At this time of year another batch of young people finishes school and college and enters the job market. A job market so dry that only a tiny minority can ever hope to find jobs in the formal economy, while the majority may never be formally employed in their lifetimes.
Your Rights: MIRIAM TOSE MAJOME
They will just have to find something to do somewhere with no support other than speeches from politicians about empowerment and indigenisation. Nearly all structured career entrance supports such as the National Apprenticeship Board have collapsed. Many companies that once offered graduate trainee programmes have either scaled or closed down. With little or no inclination or training many young people are forced into the tricky maze of business to reluctantly become entrepreneurs, vendors, small-scale miners and instant farmers. This series of articles discusses basic company and commercial law and is aimed at young people already in business or those thinking of it or being forced into business. It is important to do things right from the beginning and to comply with the legal requirements of going into business and starting companies.
The Law
Companies and other commercial enterprises are governed by the Companies Act Chapter 24.03. The Act provides the legal framework to consolidate and amend the laws relating to the constitution, corporation, registration, management, administration and winding up of companies and related associations. The Companies Act does not apply to building societies, cooperative societies, private business corporations, trade unions and social clubs. Not every business venture has to be registered as a company. However, there are distinct advantages of forming and registering a company and trading formally.
Forming a Company
Any person or group of persons can form and register a company. Companies Registration Offices in Harare and Bulawayo keep records of all companies registered in Zimbabwe. If at least 20 people want to form a company, association, syndicate, or partnership they are required to formally register it. A company is formed on the basis of its Memorandum and Articles of Association. These are the rules governing the company for the purposes for which it is set up. If the company is a limited company it is stated in the Memorandum also stating the number of shares and their distribution and the share capital amount. It depends what the members have agreed and have each contributed to the capital. It also contains the personal and contact details of the directors and shareholders. Records lodged in the Companies Office are public documents and any member of the public can request to inspect them. People usually do when they require details of company directors and shareholding structure and other information.
Independence of a Company
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Once formed and properly registered a limited company assumes a life of its own that is independent from its shareholders or directors. A company assumes the capacity and powers of a natural person. It is capable of carrying out its own decisions under its own name such as opening bank accounts, suing or being sued in its own name. It can acquire and sell its own property and assume its own assets and liabilities.
The personal property of shareholders or directors are separate from its own. This means if a company accrues debts and a judgment debt is passed against it the judgment creditors cannot attach the personal assets of the directors or shareholders. The personal property of directors can only be attached if the directors have given prior express personal guarantees for the company.
Companies are incorporated differently and not all are limited companies, but the general law for limited companies is the limitation of personal liability on shareholders. This is one clear advantage of a limited company. Directors and shareholders will not have their property attached to settle the company’s debts unless special circumstances prevail. We will discuss these circumstances in another article in what is termed lifting the corporate veil. In a limited company directors and shareholders are therefore protected by the corporate veil.
Succession planning
In recent previous articles we discussed deceased estates and the wisdom of succession planning. We discussed the available options such as creating trusts and writing wills. One clear advantage of a registered company is that it allows for perpetual succession. The company can live on long after its founders and directors have passed on. Managers and other appointed office bearers can carry the company forward long into the future. There are thousands of success stories locally and internationally. The deceased shareholder’s shares can be inherited by heirs or by the deceased estate who can continue to enjoy the dividends and profits well into the future. Shareholders do not need to be directors or to work in the company. Directors also do not need to be shareholders or to work in the company either.
Responsibilities
A company is responsible for the commissions and omissions of its office bearers. A company cannot devolve itself of responsibility when its officers or any other persons authorised to act on its behalf misconduct themselves. We will later discuss the principle of vicarious liability. An example is if an individual officer defrauds a customer or member of the public. The company may try to dodge responsibility on the grounds that the omissions of the individual officer were personal acts for which the company is not responsible and that the aggrieved person should pursue it as a personal matter. Insurance companies in particular are notorious for rejecting payment claims on the grounds that the agent or broker who sold the insurance left the company so they are not obliged to pay. These are some of the underhand tactics that even respectable companies and banks can sometimes employ. Such misdemeanours are easier to challenge when the company is registered as it is for registered companies to defend themselves than unregistered companies can.
Miriam Tose Majome is a lawyer and a teacher. She can be contacted on [email protected]
