Zambia: Commercial Law In Zambia

Last Updated: 20 December 2018
Article by Adams & Adams

GENERAL INFORMATION

Zambia, an independent republic, is a landlocked country in southern central Africa, bordered to the north by Democratic Republic of Congo and Tanzania; to the east by Malawi and Mozambique; to the south by Zimbabwe, Botswana and Namibia, and to the west by Angola.

Area: 752 618 km2

Population: 13.5 million

Capital: Lusaka

Currency: Zambian Kwacha

GDP: USD 20 billion (2010)

Internet domain: .zm

Languages: English (official language), Bemba, Lozi, Tonga, Nyanja

Working week: Monday – Friday

Exports: Copper; cobalt; tobacco; flowers; cotton

Imports: Machinery; transportation equipment; foodstuffs; fuel; petroleum products; electricity; fertilizer; clothing

COMPANY LAW

Business vehicles

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

  • Private limited company.
  • Public company.
  • Company limited by guarantee.
  • Unlimited company.

Incorporation

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

  • Companies in Zambia are registered at the Patents and Companies Registration Agency (PACRA), a semi-autonomous executive agency of the Zambian Ministry of Commerce.
  • The incorporation process entails the reservation of the proposed company name, completion and submission of the necessary application forms, together with the supporting documents.
  • The following are the requirements for registering a foreign company:
    • The constitution, statutes, regulations, memorandum and articles, or other instrument relating to a foreign company must be submitted.
    • The issue and sealing of the certificate of registration marks the end of the process for registration.
  • Once registered, the company must obtain a corporate tax number from the Zambia Revenue Authority and register with the National Pension Scheme Authority for Social Security.
  • Business licenses are required, in certain sectors.

This process can take between 2 to 4 weeks, however the process can take 7 days if all documents are in order when filing the application.

Regulatory Reporting

A foreign company is required, within 3 months after each financial year, to lodge with the Registrar, a prescribed form together with annual accounts and an auditor's report regarding the operations and assets of the company in Zambia.

Share capital

A minimum of approximately USD 800 in paid up share capital is required.

Management

A minimum of 2 and not more than 9 local directors must be appointed as directors of the company.

More than half of the directors, including the managing director and at least 1 executive director must be resident in Zambia. At least 1 documentary agent is required (a firm, corporate body registered in Zambia or an individual who is a resident in Zambia).

Are local shareholders required?

There are no nationality requirements in respect of shareholders.

Is it possible to establish a branch?

A branch of a foreign company is regarded as a foreign company if it establishes a place of business or owns immovable property in Zambia. The application for a branch should include a certified copy of the company's articles of association or regulations and the written consent of the local director and documentary agent. If all documents are in place registration can be completed within 7 to 10 days. A branch must nominate at least 1 locally resident director or branch manager to take statutory responsibility for branch affairs. The formation procedures, financial statements and corporate tax obligations are similar to a local company.

COMPETITION LAW

Law

  • Competition and Consumer Protection Act 24 of 2010.

The Act is enforced by the Competition and Consumer Protection Commission and the Competition and Consumer Protection Tribunal.

Mergers

A merger is notifiable where the following thresholds are met:

  • The merging parties' combined turnover or asset value exceeds 50 million fee units (which equates to USD 170 000).

A merger may not be implemented prior to the necessary approval having been obtained from the Competition and Consumer Protection Commission.

Restrictive Practices

The Act regulates both horizontal and vertical restrictive practices. In addition to prohibiting such practices where they are likely to result in a substantial lessening or prevention of competition, certain practices are specifically prohibited, for example, bid rigging, price fixing and the division of markets.

Abuse of Dominance

The Act prohibits the abuse of a dominant position.

Sanctions

Where a firm is found to have contravened the provisions relating to the notification of mergers, restrictive practices and abuse of dominance, the Competition and Consumer Protection Commission may impose a penalty not exceeding 10% of the firm's annual turnover.

Where a person is found to have contravened any other provision of the Act (where no specific sanction is provided for), the Competition and Consumer Protection Commission may impose a penalty not exceeding 100,000 fee units (which equates to USD 350 000) and/or imprisonment for a period not exceeding 1 year.

CONSUMER PROTECTION

Consumer protection is regulated by various legislative provisions including, but not limited to, the following acts:

  • The Competition and Consumer Protection Act, 2010.
  • Weights and Measures Act
  • Food and Drugs Act and the Public Health Act.

The legislation regulating consumer protection is primarily aimed at unfair market trading and would typically regulate the following aspects:

  • Misleading of consumers.
  • Compromises in the standard of honesty and good faith which enterprises are reasonably expected to meet.
  • Undue influence and harassment of consumers (so as to get the consumers to buy goods).
  • Manner in which consumable goods are being produced (i.e that it should be in a clean environment).
  • Protection of the public against hazards products as well as fraud.

Provision is also made for product recalls and it is an offence to make false and/or misleading statements pertaining to any warranties in respect of the products being sold to consumers.

Lastly, Zambia is a member of the Common Market for Eastern and Southern Africa (COMESA) which has been established to primarily regulate competition law amongst the different economies of its member states and to ensure that a fair and effective regional competition law framework exists. COMESA also has powers regarding consumer protection matters and promotes transparency among economic operators in the region. As such the key aspects of consumer protection dealt with in the COMESA Regulations will also impact consumer protection in Zambia.

DATA PROTECTION

Zambia does not have comprehensive privacy laws that regulate the collection and use of a data subject's personal data. However, data protection is, to some degree, addressed in Zambia's Electronic Communication laws, which, among other things, prohibits:

  • Anyone from interfering with a data subject's private communications.
  • Using a data subject's personal data without their and/or the data controller's knowledge.
  • Using such personal data for purpose other than what was originally agreed to.

DISPUTE RESOLUTION

Court structure

The Supreme Court is the appellate court for both civil and criminal matters and has largely appellate jurisdiction (it can hear matters relating to election petitions and eligibility as a court of first instance).

The High Court is both an appellate court, as well as a court with original jurisdiction in civil and criminal matters.

The Industrial Relations Court has jurisdiction over industrial relations related (employment) matters only. Lower Courts include the Subordinate Court, the Small Claims Court and Local Courts.

Security by 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. The judge has to consider whether the foreign litigant has sufficient property of a fixed nature in Zambia which could cover any costs that may arise.

Costs

Successful litigants are, as a general rule, awarded costs in the matter. However, the final discretion for whether or not costs are to be awarded is left to the court. In matters where the court may deem fit, parties have been seen to bear their own costs. The apportionment of costs is left to the sole discretion of the court in the exercise of its wisdom.

Legal Practitioners

There is no split or single bar in Zambia. There is, instead, a single professional roll for all legal practitioners or advocates in Zambia. The statutory authority for legal practitioners is the Law Association of Zambia Act, the Legal Practitioners Act and the Legal Practitioners Practice Rules.

Alternative dispute resolution

Arbitration is regulated by the Arbitration Act, 2000. Recognised arbitration institutes include The Chartered Institute of Arbitrators Zambia Branch, Zambia Centre for Dispute Resolution Limited and the Zambia Association of Arbitrators. Zambia is a signatory of the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.

EMPLOYMENT LAW

Governing legislation

The Industrial and Labour Relations Act, as amended by the Industrial and Labour Relations Amendment Act, no 8 of 2008; Employment Act, chapter 268 of the Laws of Zambia

Particulars of employment

The contract may be express or implied, oral or written. There is no regulation on a probationary period and therefore there appears to be no limitation.

Forms of contracts

  • Written contracts.
  • Oral contracts.

There is no regulation of fixed term contracts which means there is no limitation.

Termination of employment / dismissal

  • Either party to an oral contract may terminate the employment on the expiration of notice given to the other party of his intention to do so, and where the notice expires during the currency of a contract period, the contract shall be thereupon terminated.
  • Notice to terminate employment may be either verbal or written and may be given at any time and the day on which the notice is given shall be included in the period of notice.
  • An employer shall not terminate the service of an employee on grounds related to the conduct or performance of an employee without affording the employee an opportunity to be heard on the charges laid against him.
  • A written contract of service shall be terminated by the expiry of the term for which it is expressed to be made; or by the death of the employee before such expiration; or In any other manner in which a contract of service may be lawfully terminated or deemed to be terminated whether under the provisions of this Act or otherwise.

Dispute resolution mechanisms and remedies

Any aggrieved party may report a dispute to a Labour Officer who shall thereupon take such steps as may seem to him to be expedient to effect a settlement between the parties and, in particular, shall encourage the use of collective bargaining facilities where applicable.

EXCHANGE CONTROL

Balance of payments regulations are monitored by the Bank of Zambia and apply to financial service providers licensed under the Banking and Financial Services Act. These include the import or export of goods or services exceeding USD 20 000 or the equivalent in foreign currency, a financial service provider designated under the National Payment Systems Act and a foreign investor and a local investor who invests outside Zambia. The Bank of Zambia monitors the outflows and inflows of funds.

In relation to outflows, the bank monitors:

  • The value of any imported goods.
  • The value of any imported services, including management services.
  • Any amounts remitted out of the country whether unrequited (gratuitous) or otherwise.
  • Loans granted to non-residents.
  • Trade credits from non-residents.
  • Investments made in the form of equity and debt securities outside the country by persons resident in Zambia.
  • Profits or dividends paid to non-residents in respect of investments made in Zambia.
  • Payments of interest or principal on an investment on private external debt. In relation to inflows, the bank monitors:
  • The value of goods or services exported.
  • Profits or dividends received in respect of investments abroad.
  • Borrowings from non-residents.
  • Investments in the form of equity from abroad.
  • Investments in the form of debt securities from abroad receipts of both principle and interest on loans to non-residents.

In relation to international transactions, the bank monitors the value of:

  • Imported or exported manufacturing services or goods to or from non-residents.
  • The net cost-effect of telecommunication services.
  • International transport, courier and postal services.
  • International accommodation and other hospitality services to or from nonresidents international money transfers in and out of Zambia.

TAX LAW

Income tax

Residents and non-residents are taxed on income sourced in Zambia as well as certain types of foreign income.

Types of taxable income

Taxes payable include income tax, value added tax (VAT), property transfer tax and tax on turnover for small businesses.

Tax rates

The income tax rate is 35% on adjusted company profits (except for telecommunication companies, which are taxed at 40%).

There is a property transfer tax of 5% on transfers of shares or property. A 3% presumptive tax on turnover for small businesses is payable.

Foreign management or consultant's fees, royalties, interest, rents, commissions are subject to withholding tax of 15%.

Double taxation treaties

Zambia has double taxation agreements with Canada, China, Denmark, Finland, France, Germany, India, Ireland, Italy, Japan, Kenya, Mauritius, Netherlands, Norway, Poland, South Africa, Sweden, Switzerland, Tanzania, Uganda and the United Kingdom.

Published in 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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