Private Business Corporation: Why should you register and/or convert to a PBC?

Many a time, people get scared of operating a formal business on the backdrop of huge compliance issues.

Given that most organisations are still small, copying with regulatory demands has never been a walk in the park. Zimbabwe’s new Companies and Other Business Entities Act Chapter 24:31 provides for the establishment of Private Business Corporations (PBCs) and the conversion of Private Limited Companies (PLCs) to PBCs. It is now possible to formalise a business at a lower cost with minimal regulatory requirements.

There are numerous benefits for registering a PBC, chief amongst them are:

λ  At least 1 member and not more than 20, hence its suitable for your dream business as a sole trader without having someone to buy into the idea.

λ Affordable registration fees given that one can complete registration for less than USD100

λ  Has limited liability which separates you from your business

λ  Is perpetual, which means your dream can outlive you for posterity

λ  There is no distinction between owners and shareholders

The requirements for establishing a PBC are limited to:

λ  Name of the PBC and address – physical, postal and email

λFull names, ID numbers and addresses of member(s)

λContribution of each member and percentage of contribution

λName and address of accounting officer who should be a registered public accountant

λ  Date for end of financial year for the PBC

In Zimbabwe, most small and medium enterprises (SMEs) were established as PLCs and many people continue to register as private limited companies due to lack of information. An existing Private Limited Company (PLC) may now be converted to a PBC in line with section 251 of the Companies and Other Business Entities Act Chapter 24:31(‘’the Act’’).

A notice for the intention to change from PLC to PBC should be published in the Gazette and changes lodged with the Registrar of Companies. Changing a PLC to a PBC does not close off the entity from converting to a PLC later as this is provided for by section 250 of the Act.

PLCs that convert to PBCs will immediately start to enjoy numerous benefits such as:

λ  No need to lodge annual return

λ  No need for annual general meeting

λ  No need for audited accounts

λ  No need to maintain a register of members

λ  Only an incorporation statement in place of a memorandum of association, articles, CR6 (directors) and CR5 (registered office)

λ  No prohibition for providing financial statements for the acquisition of member’s interest.

Get your idea into motion in 2023 and register a PBC. If you have a private limited company, it’s high time you consider converting to a PBC and reduce the compliance burden.

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.