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  1. Corporate Governance


1. Corporate Governance Assessment And ROSC Module


Section Contents:

1. Summary fact sheet

2. Market overview

2.1 Structure of the corporate sector and capital market in the country

2.2 Legal, regulatory and professional/best practice bodies

3. Registration and listing requirements

3.1 Capital markets regulator

3.2 Stock exchange

4. Treatment of shareholders

4.1 Legal rights/treatment of shareholders

4.2 Minority shareholders

4.3 Statutory and other remedies

4.4 Insider trading and self-dealing

4.5 Share registration

5. Oversight of management

5.1 Structure and powers of the ultimate body governing the corporation

5.2 Legal duties owed by the members of the governing body

5.3 Process for nominations to the governing body

5.4 Independent oversight of management

6. Disclosure and transparency

6.1 Disclosure of material financial and non financial performance

6.2 Independent audit

6.3 Disclosure of ownership

6.4 Disclosures relating to the company’s directors, managers and advisers

6.5 Disclosures for related party transactions

6.6 Other disclosure provisions, risk management

Annex Zimbabwe OECD principles matrix

1 Summary fact sheet

Market and Regulatory Overview


Market Cap (percent of GDP)

As of 12/31/99: Z$ 485.6 billion (US$ 9.07 billion), or 35% of 1998 GDP

Turnover Ratio


Number of Listed Companies

70 as of 12/31/1999

Legal System (Origin)

Predominantly common law system (UK) with some civil law influence (Dutch); incomplete securities regulation.

Autonomy of Capital Markets Regulator

No capital markets regulator. The draft Securities Commission Act has not been approved. The registrar of companies, under MOJ, administers and regulates the Companies Act.

Powers of the Capital Markets Regulator

Administrative powers and can impose penalties. Can initiate investigations on its own or upon request of third parties.

Stock Exchange Governance

A body corporate. SRO under the supervision of the committee of the exchange under the authority of the minister of finance. 2 committee members are elected by the minister of finance, and 5-7 members by stockbrokers.

Corporate Ownership Structure

Local institutional investors own some 70% of listed shares. Foreign investors including individuals and institutional investors own 15%.

Shareholders' Rights

Voting Rights

Preference shares are rare; number of votes of each class may be limited by bylaws.

Proxy Voting


Proxies of foreigners must be notarized. Postal voting allowed.

Cumulative Vote/Proportional Representation


Ownership % required to call Shh Meeting

5% of capital, 50 shareholders, or the court.

Redress against Violations/ Minority Oppression Remedies


100 shareholders, or shareholders representing ≥5% of the issued share capital, can request inquiry board to investigate company’s affairs.

Take-over Code


Material restrictions for foreigners (foreigner ownership limit ≤10%).

Mandatory Tender Offer in Change of Control


Buyers of ≥35% of stock must make an offer for outstanding shares.

Insider Trading & Self-Dealing Prohibition


Not a civil or criminal offense.

Preemptive Rights

Relationship to OECD Principles of CG

See annex.

Oversight of Management

Board Structure

Single tier structure. A company must have at least two directors.

Independent Directors


No written rules. In practice some companies have independent directors

Committee Practices


While not obligatory, many companies have board committees such as audit or remuneration.

Relationship to OECD Principles of CG

See annex.

Disclosure and Transparency

External Auditors


Appointed/removed at shareholder meetings. ZSE can de-list companies for non compliance

Consolidated Statements


As of 2000

Segment Reporting


As of 2000

Disclosure of Price Sensitive Information


Accounting – Standards and Enforcement

In line with IAS, but compliance varies.

Company Officers related Disclosures


Aggregate remuneration information presented at shareholder meetings.

Related Party Transactions

IAS 24 has been adopted for large entities and corporations with significant minority shareholdings.

Disclosure of Ownership

Companies must maintain a register with details of directors' shareholdings

Risk Management and other Disclosures


Relationship to OECD Principles of CG

See annex.


ZSE: Zimbabwe Stock Exchange IAS: International Accounting Standards

MOJ: Ministry of Justice SRO: Self-regulatory Organization

IODZ: Institute of Directors of Zimbabwe


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2 Market overview

2.1 Structure of the corporate sector and capital market in the country

Zimbabwe boasts the second largest stock market in Sub Saharan Africa behind South Africa. Still, the market is small by international standards and somewhat illiquid. As of December 31, 1999 the market capitalization of ZSE stood at Zimbabwe dollars (Z$) 485.6 billion (US$ 9.07 billion), or 35 percent of 1998 GNP, and its turnover ratio was 12 percent. There were 70 listed companies on the exchange. However, out of 70 listed companies, only 20 to 25 had any meaningful turnover. The Zimbabwean securities market was opened to international investors in June 1993.More than ten firms had an ADR/GDR program as of March 2000. The following table illustrates the break down of ZSE’s listed companies by sectors of activity.

Table 1: List of sectors represented on ZSE as of December 31, 1999


Market cap (Z$ mn)




Market cap

(Z$ mn)



Financial Services



Printing & Packaging






Industrial Sector















Agri Processing






Agricultural Inputs






Consumer Goods












Source: Zimbabwe Stock Exchange

Listed companies represent a small percentage of the total number of companies incorporated in Zimbabwe comprised of several thousand privately held small and medium enterprises and subsidiaries of multinational corporations. Most private companies are family owned. While many of the largest companies are listed on the exchange, some of the multinational corporations have major subsidiary operations that remain privately held. The free float is at least thirty percent by requirement of ZSE. Parastatals do not have any cross shareholdings in private or public companies.

Old Mutual is the largest foreign institutional investor with a portfolio of approximately 40 equity stakes ranging from ten to 30 percent. Anglo American Corporation of Zimbabwe is the second largest investor. Its portfolio consists of nine ownership interests ranging from 30 to 56 percent in blue chip listed companies. Anglo American is the only institutional investor to take an active part in the governance of its portfolio companies. The two other major domestic institutional investors are Southampton Assurance Company and First Mutual Life Assurance Society. Both are unlisted. They are passive investors in 46 listed companies. In addition there are eight unit trusts, either equity or income funds, which are not listed.

Data on the structure of ownership of listed companies is scant. According to ZSE, local institutional investors, including government institutions, own some 70 percent of the listed shares. Foreign investors including individuals and institutional investors own 15 percent, local companies and nominees ten percent, and retail investors slightly less than five percent. Although investing in equities is a relatively alien undertaking for most ordinary Zimbabweans, there has been a rise in the number of retail shareholders since July 1999, when the Mutual Society Life Insurance Company was de-mutualized. In the process several thousand policy holders were offered free shares in the new entity. The government owns significant stakes in listed companies ranging from 3.1 percent in Hunyani Holdings to 54 percent in Mhangura Copper Mines and 78 percent in TH Zimbabwe. No prior exchange control approval is necessary for foreign investors to invest in listed companies. However, there are foreign investment limits of ten percent per individual shareholder and 40 percent as a group. Foreign investments must be held through a Zimbabwean bank acting as nominee. Transfer Secretaries (see section 4.5) are responsible for monitoring limits.

To date all settlements are physical. Brokers settle among themselves on a trade-by-trade basis. Checks are exchanged manually for share certificates and/or signed transfer deeds, officially at T+5 though brokers do not maintain strict adherence and T+7 is more the norm. There is no netting involved. ZSE oversees the process but plays no active role in it. If checks are drawn on Harare banks, clearance of funds can take up to three days. Brokers who fail to deliver securities or make payment are in breach of the Zimbabwe Stock Exchange Act 1996. The penalty for non-compliance is de-registration. This threat has apparently sufficed to entice brokers to comply with the provisions of the Act. Zimbabwe does not adhere to ISSA Group 30 recommendations.

2.2 Legal, regulatory and professional/best practice bodies

Zimbabwe is a common law country. Two acts substantively govern corporate activity in Zimbabwe, the Companies Act 1951 and the Zimbabwe Stock Exchange Act 1996. The Companies Act regulates the pre-incorporation, incorporation, operations and duties of a company and its directors. It also deals with the rights and obligations of directors and shareholders. All public and private companies are governed by the Companies Act and regulations.

The legislative, institutional and regulatory frameworks supporting the capital market are incomplete. To date, there is no securities exchange commission in Zimbabwe. There is a five years’ old draft Securities Commission Act which deals with the creation of a securities commission but the project law has not been endorsed by government yet. The registrar of companies, under the ministry of justice, currently administers and regulates the Companies Act and performs some of the activities typically done by a securities regulator. It is empowered to investigate potential violations of both Acts and prosecutes when appropriate. However it does not have the power to institute civil action on behalf of an investor suffering loss or damage. The minister of justice also has the powers to investigate into the affairs of a company, either through an application of the shareholders or the registrar of companies, or of his own accord if he has reasons to believe that the management is guilty of fraud or other misconduct towards shareholders.

The Stock Exchange Act regulates ZSE. ZSE is responsible for conducting trades, overseeing the clearing and settlement process, registering brokers, supervising listed companies and brokerage houses, and for market surveillance. ZSE is organized as a body corporate and is a self regulatory organization operating under the supervision of the committee of the exchange which falls under the authority of the minister of finance. The minister has the power to appoint inspectors to carry out an investigation if he suspects the committee of wrongful behavior. The committee is comprised of two members appointed by the minister of finance, and five to seven members elected by stockbrokers. It is governed by a chairman, a vice-chairman and a treasurer elected by its members at the first meeting following an election. The registrar of companies is not represented on the committee. Each member holds office for a period of one year renewable. All matters are decided by simple majority, with the person presiding the meeting having the deliberative vote. The committee manages and controls the affairs of the exchange. Its responsibilities include: appointing a secretary and other employees of the exchange; regulating the trading of securities on the exchange; granting, deferring or refusing listing applications from issuers; suspending operations in consultation with the registrar; ensuring fair and efficient dealing in securities; ensuring that stockbrokers are competent; and raising and investing funds for the exchange. In addition to its official duties, it keeps a list of all securities listed on the exchange, transmits it to the registrar, periodically publishes it, and notifies every registered stockbroker of any changes to it.

Overall, corporate governance is gaining recognition in the country largely due to the efforts of the Institute of Directors of Zimbabwe (IODZ) which has been active in promoting the principles set out in the Cadbury report of the UK, and the King report of South Africa. The IODZ is dedicated to improving the expertise, status and professionalism of managers and directors of Zimbabwean companies through training and education. It also seeks to curb fraud and corruption. IODZ has set up a special purpose committee that prepares and disseminates guidelines on corporate governance. Certain prominent members of the institute, such as Anglo American or Delta Corporation, have also developed their own in-house corporate governance manuals. At this time, the IODZ is intensifying its corporate governance awareness campaign by including parastatal bodies and parliamentarians in its training programs. However, membership is voluntary. Therefore IODZ cannot monitor compliance of its corporate governance principles by non-member companies.

According to market analysts, the monitoring and enforcement capacities of the registrar of companies and the High Court need to be enhanced for better implementation of corporate governance.


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3 Registration and listing requirements

3.1 Capital markets regulator

Zimbabwe follows a disclosure based regime. As mentioned earlier, the country does not have a securities exchange commission at present. Nevertheless, companies, whether private or public, must file a prospectus with the registrar of companies upon incorporation. The prospectus must include basic information on the company and its directors including their term of appointment, ownership interests and remuneration, as well as basic details concerning the company’s accountants, lawyers, and bankers. Information must also be provided on all material contracts and current litigation. If shares are offered to the public for subscription, the prospectus must contain the following information: (i) minimum amount to be raised by the issue and the proposed uses of funds; (ii) details on the subscription period; (iii) the amounts payable on application and allotment of each share; (iv) the substance of any contract which would create preferential rights of any kind; (v) the number and amount of shares issued in the last two preceding years; (vi) amounts, nature and extent of any consideration paid within the two proceeding years to directors or officers of the company; (vii) the nature and extent of interests of every director in property acquired within two years of the date of the prospectus; (viii) number of founders and management or deferred shares, and any special rights attached thereto.

In addition, auditors reports must be filed. These reports include a profit and loss statement, a statement of assets and liabilities, and a summary of the dividend rates paid by the company in respect of each class of shares. If the company has one or several subsidiaries, separate profit and loss statements must be filed for each of them. If the company is raising additional capital to purchase a business, the profit and loss statement of the proposed acquisition must also be included.

3.2 Stock exchange

In 1998, ZSE rewrote its listing requirements based on those of the Johannesburg and the London Stock Exchanges. Companies seeking a listing on ZSE must commit to diffuse in the public at least one million shares or not less than Z$500,000 (US$9,345) in nominal value; the shares sold to the public must represent no less than 30 percent of the company’s issued capital; there must be no special class of shares controlling the company; options may not be granted to any specific class of shareholders without the consent of ZSE; the range of shareholders must be broad enough to create an orderly market; the shares must be freely transferable; and the company should have a trading record showing a satisfactory profit history over the last three years. However, in 1999, ZSE waved the three year profitability requirement for Econet, a local wireless company. More wavers are expected in the future to encourage high tech start ups. In addition the company must have its financial statements audited by an external auditor.

Finally, a company seeking a listing on ZSE must prepare and submit a prospectus containing the same information as submitted to the registrar upon incorporation with certain additional details. In particular information on: related party transactions and historical financial statements for the preceding five years. This prospectus must be published in the local newspaper and made available to investors through sponsoring brokers.


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4 Treatment of shareholders

4.1 Legal rights/treatment of shareholders

The primary rights of a shareholder are the right to a dividend when declared and the right to vote in company meetings. However, there are two types of shareholders in Zimbabwe: owners of preference shares and owners of ordinary shares. Ordinary shares grant the owner the right to vote at shareholders assemblies while preference shares give the holder the right to a fixed dividend but without the right to vote. In practice, preference shares are rare. The memorandum and the articles of association may authorize revisions of the rights attached to any class of shares, subject to the consent of their holders. However, section 91 of the Companies Act protects the rights of dissenting shareholders. It grants holders of 15 percent of preference shares who do not consent to or vote in favor of the revision, the right to apply to the court to have the variation cancelled. The variation in rights is not effective until the court has ruled.

Decisions involving election and remuneration of directors, appointment of the statutory external auditor, remuneration of auditors, payment of dividend, approval of annual accounts and the routine matters relating to the conduct of a company require the passing of ordinary resolutions. Ordinary resolutions are passed by simple majority unless the Companies Act or the articles of association provide otherwise. More important matters such as reduction of capital, issuance of shares at a discount, removal of directors or auditors, mergers and acquisitions, and voluntary winding up of a company, require a special resolution. Such resolutions require a 21 days notice unless 95 percent of the shareholders agree to lift the notice period. Holders of not less than 25 percent of votes must be present in person or by proxy and the resolution must be passed by a 75 percent majority. All special resolutions must be registered with the registrar of companies who annexes each resolution to the company’s articles of association. Non-compliance is an offence under section 136 of the Companies Act punishable by a fine. However the maximum amount of the fine is Z$ 4only.

Shareholders have several means of redress in case their rights have been violated. In compliance with the Companies Act, if a shareholder is not satisfied that the board of directors or the management is working towards the best interest of the company, he/she may apply to the registrar of companies to request a board of inquiry; or, if there are at least 100 dissatisfied shareholders, or if the dissenting party represent at least five percent of the issued share capital of the company, they may apply directly to the minister of justice for such an inquiry as discussed in section 4.3 below. An aggrieved shareholder may also approach the court directly if his statutory rights are allegedly violated or, subject to a provision in the articles of association, make use of the arbitration courts.

Courts appear to provide a reliable mechanism for protecting shareholders rights. The timing and costs, though relatively reasonable, are enough of a deterrent for most minority investors. According to market analysts, the establishment of the commercial arbitration center in July 1995 has gone a long way toward complementing the administration of justice in Zimbabwe. Arbitration is now regularly chosen as the means of resolving commercial disputes and the superior courts have an enviable record of enforcing arbitrage agreements and awards expeditiously, economically and reliably. However, some analysts have expressed concerns about the level of experience of high court judges and their level of remuneration which deters the more capable legal practitioners to leave their practices to become judges.

In general, there are no material restrictions on the ability of an investor to launch a hostile take over bid, except for foreign investors. As mentioned earlier, individual foreigners are not allowed to own more than ten percent of a Zimbabwean listed company. If a foreign investor exceeds the ten percent limit, the transfer secretary will not effect registration and the investor must sell the excess shares within 60 days and incur the losses that may result from the sale. ZSE is required to notify the Reserve Bank of Zimbabwe (RBZ) when these limits are exceeded. This regulation is enforced by RBZ’s exchange control department. There is no written takeover code in Zimbabwe to date, nor a comprehensive set of rules governing the substantial acquisition of shares. Nevertheless, ZSE follows the guidelines of the City Code in London and those of the Securities Exchange in South Africa. In addition, ZSE has issued some directives aimed at protection of minority shareholders. These directives include a provision that any person or body corporate who acquires 35 percent or more of the share capital of a listed company must make an offer for the outstanding shares.

4.2 Minority shareholders

The Companies Act guarantees minority shareholders the right to participate and vote in company meetings and shareholder ballots. It mandates every company to hold an annual general meeting (AGM) of its shareholders within 18 months of incorporation, and thereafter within six months of each financial year end and not more than 15 months after the previous AGM. Prior to the meeting shareholders must receive from directors a copy of the statutory reports of the company. The Company Law sets forth, subject to any restrictions attached to any class of shares, the one share one vote principle at annual or special shareholders' meetings. The Law authorises by-laws to limit the number of votes of each class of shareholders. Voting is normally by show of hands unless a poll is demanded.

Shareholders, representing five percent of the paid-up capital also have the power to call an extraordinary meeting; in this case the directors must call the meeting within 21 days. If the directors fail to do so, a group of 50 shareholders or shareholders representing 50 percent of the total voting rights may themselves convene such a meeting stating its objectives in the notice – given at least 21 days before the meeting. Expenses incurred for such meetings are reimbursed by the company. Directors and officers who fail to call either the annual meeting or the extraordinary meeting are liable to a fine not exceeding Z$ 100(US$ 1.80). In addition the courts may order a company either of its own motion or upon the request of a voting member of the company, to call a shareholder meeting.

As discussed in section 5.2, the board of directors is responsible for arranging the AGM. Notice of the meeting must be delivered in writing to all shareholders at least 21 days before the date of the meeting. A shorter notice may be acceptable if all shareholders entitled to attend and vote at the meeting agree to bring the meeting forward unanimously. For extraordinary meetings, a 14 day notice in writing is required. Inadvertent omission to give notice to a person entitled to receive it does not invalidate the proceedings at the meeting. Each notice must be accompanied by a statement of no more than a thousand words outlining the proposed resolutions or the business to be dealt with at the meeting. The quorum for the meeting is two members.

Shareholders are not required to attend meetings in order to vote. They may cast vote by using a proxy form or postal vote and are entitled to appoint another person as proxy. There is no limit to the number of proxies that any given attendee may represent at the meeting. A proxy has the right to attend a shareholders meeting, vote on behalf of a shareholder and speak at the meeting. Compliant with the Companies Act, notices of meetings must inform shareholders of their right to appoint a proxy and must include a proxy form. To be valid, proxy forms must be provided to the company 48 hours before the meeting. A company is prohibited from soliciting proxy votes from selected shareholders only. Local proxy appointments do not have to be notarised but foreign appointments do. Shareholders are required to lodge their share scripts with the company secretary in advance of the vote.

4.3 Statutory and other remedies

Section 157 of the Companies Act provides that a group of 100 shareholders, or shareholders representing at least five percent of the issued share capital, can approach the minister of justice with a request to order an inquiry board to investigate the affairs of their company. Petitioning shareholders must pay the costs involved in setting up the inquiry board. After the investigation, the inquiry board makes its recommendations to the minister. The latter determines whether to transmit them to the attorney general's office for civil or criminal proceedings, or whether to pursue other administrative remedies including revoking the registration of the company. In cases involving the recovery of damages in respect of a fraud or misconduct of the management, the minister may himself bring the proceedings in the name of the company. The minister may at his discretion, publish the findings of the inquiry board, and make them available to the shareholders who requested the investigation. He may also decide to keep the findings confidential.

A single shareholder cannot initiate legal action for a wrong perpetrated against the company. Such court action must be decided by the majority of voting shareholders. However, minority shareholders can initiate legal proceedings if the actions of the controlling shareholder amount to a fraud on the company or if the company’s affairs are conducted in a manner unfairly prejudicial to the interests of some shareholders. As of March 2000, a case was pending before the high court where a group of institutional investors were suing a medical service company which had allegedly violated a number of provisions of a shareholders agreement.

4.4 Insider trading and self-dealing

To date, insider trading is not an offence in Zimbabwe. There is no effective mechanism to deal with insider trading which has been a growing source of concern within the last ten years. During 1999, several allegations of insider trading were made for which ZSE launched a formal investigation. No evidence of improper dealings has yet been proven. Further to ZSE’s investigation, a parliamentary committee was also instituted to undertake an independent investigation. Its inquiries are still in progress. However, even if insider trading can be proven, there are no legal sanctions that can be applied to the perpetrators. IODZ has tried to push for reforms but its efforts have not yet born results. According to market analysts, it will likely take concerted action from the law society and the institute of chartered accountants as well as ZSE to influence the ministry of finance and the attorney general’s office to initiate the necessary legislation. There is anecdotal evidence that many legislators and government functionaries have only a limited understanding of the issues associated with insider trading.

4.5 Share registration

The Companies Act requires companies to maintain a register of their shares and provide the same information to the registrar of companies. Transfer secretaries are usually appointed as registrar by issuers, though on some occasions, issuers have decided to maintain their own registry. Current practice is for securities to be physically presented to the registrar with a transfer deed, duly signed by both parties. During the process, non-resident status must be disclosed so as to track foreign stock holding. According to market analysts, the registration process can take up to two months to complete though the normal time-frame is approximately two weeks.


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5 Oversight of management

5.1 Structure and powers of the ultimate body governing the corporation

Zimbabwean companies are governed by a single tier structure. The board of directors is the ultimate body governing the corporation and has the duty to monitor the performance of the executive management team against agreed objectives set out in the business plan. It is responsible for ensuring that the company operates within its articles of association, in compliance with the Companies Act and common law, and in accordance with resolutions passed at shareholders meetings and at meetings of directors. In addition, the directors exercise all the powers of the company to borrow money and to mortgage or charge any uncalled capital. However, all moneys borrowed or secured by the directors, besides the amounts borrowed in the ordinary course of business, require prior approval of the shareholders.

The Companies Act requires every company to have at least two directors; most companies have six or seven. One director must be residing in Zimbabwe. Directors may appoint alternates subject to board approval. Appointees must undertake in writing to act as director of the company and have this undertaking registered with the registrar of companies. The articles of association may require a director to purchase a requisite number of shares as a qualification. If a director fails to comply with this requirement within two months, his appointment stands annulled. Directors can hold any other office inside or outside the company, other than the office of auditor of the company, in conjunction with their office of director for a term as determined by the board of directors. Where such director acts in a professional capacity for the company he is entitled to remuneration for professional services. There is no distinction of duties between executive and non-executive directors. Usually the managing director as well as the marketing and finance directors are the executive directors, although it depends on the management structure adopted by the company in question.

The board may appoint one or more of its directors to the office of managing directors for a period determined by the board and may also revoke such appointment. Members of the board receive management accounts on a monthly basis. There is no legal definition of an independent director, although in practice a non-executive director is understood to be fulfilling such a role.

Directors can set up committees of the board and delegate its powers to them but there are no legal requirements for inclusion of specific committees. However in practice, public companies, both listed and unlisted, have board committees such as audit, remuneration, nominations, investment, general purpose and technical committees, depending on the nature and scope of their activities.

5.2 Legal duties owed by the members of the governing body

Directors must demonstrate duties of loyalty, care, skill and attendance. They have a fiduciary relationship to the company and some obligations towards the shareholders. They must observe the utmost good faith in their dealings with the company, exercise their powers for its benefit and not their own, and ensure that they avoid conflicts of interests between themselves and the company. Boards usually meet every three months. Decisions of the board are passed by a simple majority; the quorum is fixed in the articles of association.

The board is responsible for signing off the annual report of the company before it is presented to the AGM. The annual report must be signed by at least two directors. The board must prepare a directors’ report attached to the annual report. It includes a discussion on the state of the company's affairs; moneys paid or declared as dividend; and details of directors remuneration if this topic is to be discussed at the AGM. Wilful non compliance is an offence punishable with imprisonment of up to 12 months and a fine up to Z$ 400(US $7.40) under section 147 of the Companies Act. The board is also responsible for calling and organizing the AGM and extraordinary shareholders meetings. Non-compliance with these duties is an offence punishable with fines according to the Companies Act. However, the level of fines is too low to act as a deterrent (Z$ 100 only or US$ 1.80).

Directors must maintain the minutes of meetings of shareholders, directors, committees and managers. The minutes must log the names of participants to each meeting, keep score of appointments made by the directors and keep records of resolutions and proceedings passed during meetings. Each director present is required to sign his name in the directors’ attendance register. Any member of the company may request to inspect the book for a charge. Default for maintaining such book is an offence which may incur a fine of up to Z$200(US$3.70). Refusal to provide it for inspection, is also an offence liable for a fine. In case of refusal, the court may order an immediate inspection of the minutes of the general meetings.

Enforcement is left to individual boards. Any attempt to relieve directors of personal responsibilities is rendered void by section 190 of the Companies Act. It is the shareholders’ prerogative to sanction directors for non-performance. To date there have been no decisions made on cases filed by shareholders against directors. In 1998 shareholders filed a case with the high court against a board of directors for breach of fiduciary duties when it was found that the CEO had defrauded investors. The case is still pending. Neither the registrar nor the high court have the power to sanction directors. However, under the Companies Act the high court does have the power to relieve a director from liability, if he has acted honestly and reasonably.

5.3 Process for nominations to the governing body

Appointment and removal of directors is governed by the articles of association. The prerogative to appoint and remove directors usually rests with the shareholders. Appointment takes place at the AGM. To give shareholders an opportunity to consider the merits of each director individually, the Companies Act prohibits the appointment of two or more directors by the same resolution unless a resolution to this effect has first been passed without a dissenting voice. Normally, directors retire by rotation. However they can be removed at any time by ordinary resolution of the shareholders.

Some companies have structured their board of directors with nomination committees. In this case, directors are first nominated by the committee, which is comprised of the non-executive chairman, a senior non-executive director and the chief executive officer. Then their appointment is submitted to the vote of shareholders. Directors must step down at age seventy.

The Companies Act sets forth the disqualifications for appointment as director of a company. Restrictions include a body corporate, a minor or a person with a legal disability, a person who is insolvent, convicted of theft, fraud, or perjury. Besides these restrictions, there are no minimum criteria for selecting of directors. Non-residents or foreigners can be appointed. Cumulative voting does not exist in Zimbabwe.

In general, there is a core set of about 20 individuals who sit on the boards of most of the top firms in the country and even fewer truly independent non-executive directors with requisite skills and experience. Due to the shortage of reputable and experienced directors in the country, non-executive directors are typically recruited from among, former executive directors, senior directors of major subsidiaries and directors of companies providing complimentary services. There are no written rules regarding the inclusion of independent directors though in practice some companies have independent directors on their boards. In this case the latter serve on such committees appointed by the board as audit, remuneration, nominations, and investment committees.

5.4 Independent

Audit committees are not mandatory. The board of directors has the overall responsibility for establishing and maintaining a professional relationship with both internal and external auditors. However, according to market analysts all listed companies have established an audit committee. Typically these are manned by a majority of non-executive directors. The chairman of the board is not a member of the committee though the committee is at liberty to communicate directly with the chairman. The committee meets quarterly to review the company’s financial statements. Many of these committees have written terms of references. There is anecdotal evidence that audit committees need to work closely with internal auditors because of the increasing incidence of fraudulent activities. According to market analysts, it has always been the norm for audit committees to meet with external auditors without executive directors and managers present to ensure that there are no unresolved issues of concern.


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6 Disclosure and transparency

6.1 Disclosure of material financial and non financial performance

The Companies Act requires all companies to provide books of account which give a fair view of the state of affairs of the company. Compliant with section 104 of the Act, these books must comprise the company's balance sheet, its profit and loss account and cash flow statement. Financial statements must be audited by external auditors and accompanied by the auditors’ report together with the directors’ report which discusses the performance of the company during the last fiscal year, identifies the major issues that the company had to deal with and those expected in the future. The accounts must be filed with the registrar and ZSE, mailed to shareholders and made available at the shareholders meeting. Companies with subsidiaries must file consolidated financial statements. Information on subsidiaries must coincide with the company's own financial year.

Listed companies must also issue semi-annual reports, which are usually not audited. Copies are sent to every shareholder. In addition, several new rules were enacted in 1999. As from 2000, companies must disclose in their annual reports the identity of shareholders behind nominee companies, their costs of sales, information on the markets where the company is selling its products, segment reporting and full disclosure of relationships with other companies. The country having recently been designated a hyperinflation country, companies are required to use inflation accounting for the preparation of their reports. According to domestic analysts Zimbabwe complies with IAS standards.

If a listed company fails to comply with any of the above reporting requirements, ZSE may decide to suspend trading in its stock. Indeed it has done so recently. In 1999 trading in the shares of Mhangura Copper Mines and Merspin Limited were suspended because the companies had failed to comply with the exchange’s disclosure standards.

6.2 Independent audit

It is a continuous listing requirement of ZSE that listed companies’ forecasts and annual reports must be audited by external auditors who are appointed and removed by the directors for the first year of incorporation for a term ending at the AGM. Thereafter auditors are appointed by the shareholders. However, where the directors and the shareholders fail to make such appointment, the minister of justice may appoint them on the application of any shareholder.

As mentioned earlier, responsibility for the preparation and presentation of the accounts falls on the directors of the company. The auditors’ duty is to examine the accounts and report on them to the shareholders. If the auditor fails to perform his/her duty, the company can sue the errant auditor. According to market analysts, it is difficult to institute successful litigation against auditors, due to the way they cover themselves in their statement accompanying the audited accounts. The extent of an auditor’s liability to third parties who have suffered loss from relying on accounts on which he has reported is currently under test for the first time. The liquidator ZECO Ltd., is suing Deloitte & Touche for Z$337 million (US$ 6.3 mn) for damages allegedly suffered by a consortium of banks led by FMB. ZECO Ltd was placed under liquidation despite having been given a clean bill of health by Deloitte & Touche.

6.3 Disclosure of ownership

There are no provisions in the Companies Act regarding the disclosure of ownership in Zimbabwean companies. As mentioned in section 4.5 the Act requires all subscribers to the memorandum of association to be recorded in the company’s register of members; it also calls for the maintenance of a register of directors’ shareholdings and debenture holdings. However, there are no provisions concerning the dissemination of information on substantial shareholders who own more than a specific percentage of the share capital of company. Similarly, the Stock Exchange Act does not contain rules regarding the substantial acquisition of shares or rules concerning the disclosure of ownership of shareholders when they pass through certain thresholds, as is usually the case in modern stock exchanges.

6.4 Disclosures relating to the company’s directors, managers and advisers

The Companies Act contains several provisions regarding disclosures of company directors, managers and advisers. First, the prospectus must include information on the composition and compensation of the board of directors as discussed in section 3.1. Non compliance exposes the directors and officers of the company to the possibility of being sentenced to imprisonment of up to two years and a fine. Second, information on the aggregate amount of the directors' emoluments and pensions must be included in the accounts of the company submitted to the approval of the shareholders at the AGM or in a statement annexed thereto. Similarly, the accounts must provide the amount of any loans made by the company or by any subsidiary to any director or other officer of the company.

Where directors incur expenses on behalf of the company they may be so reimbursed. However, such reimbursements are subject to the approval of the general meeting at which the amount of advances, or extent of security must be disclosed. If reimbursements are made without such approval, the directors are jointly and severally liable to indemnify the company against any loss arising therefrom. In addition, default to comply with the provision of loans could lead to imprisonment for a period not exceeding two years and/or a fine of Z$ 1000 (US$ 19).

Each company is also required to maintain a register of directors and secretaries at its office which must contain the full name, business address, nationality and particulars of any other directorships held by each director. Such information is provided to the registrar of companies. The latter must be notified of any changes in the information so provided. Directors are obliged to provide such information to the company so that the register can be updated. They are not absolved of their duties even after resignation until notice has been delivered to the registrar.

Every company must also maintain a register of directors' shareholdings showing for each director the number, description and amount of any shares or debentures of the company or its subsidiary or holding company, which are held by him, or in trust for him or of which he has any right to become the holder. It must also include the date of and price or other consideration of the transaction along with the nature and extent of the director's interest in the shares so recorded. This register is open for inspection to shareholders 14 days before the annual meeting. The registrar may also at any time require a copy of the register. Default in compliance is an offence punishable with a fine not exceeding Z$ 1000 (US$ 19). It is the duty of each director to inform the company during directors’ meetings of any change on the ownership.

6.5 Disclosures for related party transactions

According to section 186 of the Companies Act, a director who is in any way interested in a contract or proposed contract with the company must declare the nature of his interest at a meeting of the directors. He is mandated to abstain from voting in respect of such a contract or arrangement, and is not counted in the quorum present at the meeting. However, these provisions can be relaxed in the general meeting of a company. Directors violating the notice requirement are guilty of offence and liable to a fine not exceeding Z$ 200 (US$ 4) only.

In addition, the related party disclosure standards set out in international accounting standards form 24 (IAS 24) have recently been adopted in Zimbabwe though the standards will be applied in a manner that takes into account the current business environment. As such, the application of the standards will be limited to economically significant entities as well as any entities for which there exists a significant minority shareholding and in whose business the shareholders are not involved in the day-to-day management. Compliance with these disclosure standards varies by company.

6.6 Other disclosure provisions, risk management

Directors’ remuneration may be fixed in the articles of association or decided at the AGM. Some companies’ articles of associations allow directors to fix their own remuneration. If a minority shareholder has a complaint about dividends or the financial strength of the company due to excessive remuneration to directors, he may seek relief from the high court. In addition, the commissioner of taxes can disallow expenditure by the company on excessive remuneration to directors.

Discussion on risk management is not compulsory in annual reports but it is strongly encouraged by the accounting profession


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