection shall be valid for all purposes. 54. (1) An instrument appointing a proxy shall be in writing under the hand of the appointer or of his attorney duly authorised in writing or, if the appointer is a body corporate, either under seal or under the hand of an officer or attorney duly authorised. (2) An instrument appointing a proxy may specify the manner in which the proxy is to vote in respect of a particular resolution and, where an instrument of proxy so provides the proxy shall not be entitled to vote in the resolution except as specified in the instrument. (3) An instrument appointing a proxy shall be deemed to confer authority to demand or join in demanding a poll. (4) A proxy need not be member of the company. (5) An instrument appointing a proxy shall be in the following form or in as similar a form as the circumstances allow. (name of Company) I/we, of being a member/members of the above named company, hereby of or, in his absence. of as my/our proxy to vote for me/us on my/our behalf at the annual/extraordinary general meeting of the company to be held on the... day of and at any adjournment of that meeting: *in favour of/ against resolution No... *in favour of/ against resolution No... *in favour of/ 423

424 against resolution No... Unless otherwise instructed, the proxy will vote as that person thinks fit. Signed... Date... *Strike out whichever is not desired. 55. An instrument appointing a proxy shall not be treated as valid unless the instrument, and the power of attorney or other authority (if any) under which the instrument is signed or a notarially certified copy of that power or authority, is or are deposited, not less than forty-eight hours before the time for holding the meeting or adjourned meeting at which the person named in the instrument proposes to vote, or, in the case of a poll, not less than twenty-four hours before the time appointed for the taking of the poll, at the registered office of the company or at such other place in Zambia as is specified for that purpose in the notice convening the meeting. 56. A vote given in accordance with the terms of an instrument of proxy or of a power of attorney shall be valid notwithstanding the previous death of unsoundness of mind of the principal, the revocation of the instrument (or of the authority under which the instrument was executed) or of the power, or the transfer of the share in respect of which the instrument or power is given, unless notice in writing of the death, unsoundness of mind, revocation or transfer has been received by the company at the registered office before the commencement of the meeting or adjourned meeting at which the instrument is used or the power is exercised. 12-Directors 57. The company may by ordinary resolution fix a share qualification for directors, but unless and until a qualification is so fixed, there shall be no share qualification. 58. In addition to the circumstances in which the office of a director becomes vacant by virtue of the Act, the office of a director shall become 424

425 vacant if the director makes any arrangement or composition with his creditors generally. 13-Borrowing powers 59. (1) Subject to sub-regulation (2), the directors may exercise the powers of the company to borrow money, to charge any property or business of the company or all, or any of its uncalled capital and to issue debentures or give any other security for a debt, liability or obligation of the company or of any other person. (2) The amount of any borrowings outstanding at any time shall not exceed the amount of issued share capital of the company at the time. 14-Proceedings of Directors 60. The provisions of subsection (7) of section two hundred and eighteen of the Act (providing that a director who is materially interested in a contract or arrangement to be considered at a meeting of the company or of the directors should not be counted in the quorum or vote on the matter) may be suspended or relaxed, whether generally or in respect of a particular transaction, by a resolution of the company. 61. (1) A director may, if the other directors approve, appoint a person as an alternate director in accordance with the Act. (2) An alternate director shall be entitled to notice of meetings of the directors. (3) An alternate director may, subject to the instrument of appointment, exercise any powers that the appointer may exercise. 62. At a meeting of directors, the quorum shall be two, or such larger number as is determined by resolution of the company. 63. In the event of a vacancy or vacancies in the office of a director or offices of directors, the remaining directors may act but, if the number of remaining directors is not sufficient to constitute a quorum at a meeting of directors, they may act only for the purpose of increasing the number of directors to a number sufficient to constitute such a quorum or of 425

426 convening a general meeting of the company. 64. (1) The directors shall elect one of their number as chairman of their meetings and may determine the period for which he shall hold office. (2) Where meeting of directors is held and- (a) a chairman has not been elected as provided by sub-regulation (1); or (b) the chairman is not present within ten minutes after the time appointed for the holding of the meeting or is unwilling to act; the directors present shall elect one of their number to be a chairman of the meeting. 65. (1) The directors may delegate any of their powers to a committee or committees consisting of such of their number as they think fit. (2) A committee to which any powers have been so delegated shall exercise the powers delegated in accordance with any directions of the directors and a power so exercised shall be deemed to have been exercised by the directors. (3) The members of such a committee may elect one of their number as chairman of their meetings. (4) Where such a meeting is held and- (a) a chairman has not been elected as provided by sub-regulation (3); or (b) the chairman is not present within ten minutes after the time appointed for the holding of the meeting or is unwilling to act; the members present may elect one of their number to be chairman of the meeting. (5) A committee may meet and adjourn as it thinks proper. (6) Questions arising at a meeting of a committee shall be determined by a majority of votes of the members present and voting. (7) In the case of an equality of votes, the chairman, in addition to his deliberative vote (if any), has a casting vote. 15-Managing Director 66. (1) The directors may, upon such terms and conditions and with such restrictions as they think fit, appoint a managing director in accordance 426

427 with the Act and confer upon the Managing Director any of the powers exercisable by them. (2) Any powers so conferred may be concurrent with, or be to the exclusion of the powers of the directors. (3) The directors may at any time withdraw or vary any of the powers so conferred on a managing director. 16-Associate Directors 67. (1) The directors may from time to time appoint any person to be an associate director and may from time to time terminate any such appointment. (2) The directors may from time to time determine the powers, duties and remuneration of any person so appointed. (3) A person so appointed shall not be required to hold any shares to qualify him for appointment but, except by the invitation and with the consent of the directors, shall not have any right to attend or vote at any meeting of directors. 17-Secretary 68. A secretary of the company shall hold office on such terms and conditions, as to remuneration and otherwise, as the directors determine. 18-Seal 69. (1) The directors shall provide for the safe custody of the seal. (2) The seal shall be used only by the authority of the directors, or of a committee of the directors authorised by the directors to authorise the use of the seal, and every document to which the seal is affixed shall be signed by a director and be countersigned by another director, a secretary or another person appointed by the directors to countersign that document or a class of documents in which that document is included. 19-Inspection of Records 70. Subject to the Act, the directors shall determine whether and to what extent, and at what time and places and under what conditions, the 427

428 accounting records and other documents of the company or any of them will be open to the inspection of members other than directors, and a member other than a director shall not have the right to inspect any document of the company except as provided by law or authorised by the directors or by a resolution of the company. 20-Dividends and Reserves 71. (1) The company by resolution may declare a dividend if, and only if, the directors have recommended a dividend. (2) A dividend shall not exceed the amount recommended by the directors. 72. The directors may authorise the payment by the company to the members of such interim dividends as appear to the directors to be justified by the profits of the company. 73. Interests shall not be payable by the company in respect of any dividend. 74. A dividend shall not be paid except out of profits of the company. 75. (1) The directors may, before recommending any dividend, set aside out of the profits of the company such sums as they think proper as reserves, to be applied, at the discretion of the directors, for any purpose for which the profits of the company may be properly applied. (2) Pending any such application, the reserves may, at the discretion of the directors, be used in the business of the company or be invested in such investments as the directors think fit. (3) The directors may carry forward so much of the profits remaining as they consider ought not to be distributed as dividends without transferring those profits to a reserve. 76. (1) Subject to the rights of persons (if any) entitled to shares with special rights as to dividend, all dividends shall be declared and paid according to the amounts paid or credited as paid on the shares in respect of which the dividend is paid. 428

429 (2) All dividends shall be apportioned and paid proportionately to the amounts paid or credited as paid on the shares during any portion or portions of the period in respect of which the dividend is paid, but, if any share is issued on terms providing that it will rank for dividend as from a particular date, that share shall rank for dividend accordingly. (3) An amount paid or credited as paid on a share in advance of a call shall not be taken for the purposes of this regulation to be paid or credited as paid on the share. 77. The directors may deduct from any dividend payable to a member all sums of money (if any) presently payable by him to the company on account of calls or otherwise in relation to shares in the company. 78. (1) If the company declares a dividend it may by resolution direct the directors to pay the dividend wholly or partly by the distribution of specific assets, including paid up shares in, or debentures of, any other corporation. (2) Where a difficulty arises in regard to such a distribution, the directors may settle the matter as they consider expedient and in particular may issue fractional certificates and fix the value for distribution of the specific assets or any part of those assets, and may determine that cash payments will be made to any members on the basis of the value so fixed in order to adjust the rights of all parties, and may vest any such specific assets in assignees as the directors consider expedient. 79. (1) Any dividend, interest or other money payable in cash in respect of shares may be paid by cheque sent through the post directed to- (a) the registered address of the holder or, in the case of joint holders, to the registered address of the joint holder named first in the register of members; or (b) to such other address as the holder or joint holders in writing directs or direct. (2) Any one of two or more joint holders may give effectual receipts for any dividends, interests or other money payable in respect of the shares held by 429

430 them as joint holders. 21-Capitalisation of Profits 80. (1) Subject to sub-regulation (2), the company may resolve- (a) to capitalise any sum, being the whole or a part of the amount for the time being standing to the credit of any reserve account or the profit and loss account or otherwise available for distribution to members; and (b) to apply the sum, in any of the ways mentioned in sub-regulation (3), for the benefit of members in the proportions to which those members would have been entitled in a distribution of that sum by way of dividend. (2) The company shall not pass a resolution under sub-regulation (1) unless it has been recommended by the directors. (3) The ways in which a sum may be applied for the benefit of members under sub-regulation (1) shall be- (a) in paying up any amounts unpaid on shares held by members; (b) in paying up in full unissued shares or debentures to be issued to members as fully paid; or (c) partly under paragraph (a) and partly under paragraph (b). (4) The directors shall do all things necessary to give effect to the resolution and, in particular, to the extent necessary to adjust the rights of the members among themselves, may- (a) issue fractional certificates or make cash payments in cases where shares or debentures become issuable infractions; and (b) authorise any person to make, on behalf of all the members entitled to any further shares or debentures upon the capitalisation, an agreement with the company providing for the issue to them, credited as fully paid up, of any such further shares or debentures or for the paying up by the company on their behalf of the amounts or any part of the amounts remaining unpaid on their existing shares by the application of their respective proportions of the sum resolved to be capitalised; and any agreement made under an authority referred to in paragraph (b) shall be 430

431 effective and binding on all the members concerned. 22-Winding up 81. (1) If the company is wound up, the liquidator may, with the sanction of a special resolution, divide among the members in kind the whole or any part of the property of the company and may for that purpose set such value as the liquidator considers fair upon any property to be so divided and may determine how the division is to be carried out as between the members or different classes of members. (2) The liquidator may, with the sanction of a special resolution, vest the whole or any part of any such properly in assignees upon such trusts for the benefit of the contributories as the liquidator thinks fit, but so that no member is compelled to accept any shares or other securities in respect of which there is any liability. 23-Indemnity 82. Every officer, auditor or agent of the company shall be indemnified out of the property of the company against any liability incurred by him in his capacity as officer, auditor or agent in defending any proceedings, whether civil or criminal, in which judgment is given in that favour or in which that person is acquitted or in connection with any application in relation to any such proceedings in which relief is under the Act granted to him by the court. 431