Companies Form 2

Company Law and Procedure

The course is not like the substantive company law course at UNZA. It is mainly a procedural law course
that focuses on the provisions of the Companies Act. First however, it is necessary to see how the company,
as a form of business association, compares with other types f business association found in Zambia.
The Various Forms of Business Associations in Zambia
Clients may come to get advice from you as a lawyer as to what form of association they should set up in
order to carry out certain activities or business plans. Thus you need to be very conversant with the various
forms of business association and their advantages and disadvantages. Business associations in Zambia
may be broadly classified into six categories:
(i) Sole Proprietorships
(ii) Partnerships
(iii) Cooperatives
(iv) Private and Public Companies limited by shares
(v) Companies formed for non-profit purposes limited by guarantee.
(vi) Statutory Corporations
Sole Proprietorships. Sr-!'5 thisthey

Sole Proprietorships are aürlso loosely (but erroneously) called “one-man companies”. They include such
businesses as retail trading, transport business (especially passenger transport), bottle stalls, barbershops,
tailoring shops and farms. Although run commercially, sole proprietorships are normally conducted on a
personal basis and they are usually owned by an individual, who operates it with the assistance of family
members. Sole proprietorships are easy to form and they are operated very informally. While sole
proprietorships must comply with various laws, including tax laws and licensing legislation, the only
mandatory provisions that they ought to comply with prior to starting a business are those contained in the
Registration of Business Names Act [Cap. 389]. This Act directs that any person, firm or corporation
carrying on business under any name other than the true Christian name and surname of the owner thereof
must register under the Act. This requirement for registration is set out in section 3 and it captures
individuals, firms and corporations. It is also clear that section 3 applies to partnerships as well. [Thus,
when you set up a law practice you must apply for a business name]. Section three reads:
S.3. Subject to the provisions of this Act-
(a) every firm having a place of business in Zambia and carrying on business under a
business name which does not consist of the true surnames of all partners who are
individuals and the corporate names of all partners who are corporations without
any addition other than the true Christian names of individual partners or initials
of such Christian names;
(b) every individual having a place of business in Zambia and carrying on business
under a business name which does not consist of his true surname without any
addition other than his true Christian names or the initials thereof;
(c) every individual or firm having a place of business in Zambia, who, or a member
of which, has either before or after the commencement of this Act changed his
name, except in the case of a woman in consequence of marriage;
shall be registered in the manner directed by this Act: Provided that-
(i) where two or more individual partners have the same surname, the addition of an
"s" at the end of that surname shall not of itself render registration necessary; and
(ii) where the business is carried on by a trustee in bankruptcy or a receiver or
manager appointed by any court, registration shall not be necessary; and
(iii) a purchase or acquisition of property by two or more persons as joint tenants or
tenants in common is not of itself to be deemed carrying on a business, whether or
not the owners share any profits arising from the sale thereof.
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The procedure for registration of a business name is straightforward. The person/firm required to register
under the Act must deliver to the Registrar of Business Names (Ms. Anis Banda BoBo?) a completed
application form, which is prescribed under the Act together with the application fee. The application forms
for registering a business name are obtained from he Registrar of Business Names (in Long acres). The
Registrar will not accept a computer generated application form and the form used must be the one
obtained from her office (for a fee).

In terms of the Registration of Business Names Regulations of 1998 contained in S.I. 100 of 1998,
corporations, firms and individuals will be required to complete different forms. The particulars required
under these forms include: (i) the proposed business name; (ii) the general nature of the business; (iii) the
present Christian and surnames of the person (if an individual) or those of the partners (if a firm) or
corporate name (if a corporation); (iv) the age of the individual/partners as the case may be; (v) the
commencement date of the business.

The Registration of Business Names Regulations of 1998 introduced, under regulation 10, a requirement
for filing of annual returns for any entity registered under the Regulations. [But can regulations amend the
parent Act? They impose an obligation on businesses that is not imposed by the mother Act].

The most significant disadvantage of sole proprietorships is that it has no separate existence from its owner
and in the event of failure to pay the debts of the business the owner’s personal assets are at risk from
creditors i.e. there is no limited liability. Similarly, the continuance of the business may be placed in
jeopardy when the owner dies - no perpetual succession.

Partnerships
Zambian law recognizes unincorporated business associations called partnerships. The law governing
partnerships in Zambia is the English Partnership Act of 1890. It applies in Zambia by virtue of the English
Law (Extent of Application) Act Cap 11 of the Laws of Zambia. The statutory law on partnerships in the
Act is supplemented by judicial decisions and general common law principles. Although it is possible to
form a limited partnership in terms of the Limited Partnerships Act of 1907, in practice no such
partnerships exist in Zambia as when the limitation of liability is desired, it is often preferable for the
association to be formed as a limited company under the Companies Act.

Cooperatives
Cooperatives have been part of Zambia business life for many years. A cooperative, as we conceive it
today, is a form of business association. The cooperative idea however is not a single idea but a number of
ideas and concepts. A cooperative is often conceived as a communal group of mutually dependent
individuals who come together for the purpose of exploiting their strength of numbers to achieve a set
economic goal. Cooperatives are often set up by persons seeking to improve their position in areas such as
agriculture and marketing. The current law governing cooperatives is the Cooperative Societies Act No. 20
of 1998. It sets out provisions on formation, registration and organization.

Clubs/Trade Unions - narrower interests, largely social rather than business entities

Companies
There is no strict or technical definition of the word “company”. It may be defined as an association of
persons with a common purpose. S.2 of the Companies Act defines “company” as “A company
incorporated under this Act or an existing company” - not a very useful definition. In Tennant v Stanley
[1906] 1 CHD 131, Buckley J. defined the word “company” as follows: “The word “company” has no strict
technical meaning. It involves two ideas namely, first that the association is of persons so numerous as not
to be aptly described as a firm and secondly that the consent of all the other members is not required for the
transfer of a member’s interest.”

In Darmouth v War word [ ] 4 Wheat (US) 518, Marshall C.J. defined a company as “A person, artificial,
invisible, intangible and existing only in the contemplation of the law being a mere creature of the law. It
possesses only those properties which the charter of its creation confers upon it, either expressly or
incidental to its existence.”
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In Zambia, a registered company is one formed and registered under the Companies Act (Cap 388) of 1994.
It also includes existing companies that were formed before this Act. A company comes into existence at a
definite point in time. A company is deemed to come into existence when it is registered under the Act i.e.
when its name is entered into the register meant for the purpose under the Act and the Registrar of
Companies issues a Certificate of Incorporation to it. This certificate is in the prescribed form and states
that the company is on and from the date specified in the certificate, incorporated. Registered Companies
are governed by the provisions of the Companies Act and by the rules made there under as well as by the
Articles of the Company itself.
S.13 of the Act lists the types of Company that can be incorporated under the Act as:
(a) Public Companies, and
(b) Private Companies, which can be:
a. Limited by shares,
b. Limited by Guarantee, or
c. Unlimited companies.
Limited Companies
A limited Company is one where the liability of the members is limited. By limited liability it is meant that
the members are liable to a limited amount and beyond that limit they cannot be called upon to contribute
to the liabilities of the company. Thus, assuming that in the event of winding up of a company the assets
are not sufficient to pay the liabilities, then the private property of the shareholders cannot be attached or
forfeited to pay the company’s liabilities. [But see Cropex Ltd. v Sasol SCZ judgment No. Chisamba
Grain Co. Ltd.]
A private company limited by shares or by guarantee is obliged under the Company’s Act to include the
word “limited” in their name - see s. 37(1) while a Public Limited Company must have “Plc” at the end of
its name i.e. Public Limited Company.
A Company Limited by Shares
The vast majority of limited liability companies are companies limited by shares. As is implied in the name,
such companies must have a share capital. A company limited by shares is one where the liability of its
members i.e. its shareholder, is limited to the unpaid amount (if any) on the shares held by them. In s. 17(3)
and s. 266 (1) of the Company’s Act members of the company still owing on the shares that they have will
be called upon to contribute in the event that the company is wound up and its assets are not sufficient to
discharge its liabilities. [This liability of the members can be enforced both when the company is in normal
existence and when the company is wound up. A company limited by shares can be private or public.
A Company Limited by Guarantee (Legal Resource Foundation, Save the Rhino Trust)

This is provided for in s.19 of the Act. The liability of the members here is limited to the amount the
members agree to contribute to the company in the event that the company is wound up. See s. 266(2) and
s. 19 (1). Each subscriber to an application for incorporation of a company limited by guarantee is required
to sign a declaration guaranteeing that amount each subscriber will pay in the event that the company winds
up. [s. 266(2)]. Two points: (I) the guaranteed amount may differ form member to member or it may be
fixed by the articles and (ii) the liability of the members can only be enforced during the winding up of the
company as members cannot be called upon to pay their guaranteed amounts during the operation of the
company.

While in some jurisdictions, companies limited by guarantee may or may not have share capital; in Zambia
such companies have no share capital. This means that such companies do not receive their initial capital
from their members and sources of initial capital is usually from grants, subscriptions, endowments etc. s.
19(5) prohibits companies limited by guarantee from carrying on business for purposes of making a profit
for members or anyone concerned with their promotion or management. It is for this reason that companies
limited by guarantee are confined almost exclusively to charitable and philanthropic causes. A Company
limited by guarantee can never be a public company - see s. 14. Under s. 39, the Registrar may, on
application from such a company, allow it to dispense with the word “limited” in its name, and in practice
this provision is often invoked.
Unlimited Companies
 Companies Form 2

This is a company having no limit at all on the liability of its members who are personally liable for the
company’s debts and liabilities. If, when winding up, the assets are not sufficient to discharge the liabilities
then the personal property of the members can be attacked for the purpose of settling the company’s
obligations. But note: there is still privity of contract and separate legal identity and creditors cannot go
after the property of members during the normal business of the company. Unlimited Companies are
provided for in s. 20 of the Act. The Act directs that such companies must have share capital. From the
definition of a private company in s. 2 of the Act, it is obvious that an unlimited company can never be a
Public Company.

S.20 (3) when an unlimited company is wound up, the members are liable to contribute without limit, but
not when the company is operating as a going concern. While s 37 imposes an obligation on all limited
companies to use “Limited” as part of their name, there appears to be no equivalent provision in respect of
an unlimited company to add the word “Unlimited” after its name for reasons that are not immediately
obvious.
Attributes of Incorporation
An incorporated company has several characteristics that give it advantages over unincorporated business
associations. These attributes set the company, as a business association, apart from other forms of business
enterprise.
(a) Separate Legal Personality - A company is in law regarded as a legal person with separate and
distinct identity from its members. As an artificial person a company will be entitled to deal with
other persons, natural and artificial, in its own name and in its own right. In terms of s.11 of the
Co. Act, a company is deemed to come into existence on the date of incorporation i.e. from the
date its name is entered into the register and given a certificate of incorporation by the Registrar of
Companies in terms of s. 22. Once incorporated, a company has the rights, powers, capacity and
privileges as an individual, subject to such limitations as are inherent to its corporate nature and as
may be prescribed by the Companies Act. A member of the company can thus not be held liable
for the acts of the company nor can he/she claim or enjoy the benefits due to the company. The
leading case on corporate personality is Salomon v Salomon [1897] where Salomon sold his
leather business to a Company that he formed and was the principal shareholder for which he was
paid, in part, by a debenture on the company. Within a year the Company went under and, as a
secured creditor, he was entitled to be paid first. Other creditors sued saying that Salomon and the
Co. were one and the same but the House of Lords held that Salomon and the Company were
separate legal personalities and Salomon as a secured creditor could be paid as a secured creditor
first. [See also Macaura v Northern Assurance Co.]. In Zambia the SCZ upheld the concept of
separate corporate personality as articulated in Salomon in ZCCM and Ndola Lime Ltd. v
Sikanyka and Others SCZ Judgment No. 24 of 2002. SCZ held: The change of ownership of
shares in a company cannot result in the corporate entity becoming a new employer. The SCZ
emphasized the distinction between a company as a body corporate and the shareholders in that
company. In similar fashion, the SCZ in Newton Silulanda and Others v Foodcorp Products Ltd.
[2002] ZLR 36 held that a sale of shares to a new shareholder does not alter the corporate
character in which the shares are held. In this case the appellants sought a declaration that there
had been a change of employer without their consent when all the shares in ZAMHORT Products
were sold to Foodcorp Products Ltd. or when the name was changed from the former to the latter.
The workers contended that there had been a disadvantageous change in their conditions of service
that should be deemed to be a breach of their contract of employment and therefore they were
entitled to treat their contracts as repudiated. Ngulube C.J dismissing the appeal said:
“Another argument advanced sought to assert that the change of the ownership of the
shares brought about a new employer. The court below, quite corrected itself in the law
which has long recognized separateness of the corporate entity from those behind it,
owning it and directing its affairs. The celebrated case of Salomon v Salomon on the
point is still good law. Similarly our holding in ZCCM and Ndola Lime Ltd. v
Sikanyka and Others is still valid and applies with equal force to the case at hand.”
(b) Perpetual Succession - Once incorporated, the company has perpetual succession i.e. the
company has a continuous existence and can outlive its original members. The continuity of the
company does not depend on the continuity of the shareholder. They may come and go but the
 Companies Form 2

company will live on. This however does not suggest that once incorporated, a company will
never come to an end. A company’s life comes to an end up to when it is wound up or struck off
the register in accordance with the Companies Act. Where a shareholder of a company dies, the
legal representative of the deceased shareholder becomes entitled to the shares by transmission.
This is provided for in s. 71 of the Companies Act.
(c) Can Own Property in its Own Name - As a legal person, a company can own property in its
own name, enjoy such property and dispose of it. The property of the Company will not be
considered as the joint property of the shareholders. It is for this reason that it was held in
Macaura v. Northern Assurance Co. Ltd. [1925] that the shareholder had no interest in the
property of the company. In an unincorporated business association such as a partnership, there
will often be no clear distinction between the property of the firm and the private property of the
partners.
(d) Limited Liability - An important attribute of incorporation as a company is that the liability of
the members is limited. This is arguably the main advantage of incorporation. Limitation of
liability is either by way of shares or by guarantee. Where limited by shares, the liability of the
members is limited to the amount unpaid if any on the shares they hold. Where the company is
limited by guarantee, the liability of the members is limited to such amount as the members will
have undertaken to contribute to the assets of the company in the event it is wound up. Section 19
of Companies Act provides that each subscriber for application for incorporation as a company
limited by guarantee must sign a declaration of guarantee specifying the amount he undertakes to
contribute to the assets of the company in the event it is wound up.
(e) Transferability of Shares - The shares of a company are freely transferable and can be sold and
purchased in the share market. This is another advantage over e.g. partnerships. Transferability is
recognized by s. 57 of the Companies Act “Share or other interest of a member of a company shall
be personal estate and movable property transferable by a written transfer in a manner prescribed
by the articles of the company.” This, shares are: (a) personal and movable property and (b)
transferable as such. However, the articles of a private company may impose restrictions on the
transferability of shares after they have been issued and transfer may only be done in accordance
with conditions laid down in the articles. See s, 16 and s. 65 of the Companies Act. Transferability
is an advantage to both the company and the shareholder. Thus the stability of the company is
assured as the shareholder will not withdraw anything from his share capital and on the other hand
the shareholder gets a marketable security which he can convert into liquid form as and when
desired. This in turn allows companies to raise large amounts of capital on the share markets
through IPOs or new share issues.
(f) Common Seal - A company, being an artificial person, cannot sign its name on any document. A
common seal of the company is thus used in place of a signature. S.195 states every company
shall have a common seal bearing the Company’s name and the words “common seal”. A rubber
stamp may not satisfy the requirements of s.195 of the Act.
(g) Capacity to Sue and Be Sued - As a legal person with independent existence, a company can file
suits against other persons in its own name and similarly it can be sued in its own name. No action
can be maintained in a company’s name without the authority of the company nor can a director
or shareholder be a proper plaintiff or defendant to an action to redress wrongs committed by or
against the company.

Piercing the Corporate Veil - Can be done:

(a) By the Judiciary - it is difficult to be precise about the circumstances under which a judge will lift
the corporate veil but it is a tactic that a judge will use to counter fraud, sharp practice, oppression
and illegality.
(b) By Statute - e.g. if number of members falls below 2 for more than 6 months.
Formation of a Company:
Before a company is formed someone would have conceived the idea alone or in association with others.
These are the promoters although the term promoter is one of commerce and not law. It is not defined in
the Companies Act and is a term of business that sums up in one word a number of business operations
familiar to the commercial world by which a company is brought into existence. Note: A promoter is not
 Companies Form 2

an agent of the company as an agency relationship cannot be formed before a principal is formed.
[Similarly, he/they are not trustees].
The promoters will decide such matters as (a) the company name, (b) the kind of business the company will
engage in, (c) if the company will be public or private (d) if the company will be limited by shares or
guarantee etc. After deciding on these issues the promoter(s) will take steps to actualize his/their intention.
Promoters play an important role e.g. they decide on the scope of the business of the company and if
necessary can negotiate the purchase of existing businesses or property. They instruct lawyers, accountants
etc. to prepare the necessary incorporation documents and they provide the necessary pre-incorporation
expenses. For a public company promoters also arrange for the preparation and publication of a prospectus.
Promoters may be an individual or a group/syndicate, or even a firm or other corporate body. A person can
not be called a promoter even if they have taken only a minor role in the formation of the company.
However, not everyone involved in the formation of a company is a promoter. Persons acting in a
professional capacity e.g. lawyers, accountants, engineers, etc. are not promoters in the eyes of the law
unless such persons exceed their professional mandate and take a peculiar interest in the formation of the
company.
Although not defined in the Companies Act, promoters are referred to in a number of sections of the
Companies Act Cap 388:
s.129 (2)(c) deals with civil liability for misstatements contained in a prospectus.
s. 132 deals with the waiting period when an invitation is made to the public to acquire shares.
s. 300 - a promoter is one of the persons who may be summoned to court in the process of winding up a
company for purposes of enquiring if he has any assets of the company or to supply any relevant
information relating to the company.
Although promoters are very important in the life of a company, the Act is unfortunately silent as to their
legal position. However, as far as the legal position of promoters vis a vis the company is concerned, the
common law has developed considerably. The position is that the promoter stands in a fiduciary
relationship with the company he floats. He is neither an agent nor a trustee but the old familiar principles
of the law of agency and trusteeship are applied. [He is not an agent because there is no principal - see
Kelner v Baxter, [1866], there is no trustee as there is no trust in existence. Erlanger v New Sombrero
Phosphate Co.]
Status of a Promoter
May not be defined in legal terms but many of the principles of the law of agency and trusteeship are
extended to the promoter/company relationship. It is therefore well settled that the promoter of a company
is accountable to it for all monies secretly received by the promoter, just as an agent is liable to his
principal for any secret profits. The same principles apply in relation to a trustee and the beneficiaries
(cestui que trust). This fiduciary relationship between the promoter and the company he floats imposes on
the promoter the following specific duties.
(a) The promoter may not directly or indirectly make any profit at the expense of the company without the
knowledge of the company. If he does so, he will be compelled to account for it. I.e. the company is
entitled to any profit that the promoter makes during formation.
Gluckstein v Barnes [1900] AC 240. A syndicate bought property for 140,000 pounds and resold it to the
company for 180,000 pounds. Previously, the syndicate had bought charges ion the property at a discount
and after they bought the property, the vendor paid these charges in full. He prospectus issued for the new
company showed only the 40,000 pounds the syndicate made on the sale of the property to the company
but no disclosure of the 20,000 pounds it made on the charges. However, the 40,000 pounds was disclosed
in a way that “excluded profits made on interim investments”. The House of Lords held that the promoters
were liable to account to the company for the 20,000 pounds made on the charges as well as the 40,000
pounds.
(b) Promoters should never be allowed to derive gain from the sale of their own property to the company
they float unless all material facts are disclosed (no conflict of interest). Where the promoter contracts
to sell his own property to the company without disclosing fully, then the company can either
repudiate the sale or affirm the contract and recover the profit made by the promoter. [Erlanger v New
Sombrero Phosphate Co. [1878] Note: it is not the making of a profit that the law seeks to forbid but
 Companies Form 2

any non-disclosure of this profit - see Salomon v Salomon - the profit was disclosed. The law only
requires that the promoter make a full disclosure.
(c) The promoter must not make any unfair/unreasonable use of his position. He is under a duty to avoid
anything that may suggest undue influence/fraud. This is a cross cutting issue.
(d) The promoter has a duty not only to be honest to the company and its shareholders but also to be
careful towards them as well. The standard of duty - Hedley Byrne & Co v Heller & Partners Ltd
[1964]. The promoters’ liability is imposed by both the common law and the Companies Act.

Promoters Liability
The liability of the promoter is imposed by both the Common Law and the Companies Act. It is important
to note that the rules under which a promoter will be liable for any secret profit made and for failure to
disclose are identical to the rules of the Common Law which impose liability on agents and trustees. The
Companies Act makes reference to the liability of a promoter in numerous sections, e.g.
S.129(1) - liability of promoter for misstatements or omissions in the prospectus issued to the public.
S. 119 and s. 136 - relating to the public issue of shares -impose obligations and liabilities on a promoter
without necessarily referring to them by that name.
Breach by the promoter of these fiduciary duties entitles the company to pursue the remedies available
under normal contractual and tortious principles. Thus a company may rescind any contract on discovery
of any secret profit made by a promoter or it may claim damages. Under the Companies Act both criminal
and civil remedies are prescribed against any erring promoter. Promotion of public companies is often
dome by professional promoters (accounting firms, finance houses etc.) whereas private companies are
normally promoted who may not have company promotion as their main business.

Remuneration of Promoters
Promoters cannot claim remuneration as a matter of right. They can only do so for services they provide
where there is a contract to that effect 1. If there is no contract, the promoter is not even entitled to recover
expenses incurred in the incorporation of the company. In Re: Clinton’s Claim [1908] 2 ChD 515 a group
promoted a company and incurred expenses of 400 pounds in registration fess and stamp duty. There was
no contract entitling the promoters to recover these expenses. The company shortly went into liquidation
and the question was whether the group could be reimbursed their costs. Held: the expenses were NOT
recoverable.

The Articles of a Company generally empower the Directors to pay the preliminary expenses out of
company funds. However, even in these circumstances there is, in law, still no binding contract between
the principal and the company. In practice the promoters will often be the first directors of the company
and so will ensure that they receive their remuneration anyway. Where a promoter is entitles to
remuneration, the mode of payment will either be (a) a lump sum, (b) issuance of shares to the promoter,
(c) payment of a commission or (d) granting of discounts on shares.

Pre-Incorporation Contracts
These are necessarily entered into by a promoter, on behalf of the company, before it is incorporated. At
Common Law, where a contract is entered into by the promoter before the company is incorporated, the
Company is not bound. However, promoters do enter contracts on behalf of unborn companies, which
contracts may relate to property that the promoter may wish to buy for the company or may relate to the
acquisition of an existing business. These need the promoter to enter into a contract with the vendor. In Re:
English and Colonial Produce [1906] 2 ChD 435 the court reiterated the common law position that the
company will not be bound by a contract entered into before incorporation Here, a solicitor was engaged
by a promoter to draft the memorandum and articles of association of a proposed company and to attend to
registration. He prepared the documents and paid the registration fees. He then filed a suit against the
company to recover his fees and the expenses he incurred. Held: the company was not liable to pay for the
services and reimburse the expenses of the solicitor. See also Kelner V Baxter.

Although the law provides that a person who enters into a contract on behalf of an unincorporated
company is personally liable on the contract, it does not follow that that person can enforce the contract -

1
Note: a contract under seal - consideration can be past.
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see Newborn ……..[1953] 1 All ER 708. In practice the principal often binds himself personally on
condition that his liability will abate once the company is formed and adopts the contract. For public
companies, such contracts must be disclosed in the prospectus or statements made in lieu of a prospectus.
See s. 124(1)(e) and also in terms of the Fourth Schedule, clause 28(b) and clause 46.

The position on pre-incorporation contracts was considered by the Jenkins Committee [1960/62] that has
influenced the Zambian Cap 388. The Committee concluded that the position was unsatisfactory. It
observed, “It frequently happens that a person engaged in forming a company has company notepaper
printed and orders supplies thereof prior to the incorporation of the company. Under the present law, the
company when formed cannot unilaterally adopt the resulting contract but must make a new contract with
the parties concerned. The unsatisfactory position of the person contracting with another, acting on behalf
of a company not yet formed is reflected in the recent case of Newborn ….”

The Roman Dutch system presents a completely different system for the common law. Under the principle
known as Stipulatio Alteri that system allows the enforcement of contracts for the benefit of third parties.
The third party can enforce the contract even if it was not in existence when the contract was concluded.
Before the passage of the current Companies Act is 1994. the position of the law in Zambia with regard to
pre-incorporation contracts was the same as in England at the time of the Jenkins Committee. Previous
Acts did not address the issue specifically. 1994 Act now adopts a combination of the Roman Dutch
system and the recommendations made by the Jenkins Committee in the early 1960s and has specifically
provided for pre-incorporation contracts. Thus section 28 reads:
S.28)(1) If a person purports to enter into a contract not evidenced in writing in the name of or on behalf of
a company before it comes into existence, the person shall be bound by the contract and entitled to the
benefits thereof.
(2) If a person purports to enter into a contract evidenced in writing in the name of or on behalf of a
company before it comes into existence, the person shall be bound by the contract (in this section called
"the relevant contract") and entitled to the benefits thereof except as provided in this section.
(3) The company may, not later than fifteen months after its incorporation, adopt the contract by an
ordinary resolution, and upon the adoption, subject to subsection (4)-
(a) the company shall for all purposes be bound by the contract and entitled to the
benefits thereof as if the company had been in existence at the date of the contract
and had been a party thereto; and
(b) the person who purported to act in the name of or on behalf of the company shall
cease to be bound by or entitled to the benefits of the contract.
(4) Subject to subsection (5), whether or not the relevant contract is adopted by the
company, the other party to the contract may apply to the court for an order fixing
obligations under the contract as joint or joint and several, or apportioning liability
between or among the company and the person who purported to act in the name of or on
behalf of the company, and upon such application the court may make any order it thinks
just and equitable.
(5) Subsection (4) does not apply if the relevant contract expressly provides that the
person who purported to act in the name of or on behalf of the company before it came
into existence shall not in any event be bound by the contract nor entitled to the benefits
thereof.
Incorporation of Companies - Necessary Steps
The Companies Act Cap 388 simplified the procedure for the formation of companies in Zambia and
introduced a departure from the practice in many Commonwealth countries including the UK. A
person wishing to incorporate a company in Zambia (i.e. the promoter - also a checklist for a lawyer
who is as\ked to form a company for a client) will need to ask himself a number of questions
including the following:
 Companies Form 2

(a) What will be the name of the company?

(b) What business will the company undertake?
(c) How much money will the business require to start operating - i.e. what is to be the share capital?
(d) Will liability of shareholders be limited or not?
(e) Who will be the shareholders and directors?
(f) Where will the registered office of the company be?
(g) What rules will govern the company once formed?

Name - Name clearance

In terms of section 37(3) and (4) the Registrar of Companies shall not register as the name of a company a
name that is likely to cause confusion with the name of an existing company or one that suggests that the
company will enjoy the patronage of the President [Note: Institution of the Presidency rather than any
current incumbent]. A name that suggests that the company enjoys the patronage of the President may only
be registered and used after obtaining the written consent of the Minister responsible for Commerce. The
first formal contact that the promoter will have with the office of the Registrar of Companies is at the name
clearance stage. S 37(5) provides that a person wishing to incorporate a company may request the Registrar
on the acceptability of the proposed name. In practice this always happens and is called name clearance.
Some names would be undesirable because they would (a) cause confusion with the names of other
companies, (b) be suggestive of impropriety, (c) be deceptive or (d) be blasphemous

37. (1) A public company shall have a name the last word of which is "PLC".
(2) Subject to this Division, a private company limited by shares or a company limited by
guarantee shall have a name the last word of which is "Limited".
(3) The Registrar shall not register as the name of a company a name which in his
opinion is likely to cause confusion with the name of another company or is otherwise
undesirable.
(4) The Registrar shall not, without the written consent of the Minister, register as the
name of a company a name which in the Registrar's opinion suggests that the company
enjoys the patronage of the President.
(5) The Registrar may, at the request of persons who intend to form an incorporated
company, give an opinion on the acceptability of a proposed name.
Name clearance - involves writing a letter to the Registrar asking if a stated name is
available for registration. Now there is a standard form. Upon receipt of this form the
office of the Registrar conducts a name search to see if (a) there is already an existing
company using this or a similar name that may cause confusion, (b) if there is any other
reason why the name is undesirable e.g. if it may cause offence, is blasphemous etc. A
search fee of K 10,000 is payable. The Registrar will only clear the name upon being
satisfied with the search and on confirmation that the name is available for registration.
Although the wording of s. 37(5) does not appear to impose a strict requirement to obtain
a name clearance, it is in fact an important mandatory step for incorporating a company
in Zambia.
A person desiring to form a company may proceed in terms of s. 38 to have the name reserved for a period
of 3 months for a further fee of K 50,000.

38. (1) A person or persons who propose to form a company may, subject to this section,
reserve a name for the company by lodging with the Registrar an application in the
 Companies Form 2

prescribed form specifying the name proposed to be reserved (in this section called "the
reserved name"). Reservation of name
(2) If the reserved named is acceptable to the Registrar and the Registrar is satisfied that-

(a) the reserved name is a registered business name of the person or persons;
(b) the reserved name is the name of an unincorporated association consisting of
or represented by the person or persons;
(c) the reserved name is a name under which the person or persons are trading or
conducting business, or is such a name with minor modifications or additions;
or
(d) the person is a body corporate other than a company and the reserved name is
the name of the body corporate or that name with minor modifications or
additions;
the Registrar shall register the name as reserved by the person or persons for a period of
three months.
(3) While the name is so registered-
(a) subject to this Act, the person or persons shall be entitled to incorporate a
company under the name; and
(b) the Registrar shall treat the proposed name as the name of a company
incorporated by the person or persons for the purposes of determining the
acceptability of any other name as the name of a company.
Under the Registration if Business Names Act Cap 389 any person(s) wishing to carry on business under a
name not consisting of his true Christian and surnames must register this business name with the Registrar
of Business Names. Again the Registrar of Business Names will not register any name if, in her opinion
that name is in some way undesirable or confusing with an existing mane. The Registrar is also empowered
to remove any name from the register which she believes to be undesirable but was registered through
inadvertence - s.16(1) of Cap 389. Cap 389 applies mainly to sole proprietorships, partnerships and firms S.
38(2) of Cap 388 provides an important nexus between unincorporated entities registered under cap 389
and companies proposed to be incorporated under Cap 388. That section provides:

“That if the reserved name is acceptable to the Registrar and the Registrar is satisfied that the reserved
name is a registered name, the Registrar shall register the name reserved by the person.”

A name that is used by an unincorporated business association which wants to transform into a registered
company may therefore be used by the proprietor without the requirement of name clearance. So, although
there are no clear instructions in this aspect, any person wishing to use the name already registered under
the Business Names Act only requires to deliver to the Registrar of Companies the relevant incorporation
application documents together with a notice of cessation of business entered under section 15 of the
Business names Act along with the Certificate of Business name issued under the Registration of Business
Names Act. The notice of cessation of business is Form 8 in the Registration of Business Names Act.

Reservation of a name pending incorporation is rarely done in practice. As a person wishing to incorporate
a company, you will normally have prepared all the necessary incorporation documents while waiting for
the name clearance and you will lodge them immediately the name is cleared. The final point to note about
the name is that under s. 37 (1) and (2) the name should end with the word “limited” if a limited company
and “plc” if a public company. Curiously s. 37 does not direct that an unlimited company should end with
the word “unlimited”.

Once the issue of name clearance is concluded a person wishing to incorporate a company must then
complete a number of forms each requiring separate details to be furnished. This is unlike the position
 Companies Form 2

before 1994 when incorporation of a company was by subscription to the Memorandum and Articles of
Association. Today, incorporation is done by application that is done by the persons wishing to incorporate
a Company subscribing their names to an application for incorporation, which is a prescribed form.

Section 6 of the Act states that any two or more persons associating for a purpose may form an
incorporated company by subscribing their names to an application for incorporation. The current Act
dispensed with the Memorandum of Association. Also it is not clear why the new Act dispensed with any
reference to “associated for any lawful purpose which were used in the pre-1994 Act.

Why is the reference to “ associated for any lawful purpose dispensed with”? One would suppose that the
drafters of the new Act intended to avoid tautology since any company incorporated under the Companies
Act will be presumed to have been incorporated for lawful purposes. This would however be too assuming
for, as will be shown later, the Articles of Association of the Act create a contract amongst members
themselves and between members and the company and it is arguable, as provisions stand in the current
Act, if persons associate and form a company for unlawful purpose e.g. money laundering but do not say so
in the application for incorporation, the company is not necessarily illegal from inception but will be only
illegal when it executes the illegal and unlawful object. If on the other hand the provisions as they stood in
the pre 1994 Act were still in place, an agreement by members to associate for any illegal purpose would
make the association illegal from inception. The two scenarios presented are different, but the pre 1994 one
is preferable.

Application for Incorporation

The application for incorporation is in a prescribed form requiring the applicant to furnish very specific
details. The prescribed forms are:
Company Form I – Public Companies
Company Form II – Companies limited by shares
Company Form I – Companies limited by guarantee
Company Form I – Unlimited Companies
The application form for incorporation requires:
(a) Name of the Company
(b) General nature of business of the company stating the principal business and other business the
company will undertake.
(c) Statement whether the articles of the Company do or do not restrict the business the company will
do and if it restricts the type of business it will undertake, in what way does it restrict.
(d) The situation of the registered Company office
(e) The postal address of the company
(f) The nominal capital of the company and its division
(g) Whether the articles place any limit on the number of shareholders or not
(h) The date of the beginning of the second anniversary year of the company if not date of anniversary
of incorporation
(i) Particulars of the first directors including their present forenames, surnames, former forenames
and surnames, NRC/passport numbers, their residential and postal addresses, their occupation and
their directorships, if any, in other corporate bodies.
(j) Particulars of the first company secretary, again same details as for directors.

The application form has a subscription section, which requires an indication of the names of the members
and their personal details e.g. sex, NRC Nos. etc. and the number, and class of shares each proposes to
have. At the bottom is a requirement for the subscription to be signed and witness also to sign. It is
important to note that under the current Companies Act, although the application form for incorporation has
not replaced the memorandum of Association as previously required, virtually all the information required
to be furnished is the same as needed to be furnished in the Memorandum of Association i.e. name of
company, registered office, liability clause, capital, subscription for association provision. Under the old
nomenclature, these provisions were classified as clauses.
Name Clause
We have already seen that a company cannot use a name that is undesirable or identical with that of an
existing company or which is suggestive that it enjoys the patronage of the President. Also that the name
 Companies Form 2

should end with Ltd and Plc as appropriate. Where the name so closely resembles the name of an existing
co. the Registrar is empowered under s.42(1) to direct that the company should change its name. This is
where the Registrar is of the opinion that the name will cause confusion or is otherwise undesirable. If he is
not of that opinion he will not exercise his s.42 powers but any company whose name resembles the new
name may apply to court to restrain the new company from using the name as the name is part of the
company’s business reputation and goodwill. The court, if satisfied will grant the application.
Ewin v. Buttercup Margarine [1917] 2 CH 1 Here the plaintiff carried on business under the company
called Buttercup Dairy Co. and the new company was to be called Buttercup Margarine Ltd. was
incorporated with that name. The plaintiff brought an action against the new company for an order
restraining it from using this name as it created an impression that the two companies were closely
connected. The CA granted the application.
Where however the name of a company does not create an impression that it is connected with an existing
business or its business will be very different from that of an existing company, there may not be confusion
and the court will not grant an application. Thus: in The Society of Motor Manufacturing and Traders Ltd.
v. Motor Manufacturers’ and Traders Mutual Insurance Co. Ltd. [1925] 1Ch 675 the court declined to grant
an injunction. The court held that the name of the new company could not be regarded as one calculated to
deceive as the name did not suggest that the companies were connected or associated with each other. Also,
the court held that the first company was a trading company while the second was an insurance company.
Where a firm has carried on business under a partnership name for a considerable period without an
objection being made, the right to restrain the company may be lost. In terms of s.40 a company may at any
time change its name by passing a special resolution to that effect.
The Objects of a Company
In early Company Acts in England and elsewhere, it was envisaged that companies would be a medium
sized enterprises, bigger than family businesses but still not too big e.g. like the BSA company became. It
was thus thought desirable for a company to set out its proposed activities clearly so that any potential
investor knows precisely the kind of business in which he is investing. It was thought undesirable for an
investor to invest in a drinks company because he believed there was a good future in that area to see the
company transform itself into e.g. an explosives company. Further people dealing with the company ought
to know the powers of the company and in this way creditors would have a greater degree of protection
because they would know the company was founded for sound objectives. It was also considered in the
public interest if a companies powers and activities were confined to a defined area and that the company
does not exceed these powers or activities. This briefly explains the theory on the basis of which is a wealth
of case law as to the activities of a company has evolved. Thus, the position was that if a company
exercised powers outside its Memorandum of Association or carried out activities that were not specified,
the company’s acts were null and void due to the ultra vires doctrine - see Ashbury Railway Carriage and
Iron Co. v Riche [1875].
The High Court of Zambia had occasion to consider the effect of a contract that was beyond the powers of
a company as set out in its Memorandum of Association in the case of J.P. Karnezos v Hermis Safaris
[1976] HP 526. The defendant company which was engaged predominately in the business of
transportation entered into a contract to buy 7,484 bags of burnt maize from the plaintiff for K 9,729.20
Having taken delivery of about half the amount, the Manager and MD was deported. Consequently the
company failed to perform the rest of the contract. On an action for the price, Sakala J as he then was
agreed with the defendant that the company had no power under its Memorandum of Association to buy
burnt maize. Sakala said “applying the law as I find it I have to regrettably hold and I so hold that the oral
agreement entered into between the plaintiff and the defendant Company was ultra vires and void on the
ground that the company had power to buy burnt maize.”
Whether or not a contract or any activity is ultra vires the objects of a company is a matter of language and
the usual rules of construction apply. Firstly, the courts will imply a term into the objects clause even if it is
not expressly provided for so long as it is incidental to or consequential upon the objects stated in the
Memorandum. In: Foster v London Chatham & Dover Railway [1895] 1 QB 711 a company constructed a
railroad over a series of arches and then let out the arches as shops and workshops. The letting out of the
arches as workshops was objected to by irate neighbours and contended that doing so was ultra vires the
Company’s objects. The court held however, that the letting out of the arches was fairly incidental to the
 Companies Form 2

powers of the company and was thus valid. To hold otherwise, the court held, would be as bad as
contending that railway companies could not sell the hay that grows on their railway banks so as to make
something out of it.
Secondly came the independent clauses provision that meant that each clause of a company was
independent from the other. In Re: German Date Coffee Co. [1882] 20 Ch D 169 the Memorandum of
Association stated that the company was created to work out a German patent which would be granted for
making coffee from dates and also to acquire or produce any other invention for similar purposes and to
import and export all descriptions of produce for the purpose of food. The German patent was never
granted to the company but the company acquired a Swedish patent and the company started work in
Hamburg where the company made and sold coffee without a patent. Some shareholders withdrew from the
company when they heard a German patent was not given while others desired the business to continue.
Two shareholders then petitioned for the winding up of the company. The Court held that as the main
object - that of obtaining a German patent - failed, the company could not? continue business on other
objects, which were stand alone

Several other documents have to be filed along with the application for incorporation including a document
called the Articles of Association. S.6 through to s.12 of the Companies Act are pertinent here. These are
set out below:

6. (1) Subject to this Act, any two or more persons associated for any purpose may form
an incorporated company by subscribing their names to an application for incorporation
that satisfies this section and lodging it with the Registrar, together with- Application for
incorporation
(a) any proposed articles of the company;
(b) a statutory declaration in accordance with section nine;
(c) a signed consent from each person named in the application as a director or
secretary of the company to act in the relevant capacity; and
(d) a declaration of guarantee by each subscriber, if the company is to be limited by
guarantee.
(2) An application for incorporation shall be in the prescribed form, shall be signed by
each subscriber and shall specify-
(a) the proposed name of the company;
(b) the physical address of the office to be the registered office of the company;
(c) a postal address to be the registered postal address of the company;
(d) the type of company to be formed;
(e) if the company is to have share capital-
(i) the amount of share capital of the company;
(ii) the division of the share capital into shares of fixed amount; and
(iii) the number of shares each subscriber agrees to take;
(f) the particulars referred to in subsection (2) of section two hundred and twenty-four of at least two
persons who are to be the first directors of the company
(g) the particulars referred to in subsection (3) of section two hundred and twenty-
four of the person or persons who are to be the first secretary or joint secretaries
of the company;
(h) the name and address of the individual lodging the application; and
(i) such other information respecting the application, the company and the nature of
its proposed business as the prescribed form may require.
 Companies Form 2

(3) The application for incorporation may also specify a date, being a date not more than
fifteen months after the date of lodgement of the application, on which the second
financial year of the company will begin.
(4) The application for incorporation and the documents lodged with it shall be printed or
typewritten.
(5) The application for incorporation shall be signed by each subscriber in the presence of
at least one witness who attests to the signature.
(6) An individual shall not subscribe to an application for incorporation if he-
(a) is under eighteen years of age;
(b) is an undischarged bankrupt under the laws of Zambia;
(c) subject to an order by the court, is an undischarged bankrupt under the laws of
another country; or
(d) is of unsound mind and has been declared to be so by the court or a court of
competent jurisdiction of another country.
(7) The incorporation of a company shall not be invalid by reason only that an individual
or individuals subscribed to the application for incorporation in contravention of
subsection (6).
7. (1) A company may have articles regulating the conduct of the company. The
articles of a company
(2) The articles may contain restrictions on business that the company may carry on.
(3) Where a provision in the articles is inconsistent with this Act or any other written law,
the provision is invalid to the extent of the inconsistency.
(4) The articles of a company may adopt the regulations of the Standard Articles, or any
specified regulations thereof.
(5) The articles of a public company or a private company limited by shares shall be
deemed to have adopted the regulations of the Standard Articles except insofar as the
articles exclude or modify those regulations.
(6) The articles of a company shall be divided into paragraphs numbered consecutively.
8. (1) Subject to this Act, and to its articles, a company may amend its articles if it passes
a special resolution approving the amendment. Amendment of articles
(2) If a company passes a special resolution approving the amendment of its articles, it
shall within twenty-one days after the date of the resolution lodge a copy of the resolution
with the Registrar together with a copy of each paragraph of the articles affected by the
amendment, in its amended form.
(3) The articles have effect in their amended form on and from the day of their lodgment
with the Registrar or such later date as may be specified in the resolution.
 Companies Form 2

(4) If a company fails to comply with subsection (2), the company, and each officer in
default, shall be guilty of an offence, and shall be liable on conviction to a fine not
exceeding three monetary units for each day that the failure continues.
9. (1) An application for incorporation shall be accompanied by a statutory declaration
that the requirements of this Act in respect of registration and of matters precedent and
incidental thereto have been complied with, made by- Statutory declaration as to
compliance with the Act
(a) a legal practitioner having a practising certificate who was engaged in the formation of the
company; or
(b) a person named in the application as a first director or secretary of the company.

(2) The Registrar may accept the declaration as prima facie evidence of compliance.
10. (1) Where an application for incorporation and the documents referred to in section
six have been duly lodged, the Registrar shall, subject to this Act, issue a certificate in the
prescribed form stating that the company is, on and from the date specified in the
certificate, incorporated and that the company is the type of company specified in the
application for incorporation.Certificates of incorporation and of share capital
(2) If the company has share capital, the Registrar shall, at the same time, issue a
certificate stating-
(a) the amount of share capital of the company; and
(b) the division of the share capital into shares of a fixed amount.
(3) The Registrar shall keep a copy of each certificate issued under this section, and this
Act shall apply to the copies as if they were documents lodged with the Registrar.
11. On and from the date of incorporation specified in the certificate of incorporation,
but subject to this Act, there shall be constituted an incorporated company by the name
set out in the certificate. Incorporation of the company
12. (1) The Registrar shall maintain a register of companies in which is entered, in
respect of each company- Register of companies
(a) a chronological record of the prescribed particulars, and of any other particulars which the
Registrar thinks fit, in relation to the company; and
(b) a record of the documents lodged under this Act in respect of the company, other
than documents whose only effect is to change particulars recorded under
paragraph (a).
Section 6(1) provides that any proposed Articles of Association may be submitted with the application for
incorporation. Traditionally the Articles of Association have served as the rules governing the relations
between the members of the company inter se, while the Memorandum of Association in jurisdictions
where it is still a requirement (and in Zambia before 1994) is understood to be a charter of the Company
governing its relations with the outside world by setting out the objects and powers of the company. The
Articles govern the internal relationships between members of the company and deal with such matters as:
(a) The share capital of the company
(b) Changes in the share capital
(c) Appointment of the Directors and their powers.
(d) Conduct of Meetings etc.
 Companies Form 2

Under the old Co. Act there was a Memorandum of Association and also every co. was required to have
Articles of Association when being incorporated failing which it would be deemed to have adopted the
standard articles set out in table A of the old Co. Act. A question that is pertinent today is whether every
company that is registered in Zambia ought to have Articles of Association. S. 6 of the Act provides that
the documents to be filed along with the application for incorporation are “any proposed articles” and
Section 7, by using the word “may”, suggests that there is no mandatory requirement for a company to have
articles - this is bad drafting. Section 7 then proceeds to give other attributes of Articles as set out below:

7. (1) A company may have articles regulating the conduct of the company.
(2) The articles may contain restrictions on business that the company may carry on.

(3) Where a provision in the articles is inconsistent with this Act or any other written law,
the provision is invalid to the extent of the inconsistency.
(4) The articles of a company may adopt the regulations of the Standard Articles, or any
specified regulations thereof.
(5) The articles of a public company or a private company limited by shares shall be
deemed to have adopted the regulations of the Standard Articles except insofar as the
articles exclude or modify those regulations.
(6) The articles of a company shall be divided into paragraphs numbered consecutively.
The use of the words “any proposed articles” in s. 6 and “a company may have articles” in s. 7 point to the
absence of a mandatory requirement for articles. The phrases used in the two sections are clearly
permissive. Leaving alone the argument of the absurdity of a Co. operating without rules and regulations
governing the conduct of its internal business and construing the provisions of the Act strictly, it is tenable
to argue that a Co. may be incorporated without articles.

S. 7(4) provides that the Articles of a Co. may adopt the regulations contained in the Standard Articles This
section presupposes that for a Co. to adopt the Standard Articles it must have some sort of articles of its
own in the first place. The position would have been clearer if the ss. had simply said “may adopt the
Standard Articles”.

Also s.7(5) provides “The articles of a public company or a private company limited by
shares shall be deemed to have adopted the regulations of the Standard Articles except
insofar as the articles exclude or modify those regulations.” The same argument can be
advanced here. For any public/private Co. limited by shares to be deemed to have
adopted the Standard Articles it must in the first place have Articles.
It is not clear why s.6 and s. 7 were deliberately drafted in a fashion suggesting the absence of a mandatory
requirement for a company to have Articles at the time of its incorporation. It is not clear why there is no
express provision that every Co. shall have articles at the time of registration and if not the Standard
Articles will apply.

[Note: where a provision in any Articles is inconsistent with the Act or any written law, such provision will
be invalid to the extent of such inconsistency.]

Besides the Application for Incorporation and any proposed Articles, the other documents to be filed are:
[A] A statutory declaration known as the “Declaration of Compliance” and is given in Form 11 of the
Act Section 9 states:
 Companies Form 2

9.1) An application for incorporation shall be accompanied by a statutory declaration that

the requirements of this Act in respect of registration and of matters precedent and
incidental thereto have been complied with, made by-
(c) a legal practitioner having a practising certificate who was engaged in the formation of the
company; or
(d) a person named in the application as a first director or secretary of the company.

(2) The Registrar may accept the declaration as prima facie evidence of compliance.
[Note: the this Declaration is done “solemnly” in terms of the Statutory Declarations Act of 1835 and the
Registrar may accept it as prima facie evidence of compliance with the Act] Form 11 is given below:

Companies Form 11
DECLARATION OF COMPLIANCE
(Section 9)
Company Registration No. .....................................
To: THE REGISTRAR OF COMPANIES:
I,
of

do solemnly and sincerely declare that I am: *a legal practitioner engaged in the formation of the
company/a first director named in the application for incorporation/or the first secretary named in the
application for incorporation
of
(name of company)
and that all the requirements of the Companies Act, 1994, in respect of matters precedent to the
incorporation of the Company and incidental thereto have been complied with. And I make this solemn
declaration conscientiously believing the same to be true and by virtue of the provisions of the Statutory
Declarations Act, 1835, of the United Kingdom.

Declared at
the day of............................................................, 20...........
Before me,
...............................................................................................................
(Commissioner for Oaths, or Notary Public)
*Delete whichever is not applicable
[B] A Signed Consent Form - from each person named in the application as Director or
Secretary consenting to act in the relevant capacity. Form 5 is used.
Companies Form 5
DECLARATION OF CONSENT TO ACT AS DIRECTOR OR SECRETARY
(Section 6)
Company Registration No. .....................................
To: THE REGISTRAR OF COMPANIES:
*I/*We, the undersigned, hereby testify *my/*our consent to act as director or secretary
to the proposed company
 Companies Form 2

..........................................................................................................................................
(company name)
pursuant to paragraph (1) (c) of the Companies Act 1994.
Signature Address Description
Note: If a director or secretary signs by his agent authorised in writing, the authority must
be produced and a copy filed.
Dated this..................................day of..................................20.........
[C] For a Co. Limited by Guarantee - a “Declaration of Guarantee” must be filed by
each subscriber.
Section 10: On receipt of the complete application documents the Registrar shall issue a
certificate of incorporation (and a certificate of share capital) in the prescribed form
stating that the Co. is on and from the date specified in the certificate, incorporated as a
Co. of the type specified in the application for incorporation.
10. (1) Where an application for incorporation and the documents referred to in section six have been duly
lodged, the Registrar shall, subject to this Act, issue a certificate in the prescribed form stating that the
company is, on and from the date specified in the certificate, incorporated and that the company is the type
of company specified in the application for incorporation. Certificates of incorporation and of share
capital
(2) If the company has share capital, the Registrar shall, at the same time, issue a certificate stating-
(a) the amount of share capital of the company; and
(b) the division of the share capital into shares of a fixed amount.
(3) The Registrar shall keep a copy of each certificate issued under this section, and this
Act shall apply to the copies as if they were documents lodged with the Registrar.
Conversion of A Company from One Type to Another
[A] Conversion from a Private Company to a Public Company
This may be done (i) by choice or (ii) by default
 Conversion by choice: is specified in s.35 and is done when a special resolution is
passed which approves the conversion from a private to a public company and also
approves the amendment to the Articles to satisfy the requirements of section 14
(that deals with what the Articles of a Public Co. must contain). On satisfying s. 35
a company must within 21 days lodge with the Registrar an application in the
prescribed form for the conversion, together with the following documents.
i. The Special Resolution
ii. The Certificate of Incorporation
iii. Copy of the Articles highlighting the amendments
iv. A Statement by a director and secretary of the company confirming that the
requirements of s. 35 have been complied with and also that in their view the
company was solvent.
v. A certificate by auditors of the company made not more than 3 months before
the date of application certifying that they have investigated the company’s
affairs and that the company was solvent at the date of the certificate.
 Companies Form 2

Upon receipt of the complete application, the Registrar shall issue a replacement
certificate of incorporation and make appropriate entries in the company register. From
the date the certificate is issued, the company is converted into a public company and
will be expected to make all the necessary adjustments appropriate to its new status.
[Note: when converting from one type of company to another, the company retains its
own legal identity throughout and does not at any time cease to have corporate status
see s. 36(5) which reads:
S.36 (5) The conversion of the company under this section shall not alter the identity of
the company, nor affect any rights or obligations of the company except as mentioned
in this section, nor render defective any legal proceedings by or against the company.]
 Conversion by Default: A private company is expected to comply with certain
requirements E.g. it should limit its members to no more than 50 and it must NOT
invite members of the general public to subscribe to shares or debentures in the
company. S.60(5) provides that a private company whose members are more than
50 or which invites the general public to subscribe for its shares or debentures may
ultimately be deemed to have been converted from a public to a private company.
This is in essence, conversion by default.
[B] Conversion of a Public Company in to a Private Company
Circumstances may arise where the shareholders of a public company decide to have
more flexibility in the manner in which the company is run and to avoid the necessity of
making the company’s affairs public. This can be achieved by converting from being a
public company to being a private company under s. 34.
S. 34 - a Public company can convert to being a private company limited by shares if a special resolution is
passed approving the conversion and amending the Articles to satisfy the provisions of ss.16 & 17 if the
Articles do not satisfy those sections. Thus there must be (a) a Special Resolution and (b) an amendment to
the Articles so as to include restrictions on the number of members and to remove provisions allowing the
public to subscribe for shares and removing all other provisions that are inconsistent with the requirements
for a private company.
Once s.34 is complied with, the company must within 21 days lodge with the Registrar
the following documents:
i. The Application for conversion in the prescribed form;
ii. Special Resolution approving the conversion
iii. The Certificate of Incorporation
iv. Copy of the Articles highlighting the amendments
v. A Statutory Declaration by a director and secretary of the company
confirming that the requirements of s. 34 have been complied with and also
that in their view the company was solvent.
vi. A certificate by auditors of the company made not more than 3 months before
the date of application certifying that they have investigated the company’s
affairs and that the company was solvent at the date of the certificate.
vii. Certified copies of every Balance Sheet, Trading and Profit and Loss Account,
Directors’ Reports, Group Accounts etc. sent to members of the company in
the preceding 12 months if the company has been in existence for more than
15 months.
 Companies Form 2

Upon receipt of the complete application, the Registrar “shall2” issue a replacement
certificate of incorporation and make appropriate entries in the company register. From
the date the certificate is issued, the company will be deemed to have converted into a
private company and is obliged to make all necessary adjustments appropriate to bring its
position in accordance with this new status.
[C] Conversion: Private Company limited by shares to Co. limited by Guarantee
It is possible to convert a company limited by shares into a company limited by guarantee and vice versa.
S.19(5) => a company limited by guarantee is not allowed to operate with a profit motive 3. If the members
of a private company want to change to a company with charitable/non-profit making objectives, they can
do so under s. 30 of the Act. The conditions precedent for such a conversion is set out in s.30:
30. (1) A private company limited by shares may be converted into a company limited by guarantee if:
(a) there is no unpaid liability on any of its shares;
(b) all its members agree in writing to such a conversion;
(c) a special resolution amending the articles to satisfy section nineteen is passed,
if the articles do not satisfy that section; and
(d) each member makes a declaration of guarantee.
The latter declaration specifies the amount that a member undertakes to contribute to the
assets of a company in the event it is wound up. When these conditions are satisfied, the
company must within 21 days, lodge with the registrar an application for conversion in
the prescribed form together with the documents specified in s.36(4). Thus section 36 (1)
and 36(4) reads:
36. (1) If the requirements of section thirty, thirty-one, thirty-two, thirty-three, thirty-four
or thirty-five (in this section called "the conversion section") are satisfied with respect to
a company, the company shall, within twenty-one days after the conversion section's
becoming satisfied, lodge with the Registrar an application in the prescribed form for
conversion of the company in accordance with the resolution or agreement, together with
the documents referred to in subsection (4).
(4) The documents to be delivered to the Registrar are the following:
(a) the company's certificate of incorporation;
(b) a copy of each paragraph in the articles affected by any amendment, in its
amended form;
(c) a copy of the special resolution or written agreement by the members referred
to in the conversion section;
(d) the declarations of guarantee by each member, if the company is being
converted to a company limited by guarantee;
(e) a statutory declaration by a director and the secretary of the company stating-
(i)that the conditions of the conversion section have been complied with &

2
Does the Registrar have any discretion? See N. Rhodesian case - he does have discretion (whether to incorporate or to convert
companies) despite the word “shall” but this is subject to judicial review.
3
Note also 39. (1) The Registrar may, on the application of a company limited by guarantee, grant the company written permission to
omit the word "Limited" from its name for the purposes of this Act apart from this Part.
(2) The Registrar may grant the permission on such conditions as he thinks fit, and those conditions shall be binding on the company
and shall, if the Registrar so directs, be inserted in the articles of the company.
(3) The Registrar may revoke the permission at any time, after giving written notice to the company of his intention to do so and
considering any objections of the company.
 Companies Form 2

(ii) that in their opinion the company is solvent;

(f) a certificate by the auditors of the company, made not more than three months
before the date of the application, that they have investigated the affairs of the
company and that the company is solvent at the date of the certificate;
(g) certified copies, certified by a director and the secretary of the company, of
every balance sheet, profit and loss account, group accounts, directors' report
and auditors' report sent to the members of the company in the preceding
twelve months, if the company is being converted from a public company to a
private company and has been incorporated as a public company for more
than fifteen months.
As per s.36(2) the Registrar shall issue a replacement certificate of incorporation and make the necessary
changes in the register as appropriate. Thus 36(2) reads:
(2) On receiving the application the Registrar shall-
(a) issue a replacement certificate of incorporation in the prescribed form worded
to meet the circumstances of the case and stating the date of conversion of the
company; and
(b) make such entries in such registers as he considers appropriate.
From the date of the certificate, the company is deemed to have been converted and will be expected to
take all steps to comply with its new status. Thus s. 36(3) reads:
(3) On and from the date stated in the certificate as the date of conversion.
(a) the company shall be converted into a company of the status sought;
(b) if the company is being converted from a company with share capital to a
company limited by guarantee, the shares therein shall be validly surrendered
and cancelled notwithstanding section seventy-six;
(c) the articles of the company shall be amended in accordance with the
documents lodged with the application; and
(d) where this Act requires different words to be the last words of the name of a
company of the new status, the name of the company shall be changed
accordingly.
Note: in practice conversion of private companies limited by shares to companies limited by guarantee are
very rare and hardly ever happen. Persons who associate for profit are unlikely to change the essence of
their association to be non-profit making. Where it is desirable for the same individuals to associate for a
non-profit cause, the usual thing to do is to set up a different vehicle altogether i.e. a company limited by
guarantee.
A company limited by guarantee may likewise be converted a company limited by shares (or an unlimited
company) by complying with s. 32 i.e.
32. A company limited by guarantee may be converted into a company limited by shares or an unlimited
company if-
(a) all the members agree in writing-
(i) to convert the company into such a company; and
(ii) to a share capital for the company and the division thereof into shares of
fixed amounts; and
(b) each member agrees in writing to take up a specified number of shares.
The application must be made in the prescribed form to the Registrar of Companies and is accompanied by
the documents set out in s.36 (4) as stated above.
 Companies Form 2

[D] Conversion: Private Co. Limited by Shares to Unlimited Co. & vice versa
Sections 31 and 33 provides for these conversions and read as follows:
S.31. A private company limited by shares may be converted into an unlimited company if all its
members agree in writing to its conversion.
S. 33. (1) An unlimited company may be converted into a private company limited by
shares or a company limited by guarantee if-
(a) all its members agree in writing to its conversion;
(b) a special resolution amending the articles to satisfy section seventeen or
nineteen, as appropriate, is passed, if the articles do not satisfy section
seventeen and nineteen, as appropriate; and
(c) each member makes a declaration of guarantee, in the case of conversion to a
company limited by guarantee.
Note: The Act does not impose any preconditions for the conversion beyond the written
consent of members as the Articles of an unlimited company are the same as that of a
company limited by shares save for the provision making liability limited in one and
unlimited in the other. Note that the documents needed to accompany the application for
conversion are as set out in s.36 (4) and the Registrar “shall” issue a replacement
certificate. See also s.17 & s.20 shown below:
17. (1) The articles of a private company limited by shares shall state-
(a) the rights, privileges, restrictions and conditions attaching to each class of
shares, if there are two of more classes; and
(b) the authority given to the directors to determine the number of shares in, the
designation of, and the rights, privileges, restrictions and conditions attaching
to each series, if a class of shares may be issued in series.
(2) All shares shall rank equally apart from differences due to their being in different classes or series.
(3) Where a private company limited by shares is wound-up, a member shall be liable to contribute, in
accordance with Part XIII, an amount not exceeding the amount, if any, unpaid on the shares held by him.

20. (1) An unlimited company shall have share capital and its articles shall state-
(a) the rights, privileges, restrictions and conditions attaching to each class of
shares, if there are two or more classes; and
(b) the authority given to the directors to determine the number of shares in, the
designation of, and the rights, privileges, restrictions and conditions attaching
to each series, if a class of shares may be issued in series.
(2) All shares shall rank equally apart from differences due to their being in different classes or series.
(3) Where an unlimited company is wound-up, a member shall be liable to contribute, in accordance with
Part XIII, without limitation of liability.
Note also s. 36(6), which reads:
S. 36 (6) Where an unlimited company is converted to a limited company and is wound-
up within three years after the conversion, a member of the company who was a member
immediately before the conversion shall not be entitled to a limitation of liability under
section two hundred and sixty-six.
Note also that for all conversions s 36(7) and s. 36 (8).
 Companies Form 2

S. 36 (7) If the company fails to comply with subsection (1), the company, and each officer in default, shall
be guilty of an offence, and shall be liable on conviction to a fine not exceeding three monetary units for
each day that the failure continues.
S. 36 (8) If a director, secretary or auditor of a company makes a declaration or certificate for the purposes
of subsection (4) that in his opinion the company is solvent, without having reasonable grounds for the
opinion, he shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding five
hundred monetary units.
Membership of a Company
A company, as a corporate entity is made up of natural and/or artificial persons who in
essence own the company. The persons who make up the company are known as
“members” or “shareholders”. Although these terms are used interchangeably, it is
possible to have a member who is not a shareholder and vice versa. In s. 45 members of a
company with a share capital shall be the shareholders and stockholders while for a
company limited by guarantee, the members will be those subscribers to an application
for incorporation who signed a declaration of guarantee undertaking to contribute to the
assets of the company in the event it winds up.
How to become a Member of a Company
Section 45 prescribes two methods:
45.(1) The members of a company with a share capital shall be the shareholders and stockholders of the
company. Membership of company
(2) On the incorporation of a company with share capital and until the first allotment of shares by the
company, the members shall be those subscribers to the application for incorporation who have not given
the company written notice of their ceasing to be members.
(3) The members of a company limited by guarantee shall be the persons who are
members in accordance with section nineteen.
Thus s.45(2) states that upon incorporation of a company with share capital and until the
first allotment of shares by the company, the members of the company shall be those
subscribers to an application for incorporation who have not given the company written
notice of their ceasing to be members. The combined effect of s, 45(1) and (2) is that a
person may become a member by (a) subscribing to an application for incorporation
and/or (b) by being a shareholder or stockholder of the company. From section 45, a
subscriber can, notwithstanding that there was no allotment to him of shares nor entry of
his name in the register of members, become a member of the company during the initial
post-incorporation phase of a company. To this extent, it is true to assert that a person
may be a member of a company without being a shareholder. Thus, membership without
being a shareholder may arise in the following circumstances:
(a) A person who has subscribed to an application for incorporation immediately
becomes a member of the company even if no allotment of shares to him has been
effected.
(b) In terms of s.57, shares are personal property that can be transferred from one
person to another. The transferor of shares however remains a member until his
name is replaced by the name of the transferee in the register of members. S. 48
requires a company to maintain a register of its members in which should be
entered, inter alia, the names and addresses of the members. Where an instrument
of transfer of shares has not yet been registered in the register of members, the
transferor will technically remain a member although he no longer owns the
shares.
 Companies Form 2

(c) Where a person forfeits or surrenders shares, he ceases to be a shareholder by

reason of such forfeiture or surrender but he is considered to be a contributory
under s.265 (2).
It must be emphasised that the Articles of a company will normally contain provisions regarding the
forfeiture and surrender of shares although the subject of forfeiture and surrender are not substantively
dealt with in the Act. A typical formulation of the provisions for forfeiture and surrender are to be
found in clause 17 of the Standard Articles. Thus, clause 17(1) provides that if a member fails to pay a
call or an instalment on a call on the day appointed for such a payment, the directors may, at any time
after, and during the period when any such part of the call or instalment remains unpaid, serve a notice
on him requiring so much or the call or instalment as is unpaid from him together with interest if any
has accrued. Clause 17(2) states that the notice served in 17(1) shall state a further date not earlier than
14 days from the date of the service of the notice on or before which the payment is to be made and
shall also state that in the event of non-payment, shares in respect of which the call was made will be
liable to be forfeited.
The Articles normally also allow the directors to accept the surrender of shares. However, this will
only be the case if the circumstances justify forfeiture. In the absence of a provision in the Articles
allowing for forfeiture or surrender, the directors can never sanction surrender or forfeiture, even if the
majority of the shareholders so resolve as to do so without the sanction of a court order would amount
to a reduction of capital and contrary to the provisions of s.76 of the Act.
It is also possible for a person to be a shareholder without being a member of a company. E.g. A holder
of a share warrant, issued in accordance with s.69, is considered to be a shareholder but is not a
member of the company. S.69(1) states:
69(1) A company may, with respect to any fully paid-up shares (or stock) issue a warrant (in this Act called
a "share warrant") stating that the bearer of the warrant is entitled to the shares therein specified, and may
provide by coupons or otherwise for the payment of the future dividends on the shares included in the
warrant.
s.69(2) reads “(2) A share warrant shall entitle the bearer to the shares therein specified,
and the shares may be transferred by the delivery of the share warrant.”
More relevant is s.69(3) that says “(3) The bearer of a share warrant shall be entitled, on
surrendering it for cancellation, to have his name entered as a member in the register of
members, and the company shall be responsible for any loss incurred by any person by
reason of the company entering in its register the name of a bearer of a share warrant in
respect of the shares therein specified without the share warrant being surrendered and
cancelled.”
Equally a personal representative of a deceased shareholder is a shareholder of the
company even though his name is not entered in the register. [s.48 - a register of
members (name, address, number and type of shares etc.) must be maintained by the
company]. However, in accordance with s.70(2) a personal representative of a deceased
shareholder to whom the shares pass by transmission will only become a member of the
company when his name is entered in the register of members. S. 70(4) states that the
personal representative, shall prior to registration of himself or a transferee, be entitled to
the same dividends and other advantages as if he were the registered holder and to the
same rights and remedies as if he were a member of the company, except that he shall
not, subject to any order by the court under s.144, before being registered as a member be
entitled to vote at any company meeting.
The whole of s.70 is as follows:
70.(1) In the case of the death of a shareholder of a company, the survivor or survivors
where the deceased was a joint holder, and the legal personal or representative of the
 Companies Form 2

deceased where he was a sole holder or last survivor of joint holders, shall be the only
persons recognised by the company as shareholders.
(2) A person (in this section called "the representative") upon whom the ownership of a
share devolves by reason of his being the legal personal representative, receiver, or
trustee in bankruptcy of the holder, or by operation of law may, upon such evidence
being produced as the company may reasonably require-
(a) be registered himself as the holder of the share; or
(b) transfer the share to some other person without first registering himself as the
holder of the share.
(3) A company shall have the same right, if any, to decline registration of a transfer by
the representative as it would have had in the case of a transfer by the registered holder,
but shall have no right to refuse registration of the representative himself.
(4) The representative shall, prior to registration of himself or a transferee, be entitled to
the same dividends and other advantages as if he were the registered holder and to the
same rights and remedies as if he were a member of the company, except that he shall
not, subject to any order by the court under section one hundred and forty-four, before
being registered as a member in respect of the share, be entitled to vote at any meeting of
the company.
(5) The company may at any time give notice requiring the representative to elect either to be registered
himself or to transfer the share, and, if the notice is not complied with within three months, the company
may thereafter suspend payment of all dividends or other moneys payable in respect of the share until the
notice has been complied with.
Capacity to be a Member
This refers to the legal competence of a person to be a member. It will be recalled that in accordance with
s.21, incorporation of a company has the same effect as a contract under seal concluded between the
members of the company and the company, and between the members of the company inter se, under
which they agree to form a company whose business would be conducted in accordance with the
application for incorporation and the Articles. This means therefore that members must have the capacity to
contract when they form the company. Capacity to be a member in this regard is co-extensive with the
capacity to contract generally. Strangely, the provisions of the Act relating to membership i.e. ss.45-46
make no reference whatsoever to the capacity required of would be members of the company. This
omission may not be easy to appreciate, particularly given s.207 that deals with directorship in a company
and clearly sets out the eligibility criteria for directorship that includes capacity. [Thus s.207 (1) states:
207(1) A person shall not be appointed as or continue to hold office as a director of a
company if the person is- Eligibility of persons to be directors
(a) a body corporate;
(b) an infant or any other person under legal disability;
(c) any person prohibited or disqualified from so acting by any order of a court; or
(d) an undischarged bankrupt.]
Further s.65(3) states that a company may refuse to register a transfer of shares to a person under 18 years.
From these provisions it would not be unreasonable to conclude that while the Act requires a person to
have capacity to contract at the time of incorporation, there is no requirement for a person to have legal
capacity to be a member after the company has been incorporated.
Minors, lunatics and bankrupts may contract subject to common law and statutory restrictions peculiar to
their situations. Minors generally have no legal capacity to contract and all contracts with them, save for
necessaries, are void. [See s1 of Infant Relief Act of 1874]. But, as regards membership in a company is
concerned, a minor may be allotted shares in a company and his name may remain in the register of
members. However, such a minor cannot incur any liability on the shares. It is thus advisable and in the
 Companies Form 2

best interests of the company that only fully paid up shares be allotted to a minor as the minor will not be
liable for any unpaid amount on the shares allotted to him. During allotment, the minor can repudiate the
allotment at any time. When reaching majority, he can repudiate within a “reasonable” time. I.e. using the
objective test of what a reasonable man would think is a reasonable time in the circumstances. When a
minor does not repudiate the allotment and does any act e.g. receive dividends after reaching 18 the minor
is deemed to have adopted the allotment
A company is a legal person. As such it can own property in its own name and thus has capacity to own
shares in, and be a member of, another company subject to certain limitations. These include:
(a) A company cannot own shares in another if the application for incorporation and/or its Articles state
that it will not do so. If ownership of shares in another is not expressly or impliedly authorised in the
application for incorporation or the Articles, such ownership will be ultra vires.
(b) A Subsidiary Company cannot hold shares in its holding company (s.46)
(c) A company cannot own shares in itself (cannot buy its own shares - s.46)
A Partnership firm has no distinct legal personality and cannot therefore as a matter of strict legal
interpretation buy and own shares in a company in its own name. Prima facie, a partnership cannot be a
member of a company and if a partnership wants to invest in shares of a company, the usual method is to
buy shares and hold them in the names of the partners either individually or as joint holders. But, s.48 that
obliges every company to maintain a register of its members, provides that among the details to be entered
in the register of members are the fact that whether a member is a body corporate, an unincorporated
association or an individual member. Further, under s.63(1)(c) whenever a company makes an allotment of
its shares, it must within one month, lodge with the Registrar of Companies, a return of allotment stating,
inter alia, the number and the nominal amount of the shares comprised in the allotment, the name and
address of each allottee and the fact whether such an allottee is a body corporate, an unincorporated
association or an individual, as well as the amount paid and any unpaid amount on the shares allotted. S.66
also provides that within 2 months after the allotment of shares or after the registration of transfer of any
shares, the company shall deliver to the holder a share certificate under the common seal of the company
specifying in the share certificate, inter alia, the full names and address of the registered holder and the
status of the shareholder i.e. if a body corporate, an unincorporated association or an individual. In brief
therefore, although the Act does not define “unincorporated association”, and normally partners will own
shares as “joint holders” (see below) the Act recognizes that an unincorporated association can own shares
in a company and a partnership is such an association.
Joint Shareholders (the Act refers to them as “joint holders”) are two or more persons who hold and own
the same shares of a company. The following needs to be noted as regards joint shareholdings:
(a) They are counted as one for the purpose of determining if the number of members is less than 2
(or over 50 if a private company).
(b) Where a notice e.g. of the AGM must be sent, it is sufficient if it is sent to one of the joint holders.
(c) The delivery of a share certificate to one joint shareholder will be deemed to be delivery to all (see
clause 8 of the Standard Articles).
(d) Dividends, where declared, may be paid to the person whose name appears first on the register of
members.
(e) The transfer of shares that are jointly held will only be valid if all the joint holders execute the
instrument of transfer.
A Trustee is a person who holds shares for the benefit of another(s). He does so “in trust”. A trustee is a
member in his own name and not as trustee of the beneficiary. I.e. the register of members will NOT show
that the person holds shares in trust for another (S.54 states that no notice of any trust, express or implied or
constructive, need be entered on the register of members or be received by the Company or the Registrar -
see also clause 7 of the Standard Articles. For this reason the trustee will be a member in his own capacity
and is personally liable to make payment on any call on the shares.
Rights of Shareholders
(a) To vote (by himself or by a proxy) e.g. at the AGM
(b) Receive dividends
(c) Have access to the Financial Records
(d) To sell his shares
(e) To receive notices e.g. of the AGM
 Companies Form 2

Obligations
(a) To pay for any uncalled amounts on the shares
Note: the Ultra Vires Rule
The intention of the 1994 Act, as stated by Deepak Patel, the then Commerce Minister, in Parliament when
introducing the Act was to remove the restrictions on companies imposed by the ultra vires rule. Thus s.22
states that the company has the capacity to do anything that a person can do (except as limited by its
incorporated nature). However, although there is no longer a subscription to a Memorandum of
Association, the objects of he company still have to be stated in the application for incorporation. Further,
the Articles have to state if they impose any restrictions on the activities of the company being formed.
Even so s.23 states that no act done by the company shall be invalid if it is contrary to the Articles. Thus, it
is debatable if the Companies Act has succeeded in removing the Ultra Vires rule. Lillian Mushota believes
that it has been removed but Mumba Malila believes that it has not e.g. his interpretation of s.23 is that it is
there to protect third parties from anything done by a company that is against its Articles, not to validate
ultra vires acts per se.

Note: Forfeiture of Shares

Forfeiture is not dealt with comprehensively in the Act but it is in the Standard Articles. However, if a
shareholder forfeits shares, while he is no longer a member, he is considered to be a “contributory” under
s.265 (2) and if the company is wound up he still must contribute to any unpaid amounts of the forfeited
shares.
Share Capital
The word “capital” is not defined in the Companies Act but s6(2) provides that an application for
incorporation of a company with share capital must specify the amount of the share capital and the division
of the share capital into shares of a fixed amount. Companies are generally formed to enable individuals
participate in an enterprise by pooling resources together and by contributing gods and services to a vehicle
intended to generate profits. Assume 2 bricklayers, Sapalo and Mulenga, whish to set up a construction
company. Each offers their skill in the trade and their workmanship at the building site. Sapalo contributes
concrete mixers, wheelbarrows, spirit levels, shovels and other tools of the trade. Mulenga contributes
blocks and other essential materials and cash. Also each of them brings some goodwill and trade secrets.
Each of these contributions by Sapalo and Mulenga is “capital” in the widest sense of the word. With this
capital the two as entrepreneurs would hope to make some profit and to use it as they deem appropriate and
possibly to invest some of it back into the business so as to increase the capital from which more profit may
be reaped. There is of course no guarantee that profits will actually be made and the capital may in fact be
lost. Sapalo and Mulenga may opt to define in monetary terms the value of their construction company and
also the extent of their individual contributions in money form. The value of their contributions would be
expressed in the capital account of the business so that each one of them is credited with a proportion of the
business assets referred to in monetary terms or alternatively as a fraction of the total assets. Either Sapalo
or Mulenga’s share of the profits of the enterprise will then be calculated with reference to that amount or
fraction. Suffice to say that capital is often expressed in terms of currency value that bears little or no
relationship either to the actual amount contributed or to the value of the assets that it purports to represent.
From this example, the word “capital” has been used in two senses:
(a) The amount of tangible and intangible assets that form the profit-making vehicle of the business
enterprise.
(b) The measure of each individual’s share of the assets which in turn determines the amount of profit
he is entitled to receive, and if the enterprise is voluntarily dissolved, his share of the assets.
Assuming that in our example, the combined value of all the assets brought into the enterprise by Sapalo
and Mulenga is K 200m and the company issues each of the two with 400,000 shares of K 250. If after a
successful year of business the value of the company’s assets is the same and the company makes a profit
of K 100m, the company could declare a dividend of K 125/share i.e. each of the two would get K 50
million (K 125 times 400,000)
The value of the bricklayers assets will probably not remain the same over time so that the 2 times 400,000
times K 250 shares i.e. (K 200m) will no longer be the correct reflection of the monetary value of the
capital. Also if the shares are being bought and sold on the open market, they will no longer be worth K
 Companies Form 2

250. While their nominal or par value will remain the same the real value or worth of the shares are what
people are prepared to pay for them in an open market. This is the real idea behind Capital.
The issued share capital of a company is the fund to which creditors of a company can look to for payment
of their debts and thus in order to protect creditors it has long been the rule share capital must be raised and
once raised it must be maintained. This rule is intended to protect creditors of the company who, due to the
operation of the doctrine of corporate personality cannot look to the individual shareholders for payment of
their debts. This policy also gives some degree of protection to the shareholders since once they invest in a
company, their money would only be used to generate profits.
The company’s capital could be lost as a result of poor business decisions but from a creditor’s point of
view the company’s capital gives some measure of credit worthiness and unsecured creditors can look to
the capital fund of the company as well as the company’s unsecured assets. This is not to suggest that
unsecured creditors are guaranteed payment by reason of the capital. In practice, companies will have a low
issued capital but a wide base of assets. The rule that share capital must be raised is intended to ensure that
money or assets equal in amount to the paid up capital on paper is or are received by the company i.e. that
shares can be treated as paid up only to the extent of the amount actually received by the company in cash
or in kind. The idea is to protect the creditors of the company. The concern of the law is that shareholders
must pay the price of their shares in money or money’s worth in accordance with the provisions of the
Companies Act. The general rule is that shares must be issued for the full value i.e. not at a discount i.e. not
issued as fully paid for a consideration less than the nominal amount.
A shareholder subscribes for shares by paying or agreeing to pay the price for those shares to be issued to
him/her. The price paid for the shares is made up of two elements (a) the par or nominal value and (b) the
premium for the shares that may be attached to the price. E.g. a company’s share capital could be K 10m
made up of 10m shares of K1 each. In this case K1 is the par or nominal value. However, a premium may
be attached to these shares such that a K1 share may be sold for K100 or more. For the purposes of the
Articles, which must state the authorized capital, only the par value is relevant and where shares are sold at
a premium, the amount of the premium is kept separately in the company’s accounts by entering it under
the heading “share premium account”. The company will treat such sums as capital which cannot be
returned to members unless by way of formal reduction of capital. In terms of s.61(2) of the Companies Act
the share premium account may be applied as follows: Thus the whole of s.61 states:
61.(1) Where a company issues shares at a premium, whether for cash or otherwise, a sum equal to the
aggregate amount of value of the premiums on these shares shall be transferred to an account to be called
"the share premium account", and the provisions of this Act relating to the reduction of share capital of a
company shall, except as provided in this section, apply as if the share premium account were paid up share
capital of the company. Share premium account
(2) The share premium account may be applied by the company-
(a) in paying up unissued shares of the company to be issued to members of the
company as fully paid bonus shares;
(b) in writing off
(i) the preliminary expenses of the company; or
(ii) the expenses of, the commission paid or the discount allowed on any issue
of shares or debentures of the company; or
(c) in providing for the premium payable on redemption of any redeemable
preference shares or of any debenture of the company.
Shareholders must pay the full nominal value of their shares. This principle was enunciated in Ooregum
Gold Mining Co. of India v. Roper [1892] AC 125. Here a company wanted to issue shares with a nominal
value of one pound on the basis that they be credited with 75 pence meaning that each shareholder had a
liability of 25 pence. The House of Lords rejected the argument that a company had the power to do so.
Lord Halsbury L.C. said “The Act of 1862 makes it one of the conditions of limited liability that the
Memorandum shall contain the amount of the capital with which the company proposes to be registered
divided into shares of a fixed amount. It seems to me that the system thus created by which the
shareholders’ liability is to be limited by the amount unpaid upon his shares renders it impossible to depart
 Companies Form 2

from that requirement and by any expediency to arrange with the shareholders that they shall not be liable
for the amount unpaid on their shares.”
Shares:
A company raises the money it requires for its business activities from its members and the money so
raised is called the company’s capital and is usually divided into different units of a fixed amount, with
these units called shares. Disappointingly the Companies Act Cap 388 does not define the term “share”
Section 2 simply states that ““share” includes stock” which is not very helpful. One of the best definitions
is that articulated by Farwell J in Boarland’s Trustee v Steel Bros. & Co. [1901] 1 Ch 279 where he defined
a share as follows: “A share is the interest of a shareholder in the company measured by a sum of money,
for the purpose of liability [and dividends] in the first place, and of interest in the second, but also
consisting of a series of mutual covenants entered into by all the shareholder inter se in accordance with
[section 41 i.e. the Act]. The contract contained in the articles of association is one of the original incidents
of the share. A share is not a sum of money… but is an interest measured by a sum of money and made up
of various rights contained in the contract, including the right to a sum of money of more or less amount.”
Thus a share is not a sum of money but is an interest measured by a sum of money namely the nominal
amount of the share and also the rights and liabilities belonging to it as defined in the Companies Act
and/or in the Articles of Association. A share represents the pecuniary interest of its holder and his rights
and liabilities. It is in this sense that a share is sometimes referred to as a bundle of rights and liabilities of
the shareholder.
Section 58(1) provides that “each issued share in a company shall be assigned a distinguished number”
although s.58(2) states that a share need not have a distinguishing number, if all the issued shares, or all the
shares of a particular class are fully paid up and rank pari passu (i.e. equally without preference/ at par) for
all purposes and it is under this subsection that numbers for shares are often dispensed with in practice.
It mandatory, under s.66 for a company to issue share certificates within two months after their allotment or
after the registration of the transfer of any shares. The share certificate specifies (a) the shares held by the
shareholder, (b) their distinguishing number, if any, (c) the amount paid on the shares and that remaining to
be paid, if any, (d) the address of the registered holder. Failure to comply with s.66 makes the company and
its officers liable criminal sanctions and may, upon conviction, be fined (3 PU for each day). A share
certificate is prima facie evidence of the title to the shares of the person named in the certificate. As regards
the nature of the share s. 57 states that a share is personal property, transferable by a written transfer in
a manner provided by the Articles or the Co. Act Cap 388 itself. A share is thus an item of property which
should be regarded and treated in the same way as other personal property and may as such be transferred,
sold, bequeathed, mortgaged or pledged by the owner as he pleases, subject always to the provisions of the
Articles and the Act.

The Rule in Turquand’s Case [The “Indoor Management” Rule]

The application of agency rules has always caused some difficulties in company law,
particularly in the context of limitations placed on the authority of directors imposed by a
company’s constitution. The doctrine of constructive notice exacerbated the problem as
anyone dealing with a company was deemed to know the contents of the memorandum
and articles of association, whether or not he had seen these documents.
The rule in Turquand’s case developed alongside the doctrine of constructive notice and
mitigates its effect. Where:
(a) The directors have power to bind the company but certain preliminaries must be
gone through, and
(b) There are no suspicious circumstances
A person dealing with a company is entitled to assume that all matters of internal
procedure have been complied with (There is no need to go indoors the management to
make active enquiries - see Royal British Bank v Turquand [1856] 6 E & B 327)
 Companies Form 2

Exam
Two sections A and B
Most important thing is to identify the issues in the problem

Companies Form 42

ANNUAL RETURN OF A COMPANY LIMITED BY SHARES

(Section 184)

Company Registration No…48323………………………….

(1) Annual return of..……UTILINK

LIMITED…………………………………………………………………….……………………
 Companies Form 2

…………………………………………………………………………………………………..
………………….

made up to the……………
DECEMBER………………………………………………………………………..…., 2005……….

NOTE: under section 184, the return should be made up to the date of the annual general meeting or, if there is no annual general
meeting, any date within three months after the end of the financial year.

(2) Nature of the business or businesses of the company or, if the company is not carrying on any business,
the nature of its objects:

ENERGY MANAGEMENT, ALL ENERGY ASSOCIATED ACTIVITIES AND ALL OTHER

KINDS OF BUSINESS
…………………………………………………………………………………………………………………
……

(3) Situation of the company’s registered office…SUITE 3, PHASE 1, BUUNGANO HOUSE, PLOT
1311, LUBU ROAD, LONGACRES,
LUSAKA………………………………………………………………

(4) Situation of the company’s registered records office, if different from registered office:

AS
ABOVE………………………………………………………………………………………………………
……

(5) Situation of the company’s principal place of business in Zambia:

AS
ABOVE………………………………………………………………………………………………………
………

(6) Situation(s) at which company’s register of members and register of debenture holders are kept, if
elsewhere
than at registered records office:

N/A……………………………………………………………………………………………………………
………

(7) Summary of share capital and debentures:

(a) Nominal Share Capital:

a
b (1) Nominal share capital K,USS,…K5,000,000………………………divided into: 2,000,000

Number *Class Value

2,000,000..………… ORDINARY……shares of ……K2.50 …………

each

………..……..………… ………………………shares of ………..………………

each
 Companies Form 2

………..……..………… ………………………shares of ………..………………

each

………..……..………… ………………………shares of ………..………………

each

(b) Issued share capital and debentures:

Number Class

(2) Number of shares ………………………………….. …………………………….shares

of
Each class issued …… …ORDINARY……….shares
up to the date of 2,000,000…………………………
this return (which ….. …………………………….shares
number must
agree with the …………………………………. …………………………….shares
total shown in the
list as held by ………………………………….
existing members)

(3) Amount called up on number of shares of each class:

……K2.50……………………………… per share on…..…2,000,000……… …………………………
Shares
……………………………………………. per share on…..……….…………………………………………
Shares
……………………………………………. per share on…..……….…………………
………………………. Shares …..……….……………………………… per share
on……………………………… ..……………………Shares

(4) Total amount of called received, (Note 3)

K5,000,000……………………………………………………..……..………………..
(5) Total amount of called unpaid
K……N/A………………..……………………………………………………………………..

(6) Amount of unpaid liability on shares in each class, not yet due for payment:
………………………………. per share on…..……….…………………
…………………………..shares
………N/A ………………. per share on…..……….…………………
…………………………..shares
 Companies Form 2

………………………………. per share on…..……….…………………

…………………………..shares
………………………………. per share on…..……….…………………
…………………………..shares
(7) Total amount of unpaid liability K……N/A…………………………………….……………………….

(9) Total number of shares of each class forfeited:

Number Class
…………………………N/A…………… ……………………………………shares
…………………………………………… …………………………………….shares
(10) Total amount paid (if any) on shares forfeited: K……
N/A………………………………………………

(11) Total amount of shares for which share warrants to bearer are outstanding K…N/A…………….

(12) Total amount of share warrants to bearer surrendered since the date of the last return:
K………
N/A……………………………………………………………………………………………………..

(13) Number of shares comprised in each share warrant to bearer, specifying in the case of warrants of
different kinds, particulars of each kind:
Number Kind
………………………………………….…
………………………………………………….
……………N/A………………………
…………………………………………………..
……………………………………………
…………………………………………………...

(8) Particulars of indebtedness:

Total amount of indebtedness of the company in respect of all mortgages and charges which are
required to

be registered with Registrar of Companies: K…

NIL………………………………………………………………

(10) Particulars of secretary of company (a) (if an individual):

Present forenames and Former forenames Nationality and NRC Residential and Occupation, any other
surnames or surnames No. or Passport No. postal address secretaryships held
 Companies Form 2

(b) (if a body corporate)

Name of body Registered office Registered postal Name of any other Address of principal
corporate of address body corporate in office, if different from
body corporate which a registered office
secretaryship is held

PALAN & GEORGE 6TH FLOOR, P.O BOX

ADVOCATES
PREMIUM 32091
HOUSE, LUSAKA
INDEPENDENC
E AVENUE,
LUSAKA
 Companies Form 2

Particulars of:

(a) persons holding shares in the company on…DECEMBER

2006…………………………………………………(Date to which this return is made up); and

(b) persons who held shares in the company at any time during the period since………
DECEMBER……………………………………….…….., 2004……..(Date of previous
annual return)

Names, addresses and occupations

Folio
in Remar
regist ks
er
with
detail
s
Shares
Surname Forena Address Occupatio held Shares Shares
mes n On acquired divested
return during year during year
day
Numb Dat Numb Dat
er e er e

CHARLE HOUSE ENGINE 1,500,0 NIL

S NO. 8 ER 00
MOONG MUNALI
A ROAD
HAANYI CHUDLE
KA IGH
LUSAKA

HOUSE
NO. 8 NIL
ZENNIE MUNALI DIRECT 500,00
MANDA ROAD OR 0
HAANYI CHUDLE
KA IGH
LUSAKA
 Companies Form 2

(9) Particulars of current directors:

Present forenames Former Nationality and Residential and Occupation and

and Surnames in forenames and NRC No. or Postal Address other bodies
full surnames Passport No. corporate in which
in full directorship is
held

CHARLES ZAMBIAN HOUSE NO. 8

MOONGA 161286/75/1 MUNALI ROAD
HAANYIKA CHUDLEIGH

P.O BOX
31661
LUSAKA
ZAMBIAN
ZENNIE MANDA 216296/66/1
HAANYIKA

HOUSE NO. 8
MUNALI ROAD
CHUDLEIGH
P.O BOX 31661
LUSAKA
 Companies Form 2

Companies Form 11

DECLARTION OF COMPLIANCE
(Section 9)

Company Registration No……………………………………………….

To: THE REGISTRAR OF COMPANIES

I…GEORGE KANJA...................………………………………………………………..

of…PLOT 6614, MBERERE ROAD, OLYMPIA EXTENSION, LUSAKA

………………………………………………………………………………………………
(RESIDENTIAL ADDRESS)

Do solemnly and sincerely declare that I am: *a legal practitioner engaged in the
formation of the company, a first director named in the application for
incorporation or the first secretary named in the application for incorporation

of… INDEPENDENT MEDICAL - LEGAL UNIT - ZAMBIA

………………………………………………………………………………………………
(NAME OF COMPANY)

and that all the requirements of the Companies Act, CAP 388 in respect of
matters precedent to the Incorporations of the Company and incidental thereto
have been complied with. And I make this solemn declaration conscientiously
believing the same to be true and by virtue of the provisions of the Statutory
Declarations Act, 1835, of the United Kingdom.

Declared at ………………………………………………………………………………..

the ……………………………………….day of …………………………………..2006

Before me, ………………………………………………………………………………..

 Companies Form 2

……………………………………………………….
(Commissioner for Oaths, or Notary Public)
J P. KARNEZOS v HERMES SAFARIS LIMITED (1978) ZR 197 (HC)
Flynote
Company - Memorandum of association - Powers of company - Objects clause -
Construction of - Rules Applicable.
Company - Memorandum of association - Objects clause -General words - How
construed.
Headnote
The plaintiff claimed from the defendant a sum of money for goods sold and delivered.
By an oral agreement with the manager of the defendant company, the defendant agreed
with the plaintiff to purchase burnt maize. Under the objects clause of the memorandum
of association of the company the goods the company could buy did not include burnt
maize. It was contended by the defendant that the purchase of the burnt maize was not
within the power of the company.
Held:
(i) Whether any given transaction is or is not within the powers of a company
is a question of law depending on the construction to be placed on the
objects clause of the memorandum of association.
(ii) In construing any memorandum of association in which there are general
words, care must be taken to construe those general words so as not to
make them a trap for unwary people. General words must be taken in
connection with what are shown by the context to be the dominant or main
objects of the company Re German Date Coffee CO. (2) followed.
Cases cited:
(1) Simpson v Westminster Palace Hotel Company (1860) 8 HLC 712.
(2) Re German Date Coffee Company (1882) 20 Ch. D. 169.

H Ndhlovu, Jaques and Partners, for the plaintiff.

EA Gani, Gani & Company, for the defendant.
Judgment
Sakala J: The plaintiffs claim is for K9,729.20 for goods sold and delivered to the
defendant company. The circumstances of the transaction are that by an oral agreement
on or about 28th November, 1974, the defendant agreed with the plaintiff to buy 7 484
bags of burnt maize at K1.30 per bag making a total consideration of K9,729.20.

The most relevant paragraphs of the statement of claim read as follows:

"3. On the 28th day of November, 1974 an oral agreement was made between the
Plaintiff: and the Defendant that the Plaintiff sell and the Defendant purchase 7,484 bags
of burnt maize which were situated on the Plaintiff’s farm at Mkushi for the sum of 20
K9,729.20 being the sum at K1.30 per bag;

4. The Defendant gave a form or order showing that it has purchased the said 7,484 bags
of burnt maize from the Plaintiff;

5. The Defendant collected approximately half of the said bags of burnt maize and failed
to collect the remaining bags;
 Companies Form 2

6. The said remaining maize has at all times been available for collection by the
Defendant;
7. The Defendant has not paid the said amount of K9,729.20 and is refusing to pay the
said amount up to now;

8. The Plaintiff claims the sum of K9,729.20 being a debt under an oral agreement made
between the Plaintiff and the Defendant on the 28th November, 1974, the said debt is still
due and payable."

The defendant company did not give evidence in this case. Mr Gani for the defendant
informed the court at the end of the case for the plaintiff that the defendant relies entirely
on the documentary evidence. Apart from admitting pares 1, 2 and 7 of the statement of
claim, the defendant denies every allegation in the statement of claim.
The issue in the instant case does not end with the finding of the existence of an oral
agreement in August, 1974. Mr Gani in the alternative has submitted that under the
objects clause in particular c 1.3 (1) the goods the company can buy are clearly set out
and do not include the purchase of burnt maize. He submitted that the company had no
power to purchase or resell burnt maize. This brings me to the issue of ultra vires.
Whether any given transaction is or is not within the powers of a company is a question
of law depending on the construction to be placed on the objects clause of the
memorandum of association (see Simpson v Westminster Palace Hotel Company (1). At
p. 99, Palmer's Company law, Volume 1, 22nd Edition sets out the general rules of
construction of objects clause. The six well - recognised rules applicable to a
memorandum and articles of association are set out as follows:

"1. The whole document must be read and considered;

2. The expressed intention is to have effect; we are not to speculate as to what the parties
intended, but to ascertain it from the words used, for the expressed meaning is to be taken
to indicate the intention;

3. The 'golden rule' must be observed, namely, that the grammatical and ordinary sense of
the words is to be adhered to; unless that would lead to absurdity, or some repugnance or
inconsistence with the rest of the instrument, in which case the grammatically and
ordinary sense of the words may be modified so as to avoid that absurdity, repugnance or
inconsistency, but no further. Where the language is clear and unambiguous it must have
effect, even though in the result it may operate in a capricious and unreasonable manner;
if it is ambiguous, the more reasonable construction should be adopted;

4. Popular words are to be taken prima facie to be used in their popular sense, and
technical words in their technical sense; but in each case the prima facie sense may be
displaced or qualified by the context;

5. The words used must be read with reference to the subject matter;
 Companies Form 2

6. The ejusdem generis rule and the maxim expressio unius est exclusio alterius are also,
at times, applicable."

The "main objects" rule was expressed by Lindley, LJ, in re German Date Coffee Co. (2),
at p. 188 as follows:
"In construing . . . any . . . memorandum of association in which there are general words,
care must be taken to construe those general words so as not to make them a trap for
unwary people. General words . . . must be taken in connection with what are shown by
the context to be the dominant or main objects of the Company. It will not do, under
general words, to turn a Company for manufacturing one thing into a Company for
importing something else, however general the words are."

In the instant case, the memorandum of association of the defendant is part of the bundle
of documents. Clause 3 which is the objects clause has a series of pares from (a) to (w).
For the purposes of the facts of the present case, the most relevant is 3 (f) which reads as
follows:
"To purchase, take on lease in exchange hire or otherwise acquire any real and personal
property, any rights or prestiges which the company may think necessary or convienient
for the purpose of its business and in particular any land buildings easements machinery
plant and stock - in trade."

Apart from this clause, I have had the opportunity to consider the other clauses which
mainly relate to the carrying on of transport business and matters incidental thereto. Even
applying the ultra vires doctrine as reasonably as I can, I am unable on the facts of this
case and in particular on the objects of the defendant company to say that the purchase of
burnt maize can fairly be regarded as incidental to or consequential to the objects
authorised by the memorandum. The law is that any contract or agreement made
otherwise than in exercise of the powers in the objects clause of the memorandum is ultra
vires and void.

Turning to the facts now before me, the plaintiff entered into an oral agreement with one
Papadopoullos the general manager of the company. The man according to the plaintiff
was deported before he made his claim. Document one confirming the deal was in my
view written by an official of the defendant company, on the company's headed paper. I
have no doubt that the plaintiff was cheated into entering into this agreement by believing
that he was dealing with the company when the official he dealt with had no power to
purchase burnt maize for the company.

Applying the law as I find it, I have to regrettably hold and I so hold that the oral
agreement entered into between the plaintiff and the defendant company was ultra vires
and void on the ground that the company had no power to purchase the burnt maize.
Accordingly, I enter judgment in favour of the defendant company.
On the facts of this case, I consider it only fair that each party bears as its own costs.
Accordingly, I order that each party bears its own costs.
 Companies Form 2

Before leaving this case, I wish only to observe that the facts of this case are a clear
example of the hardship that the doctrine of ultra vices may cause to unsuspecting third
party dealing with a large company. It is in cases of this nature that I entirely agree with
the suggestion of the Jenkins Committee (Cmnd, 1949-1962) recommending the virtual
abolition of the doctrine and protection to third parties who might have acted reasonably
in the circumstances. I hope that any future changes to the Companies Act will take into
account the hardships caused by the doctrine of ultra hires and make provisions to modify
it.

Judgment for defendant

Name Clause
We have already seen that a company cannot use a name that is undesirable or identical with that of an
existing company or which is suggestive that it enjoys the patronage of the President. Also that the name
should end with Ltd and Plc as appropriate. Where the name so closely resembles the name of an existing
co. the Registrar is empowered under s.42(1) to direct that the company should change its name. This is
where the Registrar is of the opinion that the name will cause confusion or is otherwise undesirable. If he is
not of that opinion he will not exercise his s.42 powers but any company whose name resembles the new
name may apply to court to restrain the new company from using the name as the name is part of the
company’s business reputation and goodwill. The court, if satisfied will grant the application.
Ewin v. Buttercup Margarine [1917] 2 CH 1 Here the plaintiff carried on business under the company
called Buttercup Dairy Co. and the new company was to be called Buttercup Margarine Ltd. was
incorporated with that name. The plaintiff brought an action against the new company for an order
restraining it from using this name as it created an impression that the two companies were closely
connected. The CA granted the application.
Where however the name of a company does not create an impression that it is connected with an existing
business or its business will be very different from that of an existing company, there may not be confusion
and the court will not grant an application. Thus: in The Society of Motor Manufacturing and Traders Ltd.
v. Motor Manufacturers’ and Traders Mutual Insurance Co. Ltd. [1925] 1Ch 675 the court declined to grant
an injunction. The court held that the name of the new company could not be regarded as one calculated to
deceive as the name did not suggest that the companies were connected or associated with each other. Also,
the court held that the first company was a trading company while the second was an insurance company.
Where a firm has carried on business under a partnership name for a considerable period without an
objection being made, the right to restrain the company may be lost. In terms of s.40 a company may at any
time change its name by passing a special resolution to that effect.
The Objects of a Company
In early Company Acts in England and elsewhere, it was envisaged that companies would be a medium
sized enterprises, bigger than family businesses but still not too big e.g. like the BSA company became. It
was thus thought desirable for a company to set out its proposed activities clearly so that any potential
investor knows precisely the kind of business in which he is investing. It was thought undesirable for an
investor to invest in a drinks company because he believed there was a good future in that area to see the
company transform itself into e.g. an explosives company. Further people dealing with the company ought
to know the powers of the company and in this way creditors would have a greater degree of protection
because they would know the company was founded for sound objectives. It was also considered in the
public interest if a companies powers and activities were confined to a defined area and that the company
does not exceed these powers or activities. This briefly explains the theory on the basis of which is a wealth
of case law as to the activities of a company has evolved. Thus, the position was that if a company
exercised powers outside its Memorandum of Association or carried out activities that were not specified,
the company’s acts were null and void due to the ultra vires doctrine - see Ashbury Railway Carriage and
Iron Co. v Riche [1875].
The High Court of Zambia had occasion to consider the effect of a contract that was beyond the powers of
a company as set out in its Memorandum of Association in the case of J.P. Karnezos v Hermis Safaris
 Companies Form 2

[1976] HP 526. The defendant company which was engaged predominately in the business of
transportation entered into a contract to buy 7,484 bags of burnt maize from the plaintiff for K 9,729.20
Having taken delivery of about half the amount, the Manager and MD was deported. Consequently the
company failed to perform the rest of the contract. On an action for the price, Sakala J as he then was
agreed with the defendant that the company had no power under its Memorandum of Association to buy
burnt maize. Sakala said “applying the law as I find it I have to regrettably hold and I so hold that the oral
agreement entered into between the plaintiff and the defendant Company was ultra vires and void on the
ground that the company had power to buy burnt maize.”
Whether or not a contract or any activity is ultra vires the objects of a company is a matter of language and
the usual rules of construction apply. Firstly, the courts will imply a term into the objects clause even if it is
not expressly provided for so long as it is incidental to or consequential upon the objects stated in the
Memorandum. In: Foster v London Chatham & Dover Railway [1895] 1 QB 711 a company constructed a
railroad over a series of arches and then let out the arches as shops and workshops. The letting out of the
arches as workshops was objected to by irate neighbours and contended that doing so was ultra vires the
Company’s objects. The court held however, that the letting out of the arches was fairly incidental to the
powers of the company and was thus valid. To hold otherwise, the court held, would be as bad as
contending that railway companies could not sell the hay that grows on their railway banks so as to make
something out of it.
Secondly came the independent clauses provision that meant that each clause of a company was
independent from the other. In Re: German Date Coffee Co. [1882] 20 Ch D 169 the Memorandum of
Association stated that the company was created to work out a German patent which would be granted for
making coffee from dates and also to acquire or produce any other invention for similar purposes and to
import and export all descriptions of produce for the purpose of food. The German patent was never
granted to the company but the company acquired a Swedish patent and the company started work in
Hamburg where the company made and sold coffee without a patent. Some shareholders withdrew from the
company when they heard a German patent was not given while others desired the business to continue.
Two shareholders then petitioned for the winding up of the company. The Court held that as the main
object - that of obtaining a German patent - failed, the company could not? continue business on other
objects, which were stand alone

THE COMPANIES ACT

(CAP. 388)
 Companies Form 2

COMPANY LIMITED BY GUARANTEE

ARTICLES

OF

ASSOCIATION

OF

INDEPENDENT MEDICAL-LEGAL UNIT ZAMBIA

Palan & George Advocates,

Sixth Floor, Premium House,
P.O. Box 32901,
LUSAKA
 Companies Form 2

THE COMPANIES ACT

(CAP. 388)

COMPANY LIMITED BY GUARANTEE

ARTICLES

OF

ASSOCIATION

OF

INDEPENDENT MEDICAL-LEGAL UNIT ZAMBIA

 Companies Form 2

PRELIMINARY

In these regulations, unless the context otherwise requires:

“The Company” means the Company named above.

“The Companies Act” means the Companies Act of the Laws of Zambia and any
statutory modification or re-enactment thereof for the time being in force.

“Special Resolution” and Extraordinary Resolution” have the meanings assigned to them
respectively by the Companies Act.

“in writing” or “written” means and include words written, printed, lithographed,
represented, or reproduced in any mode in a visible form.

“the Directors” means the Directors for the time being of the Company.

“Secretary” includes any person appointed to perform the duties of a Secretary

temporarily.

Words importing the singular number only include the plural number, and visa versa.

Words importing the masculine gender only include the feminine gender.
 Companies Form 2

TABLE A NOT TO APPLY

2. The regulations contained in Table A in the First Schedule to the Company Act shall
not apply to the Company except in so far as they are repeated or contained in these
Articles.

OBJECTS

3. The main objects for which the Company is incorporated are:

(a) To provide psychotherapy to the mental torture victims;
(b) To provide physiotherapy and other forms of treatment to torture victims;
(c) To research into torture related legal issues; and
(d) To promote the Covenant Against Torture in Zambia.

MEMBERS

4. (a) The subscribers to these Articles of Association and such other persons as are
admitted to membership in accordance with these Articles shall be members of a
Company. No person shall be admitted a as member of the Company unless he is
approved by the directors. Every person who wishes to be a member4 shall deliver to
the Company an application for membership in such form as the directors require
executed by such person.

(b) A member may at any time withdraw from the Company by giving at least 7 clear
day’s notice to the Company. Membership shall not be transferable and shall cease on
death.

(c) The directors may also at their discretion terminate the membership of any member
but the requirements of natural justice shall be respected and a member shall be
entitled to be heard in his own defence by the directors or a committee of director.
 Companies Form 2

(d) it shall be lawful for the directors to provide for the admission of such persons as they
think fit to be friends or associates of the Company and for the right duties and
liabilities (if any) of such friends or associates but so that such persons shall not by
virtue of being friend or associates as aforesaid be members of the Company and their
rights (if any) shall not include a right to speak or vote at General Meetings of the
Company. The Secretary shall keep an accurate record of such friends or associates of
the Company.

GENERAL MEETINGS

5. The Company shall in each calendar year hold a general meeting as its annual general
meeting in addition to any other meetings in that year and shall specify the meeting as
such in the notice calling it; and not more than 15 months shall elapse between the
date of one annual general meeting of the Company and that of the next. Provided
that so long as the Company holds its first annual general meeting within 18 months
of its incorporation it need not hold it in the year of incorporation or in the following
year. The annual general meeting in each year shall be held at such time and place as
the directors shall appoint.

All general meetings other than annual general meetings shall be called extraordinary
general meetings.

6. The directors may call general meetings and on the requisition members pursuant to
the provisions of the Companies Act, shall forthwith proceed to convene an
extraordinary general meeting for a date not later than 8 weeks after receipt of the
requisition. If there are not within Zambia sufficient directors to call a general
meeting any director or any two members of the Company may call an extraordinary
general meeting in the same manner as nearly possible as that in which meetings may
be convened by the directors.
 Companies Form 2

NOTICE OF GENERAL MEETING

7. An annual general meeting and an extraordinary general meeting called for the
passing of a special resolution shall be called by at least 21 Clear Days’ notice. All
other extraordinary general meeting shall be called by at least 14 Clear Days’ notice
but a general meeting may be called by shorter notice if it so agreed:-

(a) in the case of an annual general meeting by all members entitled to attend and vote
thereat; and

(b) in the case of any other meeting by a majority in number of the members having a
right to attend and vote being a majority together representing not less than 95% of
the total voting at that meeting of all members.

The notice shall specify the time and place of the meeting and the general nature of
the business to be transacted and, in the case of an annual general meeting, shall
specify the meeting as such.

The notice shall be given to all persons as are under the Articles of the Company
entitled to receive such notice from the Company.

The accidental omission to give notice of the meeting to, or the non-receipt of notice
of a meeting, by, any person entitled to receive notice shall not invalidate the
proceeding at that meeting.

PROCEEDINGS AT GENERAL MEETINGS

8. All business shall be deemed special that is transacted at an Extra-ordinary meeting,

and all that is transacted at an Ordinary Meeting, with the exception of the
consideration of the accounts, balance sheets, and the ordinary reports of the
Directors and Auditors, and the fixing of the remuneration of the Auditors.
 Companies Form 2

9. No business shall be transacted at any General Meeting unless a quorum of members

is present. Save as herein otherwise provided Fifty per cent (50%) plus one members
present personally or proxy shall be a quorum.

10. If within half an hour from the time appointed for the meeting a quorum is not
present, or if during a meeting such quorum ceases to be present , the meeting, if
convened upon the requisition of members, shall be dissolved; in any other case it
shall stand adjourned to the same day in the next week at the same time and place,
and, if at the adjourned meeting a quorum is not present within half an hour from the
time appointed for the meeting the members present shall be a quorum.

11. The Chairman, if any, of the Board of Directors shall preside as Chairman at every
General Meeting of the Company.

12. If there is no such Chairman, or if at any meeting he is not present within fifteen
minutes after the time appointed for holding the meeting or is unwilling to act as
Chairman, the members present shall choose someone of their number to be
Chairman.

13. The Chairman may, with the consent of any meeting at which a quorum is present
(and shall if so directed by the meeting) adjourn the meeting from time to time and
from place to place, but no business shall be transacted at any adjourned meeting
other than the business left unfinished at the meeting from which the adjournment
took place. When a meeting is adjourned for ten days or more, notice of the adjourned
meeting shall be given as in the case of an original meeting. Save as aforesaid, it shall
not be necessary to give any notice of an adjournment or of the business to be
transacted at an adjourned meeting.

14. At any General Meeting a resolution to the vote of the meeting shall be decided on a
show of hands, unless a poll is (before or on the declaration of the result of the show
 Companies Form 2

of hands) demanded by three members present in person or by proxy or by any one or

more members present in person or by proxy and representing not less than one fifth
of the total voting rights of all members having the right to vote at the meeting and
unless a poll is so demanded, a declaration by the Chairman that a resolution has, on a
show of hands, been carried, or carried unanimously, or by a particular majority, or
lost, and an entry to that effect in the book of the proceedings of the Company shall
be conclusive evidence of the fact, without proof of the number or proportion of the
votes recorded in favour of, or against, that resolution.

15. If a poll is duly demanded it shall be taken in such a manner as the Chairman and the
result of the poll shall be deemed to be the resolution of the meeting at which the poll
was demanded.

16. In the case of the equality of votes whether on a show of hands or on a poll, the
Chairman of the meeting at which the show of hands take place or at which the poll is
demanded shall be entitled to a second casting vote.

17. A poll demanded on the election of a Chairman or on a question of adjournment shall

be taken forthwith. A poll demanded on any other question shall be taken at such time
as the Chairman of the meeting directs.

VOTING OF MEMBERS AND PROXIES

18. Votes may be given either personally or by proxy.

19. On a show of hands or on a poll every member present or by proxy and entitled to
vote shall have one vote.

20. A member of unsound mind, or in respect of who an order has been made by any
Court having jurisdiction over mentally disordered persons may vote, whether on a
 Companies Form 2

show of hands or on a poll, by his committee, curator bonis,or or other person in the
nature of a committee or curator bonis, or person may vote by proxy.

21. No person shall be entitled to speak and vote at any General Meeting unless such
person shall have been duly admitted as a member in the terms of Article 4 hereof.

22. A person may be appointed and act as proxy although he is not a member of the
Company. The instrument appointing a proxy shall be in writing under the hand of
the appointer or his attorney, duly authorised in writing, or, if the appointer is a
corporation, either under the common seal or under the hand of an officer or attorney
so authorised.

23. The instrument appointing a proxy and the power of attorney or other authority, if
any, under which it is signed, or a notarially certified copy of that power of authority
shall be produced at the meeting at which the person named in the instrument
proposes to vote, and in default the instrument of proxy shall not be treated as valid.

24. An instrument appointing a proxy may be in the common form or in any other form
which the Directors shall approve.

25 The instrument appointing a proxy shall be deemed to confer authority to demand or

join in demanding a poll.

CORPORATIONS ACTING BY REPRESENTATIVE AT MEETING

26. Any corporation which is a member of the Company may by resolution of its
Directors or other governing body authorise such person as it thinks fit to act as its
representative at any meeting of the Company or of any class of members of the
Company and the person so authorised shall be entitled to exercise the same power on
behalf of the corporation which he represents as that corporation could exercise if it
were an individual member of the Company.
 Companies Form 2

EXECUTIVE DIRECTOR
27. The Company in General Meeting may at any time appoint a Executive Director
to conduct the business of the Company, and may make such appointment on
such terms, any may from time to timer vest in or assign to any Executive
Director such powers, discretion and duties, and may impose on him such
regulations as may seem expedient, and may remove any Executive Director so
appointed, and may fill up any vacancy in the office of the Executive Director.

28. The Director shall be named subscribers to these Articles

29. The number of Directors shall be determined from time to time by the Compnay
in General Meeting but shall not be less than two years nor more than seven.

30. A director shall hold office until the next annual General Meeting but shall be
eligible for re-election.

31. The Company by Ordinary Resolution may appoint any person to be a director
and may remove any director.

32. The directors shall have power at any time and from time to time appoint any
person as a director either to fill a casual vacancy or as an addition to the Board
but so that the total number of directors shall not at any time exceed the number
fixed in accordance with these Articles or Companies Act or as may be
prescribed by the Company in General Meeting; but no regulation made by the
Company in General Meeting shall invalidate any prior act of the directors which
would have been valid if that regulation had not been made. Any director so
appointed shall hold office only until the following Annual General Meeting and
shall then be eligible for re-election.
 Companies Form 2

33. The director may from time to time employ any director to perform any work or
service or to supply any goods required by the Company, or to serve the
Company in any professional capacity or character, and may remunerate him for
such works by services or goods as the directors may think proper, and may enter
into contract with him for the purpose aforesaid, but no director shall vote at any
directors’ meeting upon any question affecting his own employment as aforesaid,
or any contract relating thereto. A director shall not be accountable for any profit
arising from such employment.

34. The director shall duly comply with the regulations contained in these presents
and with the provisions of the Companies Act, or any statutory modification
thereof for the time being in force, and in particular with the provisions in regard
to the registration of the particulars of mortgages and charges affecting the
property of the Company, or created by it, and to keeping a register of the
directors, and to sending to the Registrar of Companies an annual list of members
and a summery of particulars relating thereto, and notices of any consolidation or
increase of share capital, and copies of Special Resolutions, and a copy of the
register of Directors and notifications of any change therein.

PROCEEDINGS AT DIRECTORS’ MEETINGS

35. The directors may meet together at least four times a year or more often for the
dispatch of business, adjourn, and otherwise regulate their meetings, as they think
fit. Questions arising at any meeting shall be decided by a majority of votes. In
the case of an equality of votes the Chairman shall have a second or casting vote.
A director may, and the Secretary on the requisition of a director shall, at any
time summon a meeting of the directors.
36. the quorum necessary for the transaction of the business of the directors may be
fixed by the directors, and unless so fixed shall be fifty per cent (50%) plus one.
37. The continuing director may act notwithstanding any vacancy in their body, but if
and so long as their number is reduced below the number fixed by or pursuant to
 Companies Form 2

these regulations as the necessary quorum of directors, the continuing directors or

a sole continuing director may act for the purpose of increasing the number of
directors to that number or of summoning a General Meeting of the Company,
but for no other purpose.
38. The directors may elect a Chairman of their meetings and determine the period
for which he is to hold office; but if no such Chairman is elected or if at any
meeting the Chairman is not present within five minutes after the time appointed
for holding the same, the directors present may choose one of their number to be
Chairman of the meeting.
39. All acts done by any meeting of the directors or by any person acting as director
shall, notwithstanding that it be afterwards discovered that there was some defect
in the appointment of such director or person acting as aforesaid or that they or
any of them were disqualified, be as valid as if every such person had been duly
appointed and was qualified to be a director.
40. The directors shall cause minutes to be made in books provided for the purpose:-
(a) of all appointments of officers made by the directors
(b) of the names of directors present at each meeting of the directors
(c) of all resolutions and proceedings at all meetings of the Company and of the
directors.

RESOLUTION OF DIRECTORS WITHOUT MEETING

41. A resolution in writing signed by all the directors shall be as valid and effectual
as if it had been passed at a meeting of the directors duly called and constituted.
THE SEAL
42. The Common Seal of the Company shall not be affixed to any instrument except
by the authority of a resolution of the Board of Directors, and in the presence of
at least one Director and of the Secretary or such other person as the director may
appoint for the purpose, and the same director and secretary or other person as
aforesaid shall sign every instrument to which the seal of the Company is so
affixed in their presence. The directors may exercise the powers conferred by the
Companies Act with regard to having Official Seal for use abroad.
 Companies Form 2

ACCOUNTS
43. The directors shall cause proper books of accounts to be kept of the sums of
money received and expended by the Company and the matter in respect of
which the receipt and expenditure takes place; all sales and purchases of goods
by the Company; and assets and liabilities of the Company.
44. The books of accounts shall be kept at the registered office of the Company or at
such place or places as the directors think fit, and shall always be open to the
inspection of the directors.
45. The directors shall from time to time determine whether and to what extent and at
what times and places and under what conditions or regulations the accounts and
books of the Company or any of them shall be open to the inspection of the
members not being directors, and no member (not being a director) shall have
any rights of inspecting any account or document of the Company except as
conferred by law or authorised by the directors or by the Company in General
Meeting.
46. Once at least in every year the directors shall lay before the Company in General
Meeting a profit and loss account for the period since the preceding account or
(in the case of the first account) since the incorporation of the Company, made
up to a date not more than six months before such meeting.
47. A balance sheet shall be made out in every year and laid before the Company in
General Meeting, made up to a date not more than six months before, such
meeting. The balance sheet shall be accompanied by a report of the directors as to
the state of the Company’s affairs, the amount, if any, which they propose to
carry to a reserve fund.
48. No dividend shall at any time be declared nor shall any profit or asset of the
Company be distributed to any member both prior to and after the winding up of
the Company.
 Companies Form 2

AUDIT
49. Once at least in every year the accounts of the Company shall be examined and
the correctness of the balance sheet ascertained by one or more Auditor or
Auditors.
50. The first Auditors shall be appointed by the directors; subsequent Auditors shall
be appointed by the General Meeting.
51. If one Auditor only is appointed all the provisions herein contained relating to
Auditors shall apply to him.
52. No director or officer of the Company is eligible as an Auditor during his
continuance in office.
53. The election of Auditors shall be made by the Company at their Annual General
Meeting in each year.
54. The remuneration of the first Auditors shall be made by the directors, that of
subsequent Auditors shall be fixed by the Company in General Meeting
55. Any Auditor shall be re-elected on the termination of his term of office.
56. if any casual vacancy occurs in the office of any Auditor appointed by the
Company, the directors shall forthwith call an extraordinary general meeting for
the purpose of filling the same.
57. Every Auditor shall be supplied with a copy of the balance sheet, and it shall be
his duty to examine the same with the accounts and vouchers relating thereto.
58. Every Auditor shall have a list delivered to him of all books kept by the
Company and shall at all reasonable times have access to the books and accounts
of the Company; he may at the expense of the Company employ accountants or
other persons to assist him in investigating such accounts, and he may in relating
to such accounts examine the directors or any other officer of the Company.
59. The Auditors shall make a report to the members upon the balance sheet and
accounts, and in every such report they shall state whether in their opinion the
balance sheet is a full and fair balance sheet and properly drawn up so as to
exhibit a true and correct view of the state of the Company’s affairs, and in case
they have called for explanations or information from the directors, whether such
explanations or information have been given by the directors, and whether they
 Companies Form 2

have been satisfactory, and such report shall be read, together with the report of
the directors, at an Ordinary Meeting.

MEMBERS’ REGISTERED ADDRESS

60. Each member shall notify in writing to the Secretary an address to which notice
intended for him may be posted or at which the same may be delivered. This
address is herein referred to as the member’s “registered address”
61. If any member, save the persons named in the application for incorporation, fails
to have a registered address and to notify the Secretary thereof, he shall not be
entitled to receive any notice from the Company notwithstanding any provision
to the contrary contained in these regulations. The address of each subscriber
hereto as subscribed shall be deemed his registered address until changed by
notice in writing.
62. A notice may be given by the Company to any member either personally or by
sending it by post, fax, email, telex cable or telegram to his or (if he has no
registered address) to the address, if any, supplied by him to the Company for the
giving of notices to him. Where a notice is sent by post service shall be deemed
to be effected by properly addressing, prepaying and posting a letter containing
the notice and, unless the contrary is proved, to have been effected at the time at
which the letter would be delivered in the ordinary course of the post and every
notice so sent by fax, telex cable or telegram shall be deemed to have served on
the expiry of twelve hours from when the fax or telex message was dispatched or
in the case of a cable or telegram when the cable or telegram was handled in by
the Company for dispatch.
63. Notice of every General Meeting shall be given in some manner hereinbefore
authorised to:-
(a) Every member or director of the Company except those members who
(having no registered address) have not supplied to the Company an
address for the giving of notices to them, and also to
(b) The auditor for the time being of the Company
 Companies Form 2

No other person shall be entitled to receive notices of General Meetings.

ARBITRATION
64. Whenever any difference shall arise between the Company and the directors on
the one hand, and any of the members of their representatives on the other hand,
or between any members or classes of members, present or with regard to
anything done, executed, omitted, or suffered in pursuance of these presents or
the Companies Act, or with regard to any breach or alleged breach of these
presents, or to any of the affairs of the Company, every such difference shall be
referred to the decision of the arbitrator to be appointed by each of the parties in
difference, any such reference shall be subjected to all the provisions of the
Arbitration Act and statutory modifications thereof for the time being in force.

INDEMNITY AND RESPONSIBILITY

65. Every director, Manager, Secretary and other officer or servant of the Company
shall be indemnified by the Company against, and it shall be the duty of the
director out of the funds of the Company to pay all reasonable costs, losses and
expenses which any such officer or servant may incur or become liable to by
reason of any contract entered into or act or deed done by him as such officer or
servant, or in any way in the discharge of his duties, including traveling
expenses.
66. No director or any other officer of the Company shall be liable for the acts,
receipts, neglects, or defaults of any other director or officer, or for any loss or
expense happening to the Company through the insufficiency or deficiency of
title to any property acquired by order of the directors for or on behalf of the
Company, or for the insufficiency or deficiency of any security in or upon which
any moneys shall be invested, or for any loss or damage arising from the
bankruptcy, insolvency or tortuous act of any person with whom any moneys,
securities or effects shall be deposited, or for any loss or damage occasioned by
any error of judgement or oversight on his part or for any other loss, damage or
misfortune whatever which shall happen in the execution of the duties of his
 Companies Form 2

office or in relation thereto unless the same happen through his own willful act or
default.

LIMITED LIABILITY
67. The liability of the members is limited.
68. We the several persons whose names and addresses are subscribed being formed
into a Company limited by guarantee:
(a) agree that if, upon the winding up of the company, there remains after the
discharge of all its debts and liabilities any property of the company, that
property will not be distributed among members, but will be transferred to
some other company having similar objects or applied to some other
charitable objects, such other company or charitable objects to be
determined by ordinary resolution of the members in general meeting prior
to the dissolution of the Company.
(b) We respectively declare that if, upon the winding up of the Company, the
assets of the company prove insufficient to discharge all the debts and
liabilities of the company, we guarantee to contribute to the discharge of
those debts and liabilities an amount not exceeding the amount set against
our respective names:-
 Companies Form 2

NAME, ADDRESS, NATIONALITY AND AMOUNT GUARANTEED BY EACH

MEMBER

Name:…………………………………………………………….
Passport/NRC No………………………………………………..
Address:…………………………………………………………
…………………………………………………………..
………………………………………………………….
……………………………………………………………
Nationality:………………………………………………………
Guarantee:………………………………………………………

Name:…………………………………………………………….
Passport/NRC No………………………………………………..
Address:…………………………………………………………
…………………………………………………………..
………………………………………………………….
……………………………………………………………
Nationality:………………………………………………………
Guarantee:………………………………………………………

Name:…………………………………………………………….
Passport/NRC No………………………………………………..
Address:…………………………………………………………
…………………………………………………………..
………………………………………………………….
……………………………………………………………
Nationality:………………………………………………………
Guarantee:………………………………………………………
 Companies Form 2

Name:…………………………………………………………….
Passport/NRC No………………………………………………..
Address:…………………………………………………………
…………………………………………………………..
………………………………………………………….
……………………………………………………………
Nationality:………………………………………………………
Guarantee:………………………………………………………

Name:…………………………………………………………….
Passport/NRC No………………………………………………..
Address:…………………………………………………………
…………………………………………………………..
………………………………………………………….
……………………………………………………………
Nationality:………………………………………………………
Guarantee:………………………………………………………

Name:…………………………………………………………….
Passport/NRC No………………………………………………..
Address:…………………………………………………………
…………………………………………………………..
………………………………………………………….
……………………………………………………………
Nationality:………………………………………………………
Guarantee:………………………………………………………
 Companies Form 2

Name:…………………………………………………………….
Passport/NRC No………………………………………………..
Address:…………………………………………………………
…………………………………………………………..
………………………………………………………….
……………………………………………………………
Nationality:………………………………………………………
Guarantee:………………………………………………………

Name:…………………………………………………………….
Passport/NRC No………………………………………………..
Address:…………………………………………………………
…………………………………………………………..
………………………………………………………….
……………………………………………………………
Nationality:………………………………………………………
Guarantee:………………………………………………………

Application for Incorporation as a Private Company Limited by Shares

(Section 6)
 Companies Form 2

NOTE: This application is for a private company with share capital (section 17). It may not have more
than 50 shareholders (section 16). Is has the capacity to enter any business, unless restricted by its articles
(sections 23 and 24). The articles may restrict the right to transfer shares. It is prohibited from making any
invitation to the public to purchase its shares or debentures (section 122). If it is wound up and its assets
are insufficient to cover its liabilities, the liability of its shareholders is limited to the amount left unpaid on
their shares (section 265 and 266).

(1) Name of Company…EQUILIBRIA CONSULTING. Limited

(2) General nature of business:

(a) Principal business: PROVISION OF CONSULTANCY SERVICES

IN BUSINESS AND ECONOMIC RESEARCH

(b) Other business: TO ENGAGE IN INVESTMENT SERVICES AND

Any other business related to above
………………………………………..

(3) *The articles do not restrict the business that the company may conduct

OR

*The articles restrict the business that the company may conduct as follows:

………………………………………………………………………………………………

(4) Situation of registered office:…9TH FLOOR, PREMIUM HOUSE, INDEPENDENCE

AVENUE, LUSAKA
………………………………………………………………………

(5) Postal address of the company …P O BOX 35242, LUSAKA………………………..

(6) Nominal Capital:

K…5,000,000.00…………….

divided into….5,000,000……………………………….shares of K…1.00………………………

(7) The articles limit the number of shareholders to ……50……………………..

(8) Date of beginning of second financial year (if not anniversary of date of incorporation):

……………FIRST ANNIVERSARY OF INCORPORATION ……………………………….

*Delete whichever is not applicable

 Company Form 3

(9) Particulars of first directors:

Present forenames and surnames Former Forenames or Nationality and NRC Residential and postal address
surnames No. or passport No.

THEMBA MUNALULA - P O BOX 35242,

ZAMBIAN LUSAKA.
459906/11/1 NO. 5, SIPHO FARM,
LILAYI

CAESAR CHEELO -
ZAMBIAN P O BOX 35242,
ZG 45228 LUSAKA.
NO. 133/1, MANSANSA
CLOSE, FAIRVIEW,
LUSAKA

(10) Particulars of first secretary of company

(a) (if an individual):

Present forenames and surnames Former Forenames or Nationality and NRC No. or passport Residential and postal
surnames No. address

CAESAR CHEELO - ZAMBIAN P O BOX 35242,

 Company Form 3

ZG 45228 LUSAKA.
NO. 133/1,
MANSANSA CLOSE,
FAIRVIEW, LUSAKA

(b) (if a body corporate):

Name of body Registered office or body Registered postal address Name of any other
corporate corporate body corporate in which
a secretaryship is held
 Company Form 3

N/A N/A N/A N/A

NOTE: Where all the partners in a firm are joint secretaries, the name and address of the principle officer
of the firm (and, if that address is outside Zambia, the address of the principal officer of the firm in
Zambia) may be given, instead of the particulars of each partner.

Where the Secretary is a body corporate name and its registered or principal office (and, if that office is
outside Zambia, the address of the body corporate in Zambia) should be given.

WE, the several persons whose names and addresses are subscribed, wish to be formed into a
PRIVATE COMPANY LIMITED BY SHARES in pursue of this application, and we
respectively agree to take the number of shares in the capital of the company set opposite our
respective names:

forenames and surname Nationality and NRC Residential address Postal address No. and
number or passport shares to
number

THEMBA MUNALULA NO. 5, SIPHO P O BOX 35242,

2,500
FARM, LILAYI LUSAKA.
ZAMBIAN
459906/11/1
 Company Form 3

2,500
CAESAR CHEELO NO. 133/1,
MANSANSA CLOSE,
ZAMBIAN FAIRVIEW, LUSAKA
ZG 45228

P O BOX 35422,
LUSAKA

Dated the ………9TH……………Day of JANUARY ……….. 2006

Witness to the above signatures:
……………………………………………………… ………………………………………………………
……………………………………………………………………… ……………………………………
Name Address
Occupation Signature
Name and address of individual lodging the application:

GEORGE MPUNDU KANJA BOX 32091, LUSAKA

………………………………………………………………………………………………………
………………..

Capacity under which lodging application

ADVOCATE
…………………………………………………………………………..
 Company Form 3

Application for Incorporation as a Company Limited by Guarantee

(Section 6)
Note: A company limited by guarantee does not have share capital. It must not carry on business for the
purpose of making profits for its members or for anyone concerned in its promotion or management
(section 19). It may not have more than 50 members (section 16). It is prohibited from making any
invitation to the public to purchase its debentures (section 122). It has the capacity to enter into any
activity, unless restricted by its articles (section 22). However, it is bound by its acts even if they are
contrary to restrictions in its articles (sections 23 and 24). Each member must sign a declaration of
guarantee, specifying the amount that he undertakes to contribute if the company is wound up. If it is
wound up and its assets are insufficient to cover its liabilities, the liability of its members is limited to the
amount so guaranteed (sections 265 and 266).

(5) Name of Company…Limited

(6) General nature of business:

(a) Principal activities:

(b) Other activities:

………………………………………..

(7) *The articles do not restrict the business that the company may conduct

OR

*The articles restrict the business that the company may conduct as follows:

………………………………………………………………………………………………

(8) Situation of registered office:…3rd FLOOR, PREMIUM HOUSE, INDEPENDENCE

AVENUE, LUSAKA ………………………………………………………………………

(5) Postal address of the company …P O BOX , LUSAKA………………………..

(6) Total amount guaranteed by subscribers:

K 6,000,000

(7) The articles limit the number of shareholders to

(8) Date of beginning of second financial year (if not anniversary of date of
incorporation):
 Company Form 3

*Delete whichever is not applicable

(6) Nominal Capital:

K…5,000,000.00…………….

divided into….5,000,000……………………………….shares of K…1.00………………………

(7) The articles limit the number of shareholders to ……50……………………..

(8) Date of beginning of second financial year (if not anniversary of date of incorporation):

……………FIRST ANNIVERSARY OF INCORPORATION ……………………………….

*Delete whichever is not applicable

 Company Form 3

(11) Particulars of first directors:

Present forenames and surnames Former Forenames or Nationality and NRC Residential and postal address
surnames No. or passport No.

THEMBA MUNALULA - P O BOX 35242,

ZAMBIAN LUSAKA.
459906/11/1 NO. 5, SIPHO FARM,
LILAYI

CAESAR CHEELO -
ZAMBIAN P O BOX 35242,
ZG 45228 LUSAKA.
NO. 133/1, MANSANSA
CLOSE, FAIRVIEW,
LUSAKA

(12) Particulars of first secretary of company

(a) (if an individual):

Present forenames and surnames Former Forenames or Nationality and NRC No. or passport Residential and postal
surnames No. address

CAESAR CHEELO - ZAMBIAN P O BOX 35242,

ZG 45228 LUSAKA.
NO. 133/1,
MANSANSA CLOSE,
FAIRVIEW, LUSAKA
 Company Form 3

(b) (if a body corporate):

Name of body Registered office or body Registered postal address Name of any other
corporate corporate body corporate in which
a secretaryship is held
 Company Form 3

N/A N/A N/A N/A

NOTE: Where all the partners in a firm are joint secretaries, the name and address of the principle
officer of the firm (and, if that address is outside Zambia, the address of the principal officer of the firm
in Zambia) may be given, instead of the particulars of each partner.

Where the Secretary is a body corporate name and its registered or principal office (and, if that office is
outside Zambia, the address of the body corporate in Zambia) should be given.

WE, the several persons whose names and addresses are subscribed, wish to be formed into a
PRIVATE COMPANY LIMITED BY SHARES in pursue of this application, and we
respectively agree to take the number of shares in the capital of the company set opposite our
respective names:

forenames and surname Nationality and NRC Residential address Postal address No
number or passport shar
number

THEMBA MUNALULA NO. 5, SIPHO P O BOX 35242,

2,5
FARM, LILAYI LUSAKA.
ZAMBIAN
459906/11/1

2,5
NO. 133/1,
CAESAR CHEELO MANSANSA CLOSE,
 Company Form 3

ZAMBIAN FAIRVIEW, LUSAKA

ZG 45228

P O BOX 35422,
LUSAKA

Dated the ………9TH……………Day of JANUARY ……….. 2006

Witness to the above signatures:
……………………………………………………… ………………………………………………………
……………………………………………………………………… ……………………………………
Name Address
Occupation Signature
Name and address of individual lodging the application:

GEORGE MPUNDU KANJA BOX 32091, LUSAKA

…………………………………………………………………………………………………
……………………..

Capacity under which lodging application

ADVOCATE
…………………………………………………………………………..

(1) Name of company Limited

(2) General nature of activities:
(a) Principal activities

(b) Other activities:

(3) The articles do not restrict the activities that the company may conduct

OR
*The articles restrict the activities that the company may conduct as follows:

(4) Situation of registered office:

(5) Postal address of the company:

(9) Particulars of first directors:

Present forenames and surnames

 Company Form 3

Former forenames or surnames

Nationality and NRC No. or passport No.

Residential and postal addresses

Occupation, and other bodies corporate in which directorship is held

(10) Particulars of first secretary of company

(a) (if an individual):

Present forenames and surnames Former forenames or surnames Nationality

and NRC No. or passport No.
Residential and postal addresses Occupation, any other secretaryship held

(b) (if a body corporate):

Name of body corporate Registered office of body corporate Registered postal

address Name of any other body corporate in which a secretary-ship is held
Addres of principal office, if different from registered office

Note: Where all the partners in a firm are joint secretaries, the name and address of
the principal officer of the firm (and, if that address is outside Zambia, the address of
the principal officer of the firm in Zambia) may be given, instead of the particulars of
each partner.
Where the Secretary is a body corporate name and its registered or principal of
fice (and, if that office is outside Zambia, the address of the body corporate in
Zambia) should be given.

WE, the several persons whose names and addresses are subscribed, wish to be
formed into a COMPANY LIMITED BY GUARANTEE in pursuance of this
application, and:
(1) we agree that if, upon the winding up of the company, there remains after the
discharge of all its debts and liabilities any property of the company, that property
will not be distributed among the members, but will be transferred to some other
 Company Form 3

company having similar objects, or applied to some other charitable object, such other
company or charity to be determined by ordinary resolution of the members in general
meeting prior to the dissolution of the company;
(2) we respectively declare that if, upon the winding up of the company, the assets
of the company prove insufficient to discharge all the debts and liabilities of the
company, we guarantee to contribute to the discharge of those debts and liabilities an
amount not exceeding the amount set against our respective names:

Forenames and
surname Nationality and NRC number or passport number
Residential adress

Postal address Amount declared to be guaranteed by the abscriber

Signature of subscriber

Dated the ...............................................................day

of............................................19........

Witness to the above signatures:

................................. ............................. ................................ ....................
.......

Name Address Occupation Signature

Name and address of individual lodging the application:

 Company Form 3

Companies Form 11

DECLARTION OF COMPLIANCE
(Section 9)

Company Registration No……………………………………………….

To: THE REGISTRAR OF COMPANIES

I…GEORGE KANJA...................
………………………………………………………..

of…PLOT 6614, MBERERE ROAD, OLYMPIA EXTENSION, LUSAKA

…………………………………………………………………………………………
……
(RESIDENTIAL ADDRESS)

Do solemnly and sincerely declare that I am: *a legal practitioner engaged in

the formation of the company, a first director named in the application for
incorporation or the first secretary named in the application for incorporation

of…EQUILIBRIA CONSULTING LIMITED

…………………………………………………………………………………………
……
(NAME OF COMPANY)

and that all the requirements of the Companies Act, CAP 388 in respect of
matters precedent to the Incorporations of the Company and incidental
thereto have been complied with. And I make this solemn declaration
conscientiously believing the same to be true and by virtue of the provisions
of the Statutory Declarations Act, 1835, of the United Kingdom.

Declared at
………………………………………………………………………………..

the ……………………………………….day of
…………………………………..2006

Before me,
………………………………………………………………………………..

……………………………………………………….
(Commissioner for Oaths, or Notary Public)

DECLARATION OF COMPLIANCE WITH MINIMUM CAPITAL

 Company Form 3

Requirements for a Private Company

(Section 18)
Company Registration No. ………………………..
To:……THE REGISTRAR OF COMPANIES
………………………………………………………… CEASAR CHEELO……………...…
OF ……MANSANSA CLOSE, FAIRVIEW, LUSAKA……………………………….
………..…………………………….
being the secretary/director of the company …EQUILIBRIA CONSULTING LIMITED
……………………………………………………………………………………………………………………..………….……………..
(Name of Company)
do solemnly and sincerely declare:

(1) That the company has not transacted any business, exercised any borrowing
powers or incurred any indebtedness, except for the purpose incidental to its
incorporation or the obtaining of subscription to or payment for its shares.

(2) That the nominal value of shares capital of the Company (whether paid in cash or
otherwise) is

K…5,000,000.00…….………………….
………………………………………….……
(being not less than the minimum provided under the Act)

(3) That the amount paid up on the allotted share capital of the capital of the
Company (whether paid in cash or otherwise) is

K…
5,000,000……………………………………………………………………….
…...
(being not less than the minimum provided under the Act)

(4) That the amount, or estimated amount of the preliminary expenses that have been
paid or are payable is

K…5,000,000.00…………….……………………………………….
………………..
And I make solemn declaration conscientiously believing the same to be true and by
virtue of the provisions of the statutory Declaration Act, 1835 of the United Kingdom.

Declared at…LUSAKA……..…………………………………………………....
…………………

the 15TH ………day of …MAY…………………………………… 2006 …………..………

Before
me …………………………………………………………...………………..…….…….…
…………………………………………………………………………………………………
(Commissioners for Oaths, Or Notary Public)

*Delete whatever is not applicable

 Company Form 3

Companies Form 5

DECLARATION OF CONSENT TO ACT

AS DIRECTOR OR SECRETARY
(Section 6)

Company Registration No ……………………………………………

To: THE REGISTRAR OF COMPANIES:

*I/*We, the undersigned, hereby testify *my/*our consent to act as director or

secretary to the proposed company

EQULIBRIA CONSULTING LIMITED

……………………………………………………………………..
(company name)

Pursuant to section 6(1) (c).

Forenames & Residential & postal

surnames address Description Signature

THEMBA NO. 5, SIPHO FARM, DIRECTOR

MUNALULA LILAYI

CAESAR CHEELO NO. 133/1 DIRECTOR/

MANSANSA CLOSE, SECRETARY
FAIRVIEW, LUSAKA

Dated this ……………………day of………………………………2006

Witness to above signatures:

Name Address Occupation Signature

George Kanja Box 32091, Lusaka Advocate

……………………. ……………………….. …………………..
………………….
Company Form 3