Botswana: Commercial Law In Botswana

Last Updated: 13 December 2018
Article by Adams & Adams

GENERAL INFORMATION

Botswana, formerly a British protectorate, became independent in 1966. It is a landlocked country in southern Africa, bordered by Zimbabwe to the northeast, South Africa to the south-east, and Namibia to the west. The so-called Caprivi Strip of Namibia extends along its northern border.

Area: 581 730 km2

Population: 2.0 million

Capital: Gaborone

Currency: Pula

GDP: USD 26.5 billion (2010)

Internet domain: .bw

Languages: English, Tswana (official languages)

Working week: Monday - Friday

Exports: Diamonds; copper; nickel; beef; soda ash; textiles.

Imports: Foodstuffs; vehicles and transport equipment; textiles; petroleum products; wood and paper products; metal and metal products

COMPANY LAW

Business vehicles

There are four forms of companies commonly used by foreign investors:

  • Close company, which has a minimum of 1 member and a maximum of 5 members, and an appointed accounting officer. These entities are usually aimed at smaller businesses as companies cannot be members.
  • Private company, which has a maximum of 25 shareholders.
  • A company limited by guarantee (public or private).
  • A public company.

Incorporation

The following steps need to be taken in order to incorporate a company:

  • Obtain approval of a company name with the Registrar of Companies.
  • Submit a completed application using the prescribed form.
  • Obtain the consents of a director, the secretary, the shareholders or members to act in the capacity for which they have been named.
  • Apply for any trading licenses that are required.

A company can be incorporated in 3 to 6 weeks, once all documentation has been submitted. Companies are no longer required to have a constitution or memorandum of association and articles of association, but may have a constitution, however this is not compulsory. In the absence of a separate constitution, the rights, duties and obligations prescribed by law will apply to every director and shareholder in the case of a public company and in the case of a private company, the constitution prescribed in the Companies Act will be applicable.

There is no provision in Botswana for the registration of defensive company names.

Regulatory reporting

A public company is required to have financial statements signed by its directors and auditors within 5 months of the balance sheet date and to register them with the Registrar within twenty working days thereafter.

Share capital

A minimum share capital is not required in Botswana and an entity can be incorporated with a share capital of USD 1, provided that there is at least 1 share.

Management

A private company must have 1 or more directors. A public company must have 2 or more directors. At least 1 director must be ordinarily resident in Botswana. Public companies and non-exempt private companies must appoint a secretary who must be ordinarily resident in Botswana. The secretary must be a member of the Botswana Institute of Chartered Accountants (BICA), the Southern African Institute of Chartered Secretaries and Administrators (SAICASA) or a legal practitioner. The sole director or auditor of the company is disqualified from acting as secretary.

Public companies, non-exempt private companies and close companies must have external auditors who must be members of BICA, who are ordinarily resident in Botswana. If a partnership is appointed as auditor, at least 1 of the partners must be ordinarily resident in Botswana.

A private company, other than a close company must have at least 1 director who is ordinarily resident in Botswana.

Are local shareholders required?

There are no nationality or residence requirements for shareholders.

Branch Company

It is possible to establish a branch and the foreign company is required to register as an external company with Registrar of Companies within a period of 1 month of commencing business in Botswana.

COMPETITION LAW

Law

  • Competition Act 17 of 2009.
  • Competition Regulations 2011.

The Act is enforced by the Competition Authority and the Competition Commission, based in Gaborone

Mergers

A merger is notifiable where the following thresholds are met:

  • The turnover or asset value in Botswana of the target firm exceeds USD 1 000 000; or
  • The target firm would, following implementation of the merger, supply or acquire 20% of goods or services of a particular description in Botswana.

A merger may not be implemented prior to the necessary approval having been obtained from the Competition Authority or prior to the period for the Competition Authority's review of the merger having lapsed without the Authority having made any determination in relation to the merger.

Restrictive Practices

The Act regulates restrictive practices and specifically prohibits certain horizontal agreements, for example price-fixing, whether direct or indirect; the division of markets; and bid rigging.

Abuse of Dominance

The Act prohibits the abuse of a dominant position.

Sanctions

Penalties will only be imposed in respect of prohibited restrictive conduct, committed intentionally or negligently and the amount may not exceed 10% of the firm's turnover during the period of the breach (for a maximum period of 3 years).

CONSUMER PROTECTION

Consumer Protection is regulated by the Consumer Protection Act, 1998. This Act makes provision for the establishment of institutions responsible for the protection of consumers' interests in Botswana. It also sets out the manner in which consumers should lodge their complaints, how investigations ought to be conducted and other provisions relating to the institution of legal proceedings against a supplier of goods and services.

Botswana also has consumer protection regulations which set out various practices forbidden to suppliers. These practices include, but are not limited to the following:

  • Unlawful business practices – i.e. intentionally deceiving consumers through speech or conduct.
  • Failure to comply with the minimum standards of performance – i.e. not rendering services with reasonable care and skill.
  • Failure to comply with the minimum standards and specification – i.e. selling second hand products as if they are new.

If a consumer buys goods and it later turns out that they do not meet the guarantees made by the supplier then:

  • If the goods have minor faults the supplier can repair the goods, give the consumer a replacement or give the consumer a refund.
  • If the supplier chooses to repair the goods, the supplier has to do so in a reasonable time.
  • If the problem is major or cannot be fixed, the consumer may return the goods and choose between a refund or a replacement.

DATA PROTECTION

Currently Botswana does not have any promulgated data protection laws. However, Botswana's constitution recognises a right to privacy. Some specific statutes may also contain provisions that directly or indirectly relate to data protection.

DISPUTE RESOLUTION

Court structure

Smaller matters are dealt with by the Magistrate's Courts, Small Claims Courts and Customary Courts, which are all subordinate to the High Court. The High Court is the superior court and has the jurisdiction to determine any criminal and civil case. It has the jurisdiction to hear both appellate matters and matters de novo. The highest and final Court is the Court of Appeal, which is the final arbiter of all legal matters in Botswana.

Foreign litigants

Although there is no rule in place requiring foreign litigants to provide security for costs, any party to proceedings is entitled to demand security for costs; provided that they timeously deliver a notice setting forth the grounds upon which security is claimed and the amount demanded. The judge has the discretion to grant the order or not.

Costs

Successful litigants are permitted to recover their costs. The judge may make such order as to the costs of the case as he may deem fit, including an order that the unsuccessful party shall pay to the opposing party a sum fixed by the judge.

Legal Practitioners

Although the Law Society's Regulations distinguish advocates from attorneys, the Botswana Law Society acts as a single professional roll for all legal practitioners. The Legal Practitioners Act, 1996, and the Botswana Law Society's Regulations regulate the conduct of legal practitioners in the courts of Botswana. It is not uncommon for experienced advocates from neighbouring countries, such as South Africa, to obtain rights of appearance in the High Court and act as counsel for large disputes.

Alternative dispute resolution

Arbitration is a recognised form of dispute resolution, and the Arbitration Act of 1959 provides authority for the conduct of arbitrations. Parliament passed the Recognition and Enforcement of Foreign Arbitral Awards Act, 1971, in response to the New York Convention. Foreign arbitral awards, if made in countries which are signatories to the Convention, are enforceable in Botswana, subject to the provisions of the Act. The foremost arbitration institute is the Botswana Institute of Arbitrators.

EMPLOYMENT LAW

Governing legislation

Employment Act, 1982 and Trade Disputes Act.

Particulars of employment

A contract must be in writing, signed by both parties and contain certain particulars of employment. If not, it will not be enforceable.

Forms of contracts

Contacts of employment are permitted for unspecified periods of time with probation:

  • Not exceeding 3 months in the case of unskilled employees.
  • Not exceeding 12 months in the case of skilled employees.
  • Where a contract is terminated during a probationary period by either the employer or the employee by not less than 14 days' notice, the contract is deemed to have terminated with just cause and neither party is required to give any reason therefore.

Termination / Dismissal

A dismissal is unfair if it is not effected for a fair reason (valid reason which must be fair) based on the misconduct or incapacity of the employee or is based on the employer's operational requirements and in accordance with a fair procedure. There are exceptions to this general rule where summary dismissal is possible.

Breach of contract of employment:

  • By employer – if he fails to pay basic pay or wages.
  • By employee – if he is absent from work without the prior consent of his employee.
  • Liability flowing from the above breaches – payment of a sum equal to the amount that he would have been liable to pay to the other party to terminate the contract with or without giving notice, as is appropriate.

Dispute resolution mechanisms and remedies

  • Mandatory mediation failing which arbitration. Appeals and reviews from decisions of mediators and arbitrators are referred to the Industrial Court (IC) who hear and determine all trade disputes except disputes of interest.
  • Where the IC determines that an employee has been wrongfully dismissed or disciplined the IC may make an order of reinstatement with/without compensation or compensation in lieu of reinstatement or reinstatement if dismissal is considered to be unlawful or motivated on the grounds of gender, trade union membership or activity, lodging a complaint or grievance, religious, tribal or political affiliation or compulsory reinstatement if the employment relationship has not broken down irrevocably.
  • In the event that an employee does not seek reinstatement, the parties may agree on compensation which shall not exceed the actual pecuniary loss suffered.

EXCHANGE CONTROL

There are no exchange controls in Botswana.

TAX LAW

Income tax

Corporate income tax is levied on the Botswana source taxable income of all companies, other than tax exempt bodies (i.e. pension funds or charities) and small companies that elect to be treated as partnerships or sole proprietorships.

A company, for income tax purposes, includes any body, corporate and association or society (whether or not incorporated or registered), but excludes a partnership. Foreign sourced dividends and interest are deemed to be from a Botswana source and are taxable on accrual, while business profits are taxable only when remitted to Botswana. Non-resident entities carrying on business in Botswana (e.g. branches of foreign companies) are liable for tax in Botswana on the same basis as resident companies.

Types of taxable income

Aside from income tax, Botswana levies capital gains tax (CGT), withholding tax on interest, royalties, dividends and technical service fees, withholding tax on rent paid to both residents and non-residents and tax is withheld on commission and brokerage fees.

Tax rates

For residents, the income tax rate is 22%. The income tax rate for manufacturing and international financial service centre companies is 15% with the rate on branches is 30%.

A 5% withholding tax is payable on rent paid to both residents and non-residents, and a 10% tax is withheld on commission and brokerage fees.

Double taxation treaties

Botswana currently has double taxation treaties with Barbados, France, India, Lesotho, Mauritius, Namibia, Russia, Seychelles, South Africa, Swaziland, Sweden, the United Kingdom and Zimbabwe.

Originally published April 2015

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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