COMPANY LAW - BLL 422

What is a Company?
A company is an association of natural persons that come together to
pursue a common goal, by subscribing their names to the Articles of
Association and complying with the registration requirements. When
properly formed under s.12-15 of the Companies Act , a company is an
artificial or legal person1 or corporate body or corporation with a separate
existence of its own distinct from natural persons behind the company,
capable of handling its affairs, including owning property and settling
debts. A company thus has legal rights and obligations in the same way
that a natural person has.

Nature and types of companies in Zambia

The study of companies in Zambia is divided into three portions for the
sake of convenience, namely:
a) Nature, types and the formation of companies.
b) Corporate finance and management of companies.
c) Corporate insolvency.

This approach is necessitated by the changes in the government of

companies brought about by the 2017 legislative amendments to the
Companies Act Chapter 388. Previously, the Companies Act combined
formation and liquidation of companies. But these two are now separate.
The Companies Act No.10 of 2017 deals with the formation and
management of registered companies, while insolvency is handled by the
Corporate Insolvency Act No. 9 of 2017. Under the repealed Companies
Act Chapter 388, liquidation was the only solution to a financially troubled
company. But Under the Insolvency Act, Liquidation is the last resort
after other attempting to solve the financial problems facing the company.
These attempts include Receivership, Business Rescue, Schemes of
Arrangement and Compromise, are covered under the discussion of
the Insolvency Act No. 9 of 2017.

Types of Companies – Chartered, Statutory and Registered

Companies
Companies are formed for various reasons. For example, a Chartered
Company is an association of investors or shareholders, incorporated and
granted exclusive rights by a royal charter or similar instrument of
government to do under the terms of the charter such things as
prescribed and defined by the Charter, such as trade, explore, or even
colonise. The British South African Company (BSAC) for example was
given authority by the British government to identify major copper
deposits in central Africa. In 1911, it established the colony of Northern
Rhodesia as a protectorate, which it administered on behalf of the British
1
created by law – the Companies Act.
government until 1924 when the British Colonial Office took over
administration of the Northern Rhodesia as a Territory from BSAC.

Other companies that may be formed in Zambia include Statutory

Companies, and Registered Companies. Statutory Companies are
formed by Acts of Parliament for the provision of basic services by
government, such as transport (Zambia Railways), water (Water and
Sewerage Companies), energy (Zambia Electricity Supply Corporation–
ZESCO) and communication (Zambia Telecommunications Corporation –
ZAMTEL). Other Parastatals regulate services to the public, such as the
Energy Regulation Board (ERB). Other Parastatals are a product of inter-
state agreements, providing or obtaining services cross borders, such as
the Zambezi River Authority which regulates the utilisation of water from
the Kariba Dam following an agreement between Zambia and Zimbabwe;
and the TAZAMA Pipelines Limited for transportation of petroleum from
Dar es Salaam to Ndola, following an agreement between Tanzania and
Zambia.
Holding Company (s.185)
This is where the composition of a company’s board of directors is
controlled by another company. If more than half of the directors of the
other company is able, without the consent or concurrence of any other
person, to appoint or remove a director; or a person’s appointment as a
director follows from the person’s appointment as a director of the other
company. In determining whether the composition of a company’s board
of directors is controlled by another company, shares held or power
exercisable—
(a) by a person—
(i) who is an effective nominee of the other company shall be deemed to
be held or exercisable by the other company;
(ii) by virtue of a debenture of the company or trust deed for securing any
issue of debentures shall be disregarded; and
(iii) only by way of security for the purposes of a transaction entered into
in the ordinary course of business, shall be disregarded, if the ordinary
business of the person includes the lending of money; or
(b) in a fiduciary capacity, shall be disregarded.

The Energy Regulation Board (ERB)

The ERB was established by the repealed Energy Regulation Act Chapter
436. Its existence continued and its function of regulating the energy
sector redefined under the Energy Regulation Act No. 12 of 2019. The ERB
is constituted under s.3 as a corporate body with perpetual succession
and a common seal capable of suing and being sued in its name. Its
functions under s. 4 are
a. issue licences under the Act
b. in collaboration with the Competition and Consumer Protection
Commission to
i. investigate and monitor levels of competition within the
energy sector with a view of promoting competition
ii. develop and implement appropriate rules in the energy sector.

c. monitor with other relevant regulatory body efficiency and

performance of licensee.
d. disseminate information and promote participation of the public in
the provision of energy services.
e. receive, investigate and determine complaints on tariffs, charges
and quality of energy products and services provided.
f. approve location and construction of common carrier, energy facility
or installation, and attach terms and conditions to the licence or
permit held by the licensee under this or any other written law.
g. in collaboration with the Zambia Bureau of Standards, design the
sector according to quality, safety and reliability of the supply of
energy.
h. determine, regulate and review charges and tariffs in the energy
sector.
i. in collaboration with the Zambia Environmental Management
Agency (ZEMA), formulate measures to minimise the environmental
impact of activities carried out in the energy sector.
j. determine, regulate and review charges and tariffs in the energy
sector
k. approve, review and regulate power purchase agreements
l. pursuant to the Standards Act of 2017, establish and monitor
performance standards of licensees and enterprises.
m. develop operating procedures, codes of practice, guidelines for
incentive-based regulation specifications.
n. impose an administrative penalty against a licensee for violation of
licence conditions
The ERB is managed by a Board of Directors appointed by the Minister of
energy, with a mandate of five years.
The Zambezi River Authority
This company was established by parallel legislation in the parliaments of
Zambia and Zimbabwe on 1st October 1987. Both countries enacted
concurrently the Zambezi River Authority Act Chapter 467 to give effect to
provisions of an interstate agreement relating to the utilisation of the
Zambezi River in the generation of hydroelectric power for both countries.
The agreement also included operation and maintenance of Kariba Dam
Complex, investigation and development of new dam sites on the
Zambezi River, analysing and disseminating of hydrological and
environmental information pertaining to the Zambezi River and Lake
Kariba.

The Zambezi River Authority is a Corporation and continues to exist as a

corporate body established under this Act with a common seal and
capable of suing and being sued, in its corporate name. With power,
subject to the provisions of the Agreement, this Act or any law, the
Authority can do acts and things as a body corporate may do or perform.
On and after the appointed date the Corporation is known as the Zambezi
River Authority, governed by a Council of Ministers (COM) from ministries
responsible for energy and finance in each contracting state.
The chair of the COM is held alternatively by Energy ministers on annual
basis. The Board of Directors is represented by Permanent Secretaries
responsible for energy and finance for both countries supported by 2
independent Board members from each country.
Tazama Pipelines Ltd
This company is known in full as Tanzania Zambia Mafuta Limited, was
commissioned in 1968 running a 1710 km pipeline (Tanzania–Zambia
Crude Oil Pipeline), from Kigamboni Tank Farm in Dar es Salaam to Indeni
Refinery in Ndola. Tazama is government’s agent responsible for
transporting commingled feed stock, storage, marketing of finished
petroleum products and managing petroleum depots across the country.

The Company is jointly owned by Zambia the majority shareholder of

66.7% and Tanzania with 33.3%. It is operated under a company name,
Tazama Pipelines Limited, with headquarters in Ndola, Zambia and an
office in Dar es Salaam, Tanzania. By virtue of holding 2/3 of the shares,
the Permanent Secretary of Energy for Zambia is a permanent
chairperson of the Tazama Board. Associated infrastructure owned by
Tazama in Tanzania, includes the tank farm in Dar es Salaam consisting of
six stage tanks onshore, which comprise three tanks of 36,000 cubic
meters (36,000,000 L) capacity combined and three tanks of combined
capacity of 41,000 cubic meters (41,000,000 L). There are seven pump
stations in total between Dar-es-Salaam and Ndola; five stations in
Tanzania and two in Zambia. The Tazama Crude Oil Pipeline was
constructed to transport crude oil from the port of Dar-es-Salaam into
landlocked Zambia, at an affordable, sustainable economic cost. When
installed in 1968, the pipeline had a carrying capacity of 1,100,000 tonnes
(1,212,542 tons) annually. By 2002, carrying capacity had deteriorated to
600,000 tonnes (661,387 tons) annually. Currently, Tazama is used as
storage for finished products but plans are underway to use it to transport
finished petroleum products.

TAZARA
TAZARA is another parastatal company produced by bilateral agreement
between Tanzania and Zambia. It is in full known as the Tanzania –Zambia
Railway Authority and is jointly owned by both governments, Tanzania
50% and Zambia 50%. It is governed by a Board of directors chosen from
the two countries. The Board is responsible for setting up policies,
overseeing operations and making strategic decisions. Its headquarters
are in Dar es Salaam with regional offices in Mbeya, Tanzania and Kapiri
Mposhi, Zambia. The railway system was constructed by the two countries
with financial and technical assistance from China, and took 6 years to
complete from 1970 to 1976. It connects landlocked Zambia and Southern
Africa, covering 1860 km from Dar es Salaam to Kapiri Mposhi.

The vision of the two governments was to contribute to economic growth

by facilitating trade and transportation. However, the company has faced
stiff competition from road transport which has reduced its market share.
But it has been instrument in opening up trade and linking the Copper belt
region to the port of Dar es Salaam, as well as stimulating infrastructure
development in the railway corridor.

ZESCO LTD
ZESCO Limited is a Parastatal company formed after the enactment of the
Zambia Electricity Supply Act in 1970, and its governance has evolved
over time to one that defines an arms-length relationship with Zambian
Government. It is an integrated electricity utility which generates,
transmits, distributes and supplies electricity in Zambia. It is wholly owned
by government through the Industrial Development Corporation (IDC) as
the sole shareholder. The Zambia Electricity Supply Act which brought
together all electricity undertakings previously managed by local
authorities. Its origin is 1906 when a small thermal power station was
established in Livingstone to serve the tourist town. In 1994, Zambia
Electricity Supply Corporation Limited was changed to ZESCO Ltd to
reflect the legal status of a Company whose ownership is in the hands of
government as a single shareholder. The Permanent Secretaries of
Finance and Energy represent Government on the Board.

Rural Electrification Authority (REA)

This is a statutory body created by the Rural Electrification Act No 20 of
2003 to provide electricity infrastructure to all rural areas using
appropriate technologies in order to increase access, productivity and
contribute to improved quality of life. Target: increase electrification rate
from the current 3% to 51% by 2030.