ZIMBABWE Law and Practice Contributed by: Norman Chimuka and Tonderai Sena, ChimukaMafunga Commercial Attorneys
9. Insolvency 9.1 Rights of Shareholders If the Company Is Insolvent The rights of shareholders if the company is insolvent are specified in the Insolvency Act [Chapter 6:07] (“Insolvency Act”). They are as follows: • the right to initiate corporate rescue or liquidation proceedings (Sections 5 (7) and 122 of the Insol- vency Act); • the right to provide directions in a general meeting to the liquidator in accordance with the limits of their powers (Sections 10 (7) and 16 of the Insol- vency Act); • the right to share in the distribution of the com- pany’s residue or surplus pro rata their sharehold- ing and interests (Section 103 (4) of the Insolvency Act); • the right to consider and approve a corporate res- cue plan, especially where it affects their security rights (Section 144 of the Insolvency Act); and • generally, the right to follow and be informed about the insolvency proceedings. 10. Shareholders’ Remedies 10.1 Remedies Against the Company Shareholders have legal remedies against the com- pany primarily as follows: • the remedies available to challenge the validity of resolution as established in 2.11 Challenging a Resolution ; and • the exercise of dissenting shareholders’ appraisal rights, in which case the shareholders may demand that the company pay them the fair value for all of their shares in the company (Section 233 of the COBE Act). 10.2 Remedies Against the Directors Shareholders have several legal remedies against the company’s directors/officers as established in 6.2 Challenging a Decision Taken by Directors .
10.3 Derivative Actions Section 61 of the COBE Act permits shareholders to bring a derivative action on behalf of the company. In such case, a member or members (acting in concert) 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 com- pany by violation of the duties owed by that manager, officer, or director to the company. 11. Shareholder Activism 11.1 Legal and Regulatory Provisions The key legal and regulatory provisions that govern/ restrict shareholder activism in Zimbabwe include the following: • Section 62 of the COBE Act: This provision entitles shareholders to institute legal proceedings chal- lenging particular decisions of a company or in the event of a deadlock, fraud, oppression or other situations. A notable example is the recent case of • Thomas Mabuzwe & 6 Others vs Securities and Exchange Commission of Zimbabwe & 12 Others HC 5923-21, where seven shareholders instituted legal proceedings against publicly listed compa- nies for migrating their shares from one central securities depository (CSD) to another without their consent. As at the date of this chapter, the mat- ter is still pending final determination by the High Court of Zimbabwe. • Section 60 of the COBE Act: Direct actions by members against directors. • Section 61 of the COBE Act: Derivative actions. • Sections 223 and 225 of the COBE Act: This provi- sion 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: This provision provides an exit remedy to minority shareholders who may be against some major corporate actions through the exercise of dissenting shareholder appraisal rights.
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