ZIMBABWE Law and Practice Contributed by: Norman Chimuka and Tonderai Sena, ChimukaMafunga Commercial Attorneys
In the banking and insurance sector, any director appointments by shareholders are subject to fitness and probity tests and approval by the regulators. 6.2 Challenging a Decision Taken by Directors Shareholders can challenge a decision that has been taken by the directors or require directors to take any action in favour of the company. In accordance with Sections 60 and 61 of the COBE Act, members may bring direct or derivative actions against directors for their failure to observe their fidu- ciary duties, especially where there is fraud or misap- propriation. Shareholders may bring an action in court against any manager, officer, or director of the entity in two ways: • Direct Action: A member or members may bring a direct action in court in their name to enforce or recover damages caused to them by violation of a duty incumbent upon such an officer, manager, or director. Members may also bring a direct action against the entity seeking any relief that is not pro- hibited by the law. • Derivate Action: A member or members may bring an action in court in their names and on the entity’s behalf against any manager, officer, or director to enforce or recover damages caused to the compa- ny by violation of the duties owed by that manager, officer, or director to the company. In addition to the above, the other ways in which shareholders can challenge or influence directors’ decisions are as follows: • instituting criminal proceedings against the com- pany or its directors and officers; • Section 223 as read with Section 225 of the COBE Act permits a shareholder to apply to court for an appropriate order against another shareholder on the grounds that the company’s affairs are being or have been conducted in a manner which is oppres- sive or unfairly prejudicial to the interests of some members; • Section 233 of the COBE Act provides an exit rem- edy to minority shareholders who may be against some major corporate actions; and
• enforcement of certain disclosure and transparency requirements. 6.3 Rights to Appoint and Remove Auditors Shareholders have rights or powers to require the appointment/removal of the company’s auditors. According to Section 191 (2) of the COBE Act, eve- ry company shall, at each annual general meeting, appoint an auditor to hold office from the conclusion of that annual general meeting until the conclusion of the next annual general meeting. The removal of an auditor, prior to expiration of the term, is subject to the provisions of the auditor’s contract. Directors of public companies have an obligation to report to shareholders on the company’s corporate governance arrangements. According to Section 220 (3) as read with Section 167 (5)(e) of the COBE Act, at each annual general meeting of a public company, the board of directors shall report to the meeting on the company’s compliance with its corporate governance guidelines and their conformity to the principles set forth in the National Code on Corporate Governance, and explain the extent, if any, to which it has varied them or believes that any non-compliance therewith is justified. This is known as the board’s “comply or explain” report. There is no such positive obligation for other companies unless the company’s constitutive documents provide otherwise. 7. Corporate Governance Arrangements 7.1 Duty to Report
8. Controlling Company 8.1 Duties of a Controlling Company
There are no prescribed duties and liabilities of con- trolling companies to the shareholders of the company they control. That said, like any other shareholder, a controlling company has a duty to act fairly, lawfully, and in the best interests of the company.
278 CHAMBERS.COM
Powered by FlippingBook