The Companies Act, No. 10 of 2017 (the "Companies Act") is the primary legislation which regulates corporate governance for companies incorporated in Zambia. However, secondary and sector specific laws also provide for corporate governance issues. For example, the insurance and financial sectors both prescribe corporate governance guidelines that are specific to the respective sectors.
Directors are responsible for the overall management and supervision of the business of a company and are required to exercise their powers in accordance with the articles of association and the Companies Act. Under the Companies Act, unless directors' powers are restricted by the articles of association, they may exercise the following responsibilities without the approval of the shareholders:
(a) manage, direct or supervise the business of the company;
(b) pay all incorporation expenses incurred in promoting the company;
(c) borrow money;
(d) issue debentures or give any other security for debts, liabilities or obligations of the company or of any other person; and
(e) sign, draw or otherwise execute all cheques, promissory notes, bankers' drafts, bills of exchange, negotiable instruments and receipts for money paid to the company.
Directors, however, require the approval of the shareholders to effect other corporate actions as specified in the Companies Act, such as the issuance of new shares.
Directors owe fiduciary duties to the shareholders and to the company. These duties include:
(a) nsuring compliance with the Companies Act and the articles of association;
(b) preventing, reducing and managing any risks to the business of the company;
(c) preventing the business from being conducted in a manner likely to create substantial risk of loss to a member or creditor of the company;
(d) acting in good faith with a degree of care, diligence and skill;
(e) promoting the success of the company;
(f) exercising independent judgement;
(g) disclosing information about the directors' remuneration in the financial statements of the company; and
(h) avoiding conflicts of interest.
A director in wilful breach of their duties or responsibilities is liable to compensate the company for any loss suffered.
Company secretaries are responsible for ensuring that companies comply with all statutory and regulatory requirements.
A company secretary can be either a natural person or a body corporate. In order to qualify for appointment, a natural person must be a legal practitioner, a chartered accountant or a member of the Chartered Institute of Secretaries (a "Qualified Professional") who is resident in Zambia. A body corporate, on the other hand, must be an entity that is incorporated in Zambia and must have a Qualified Professional as an officer of the company.
Company secretaries have several obligations under the Companies Act, including providing guidance to the directors on their collective and individual duties, responsibilities and powers, informing the board of directors on legislation relevant to or affecting the board meetings and shareholder meetings and maintaining and updating information on beneficial ownership of the shares of the company. A company secretary is also required to keep and maintain the registers of the company such as the register of shares and beneficial ownership, the register of directors, the register of debenture holders and accounting records.
Shareholders' role in the corporate governance of a company under the Companies Act include:
(a) paying liabilities on all shares held, subject to a call on shares being made by the directors;
(b) considering and approving financial statements, annual reports, directors' reports and auditors' reports;
(c) appointing, removing and fixing remuneration for directors and auditors; and
(d) adopting any pre-incorporation contracts
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