Companies Act to be overhauled

Kennedy Chokuda

PARLIAMENT has gazetted the Companies and Other Business Entities Bill, 2018, which will, among other issues, update the archaic 67-year-old Companies Act which was legislated way back in 1951.

BY VENERANDA LANGA

The Bill, if passed, will improve corporate governance practices in the private sector, and regulate how directors interact with the companies they superintend.

Clerk of Parliament, Kennedy Chokuda last week invited input on the Bill from the public and the business community, as stipulated by section 141 of the Constitution, which requires that Parliament must facilitate public involvement in its legislative and other processes.

The new features include the introduction of an electronic registry for the incorporation and registration of domestic and foreign companies and private business corporations.

Other new features are additional measures to protect shareholders and investors, in particular minority shareholders and investors.

“The Bill will update and modernise the Companies Registry by re-registering all existing companies and private business corporations and removing all defunct companies and private business corporations within 12 months of the date of commencement of the Act resulting from this Bill,” the memorandum of the Companies and Other Business Entities Bill read.

“It will make new provision for the merger and takeover of companies and other business entities, and make the beneficial ownership of companies more transparent.”

In terms of clause 207(1) of the Bill, it proposes to prohibit financial assistance to directors, and will make it illegal for a company to make a loan or render other financial assistance to any person who is its director or a director of its holding company or to enter into any guarantee or provide any security in connection with a loan.

Other new provisions are measures to protect shareholders and investors, in particular minority shareholders and investors.

The new proposed law will also provide criminal penalties for making false statements by directors and other officers or responsible persons of companies and private business corporations.

“If any person in any statement, return, report, certificate, statement of financial position or other document required or for the purpose of any provisions of this Act makes a statement false in any material particular, knowing it to be false, he or she shall be guilty of an offence and liable to a fine not exceeding level seven or imprisonment for a period not exceeding one year, or to both such fine and such imprisonment,” clause 66(1) of the Bill
reads.

The Bill (Clause 4) will, however, not apply to banks, building societies, co-operative societies, insurers and other entities, whose formation is subject to other laws, and it will also not apply to trade unions and employers organisations.