There is a new Companies and Other Entities Act of 2017, that is about to be enacted, packed with new changes. In a series of articles, Capital Magazine explores the background of this bill, starting with reviews made public by the Law Development Commission in its partners.
The Law Development Commission (LDC), Law Society of Zimbabwe (LSZ), and the Public Accountants and Auditors Board of Zimbabwe (PAAZ), reviewed the current Companies Act, whose findings include the following;
The Companies Act (No. 47 of 1951), which came into effect on 1 April 1952, lags behind Constitutional, technological, economical, and other developments that have taken place in Zimbabwe over the years. Consequently, the legislative framework lacks such progressive mechanisms as corporate governance.
The present law limits the extent to which companies can embrace coordinated and comprehensible approaches which mainstream rights and responsibilities in a way that promotes transparency and accountability. The conduct of shareholders and company officials, such as directors for instance, lacks adequate regulation that can effectively protect the interests of the company and those connected to it, in one way or another, resulting in possible prejudices.
Starting a Business
In the first instance, the registration processes, as provided for in the legislative framework, fall short of the flexibility brought about by Information Communication Technology (ICT). All relevant registration requirements are attended to in the two registration offices located in Harare and Bulawayo, thereby compelling physical movement of persons from the entirety of Zimbabwe to the two offices.
The use of ICT based processes could reduce the stages of registration that require physical visits, and speed up the process, in the short term. As a long-term measure, however, the companies’ registration process should be decentralized across the country.
A survey done under the 2012 World Bank’s “Doing Business” initiative concluded that prospective business persons in Zimbabwe could wait for about 152 days before all requirements for starting a business can be finalized.
The 152 days account for all the registration processes that include the compilation and lodging of documentation. Simpler and standardized documents that highlight critical information, such as the Memoranda and Articles of Association, can be adopted for initial registration processes, with details being presented at a later stage when the business is in operation. This would speed up the registration process.
Although the ranking system in the “Doing Business Report”, does not necessarily tell the whole story about the full business environment in a given country, it captures key aspects of the regulatory and institutional environment that matter to prospective investors.
