FUNGAI CHIMAMUROMBE &
The new Companies Act in Zimbabwe being the Companies and other Business Entities Act [Chapter 24:31] introduces the concept of mandatory beneficial shareholding disclosure in Zimbabwe.
Put simply, a beneficial owner is defined as an individual who holds more than twenty percent of the company’s shares directly or indirectly which holds more than twenty percent of the company’s voting rights.
The new Act further provides that not more than twenty percent shares in a company may be held by a nominee on behalf of a beneficial owner.
A nominee shareholder is simply put as a registered shareholder who holds shares in an entity on behalf of their true and beneficial owner and this relationship is often governed by a nominee-shareholder agreement in which an agent and principal relationship whereby the nominee is often only allowed to deal with the company’s securities in a specified manner.
The limitation on shareholding by nominee shareholders is likely to cause difficulties for persons whose shareholding above the set threshold is held by nominees and it would be encouraged to regularise this position by either holding their shares directly or disposing of the share.
There is no doubt the threshold will affect beneficial shareholding operated before the enactment of the Act with some entities being wholly owned by nominees’ shareholders on behalf of the beneficial owners.
The new Act introduces a new beneficial registry which will serve the purpose of bringing said mandatory reporting to life.
The Registry will not improve transparency for the public at large given that it will be private and not available to the public.
The Companies Registry has set July 31, 2021 as the deadline for compliance and corporates would be encouraged to clean house and prepare the discloses, failing which may attract penalties.
The registry, unlike all other government offices will, however, not be a public office with the information held being confidential unless required by a court order or required law enforcement agencies in the scope of their investigations.
The clear benefit of mandatory beneficial shareholding for the shareholders is that their shareholding will be protected through registration and protected from the usual rebuttal by nominees and proof of ownership will be clear and undisputable.
For the fiscal and law enforcement, the said mandatory disclosure is a welcome step in dealing with corruption, tax evasion, money laundering and in some case the funding of terrorism.
This development is in line with not only international best practices on Anti-Money Laundering and the Combating Financing of terrorism as well as the domestic needs on the combating of corruption.
In essence, mandatory reporting requirements related to the subject ought to be endorsed while the disadvantages for some may be key the benefits outweigh them.
An amendment may be required to bring clarity to certain issues but it’s a step in the right direction by hovernment.
Fungai Chimwamurombe is a registered legal practitioner and Senior Partner at Chimwamurombe Legal Practice and can be contacted for feedback at email@example.com and WhatsApp 0772 997 889. Simba Mukwekwezeke is a senior associate, email: firstname.lastname@example.org