Limited liability companies, associations, cooperatives, churches, trusts, schools and a number of institutions have a team which sets the strategic direction and monitors the performance of the executive team or management.
The board of directors, board of governors, board of trustees and/or other boards denoted in any organisation or institution should operate within a framework or charter which governs its activities. Its sub-committees should have terms of reference setting out its scope and boundaries.
The board and the law.
The Companies and Other Business Entities Act [Chapter 24:31] herein after ‘’the Act’’ Chapter III Part III deals with management and administration of companies. Sub Part D of Part III of Chapter III of the Act provides for directors and other officers with regards to appointment, functions and removal from office. Section 195 of the Act specifically deals with directors’ functions and responsibilities.
The Co-operatives Societies Act [Chapter 24:05] provides for a management committee or board under section 54 and its functions under section 57.
The company’s constitutive documents such as the memorandum and articles of association should be registered as per section 18 of the Act whilst the incorporation of the company upon registration of the constitutive documents is provided for under section 75 to 82 of the Act.
The sixth schedule of the Act has a model articles of association i.e. the internal rules of the company which guides the board in its conduct.
Other institutions may have constitutions and governing Acts which provides for the establishment of the board.
The need for board charter and committees’ terms of reference
Companies and institutions should align to the Constitution of Zimbabwe Amendment (No. 20) Act of 2013, the Companies and Other Business Entities Act, enabling Act where its established through an Act of parliament, regulations and by-laws which are specific to the sector and/or regulating authority.
A microfinance company for example, is governed by the Act, Microfinance Act of 2019 as amended, the Reserve Bank of Zimbabwe Act [Chapter 22:15], Bank Use Promotion and Suppression of Money Laundering Act [Chapter 24:24] and Banking Act [Chapter 24:20] amongst others.
The various laws and regulations are in addition to an organisation’s own memorandum and articles of association and/or constitution.
A board charter is therefore key in that it is a framework which brings into perspective requirements of various legislative and regulatory provisions in as far as they impact on the operations of an entity.
Components of the board charter
The board charter is a document which outlines duties, responsibilities, powers and/or authority of the board with regards to leadership on strategic direction, management and control. The policy document includes the following:
λ Introduction – which outlines the basis of its establishment and alignment to international best practice in form of governance codes such as National Code on Corporate Governance (‘’ZimCode’’) in case of Zimbabwe.
λ Purpose – what it covers such as roles, policies and procedures
λ Organisation philosophy – vision, mission and principal objectives
λ Composition of the board – expertise, size and diversity (executive and no-executive directors)
λ Membership of the board – e.g. separation of the role of board chairperson and CEO
λ Tenure – period in office, retirement age, etc
λ Induction of new directors – what it entails
λ Succession planning – Board’s responsibility on organisation succession planning;
λ Role of the board – legislative and regulatory roles as well as delegation of authority for day to day operations;
λ Role of the Chairperson – in leading the board and the organisation;
λ Role of the CEO – in execution of the organisation’s strategic plan;
λ Role of the Corporate Secretary – to the board and to executive management of the company;
λ Responsibilities of the board – to internal and external stakeholders;
λ Duties of the board – legal and common law duties such as ubuntu;
λ Declaration of Interests – where a member is conflicted, be it on resolutions and/or transactions;
λ Board committees – as mandated by legal provisions, regulators and/or company mission and the role of each committee;
λ Evaluation – of board performance as per international best practice;
λ Share dealings by directors – extent and capacity;
λ Matters reserved for board decision – issues which are a sole mandate of the board as per legal and regulatory provisions and other key issues such as appointment of the CEO and executive officers;
λ Remuneration of board members and senior management;
λ Board procedures – calendar and notices;
λ Meetings and board attendances – requirements, frequency and procedure;
λ Delegation – of authority to CEO and executive team;
λ Professional and business services provided by directors – communication rules and authority to represent the organisation;
λ General – Any other relevant issues and;
λ Approval – the board charter must be approved by the chairperson and/or responsible authority for it to be effective.
The components of the board charter as outlined above, shows that it’s a must have document for each organisation as it helps the board in the discharge of its duties and ensures that the board remains conscious of its roles, duties and responsibilities.
Committees Terms of Reference
The board may have sub-committees assigned to work on various aspects. The committees may be mandatory based on the law or regulator.
Each committee should have clear terms of reference limited to a specific area e.g. Audit and Risk Committee, which would be responsible for audits and risk monitoring and management.
Fungai Chimwamurombe is a registered legal practitioner and Senior Partner at Zenas Legal Practice and can be contacted for feedback at fungai@ zenaslegalpractice.com and WhatsApp 0772 997 889. Bhekimpilo Mangena is a Business Consultant at Zenas Consulting (Pvt) Ltd and can be contacted on 0712500490.
