Corporate M&A 2024 Comparisons

COVID-19 is no longer an issue in Zimbabwe and consequently the Zimbabwean M&A market has gone back to pre-COVID-19 levels. The restrictions that were placed as measures to combat COVID-19 have been lifted which has resulted in the pace of deals going back to normal. Deal participants, including regulators, are back to normal working hours. Despite these positives, the general economic instability and currency volatility in the country continue to deter more foreign investments. The net result is that there have been few significant M&A transactions in the market.

Below are some of the top trends in Zimbabwe during the last year.

• During the year ending 2023, the Competition and Tariff Commission approved 11 mergers without conditions and three were approved with conditions while one was prohibited. Four other mergers were awaiting further representations.
• Zimbabwe has experienced a large influx of foreign investors, particularly in the lithium mining space. Notable lithium projects over the past two years include:
1. the USD422 million deal wherein Zhejiang Huayou (the world’s biggest producer of cobalt) acquired controlling rights to Zimbabwe’s Arcadia mine (Prospect Lithium (Pvt) Ltd);
2. the Premier African Minerals Limited joint venture agreement with Li3 Resources Inc to acquire 50% interest in Premier’s lithium assets located in Mutare;
3. the acquisition of a 100% stake in African Metals Management Services and Southern African Metals and Minerals by Hong Kong’s Sinomine for USD180 million (Bikita Lithium Mine); and
4. the potential acquisition of a Zimbabwean lithium mine between China Natural Resources Inc, Feishang Group Limited and Top Pacific (China) Limited valued at approximately USD1.75 billion – in total, it is estimated that there is approximately USD10 billion currently invested and/or which is earmarked for investment in various lithium-related projects.
• In addition to the acquisition of lithium mines, the government has issued permits to lithium processing companies to set up processing plants in Zimbabwe. Several companies are in the process of setting up processing plants.
• There has also been some activity in the renewable energy sector, with companies seeking to invest in Solar Energy as well as Thermal Electricity Generation. The Energy Regulator has issued Independent Power Generation Licences to companies who are in the process of setting up solar farms.
• One of the largest property development companies listed on the Victoria Falls Stock Exchange, which is a United States Dollar Stock Exchange, was the first initial public offering (IPO) on that new exchange.
• Securities (Victoria Falls Stock Exchange) (Levies, Fees and Charges) Rules, 2023, were issued in the last 12 months.
• Introduction of new taxes, for example, wealth tax and tax on transfer of mining title, and presumptive taxes for various sectors affecting small- and medium-scale businesses.

The industries that experienced significant M&A activity in Zimbabwe are the mining as well as the banking and finance industries. There is a significant increase in M&A activities in these industries as companies therein have sought to raise capital, rehabilitate operations, increase market share and/or begin conducting capital intensive operations.

The primary techniques/legal means for acquiring a company in Zimbabwe are:

• acquisition of shares from shareholders in an existing company;
• registering/incorporating a company; and
• subscription.

The primary regulators of M&A activity in Zimbabwe are:

• The Registrar of Companies – this is the authority responsible for the registration of companies and other business entities registrable under the Companies and Other Business Entities Act (Chapter 24:31).
• The Reserve Bank of Zimbabwe – under Zimbabwean laws, for a foreign resident to acquire shares in a local entity they require exchange control approval. The same applies to a local entity contracting into a foreign loan. The Reserve Bank of Zimbabwe is the exchange control authority in Zimbabwe. It approves all transactions requiring exchange control approval under the Exchange Control Act (Chapter 22:05).
• The Ministry of Industry and Commerce – together with the Indigenisation and Economic Empowerment Unit, the Minister of Industry and Commerce authorises foreign investors to invest and/or operate in a reserved sector of the economy. The two exercise this function under the Indigenisation and Economic Empowerment Act (Chapter 14:33).
• The Competition and Tariff Commission – it is tasked with approving all mergers and all transactions that have an impact on competition under the Competition Act (Chapter 14:28).
• Zimbabwe Revenue Authority – before any transfer of shares (amongst other property), in respect of which capital gains tax is payable, can occur, the Zimbabwe Revenue Authority has to issue a capital gains tax clearance (where applicable) in terms of the Capital Gains Tax Act (Chapter 23:01).
• Zimbabwe Investment and Development Agency – the Zimbabwe Investment and Development Agency registers all foreign investments in terms of the Zimbabwe Investment and Development Agency Act (Chapter 14:37). This is optional.

In addition to the above, there are also sector-specific regulators depending on the sector under which the M&A falls.

There are some restrictions on foreign investment in Zimbabwe.

The Exchange Control Regulations which provide that exchange control approval is required for any foreign resident to acquire shares in a local entity. In addition, a local entity also requires that exchange control approval incur a foreign obligation.

Apart from the above, there are certain economic sectors that are reserved for indigenous Zimbabweans and a foreign investor can only operate in these spheres with the approval of the Ministry of Industry and Commerce and the Indigenisation and Economic Empowerment Unit. These are:

• agriculture – primary production of food and cash crops;
• transportation – passenger buses, taxis and car-hire services;
• retail and wholesale trade;
• barber shops, hairdressing and beauty salons;
• employment agencies;
• estate agencies;
• valet services;
• grain milling;
• bakeries;
• tobacco grading and packaging;
• tobacco processing;
• advertising agencies;
• milk processing; and
• provision of local arts and craft, and their marketing and distribution.

Also, any controlling interest in a telecommunications company must be held, directly or indirectly, by one or more individuals who are citizens of Zimbabwe and ordinarily resident in Zimbabwe. A controlling interest is:

• the majority of shares in the company;
• shares representing more than half the share capital of the company;
• shares of a value in excess of half the share capital of the company; or
• shares entitling the holders thereof to a majority or preponderance of votes in the affairs of the company.

Further, advance approval must be granted in respect of listed securities for a single foreign investor to purchase up to 15% per counter and for a group of foreign investors to purchase up to 49% per counter.

For one to acquire a significant interest in a financial institution, the approval of the Registrar of Banks is required. 5% of the shares in the company is recognised as a significant interest.

Foreign investors wishing to rely on protection available to them under bilateral agreements between Zimbabwe and the country of origin are required to obtain an investment licence from the Zimbabwe Investment Development Agency.

The primary antitrust law in the Zimbabwean jurisdiction is the Competition Act (Chapter 14:28) which is an Act:

• to promote and maintain competition in the economy of Zimbabwe;
• to establish the Competition and Tariff Commission and to provide for its functions;
• to provide for the prevention and control of restrictive practices, the regulation of mergers, the prevention and control of monopoly situations and the prohibition of unfair trade practices; and
• to provide for matters connected with or incidental to the foregoing.

In terms of Section 34 of the Competition Act, read with the Competition (Notification of Mergers) Regulations, mergers are notifiable where:

• the merging parties’ combined annual turnover in or from Zimbabwe is valued at or more than USD1.2 million; or
• the merging parties’ combined assets in the Zimbabwean party are valued at or more than USD1.2 million.

The annual turnover is calculated in terms of international accounting standards and based on the statement of comprehensive income for the preceding financial year.

Details of the methods of calculation of turnover and assets are provided in the Competition (Notification of Mergers) Regulations, 2020, Statutory Instrument 126 of 2020, read with the Competition (Notification of Mergers) (Amendment) Regulations, 2022 (No 1).

Noteworthy regulations enacted under this Act include:

• The Competition (Notification of Mergers) Regulations, 2020, Statutory Instrument 126 of 2020 and Competition (Notification of Mergers) (Amendment) Regulations, 2022 (No 1) which provide the threshold of a notifiable merger.
• Competition (Advisory Opinion) Regulations, 2020, Statutory Instrument 125 of 2020 pertaining to the non-binding interpretation of provisions of the Act by the Competition and Tariff Commission and provide for how parties can apply to the commission for such opinions, the fees involved and the form that the application should take.
• Competition (Anti-Dumping and Countervailing Duty) (Investigation) Regulations, 2002, Statutory Instrument 266 of 2002 which governs the imposition of countervailing and anti-dumping duties on any “subject” imported into Zimbabwe and the initiation, suspension and termination of countervailing and anti-dumping duty investigations and matters incidental thereto.

Acquirers should be primarily concerned with the Labour Act (Chapter 28:01). Upon acquiring an entity, the acquirer has an obligation to continue the employment of all the employees of the undertaking in question without any adverse variation of their rights. This entails that the employees are automatically transferred together with the undertaking, unless agreed otherwise with the employees. The law does not provide for summary dismissal of employees except for misconduct after conducting a disciplinary hearing. There are also various sectoral collective bargaining agreements (CBAs) which impose obligations on employers.

Currently, there is no overt national security review of acquisitions in Zimbabwe.

Litigation surrounding M&A transactions in Zimbabwe is uncommon. Nonetheless, over the past three years, it seems the most significant court decision related to M&A is the matter of Ariston Holdings Limited v The Competition and Tariff Commission of Zimbabwe SC 83/20 wherein the Supreme Court was called upon to determine whether an entity in which a controlling interest is acquired can be described as a party (to a merger), even if it took no part in the transaction which resulted in the merger; ie, if the shareholder sold a controlling interest to a third party. The Act in Zimbabwe does not define what a “party to a merger” is. If the answer was in the affirmative, the obligation to notify the merger would attach to the party within which the stake was acquired in terms of Section 34A (1) of the Competition Act, as would the consequent penalty for non-notification. After analysing the matter, the Supreme Court held that the party divested of that control is equally liable to notify the merger if that merger met the prescribed thresholds, as is the party who acquired the stake.

Having concluded the matter, the Supreme Court called upon the Legislature to amend the Act to include the definition of “a party to a merger” as was done in the South African Act through The Competition Second Amendment Act, 2000. This would bring clarity to the issue and might remove the need for parties to engage in litigation such as the present one.

Turning to legal developments in the M&A and competition field in general, the following are the most significant.

• (i) Competition (Notification of Mergers) (Amendment) Regulations, 2022 (No 1) – these amend the Competition (Notification of Mergers) Regulations, 2020 (SI 126 of 2020) by providing that the minimum and maximum fee level for notification fees in respect of mergers shall be USD10,000 and USD40,000, respectively, payable in Zimbabwean dollars at the prevailing auction rate of the day. Previously, the maximum and minimum fee levels ZWL800,000 and ZWL100,000, respectively. Furthermore, the regulations also change the threshold for a notifiable merger from ZWL10 million to USD1.2 million (over ZWL37.024 billion). A merger is recognised as notifiable where:
1. the combined annual turnover in or from Zimbabwe is valued at or more than USD1.2 million; or
2. the combined assets in the Zimbabwean party are valued at or more than USD1.2 million.
• (ii) Companies and Other Business Entities (Fees) (Amendment) Regulations, 2023 (No 2), otherwise known as Statutory Instrument 95 of 2023 – these regulations provide for the fees to be paid for various requests or documents filed with the Deeds and Companies Registry. These range from payment of conducting a simple company name search to other things including:
1. registration of companies;
2. alteration of company constitutive documents;
3. filing of financial statements;
4. registration of share increases; and
5. filing of statutorily required resolutions and allotments.

The fees are now pegged in US dollars unlike the prior position wherein the fees were pegged in local currency. This was occasioned by the extreme volatility and erosion in value of the local currency. However, the regulations still give one the option to settle the fees in local currency at the prevailing rate on the date of settlement.

• (iii) Consumer Protection (General) Regulations, 2023 – established in terms of the Consumer Protection Act (Chapter 14:44) and also referred to as Statutory Instrument 124 of 2023, these regulations provide for:
1. additional information pertaining to the accreditation of consumer protection advocacy groups;
2. rules for consumer protection organisations;
3. application processes relating to the registration of consumer protection officers (including their qualifications);
4. dispute resolution mechanisms (including the list of eligible arbitrators); and
5. the creation of a database by the Commission, any consumer advocacy group and protection organisation, as well as any courts, of complaints lodged, amongst other things.
• (iv) Securities and Exchange (Zimbabwe Stock Exchange Listings Requirements) (Amendment) Rules, 2022 (No 1) which changed the listing and other fees.

There have been no noteworthy changes to takeover law in the past 12 months, apart from the introduction of the special capital gains tax on the transfer of a mining title, being a tax on the value of any transaction concluded within or outside Zimbabwe through Section 26 (3) of the Finance Act No 13 of 2023 which provides that:

• (3) there is, hereby chargeable, a special capital gains tax on the transfer of a mining title, being a tax on the value of any transaction concluded within or outside Zimbabwe whereby any mining title:
1. has, within the period of ten years before 1 January 2024, been transferred to an entity which still held it on the 1 January 2024;
• (4) in amplification of subsection (3):

1. the liability to pay the special capital gains tax on the transfer of a mining title of any entity referred to in subsection (3)(a):
1. is not affected by the fact that since 1 January 2024, the mining title that was the subject of the transfer has ceased to subsist due to its cancellation, forfeiture, surrender or extinction for any other reason; and
2. is payable on the latest transaction by which the mining title was transferred to the last entity holding it before 1 January 2024, and if such entity transfers it again at any time after that date, it shall become liable to the special capital gains tax on the transfer of a mining title under subsection (3)(b); and
2. referred to in subsection (3)(b), [it] is not affected by the fact that at any time between the transfer of the mining title that was the subject of the transfer, and the date when payment of the tax became due, the mining title concerned has ceased to subsist due to its cancellation, forfeiture, surrender or extinction for any other reason.

Bidders are generally free to build a stake in a target but there is no requirement to do so before mounting a takeover. However, as per the Companies and Other Business Entities Act (Chapter 24:31), a person who alone or together with any associate acquires or owns more than 20% of the ordinary shares of a public company shall, no later than 15 days from the date that such person acquires such number of shares, send written notice to the company stating the person’s name, the names of the associates, if any, the number of shares of the company belonging to him or her or to each of them (as the case may be), and whether the person intends to acquire a control block.

Additionally, subsection 1 of Section 236 of the aforesaid Act obliges a person who intends, alone or together with one or more associates, to acquire, taking into account the number of shares belonging to the person and the associate(s), a control block, to send written notice to the company stating the person’s intent to acquire a control block of shares. A control block is defined as 35% or more of the total of the ordinary shares of a company and any preference shares which have the right to vote with ordinary shares.

Section 235 (1) of the Companies and Other Business Entities Act (Chapter 24:31) mandates that any person who, or entity that, whether alone or together with another, acquires more than 20% of a target public company, must disclose the said acquisition to the company in question and indicate whether or not they intend to acquire a control block.

Additionally, subsection 1 of Section 236 of the aforesaid Act obliges a person who intends, alone or together with one or more associates, to acquire, taking into account the number of shares belonging to the person and the associate(s), a control block, to send written notice to the company stating the person’s intent to acquire a control block of shares. A control block is defined as 35% or more of the total of the ordinary shares of a company and any preference shares which have the right to vote with ordinary shares.

It should also be noted that every company is instructed under the Act to maintain an accurate and up-to-date register of the beneficial owner(s) of the company “the register of beneficial owners”, and the said register shall be filed with the Registrar of Companies. Any changes to the beneficial ownership information must be filed within seven days of such changes. This information shall be available for inspection by the Financial Intelligence Unit or by other law enforcement agencies.

A companies’ constitutive documents may not stipulate a threshold which is lower than that prescribed by the Act.

In addition to this, a public company in which a control block of shares is sought to be acquired may stop the acquisition of the control block, by a decision of a shareholder meeting within the 30-day notice period, adopted by majority vote of the holders of ordinary shares participating in the meeting, excluding votes of shares held by shareholders who intend to acquire the control block, and excluding votes of shares held by associates who intend to acquire the control block.

In addition, the above-mentioned shareholders are empowered under the Act to make a chamber application to the Magistrates Court having jurisdiction in the requisite area requesting an interdict against the proposed takeover.

Where a person and their associates acquire a control block of a public company, they must, on the date of acquisition, give notice thereof to shareholders in writing and within 60 days of such notice must give further notice in writing to all of the company’s remaining shareholders offering to acquire the company’s ordinary shares belonging to them at a price not less than the weighted average price at which he or she acquired the company’s shares comprising the control block during the last six months preceding the date of acquisition of the control block, except for the case in which a shareholder meeting adopts a decision to waive the rights of shareholders to sell the shares belonging to them.

Dealings in derivatives are permissible under the Securities (Alternative Trading Platform) Rules, 2016, otherwise known as Statutory Instrument 100 of 2016, as read together with the amendment under Statutory Instrument 70 of 2022, the Securities (Alternative Trading Platform) (Amendment) Rules, 2022 (No 3).

In terms of Section 34, read with the Competition (Notification of Mergers) Regulations, mergers are notifiable where:

• the merging parties’ combined annual turnover in or from Zimbabwe is valued at or more than USD1.2 million; or
• the merging parties’ combined assets in the Zimbabwean party are valued at or more than USD1.2 million.

The notification of a merger should be done within 30 days of the conclusion of the merger agreement between the merging parties or the acquisition by any one of the parties to that merger of a controlling interest in another.

Generally, a shareholder is not required to disclose the purpose of acquiring a company. However, the information may be required in certain instances, for example, in terms of Section 15 of the Capital Gains Tax Act (Chapter 23:01), where capital gains tax is not payable on the transfer of specified assets between companies under the same control in the furtherance of a scheme of restructuring or similar arrangement. Thus, they will need to inform the tax regulator that the transfer of the specified assets are being done in furtherance of a scheme of restructuring or similar arrangement for one to benefit under the provision.

When it comes to public companies, a person who intends, alone or together with one or more associates, to acquire a control block of shares of a public company, must, no later than 30 days prior to the date of acquiring the control block, send written notice to the company stating the person’s intent to acquire a control block of shares.

Outside of filing the necessary documents with regulatory authorities, the disclosure of bids by private companies is usually a voluntary exercise. In respect of public companies, the 29th Schedule of the Zimbabwe Stock Exchange, the Securities and Exchange (Zimbabwe Stock Exchange Listings Requirements) Rules, 2019, requires that a preliminary announcement must be issued in the press at the earliest possible moment, not later than 48 hours after the offer, in the event of a takeover bid by a listed or unlisted company, or a takeover bid being received by an issuer and that in this announcement.

Generally, the market practice on timing of disclosure does not differ from the legal requirements when there is a legal requirement to disclose.

It should be noted that the company being acquired is not mandated to extend an option to the prospective acquirer to conduct a due diligence. This right is negotiated between the parties involved.

Due diligence reports differ depending on the transaction in question. Generally, the most common areas include:

• legal (that is, the nature of incorporation of the company, whether its directors are duly established in terms of the law, its physical address, whether its constitutive documents are in order, whether the companies’ annual returns are in order, as well as, a review of its contractual obligations and regulatory and licensing compliance, including exchange control approvals, mining titles, and environmental compliance where applicable; and
• financial and tax (that is, whether the company has audited statements where mandated by law and whether its financial statements are up to date).

The pandemic has not had a significant impact on due diligence processes. The nature of conducting a due diligence has largely remained unaffected with a substantial amount of the process being undertaken online with the benefit of the virtual data room.

Neither standstills nor exclusivity are usually demanded. These are usually negotiated between the parties. The target companies’ boards of directors usually, subject to their duties to act in the best interests of the company, negotiate in good faith and extend a certain level of exclusivity to the offeree for a certain period of time before looking to other prospective offers. This, however, usually depends on the eagerness of the target company to sell and it differs from transaction to transaction.

It is permissible for tender offer terms and conditions to be documented in a definitive agreement. This is, however, not common, as this differs from transaction to transaction.

There is no “set timeframe” within which transactions occur in the Zimbabwean jurisdiction. This differs depending on the nature of the transaction, that is:

• the attitudes of the parties involved; and
• the complexity of the deal:
1. whether it is between private parties or involves a public company;
2. the value of the transaction; and
3. the number of regulatory approvals required.

Regarding steps that the government has taken, there is a proposal to amend the time within which merger approval must be granted from 60 to 90 days of receipt of the merger notification. However, in practice, the Competition and Tariff Commission generally approves transactions within a 60-day period.

The mandatory offer threshold in Zimbabwe is 35% and this is known as the “control block”.

Both cash and shares are common forms of consideration in Zimbabwean transactions, although cash tends to be the most preferred. Common tools used to bridge value gaps between the parties in a deal include requesting proof of availability of funds for a certain specified period in the form of certified bank statements and/or a bank guarantee or surety from an acceptable third party. Funds can also be held in escrow by a trusted third party. Virtually all transactions are now conducted in US dollars and this brings some stability in valuations.

Takeover offers usually contain the following conditions.

• The period during which the offeree shareholders can accept the offer to acquire shares (which may not be less than 30 days from the date of sending the offer to shareholders).
• The minimum number of shareholders who must approve the offer.
• That regulatory approval has or shall be obtained.
• Material adverse change conditions.

When it comes to public companies, regulators do restrict the use of offer conditions. One of the restrictions is that a person who, alone or together with the person’s associate or associates, has acquired a control block of shares of a public company must, on the date of acquisition, give notice thereof to shareholders in writing and within 60 days of such notice must give further notice in writing to all of the remaining company’s shareholders offering to acquire the company’s ordinary shares belonging to them at a price not less than the weighted average price at which he or she acquired the company’s shares comprising the control block during the last six months preceding the date of acquisition of the control block, except for the case when a shareholder meeting adopts a decision to waive the rights of shareholders to sell the shares belonging to them.

In addition to the above, an offer must also contain particulars of the dates on which and the prices at which the shares offered were:

• originally issued by the company; and
• acquired by the person making the offer, or by his or her principal, giving the reasons for any difference between such prices and the prices at which the shares are being offered (Section 114 of COB&EA).

There is no usual minimum acceptance condition for tender offers in Zimbabwe. The minimum acceptance conditions depend on whether the acquirer intends to acquire a controlling stake in the target. According to the Companies Act, a person who exercises ultimate effective control over a legal person, refers to a person who:

• directly or indirectly holds more than 20% of the company’s shares;
• directly or indirectly holds more than 20% of the company’s voting rights;
• directly or indirectly holds the right to appoint or remove a majority of the company’s directors; or
• otherwise exercises or has the right to exercise significant influence or control.

When it comes to public companies, “control block” means 35% or more of the total of the ordinary shares of a company and any preference shares which have the right to vote with ordinary shares.

A business combination can be conditional upon the bidder obtaining financing. It is quite rare for the target shareholders to agree to this condition. Most shareholders require proof of funding or bank guarantees to proceed with the transaction.

A bidder can protect the deal by employing a combination of the following deal security measures.

• Concluding a no-shop agreement, which stops the target from looking around for other buyers.
• Right of first refusal.
• Lock agreement – anything that ties the seller, to keep the transaction going.
• Breakup fees.
• Agreement with the biggest shareholder that it will sell to the bidder.
• Foothold acquisition – acquire something that is critical for the survival of the target business.
• Concluding a Memorandum of Understanding.

If a bidder does not seek 100% ownership of a target, bidders often request board representation in the target entity. Constitutive documents may also be amended to accommodate the bidder’s governance rights. Other rights may be negotiated in the transaction agreements.

Shareholders can vote by proxy in Zimbabwe.

If within 120 days after the date of an offer made to other shareholders after a person alone, and/or with his/her associates, acquires a control block (35% of the public company) and the offer has been accepted by the holders of at least 90% of the target shares, other than any such shares held before the offer by the offeror and its associate or associates:

• the offeror may, within 60 days thereafter, notify the holders of the remaining target shares that the offer has been accepted to that extent and the offeror wishes to acquire all remaining target shares; and
• after giving such notice the offeror shall be entitled and bound to acquire all such remaining shares on the same terms that applied to shares whose holders accepted the original offer.

If an offer to acquire such remaining shares has not been accepted by all such offerees, the offeror may apply to the magistrates’ court having jurisdiction in the area where the takeover is being effected, for an order authorising the offeror to give the notice again. The court shall issue such order if they find that:

• the minimum number of acceptances required have been received;
• the offeror, after making reasonable inquiries, has been unable to trace holders of any of the target shares to whom the notice has not been given; and
• the court is satisfied that it is just and reasonable to make the order having regard, in particular, to the number of holders of target shares who have been traced and notified but who have not accepted the offer.

It is not common to obtain irrevocable commitments to tender or vote by principal shareholders of the target company. Most of the acquisitions in Zimbabwe are not hostile, which follows that the negotiations are usually carried out with the consent of the principal shareholders. Be that as it may, irrevocable commitments can be sought at any time and usually leave room for the principal shareholder to opt out if a better offer is made and the bidder is not willing to match the better offer.

Outside of filing the necessary documents with regulatory authorities, the disclosure of bids by private companies is usually a voluntary exercise. In respect of public companies, the 29th Schedule of the Zimbabwe Stock Exchange, the Securities and Exchange (Zimbabwe Stock Exchange Listings Requirements) Rules, 2019, requires that a preliminary announcement must be issued in the press at the earliest possible moment, not later than 48 hours after the offer, in the event of a takeover bid by a listed or unlisted company, or a takeover bid being received by an issuer and that in this announcement. There is no requirement to disclose the specific details of the bid.

The documents listed in Part XVII of the Zimbabwe Stock Exchange (ZSE), the Securities and Exchange (Zimbabwe Stock Exchange Listings Requirements) Rules, 2019, must be submitted to the ZSE at the times specified in that Part for the issuance of shares in a business combination concerning public companies listed on the ZSE.

This documentation includes all documentation related to:

• acquisitions;
• all announcements other than abridged annual financial statements, interim reports and provisional reports;

• applications for the listing of additional securities or amendments to listings or termination of listings;
• reverse listings;
• capitalisation issues;
• changes of name;
• conversion of securities;
• debenture issues;
• disposals;
• explanatory statements;
• constitutive documents or amendments thereof;
• new classes of securities;
• new listings;
• notices of extraordinary general meetings;
• pyramid companies or changes of control;
• “rescue” operations;
• rights and claw-back offers;
• schemes of arrangement, reorganisation, restructuring or unbundling;
• share incentive or option schemes or amendments thereto;
• “cash company” operations and reverse takeovers;
• standby offers;
• sub-divisions or consolidations of securities;
• takeovers and mergers;
• termination of listings at the issuer’s request;
• transfer of listings;
• trustee deeds or their amendments; or
• any other document bearing the logo of a sponsoring broker.

For transactions between private entities, the requirement to produce financial statements for bidders is usually negotiated between the parties. For transactions involving a public company, these statements must be prepared for purposes of circulating them with the shareholders and they must be in accordance with the standards set in the Companies and Other Business Entities Act (Chapter 24:31).

Two or more public companies or any combination of companies consisting of at least one public company and at least one private company (hereafter called the “merging companies”) may undertake a merger subject to disclosing the following documents:

• a notice of the proposed merger in the gazette and in a daily newspaper circulating in the district in which the registered office of the company is situated, making mention of the names of the merging companies;
• a notice of the provisional contract of merger to the shareholders of each of the merging companies, for which notice shall be compliant with the requirements for a special resolution and shall be accompanied by:
1. a copy of the contract for merger together with an explanation which describes the legal and economic grounds for the merger;
2. any recommendation of the board of directors on the proposed merger and the reasons for the recommendation;
3. a copy of an opinion of an independent financial adviser if such an opinion has been obtained and more specifically if the company is a public company; and
4. the annual financial statements of all the companies which are parties to the merger for the previous three years (or any shorter time of the company’s existence):
1. provided if the latest annual financial statement was, as of a date more than six months before the contract for merger, an audited financial statement for the intervening period ending not less than one month before the shareholder meeting concerned which reflects the financial condition of the company concerned (except that the foregoing shall not apply to any new company which was created to be the surviving company in the merger); and
2. a notice that in the event that the merger is approved, dissenting shareholders are entitled to certain rights referred to as the “dissenting shareholders’ appraisal rights”.

In addition, not later than 14 days after the approval of the merger by the last shareholder meeting to approve it, the merged company or the merging companies, as the case may be, shall: (i) file the contract for merger with the Registrar in the prescribed manner and form and together with the prescribed fee, upon which the merger shall become effective; and (ii) publish notice of the merger in the gazette and in a daily newspaper circulating in the district in which the registered office of the company is situated, making mention of the names of the merging companies.

For both private and public companies, certain documents will also have to be disclosed to regulatory authorities such as the Zimbabwe Revenue Authority for tax assessment purposes and the Competition and Tariff Commission in instances of notifiable mergers. These include:

• the merger agreement(s) and the resolutions thereto;
• a report clearly outlining the effects of the proposed merger on competition;
• copies of annual reports and financial statements of the previous year; and
• any documents relevant to the proposed merger.

All details concerning the transaction and the documentation relating to the transaction may also be disclosed and/or requested. The required details are:

• the names and addresses of the merging enterprises;
• the person authorised to submit the application;
• the person to whom, and the address where, the commission can send correspondence;
• a brief description of the nature of the merger for which authorisation is being sought;
• a brief description of the steps taken to publicise the proposal, if any;
• details of share acquisitions and changes in directorships;
• details of the ownership and control of the merging enterprises before and after the merger;
• details of any enterprise that will cease to exist;
• details of all financial information of the merging entities;
• details of the timing;
• details of the plans and motives;
• details of the market covered by the merging entities;
• details of the market to be covered by the merged entities;
• all the transaction documents; and
• details of any shareholder agreements.

Lastly, for companies listed on the Zimbabwe Stock Exchange, the Securities and Exchange (Zimbabwe Stock Exchange Listings Requirements) Rules, 2019, the Zimbabwe Stock Exchange may require a company to disclose to it, within a period specified by the ZSE, such information at the company’s disposal as the ZSE may determine. It may also require a company to publish or disseminate any further information not specified in the rules in such form and within such period as it considers appropriate.

In respect of mergers and takeovers, an announcement or a cautionary announcement concerning a possible take-over or merger transaction is to be submitted to the ZSE for approval and a copy of the announcement must simultaneously be sent to the applicable regulatory authorities. The detailed requirements relating to takeovers and mergers are provided for in the 29th Schedule of the Listing Rules. The 29th Schedule requires that a preliminary announcement must be issued in the press at the earliest possible moment, not later than 48 hours after the offer, in the event of a takeover bid by a listed or unlisted company, or a takeover bid being received by an issuer, and that in this announcement the following information should be included:

• name of company or party making the bid;
• name of offeree company;
• price or method of payment;
• percentage of shares for which the offer is being made; and
• date of expiry of offer.

The principal directors’ duties in a business combination are prescribed by both the common law and the statute. In a business combination, the directors not only owe their duties to shareholders but to all stakeholders of the company.

Section 195 (4) and (5) of the Companies and Other Business Entities Act (Chapter 24:31) provides that each and every director, in discharging their duties, must exercise independent judgment and must act within the powers of the company in a way that he or she considers, in good faith, to promote the success of the company for the benefit of shareholders as a whole. In order to discharge this duty, in a business combination, every director must have regard to, among other things:

• the long-term consequences of any decision;
• the interests of the company’s employees;
• the need to foster the company’s relationships with suppliers, customers and others;
• the impact of the company’s operations on the community and the environment;
• the desirability of the company maintaining a reputation for high standards of business conduct; and
• the need to act fairly between shareholders of the company.

It is common for boards of directors to establish special or ad hoc committees in business combinations. These committees are usually used to develop ideas, solve problems, make decisions, or perform various tasks. For example, in a business combination, an ad hoc committee made up of legal expects can be set up to look at the legality of the combination. These ad hoc committees are sometimes used when some directors have a conflict of interest. However, even without the use of ad hoc committees, directors who have a conflict are required by the law to disclose their interest and to abstain from voting on an issue on which they conflict.

Although not specifically in takeover situations, Zimbabwean courts have generally deferred to the judgment of the board of directors in matters concerning company affairs. The courts have generally maintained that there is need for them to generally stay clear of the internal affairs of companies. Examples of this are found in the cases of Stalap Investments (Pvt) Ltd & three others v Willoughby’s Investments (Pvt) Ltd & two others (HH 726-19, HC 11164/17) [2019] ZWHHC 726-19 (07 November 2019) and Matanda v CMC Packaging (Pvt) Ltd & Ors (HH 113 of 2003) [2003] ZWHHC 113 (19 August 2003).

Directors often rely on information, opinions, reports or statements (including financial statements) of independent auditors or legal practitioners or of experts in the industry of the target entity as well as the opinions, statements and/or information of the employees of the registered business entity who the person reasonably believes are reliable and competent to issue such information, opinions, reports or statements.

In addition, Section 230 of the Companies and Other Business Entities Act (Chapter 24:31) states that the board of directors of a private company may, and the board of a public company must, obtain an opinion of an independent professional financial adviser on the terms of the contract for merger and the proposed merger, in which the adviser shall state: (i) the adviser’s analysis and an explanation of all the terms of the contract for the merger, including the method or methods used to arrive at any proposed share exchange ratio and the values arrived at using each method; and (ii) an opinion as to the fairness of the merger to the shareholders and, if there is more than one type or class of shareholders, to each type or class of shareholders and creditors of the merging companies.

The opinion stated above must accompany, where one public company is a party to merger proceedings, the notice of the provisional contract of merger to the shareholders of each of the merging companies.

Conflicts of interest of directors, managers, shareholders or advisers have been the subject of scrutiny in this jurisdiction. In addition to scrutiny by the courts, the legislature has taken preventive measures by enacting Sections 56, 57 and 58 of the Companies and Other Business Entities Act (Chapter 24:31).

In terms of Section 57 of the Act, where a director has a personal financial interest in respect of a matter to be considered at a meeting of the board of the company, or knows that an associate has a personal financial interest in the matter, then he or she:

• must disclose the interest and its general nature before the matter is considered at the meeting;
• must disclose to the meeting any material information relating to the matter, and known to the person;
• may disclose any observations or pertinent insights relating to the matter if requested to do so by the other persons;
• if present at the meeting, must leave the meeting immediately after making any disclosure contemplated in paragraph (b) or (c);
• must not take part in the consideration of the matter, except to the extent contemplated in paragraphs (b) and (c); and
• while absent from the meeting in terms of this subsection:
1. is to be regarded as being present at the meeting for the purpose of determining whether sufficient directors are present to constitute the meeting;
2. is not to be regarded as being present at the meeting for the purpose of determining whether a resolution has sufficient support to be adopted; and
3. must not execute any document on behalf of the registered business entity in relation to the matter unless specifically requested or directed to do so by the board or meeting of members.

Hostile takeovers are currently not precluded in the Zimbabwean jurisdiction, although they are not common as a form of M&A. Most transactions tend to be by consent of both parties.

Subject to acting in accordance with their common law and statutory duties, there is no law precluding directors from using defensive measures in Zimbabwe.

Hostile takeovers are not prevalent in the Zimbabwean market. Although defensive mechanisms remain available, they are rarely used. Some of the common defensive mechanisms that can be employed by the board are:

• clauses in the constitutional documents of the target – some constitutional documents of a company require a special resolution (vote by two-thirds majority) to confirm a takeover and/or require any person making an offer to acquire the target to pay a fair price for the shares, with a fair price being the highest price recently paid for the shares in the company; and

• active counteractions after receiving an offer – after receiving an offer, the board can take active steps to avoid a successful hostile takeover. These involve:

1. rallying the shareholders against accepting the offer;
2. media campaigns which highlight the pitfalls of the potential takeover;
3. buying shares of the attacking company and taking control of it;
4. selling or merging with another investor;
5. restructuring the assets of the company in a way that makes it unattractive to the attacking company; and
6. turning a hostile takeover into a merger.

In employing defensive measures against a hostile takeover, directors must always act in good faith, in the best interests of the company, and with the care, skill, and attention that a diligent business-person would exercise in the same circumstances. In other words, directors must discharge all their common law and statutory duties to the company. They cannot put their interests above all else.

Directors can just say no to takeover offers and take actions that prevent a business combination. This is, however, subject to them disclosing the offer(s) to the shareholders for their consideration. If the shareholders are not interested in the offer, the directors can then proceed to just say no.

Outside litigation related to competition/merger control, litigation is not common in connection with M&A deals in the Zimbabwean jurisdiction.

Litigation in M&A is not common in Zimbabwe apart from isolated cases.

Information relating to this is currently not publicly available.

Shareholder activism is not a common feature in Zimbabwe. To the extent that activism occurs, the typical aims and focus of activist shareholders include:

• to improve governance and accountability of the board (including encouraging compliance with the law);
• to unlock inefficiencies;
• to increase and promote value creation; or
• to advocate for social and environmental causes and, in some instances, political causes.

Shareholder activism is not common in Zimbabwe. To the extent that activism occurs, activist shareholders tend to lean towards transactions that unlock or promote value creation for themselves and the company.

Zimbabwe does not have any significant interference from shareholders in the completion of announced transactions as activism is not a common feature.