Incorporated Companies Registered Under the Companies Act No 10 of 2017

Private company limited by shares

This company is legally distinct from its shareholders and is the most common form of corporate body used in Zambia. In the event of the winding up of the company, shareholder liability is limited to the amount unpaid on the shares held by the shareholders.

Private company limited by guarantee

This type of company is legally distinct from its members and is commonly used for non-profit organisations. In the event of the winding up of the company, member liability is limited to the amount guaranteed by each member.

Unlimited private company

This type of company is legally distinct from its shareholders but is uncommon as shareholders are liable to contribute without limitation of liability in the event that the company is wound up.

Public limited company

This type of company is legally distinct from its shareholders and is commonly used for companies whose shares are listed and traded on a stock exchange. Shareholder liability upon the winding up of the company is limited to the amount unpaid on the shares held by the shareholders.

Unincorporated Businesses Registered Under the Registration of Business Names Act No 16 of 2011

Partnership

This is a business conducted by two or more individuals (not exceeding 20 individuals) who share a common view of making profit. A partnership does not have a separate legal personality that is distinct from its partners, who are jointly liable for all debts and obligations incurred by the firm. It is mostly used for law firms and accounting firms due to statutory requirements.

The principal sources of corporate governance requirements for companies in Zambia are as follows:

• the Companies Act 2017 as amended is applicable to all companies incorporated thereunder;
• the Securities Act 2016 as amended is applicable to all public companies whose securities are registered with the Securities and Exchange Commission;
• the Harmonised Listings Requirements of the Lusaka Stock Exchange 2012 and the Corporate Governance Code for Listed and Quoted Companies, 2005 are applicable to public companies that are listed on the Lusaka Securities Exchange (LuSE);
• the Banking and Financial Services Act 2017 as amended and the Banking and Financial Services Corporate Governance Directives 2016 as amended are applicable to financial service providers that are regulated by the Bank of Zambia;
• the Insurance Act 2021 and the Insurance Corporate Governance Guidelines, 2024 are applicable to insurance service providers that are regulated by the Pensions and Insurance Authority; and
• the Corporate Governance Guidelines for the Pensions Industry, 2021 are applicable to pension services providers that are regulated by the Pensions and Insurance Authority.

The corporate governance requirements set out under Part VII of the Companies Act are mandatory and apply to all companies incorporated under the Companies Act, including companies with shares that are publicly traded. These requirements include the following.

• A company must appoint a qualified company secretary to be responsible for providing guidance to the board of directors on their duties, responsibilities and powers.
• Shareholders must appoint a board of directors to manage the affairs of the company. For a company with shares that are publicly traded, the board of directors must comprise no fewer than three directors.
• Directors have general and fiduciary duties, which include:
1. the duty to exercise powers for the purpose for which such powers are conferred by the provisions of the Companies Act and articles of association of the company;
2. the duty to promote the success of the company and exercise independent judgement;
3. the duty to avoid a situation in which that director has, or is likely to have, a direct or indirect interest that conflicts, or is likely to conflict, with the interests of the company and the disclosure of interest requirements;
4. the duty to act in good faith with a degree of care, diligence and skill;
5. the duty to prevent the business of the company from being conducted in a manner likely to create substantial risk of loss to the shareholders or creditors of the company; and
6. the duty to disclose information about the directors' remuneration in the financial statements of the company.
• Directors must adhere to the LuSE Corporate Governance Code, which requires, amongst other things, the board to establish committees, have board evaluations, comprise majority non-executive directors and hold board meetings at least once a quarter.

Corporates are moving towards green/sustainability practices, increased anti-money laundering oversight and enhanced data protection.

The key issue is that Zambia does not yet have operational legislation specifically establishing ESG reporting requirements for companies in Zambia. The Green Economy and Climate Change Act, 2024 introduces reporting requirements for companies that emit greenhouse gases, and other ESG requirements for carbon project developers. However, the Act is not yet operational.

Various pieces of legislation include ESG reporting requirements for companies, including the following.

• Section 29 (1) of the Environmental Management Act, 2011 (EMA) requires companies to seek approval from the Zambia Environmental Management Authority (ZEMA) before undertaking any project that may have an effect on the environment.
• Section 35 (1) of the EMA requires companies that discharge, cause or permit the discharge of a contaminant or pollutant into the environment in a manner that is unlawful or that has, or is likely to have, an adverse effect on the environment to immediately report to ZEMA.
• The Mines and Minerals Development Act, 2015 (the “Mines Act”) contains various provisions requiring companies engaged in mining, exploration or mineral processing activities to submit reports to the Director of the Mining Cadastre on their operations and the protection of the environment, as may be prescribed or required by the Director of the Mining Cadastre.
• Section 4 of the Mines Act establishes general social principles for companies engaged in mining and minerals development. In particular, Section 4 (f) requires companies to promote the development of local communities in areas surrounding the mining area based on the prioritisation of community needs, health and safety.

Shareholders

Shareholders are natural persons or body corporates whose names are entered in the share register as the holder of one or more shares in a company. Shareholders are not involved in the day-to-day management of the company, but rather make decisions regarding the business of the company, its governance structure, and shareholder reserved matters that are prescribed in the Companies Act, the articles of association of the company or any shareholders agreement.

Board of Directors

The board of directors is made up of natural persons appointed or nominated as directors by the shareholders of the company, in a number that is not less than the required quorum acting together as a board. The business of a company is managed by and under the direction and supervision of the board of directors, who are involved in the day-to-day management and affairs of a company.

Company Secretary

The Company Secretary is a person or body corporate appointed by the board of directors to ensure that the company adheres to statutory and regulatory requirements.

Shareholders

Subject to the number of shares held, a share in the company gives shareholders the right to vote on the following matters reserved for shareholders:

• the appointment or removal of a director or auditor;
• the adoption and alteration of the articles;
• approving an amalgamation of the company;
• putting the company into liquidation;
• conversion of the company or a change of name;
• a share capital alteration or reduction;
• alteration of any shareholder rights; and
• approval of the following actions before the directors can undertake any of them:
1. a sale, lease or otherwise disposal of the whole, or substantially the whole, of the undertaking or assets of the company;        
2. the issue and allotment of new or unissued shares in the company;
3. the creation or grant of any rights or options entitling the holders to acquire shares of any class in the company;
4. entering into a transaction that has or is likely to have the effect of the company acquiring rights or interests or incurring obligations or liabilities, including contingent liabilities, the value of which is the value of the company’s assets before the transaction;
5. any payment, provision, benefit, remuneration, assistance or other distribution proposed by and payable to the directors;
6. with respect to private companies, giving financial assistance; or
7. with respect to companies listed on the LuSE, undertaking any transactions (including related party transactions) above a specified threshold.

Board of Directors

The board of directors is primarily responsible for the management of the company in its ordinary course of business, and has the right to exercise any power not specifically reserved for the shareholders. The board of directors derives its decision-making powers from provisions of the Companies Act, the articles of association of the company and any other constitutional document of the company.

The board of directors have the authority to do the following, amongst other things:

• designate director(s) of the company to sign, draw, accept, endorse or otherwise execute all cheques, promissory notes, bankers’ drafts, bills of exchange and other negotiable instruments, including receipts for money paid to the company, for and on behalf of the company;
• borrow money;
• charge any property or business of the company;
• issue debentures or give any other security for a debt, liability or obligation of the company or of any other person on behalf of the company;
• authorise the payment of dividends;
• appoint the company secretary; and
• determine the consideration payable in respect of a company’s shares.

Company Secretary

The company secretary generally performs an administrative role and does not have any decision-making powers in relation to the business of the company.

Shareholders

Annual general meeting (AGM)

A company is required to hold an AGM of the shareholders of the company, within 90 days after the end of each financial year of the company, at which the following decisions are made by shareholders:

• consideration and approval of the financial statements and annual report;
• the declaration of a dividend;
• the consideration of the directors’ and auditors’ reports;
• the election of directors in place of those retiring;
• the fixing of the remuneration of the directors; and
• the appointment of the auditors and the fixing of their remuneration.

A private company may dispense with the holding of an AGM, except in the first financial year, if all the shareholders entitled to attend and vote at the AGM agree in writing, before the end of the financial year, and notify the Registrar of Companies in the prescribed form.

Extraordinary general meeting (EGM)

A company may convene an EGM to address urgent matters affecting the company at which ordinary or special resolutions may be passed by a majority of not less than 50% or 75%, respectively, of the votes of the shareholders entitled to vote in person or by proxy at a meeting duly convened and held.

Procedure for convening a meeting of the company

Notice and attendance of meetings

A notice of a shareholder meeting must be given to a person entitled to receive notice of the meeting in accordance with the minimum periods set out below, unless the articles of association of the company provide for longer periods not exceeding 30 days, and not more than 50 days before the meeting is to be held:

• 21 days, in the case of an AGM;
• 21 days, in the case of a meeting at which a special resolution will be proposed; or
• 14 days, in any other case.

The following persons are entitled to receive notice of a meeting of the company:

• a shareholder who has the right to vote at such meeting;
• a person on whom the ownership of a share devolves by reason of that person being a legal personal representative, receiver or assignee in bankruptcy of a shareholder, and of whom the company has received notice;
• a director;
• an auditor of the company; or
• a person entitled under the articles to receive such notice.

Where a meeting of the company is convened with a shorter notice period than that required under the Companies Act or the articles of association of the company, full notice must be deemed to have been given if it is so agreed by:

• all the shareholders entitled to attend and vote at the meeting, in the case of a meeting convened as the AGM;
• a majority in number of the shareholders having a right to attend the meeting and vote on the resolution concerned, being a majority holding not less than 95% of the total of such voting rights, in the case of a meeting convened as a meeting at which a special resolution will be moved, and in relation to that resolution; and
• a majority in number of the shareholders having a right to attend and vote at the meeting, being a majority holding not less than 95% of the total of such voting rights, in the case of any other meeting.

Place of meetings

A meeting of the shareholders is required to be held in Zambia unless the articles of association of the company provide otherwise or all the shareholders entitled to vote at that meeting agree in writing to hold the meeting at a place outside Zambia.

Conduct of meetings and voting

A shareholder in a company has one vote for each share and whole unit of stock that the shareholder is registered as holding. A shareholder entitled to attend and vote at a meeting of the company is entitled to appoint another person as a proxy in writing, in the prescribed form.

Quorum

The quorum for a meeting of a company is two shareholders of the company, holding not less than one third of the total voting rights in relation to the meeting, unless the articles of association or an order of court provides otherwise.

Written resolutions of the company

Shareholders may pass a resolution in writing, without holding a meeting, and such resolution will be valid and have the same effect as if it had been passed at a meeting of the appropriate kind, duly convened, held and conducted if the written resolution is:

• signed by each shareholder who is entitled to vote on the resolution, if it was moved at a meeting of the company or by the shareholder’s authorised representative; and
• passed when signed by the last shareholder, or shareholder’s representative.

Types of shareholder resolutions

Ordinary resolution

Shareholders may pass an ordinary resolution at an AGM or EGM, or by way of written resolution, which is typically required for matters affecting the company that require shareholder approval as the Companies Act or articles of association of the company may require. An ordinary resolution is passed by more than half of the votes cast by the shareholders entitled to vote in person or by proxy at a meeting duly convened and held.

Special resolution

Shareholders may pass a special resolution at an AGM or EGM, or by way of written resolution, which is typically required for significant matters affecting the company as the Companies Act or articles may require. A special resolution is passed by not less than 75% of the votes of the shareholders of the company who are entitled to vote in person or by proxy at a meeting duly convened and held at which the resolution is moved as a special resolution, or such higher majority percentage as the articles of association may require.

Within 21 days after the passing of a special resolution, a company is required to lodge a certified copy of the resolution with the Registrar of Companies.

Directors

Directors act collectively as a board by exercising all such powers of the company as are not required by the Companies Act, articles of association or any other constitutional documents of the company to be exercised by the shareholders. The board acts as a collective. In this regard, the board of directors of a company may pass resolutions to formalise its decisions.

The conduct of director meetings or the passing of resolutions depends on the provisions of the articles of association of the company. Board resolutions are typically passed by simple majority of the board of directors at a board meeting duly convened, or alternatively by round robin written resolutions, which must be signed by all the directors unless the articles of association allow for majority signed resolutions. The articles of association or other constitutional documents of the company may prescribe specific thresholds and quorum for meetings of the board of directors.

A private company must have a minimum of two directors, while a public company must have a minimum of three directors. However, the articles of association of the company may specify a different structure for the board of directors, provided that such number does not fall below the prescribed minimums.

At least half of the directors on the board must be resident in Zambia.

The Companies Act provides for executive and non-executive directors. Executive directors are involved in the day-to-day management of the company and also have a contract of employment with the company, whilst non-executive directors are not involved in the day-to-day management of the company and are not employed by the company.

Companies in Zambia often have the following executive directors on the board:

• a Chief Executive Officer (CEO) or Managing Director (MD), who oversees the day-to-day operations of the company and provides guidance to employees;
• a Chief Operations Officer (COO), who oversees the operations of the company and assists the CEO with operational matters; and
• a Chief Financial Officer (CFO), who oversees the financial decisions of the company.

A private company must have no fewer than two directors, while a public company must have no fewer than three directors. However, the articles of association of a company may specify a higher number than the prescribed statutory minimums.

With respect to companies listed on the LuSE, the board must comprise majority non-executive directors. Furthermore, the chairperson of the board and the chief executive officer must be different people.

With respect to financial service providers, the board must comprise majority non-executive directors, the majority of which should be independent (ie, directors that are not nominated by or affiliated with a shareholder with control or directors whose independence is not impaired by some other factor).

Appointment of Directors

A director is appointed by the shareholders, and in some cases by the directors. In terms of Section 85 (1) of the Companies Act, the shareholders of a company may appoint a person as a director by ordinary resolution or in such manner as the articles of association so provide.

The board of directors has power under the Companies Act to appoint additional directors where there are fewer directors than the minimum number prescribed in the Companies Act, subject to ratification at the next general meeting of the company. The articles of association of the company may also give the board power to appoint directors in order to fill a vacancy or for any reason, provided that the maximum number of directors, if any, is not exceeded.

Removal of Directors

Directors may be removed from office by resignation or if removed by the shareholders. Section 98 (1) of the Companies Act provides that a company may remove a director from office by ordinary resolution of the shareholders.

A shareholder must give the company secretary notice of intention to move a resolution to remove a director in the prescribed manner and form, no less than 28 days before the general meeting of the company.

Upon receipt of a notice of intention to remove a director, the company secretary must send a copy of the notice to the director concerned. That director is entitled to:

• be heard at the meeting;
• submit a written statement to the company regarding the notice of intention to remove the director; and
• require that the director’s written statement be read at the meeting.

A notice of the general meeting at which a notice of intention to remove a director is to be considered must be sent to every person entitled to receive the notice, and must be accompanied by a copy of the director’s written statement. However, the company will not be obliged to send or circulate the director’s statement if it is received by the company fewer than seven days before the meeting.

Following the removal of a director, the company is required to file a notice of change of directorship with the Registrar of Companies in the prescribed form, notifying the Registrar of a change in the directorship of the company, whether as a result of a director ceasing to hold office or the appointment of a new director, or both. The notice of change of director must be lodged with the Registrar of Companies within 21 days of the change occurring, in the case of an appointment or resignation of a director.

Qualifications of Directors

The following do not qualify for appointment as director:

• a body corporate;
• a person who is under the age of 18, or of unsound mind, or an undischarged bankrupt;
• a person disqualified under the articles;
• a person disqualified by an order of the court obtained on grounds that the person breached the duties of a director or committed an offence under the Companies Act; or
• with respect to financial service providers:
1. any person who has been a director or senior officer in a company that has been liquidated or declared insolvent;
2. any person who has been convicted of offences involving fraud, dishonesty or breach of trust;
3. any person who has been suspended or removed from office in accordance with the Banking and Financial Services Act; or
4. any person who does not meet Bank of Zambia’s fit and proper test requirements.

Independent Judgement

Section 106 (c) of the Companies Act requires directors to exercise independent judgement when making decisions on behalf of the company. This means that directors must exercise their powers independently without subordinating their powers to the will of others or otherwise.

Conflicts of Interest

Section 107 (1) of the Companies Act requires directors to avoid a situation in which that director has or is likely to have a direct or indirect interest that conflicts, or is likely to conflict, with the interests of the company in relation to the exploitation of any property, information or opportunity, whether or not the company takes advantage of the property, information or opportunity. However, the failure by a director to comply with the disclosure requirements may not affect the validity of a transaction entered into by the company or the director if the other party was not aware of the director’s interest. In addition, where a director with an interest in a matter votes on it, the vote is null and void.

For purposes of the Companies Act, a director has interest in a transaction in which the company is a party if the director:

• is a party to, or is likely to derive a material financial benefit from, the transaction;
• has a material financial interest in the transaction, or in another party to the transaction;
• is the parent, child or spouse of another party to the transaction, or of a person who is likely to derive a material financial benefit from the transaction; or
• is otherwise directly or indirectly materially interested in the transaction.

If interested in a transaction or proposed transaction with the company, a director is required to:

• cause to be entered in the interests register and disclose to the board:
1. the nature and monetary value of the director’s interest where the penalty value of that interest is quantifiable; or
2. where the monetary value of the director’s interest cannot be quantified, the nature and extent of that interest; and
• not vote on a matter relating to the transaction.

A transaction entered into by a company in which a director has an interest known to the other party may be avoided by the company within six months after the transaction is disclosed to all the shareholders. However, a transaction must not be avoided where the company receives fair value for it. The question as to whether a company receives fair value under a transaction is determined on the basis of the information known to the company and to the interested director at the time the transaction is entered into. The avoidance of such a transaction must not affect a person’s title to, or interest in, property which that person has acquired:

• from a person other than the company;
• for an appropriate price or fair value; or
• without actual knowledge of the circumstances of the transaction under which the person acquired the property from the company.

A director who has an interest in any shares issued by the company is also required to:

• disclose the interest to the board of directors; and
• ensure that the particulars disclosed to the board are entered in the interests register of the company.

A director who acquires or disposes of an interest in shares issued by the company is required to disclose the following to the board of directors, within seven days after the acquisition or disposal:

• the number and class of shares in which the interest has been acquired or disposed of, as the case may be;
• the nature of the interest;
• the consideration paid or received; and
• the date of the acquisition or disposal.

Directors

In Zambia, “officers” include directors, company secretaries, executive officers and local directors of a company. The principal legal duties of a director are to:

• exercise that director’s power:
1. in accordance with the provisions of the Companies Act and to act within the articles of association of the company; and
2. for the purpose for which the power is conferred;
• promote the company to ensure its success;
• exercise independent judgement; and
• disclose information about that director’s remuneration in the financial statements of the company.

The Companies Act also imposes the following fiduciary duties on directors:

• the duty to exercise powers for the purpose for which such powers are conferred by the provisions of the Companies Act and articles of association of the company;
• the duty to promote the success of the company and exercise independent judgement;
• the duty to avoid a situation in which that director has, or is likely to have, a direct or indirect interest that conflicts, or is likely to conflict, with the interests of the company and the disclosure of interest requirements;
• the duty not to accept any benefit from a third party conferred by reason of being a director or doing or not doing anything as a director in the company;
• the duty to act in good faith with a degree of care, diligence and skill;
• the duty to prevent the business of the company from being conducted in a manner that is likely to create substantial risk of loss to the shareholders or creditors of the company; and
• the duty to disclose information about the directors' remuneration in the financial statements of the company.

Section 198 (1) of the Companies Act provides that the board of directors has a duty to take reasonable steps to ensure that the share and beneficial ownership register is properly kept and that matters to be recorded therein are promptly entered on it.

Company Secretary

The company secretary is responsible for:

• providing the directors, collectively and individually, with guidance as to their duties, responsibilities and powers;
• informing the board of directors of:
1. legislation relevant to or affecting the meetings of shareholders and the board;
2. reports relating to the operations of the company; and
3. the submission of documents to relevant authorities, as required by statute, as well as the implications of failure to comply with such requirements;
• ensuring that minutes of the shareholders’ meetings and of the meetings of the board of directors are properly recorded, and registers are properly maintained;
• ensuring that the company maintains and updates information on the beneficial ownership of all the shares of the company and their associated voting rights;
• ensuring that the company is in compliance with the provisions of the Companies Act in relation to the lodging of documents with the Registrar of Companies; and
• bringing to the attention of the board of directors any failure on the part of the company or a director to comply with the articles of association or the Companies Act.

Directors owe their duties to the company, to the shareholders and to creditors of the company, with the following examples.

• With respect to the company, directors are required to exercise independent judgement in their decision making regarding the business of the company, to act in the company’s best interests and to take necessary measures to ensure that they prevent or manage any attendant risks to the company.
• With respect to the company and shareholders, directors are required to ensure that the consideration on the issue of shares is fair and reasonable to the company and all the shareholders.
• With respect to the shareholders and creditors, directors are required to ensure that they do not cause, allow or agree for the business of the company to be conducted in a manner that is likely to create a substantial risk of serious loss to the shareholders or any creditors of the business.

Section 111 (1) of the Companies Act provides that a contract or other transaction entered into between a director and the company in breach of any duty of the director as specified in the Companies Act may be rescinded by the company.

Section 120 of the Companies Act provides that a director of a company who wilfully commits a breach of any duty or responsibility specified in the Companies Act must:

• be liable to compensate the company for any loss that it suffers as a result of the breach,
• be removed from the board of directors in accordance with the Companies Act; and
• be liable to account to the company for any profit made as a result of the breach.

Section 330 of the Companies Act allows the company, a director or shareholder, an entitled person or the Registrar to apply for an injunction from the High Court of Zambia restraining the company or a director from engaging in conduct that contravenes or would contravene the articles of association or the provisions of the Companies Act. Please note that the application cannot be made in relation to conduct or a course of conduct that has already been completed.

Section 331 of the Companies Act allows a shareholder, with the permission of the court, to bring a derivative action against a director, on behalf of and in the name of the company.

Section 335 (1) of the Companies Act allows a shareholder or former shareholder of a company to bring an action against a director for breach of a duty owed to the shareholder or former shareholder. However, an action may not be brought against a director to recover any loss in the form of a reduction in the value of shares in a company or a failure of the shares to increase in value by reason only of a loss suffered, or a gain forgone, by the company.

Breaches of Corporate Governance Requirements

Section 107 of the Companies Act provides that a director is required to avoid a situation in which that director has or is likely to have a direct or indirect interest that conflicts or is likely to conflict with the interests of the company in relation to the exploitation of any property, information or opportunity, whether or not the company takes advantage of the property, information or opportunity. The duty to avoid a conflict of interest must not be considered to have been infringed if the situation cannot reasonably be regarded as being likely to give rise to a conflict of interest, nor if the matter has been authorised by the board of directors.

Section 109 of the Companies Act provides that a director must not accept a benefit from a third party that is conferred by reason of being a director of the company or doing or not doing anything as a director of the company. The duty not to accept third-party benefits will not be considered to have been infringed if the acceptance of the benefit does not give rise to a conflict of interest. Similarly, benefits received by a director from a person by whom that director’s services as a director or otherwise are provided to the company will not be regarded as having been conferred by a third party.

Section 110 of the Companies Act provides that a director who is interested in a transaction or proposed transaction with the company must:

• cause to be entered in the interests register and disclose to the board:
1. the nature and monetary value of the director’s interest where the penalty value of that interest is quantifiable; or
2. where the monetary value of the director’s interest cannot be quantified, the nature and extent of that interest; and
• not vote on a matter relating to the transaction.

Section 111 of the Companies Act provides that a transaction entered into by a company in which a director has an interest known to the other party may be avoided by the company within six months after the transaction is disclosed to all the shareholders. However, a transaction must not be avoided where the company receives fair value for it. The question as to whether a company receives fair value under a transaction in which a director has a known interest must be determined on the basis of the information known to the company and to the interested director at the time the transaction is entered into.

Section 113 of the Companies Act provides that a director must not, except on written approval of the board or in circumstances authorised by the articles of association of the company, disclose to any person or use or act on information that is in the director's possession by virtue of the director’s position as a director or employee of the company and to which the director would not otherwise have had access.

Section 116 of the Companies Act provides that a director who acquires or disposes of shares or debentures in contravention of the restrictions imposed on directors by the Companies Act in circumstances where a director has information that is material to an assessment of the value of shares or debentures issued by the company or subsidiary that would not be available to that director must be liable to the person who, or from whom, the shares or debentures were acquired or disposed to, for the amount by which the consideration received by the director exceeds the fair value of the shares or debentures.

Section 121 of the Companies Act provides that a decision made by an executive officer of a company must, subject to the requirements as to disclosure contained in the Companies Act, be considered valid if:

• the decision is made in good faith for a proper purpose;
• the director does not have a personal interest in the decision;
• the company is appropriately informed of the subject matter of the decision; and
• the officer reasonably believes that the decision is in the best interests of the company.

Limitation of Liability

Section 122 of the Companies Act provides that, where a company establishes that a decision made by an executive officer is valid, the officer must be indemnified for that decision, but where the company establishes that the decision was not valid, the director must be held personally liable for any obligation or liability that arises as a result of that decision.

Other limitation of liability provisions applicable to directors will normally be provided for in the articles of association.

Under Section 118 of the Companies Act, the remuneration of directors is proposed by the board of directors but approved by ordinary resolution of the shareholders of the company.

Section 119 of the Companies Act provides that shareholders may, by special resolution, approve payments, provisions and benefits proposed and payable to directors. However, such approval may only be made where there are reasonable grounds to believe that the company will be able to satisfy the solvency test after the distribution.

The Companies Act does not prescribe specific consequences for failing to comply with the approval requirements regarding payments to directors. In this regard, the general penalty in Section 373 of the Companies Act applies, which provides that a person who contravenes any provision of the Companies Act where no specific penalty has been provided is liable, on conviction, to a fine not exceeding ZMW160,000 (approximately USD5,570) or to imprisonment for a term not exceeding four years, or both, and, if the person is a foreigner, to the variation or revocation of that person’s immigration permit.

Section 249 of the Companies Act provides that the annual financial statements of a company must state the total amount of the following in respect of the financial year concerned.

• Emoluments paid to or receivable by the directors for their services – the amount shown must include emoluments paid to or receivable by a person in respect of that person’s services as director or director of its subsidiary, or in connection with the management of the affairs of the company or a subsidiary.
• Any compensation paid to or receivable by the directors or past directors in respect of loss of office. The amount shown must include sums paid to or receivable by a director or past director by way of compensation for loss of office as director or in connection with the management of the affairs of the company or its subsidiary, where the loss arose from the loss of office as director.

Section 251 (1) of the Companies Act further provides that a person who is, or has been at any time within the previous five years, a director or officer of a company must, on the request of the company, provide the company with such information relating to the person as may be necessary for the purpose of annual financial statements, including amounts paid to directors and annual financial statements that include particulars of loans to officers.

With respect to companies listed on the LuSE, there is a requirement for the board of directors to provide full disclosure of director remuneration, giving details of earnings, share options and all other benefits.

The relationship between a company and its shareholders is proprietary in nature and denotes ownership. In this regard, shareholders are entitled to a share of the profits in the company in accordance with their shareholding. However, as the company is a separate legal entity, the shareholders are not entitled to the assets of a company other than upon the liquidation of the company.

The relationship between a company and its shareholders is governed by the articles of association of a company, which represents a contract between the company and the shareholders, and also between the shareholders amongst themselves. A shareholder’s agreement, if any, will also govern the relationship between the company and the shareholders, and between the shareholders amongst themselves.

Shareholders are not entitled to manage the day-to day-operations of the company; instead, they are entitled to exercise powers expressly reserved for shareholders. Accordingly, in terms of the Companies Act, shareholders are not entitled to manage the affairs of the company and in terms of Section 125 (1)(b)(ii) of the Companies Act may be subject to liability that arises by reason of the shareholder exercising powers or carrying out the duties of a director, as provided in the Companies Act.

A shareholder’s involvement in the management of a company is therefore limited to the powers reserved for shareholders under the Companies Act or articles of association, such as the power to:

• appoint directors and auditors;
• approve the alteration of the share capital, articles, name or type of company; and
• approve the reduction of share capital, the issue and allotment of shares, the issuing of rights or options, the selling or disposing of the whole or a substantial portion of the assets of the company, an amalgamation with another entity or entering into transactions whose value exceeds the value of the company.

Furthermore, the Supreme Court decision in the case of John Paul Mwila Kasengele and Others v Zambia National Commercial Bank Limited SCZ Judgment No 11 of 2000 requires directors to act according to the direction and wishes of the shareholders, and provides that shareholders enjoy over-riding authority over company affairs as a matter of right, even over the wishes of the board of directors and managers.

Notice and Attendance of Meetings

A company is required to hold an AGM of the shareholders of the company within 90 days after the end of each financial year of the company, at which the following decisions may be made by the shareholders:

• consideration and approval of the financial statements and annual report;
• the declaration of a dividend;
• the consideration of the directors’ and auditors’ reports;
• the election of directors in place of those retiring;
• the fixing of the remuneration of the directors; and
• the appointment of the auditors and the fixing of their remuneration.

A private company may dispense with the holding of an AGM, except in the first financial year, if all the shareholders entitled to attend and vote at the AGM agree in writing, before the end of the financial year, and notify the Registrar of Companies in the prescribed form.

A notice for the AGM must be given to a person entitled to receive notice of the meeting not less than 21 days before the AGM, subject to the articles of association of the company, which may substitute the minimum periods of notice for longer periods, of not more than 30 days, to be given not more than 50 days before the meeting is to be held. A shareholder may appoint a proxy to attend the meeting on its behalf.

The following persons are entitled to receive notice of an AGM:

• a shareholder who has the right to vote at such meeting;
• a person on whom the ownership of a share devolves by reason of that person being a legal personal representative, receiver or assignee in bankruptcy of a shareholder, and of whom the company has received notice;
• a director;
• an auditor of the company; or
• a person entitled under the articles to receive such notice.

Where an AGM is convened with a shorter period of notice than that required under the Companies Act or the articles of association of the company, full notice will be deemed to have been given if it is so agreed by all the shareholders entitled to attend and vote at the AGM.

Place of Meetings

A meeting of the company is required to be held in Zambia unless the articles of association of the company provide otherwise or all the shareholders entitled to vote at that meeting agree in writing to hold the meeting at a place outside Zambia.

Conduct of Meetings and Voting

A shareholder in a company has one vote for each share and the whole unit of stock that the shareholder is registered as holding.

Quorum

The quorum for an AGM is two shareholders of the company, holding not less than one third of the total voting rights, unless the articles of association of the company or an order of court provides otherwise.

Section 120 (1) of the Companies Act allows shareholders to bring a claim against a director for breach of any of the director's duties specified in the Companies Act.

Section 335 (1) of the Companies Act allows a shareholder or a former shareholder of a company to commence an action against a director for a breach of duty owed to the shareholder or former shareholder.

Section 336 of the Companies Act allows a shareholder to bring an action against the company for breach of a duty owed by the company to the shareholder.

The disclosure requirements relating to the ultimate beneficial ownership apply to all companies incorporated under the Companies Act, including a publicly traded company. In this regard, Section 21 of the Companies Act requires the Registrar of Companies to establish and maintain a Register of Companies in manual or electronic form, which must include a chronological record of the beneficial ownership of each company, stating the following in respect of each beneficial owner:

• full name;
• date of birth;
• nationality or nationalities;
• country of residence;
• residential address; and
• any other particulars as may be prescribed.

A beneficial owner is essentially any natural person who controls or holds at least 5% ownership/economic benefit in a company.

With respect to public companies listed on the LuSE, one of the listing requirements for companies that intend to list their shares on the LuSE is the disclosure of major shareholders. An applicant is required to disclose, insofar as is known to him/her. the name of any shareholder other than a director who directly or indirectly, is beneficially interested in 5% or more of any class of the applicant’s capital, together with the amount of each such shareholder’s interest or, if there are no such shareholders, an appropriate negative statement. The LuSE Rules also require an issuer to publish the beneficial interests of directors and major shareholders in its annual financial statements.

With respect to public companies whose securities are registered with the Securities and Exchange Commission, a substantial shareholder (ie, a person who is the beneficial owner of, or is in a position to exert control over, not less than 15% of the shares of the company) is required to notify the company where the substantial shareholder acquires further shares in the issuer or disposes of shares as a result of which the person ceases to be a substantial shareholder of the issuer. The issuer is thereafter required to notify the Securities and Exchange Commission and the listing exchange of this notification by the substantial shareholder.

Section 246 (2) of the Companies Act requires the board of directors of a company to:

• keep entries of money received and spent each day and the matters to which it related;
• keep a record of the assets and liabilities of the company; and
• if the business involves providing services, keep a record of goods bought and sold.

Section 265 of the Companies Act requires the board of directors of a private company to ensure that an audit is conducted within three months following the end of the financial year, and that the report of the financial affairs is signed by not less than two directors or, where the company has only one director, by that director. The audited financial statement of a public company must be submitted to the Registrar of Companies within 30 days of it being adopted by the shareholders. The financial statements must comply with the standards prescribed by the Zambia Institute of Chartered Accountants.

Companies listed on the LuSE are required to disclose their corporate governance arrangements and compliance in their annual reports and in circulars to shareholders in circumstances where shareholder approval is required for specific transactions.

Filings with the Companies Registry are publicly available and include:

• filings of any amendments to the articles of associations, alterations to share capital, or the issuance or transfer of shares;
• beneficial ownership details of the company;
• changes in directors, company secretary or shareholders;
• any change in the company name or registered address of the company;
• special resolutions passed by a company’s shareholders; and
• security/charges given by a company.

The audited financial statement of a public company must be filed with the Registrar of Companies within 30 days of it being adopted by the shareholders.

An annual return must be lodged with the Registrar of Companies within 90 days after the end of each financial year.

A company that has been placed in receivership or is in the process of being wound up in accordance with the Corporate Insolvency Act No 2017 will cause an annual return to be filed upon the completion of the receivership or winding up, which is not publicly available.

Section 253 of the Companies Act requires a company to appoint an external auditor within three months after incorporation. The auditor must hold office until the close of the company's first annual general meeting or as may be decided by the shareholders of the company from time to time.

Section 105 (b) of the Companies Act requires director to ensure that they do not to cause or allow for the business of the company to be conducted in a manner that is likely to cause or create substantial risk of serious loss to the shareholders of the company and its creditors.