Understanding types of business entities registrable in Zimbabwe
KELVIN SABAO
Introduction
In Zimbabwe, the Companies and Other Business Entities Act (COBE Act) serves as the legal framework governing business entities.
This comprehensive legislation not only defines the legal obligations and rights of businesses but also outlines the types of business entities that can be registered in Zimbabwe.
Section 5 of the COBE Act is pivotal in this regard, as it elucidates the various business structures that are open for registration.
These registrable business entities provide entrepreneurs and investors with a diverse range of options tailored to their specific needs and objectives.
- Public Limited Company
A Public Limited Company is a business entity that can issue shares to the public.
This means that its ownership is distributed among a wide range of shareholders, and its shares can be bought and sold freely. These shares are often traded publicly on a stock exchange. In Zimbabwe, we have the Zimbabwe Stock Exchange (ZSE) and the Victoria Falls Stock Exchange (VFEX).
A Public Limited Company is characterized by its ability to raise capital from a wide range of investors.
Furthermore, these entities are usually larger enterprises with complex ownership structures and stringent regulatory requirements to safeguard the interests of shareholders.
- Private Limited Company
A Private Limited Company denoted as Pvt Ltd, is a business entity where ownership is restricted to a limited number of shareholders.
In terms of section 85(1)(b) of the COBE Act, ownership in a Private Limited Company is limited to fifty (50) shareholders.
Shares in a Private Limited Company are not openly traded on the stock exchange, and ownership is often closely held.
Private Limited Companies are known for their flexibility and ease of management, making them a popular choice among entrepreneurs in Zimbabwe.
- Company Limited by Guarantee
Companies Limited by Guarantee are unique entities where members do not contribute capital upfront but commit to covering company debts up to a predetermined amount in case of liquidation.
They are typically used by non-profit organizations, charities, and clubs, and focus on achieving specific social or charitable goals rather than profit generation.
- Co-operative Company
Co-operative companies are structured to promote collective ownership and decision-making. They are commonly used in sectors such as agriculture and community development, where members work together for mutual benefit.
Section 87 of the COBE Act defines a co-operative company as a company which in its memorandum states that its main object is one or other or both of the following –
(i) the provision for its members of a service facilitating the production or marketing of agricultural produce or livestock;
(ii) the sale of goods to its members;
Co-operatives often prioritize principles of equity, democratic control, and shared profits.
- Foreign Company
Foreign companies are entities incorporated outside of Zimbabwe but are allowed to operate within the country under certain conditions and regulations.
These companies are subject to specific requirements and must comply with Zimbabwean laws while conducting their business activities in Zimbabwe.
- Private Business Corporation (PBC)
A Private Business Corporation, or PBC, is a unique entity type introduced to facilitate the growth of small businesses in Zimbabwe.
A PBC can have 1 – 20 members. PBCs are easy to set up and maintain, making them an attractive option for entrepreneurs looking to start or expand their informal enterprises.
- Partnerships, Syndicates, Joint Ventures, and Certain Associations of Persons
Section 5 of the COBE Act also encompasses partnerships, syndicates, joint ventures, and specific associations of persons. These entities operate based on agreements between individuals or organizations, and they are often used for specialized business activities or collaborative projects.
It is important to note that partnerships, syndicates, joint ventures, and certain associations of persons can be registered voluntarily under the COBE Act, but they must adhere to the provisions set out in Section 278 of the Act. This section outlines the requirements for their registration and operation.
Conclusion
Section 5 of the Companies and Other Business Entities Act outlines the various types of business entities that are required to register in Zimbabwe. This registration process is essential to ensure legal recognition, compliance with regulations, and access to the benefits of being a registered entity.
Understanding the obligations and benefits associated with registration is crucial for businesses operating in Zimbabwe, as it not only safeguards their interests but also contributes to the overall transparency and integrity of the country’s business environment.
In summary, section 5 of the Companies and Other Business Entities Act offers a diverse array of business entity options for entrepreneurs and investors.
Each type of registrable business entity has its own set of advantages and limitations, allowing individuals and organizations to choose the structure that best aligns with their objectives and aspirations.
Understanding these options and their implications is crucial for making informed decisions when establishing or expanding a business in Zimbabwe.
Disclaimer:
The information and opinions expressed above are for general information only. They are not intended to constitute legal or other professional advice.
Kelvin Sabao is a duly registered Legal Practitioner practising law at Titan Law. He writes in his personal capacity. He is a co-author of a book titled ‘The Directors’ Handbook in Zimbabwe’. This publication underscores his expertise and dedication to advancing the knowledge and understanding of corporate law and corporate governance in the Zimbabwean context. For more information, you can contact Kelvin via email at: sabaokelvin@gmail.com
