ZAMBIA Law and Practice Contributed by: Emmanuel Manda, Simon Kapampa, Innocent Mung’omba and Kaluwe Libeleki, Musa Dudhia & Co.
ful future takeover as the bidder would have already secured a strategic position in the target and would therefore be capable of influencing an offer. Where the target is publicly traded, the bidder will need to comply with material shareholding disclosure require - ments as discussed in 4.2 Material Shareholding Disclosure Threshold . A key stakebuilding strategy involves the gradual acquisition of shares in the target over a period of time as sudden large acquisitions may lead to sudden market fluctuations. Further, while stakebuilding is permissible, it must be borne in mind that for both private companies and publicly traded companies, the number of shareholders should not fall below two. 4.2 Material Shareholding Disclosure Threshold Under Zambia’s securities legislation, a “substantial shareholder” must give notice, in writing, to a listed company or company whose securities are registered with SEC, if the person/entity: • acquires further shares in that company; or • disposes of shares as a result of which the person ceases to be a “substantial shareholder” of that company. A person/entity is considered to be a “substantial shareholder” if the person is the beneficial owner of, or is in a position to exert control over at least 15% of, the shares of the company. The disclosure notice by a “substantial shareholder” must contain the following: • the total number of shares acquired or disposed of; • the prices paid or received for the acquired or disposed-of shares; and • the resultant total amount of shares held in the company and the percentage of shares it repre - sents. The disclosure notice must be made five days after the acquisition of the shares. Once the listed company or company whose securities are registered with SEC receives the disclosure notification from a substantial shareholder, it will be required to enter the information notified in its register and specify the date of the entry.
The company will in turn be required to notify SEC and the listing exchange, where applicable, before the expiry of a period of five days from the date on which the company was notified by the substantial shareholder. Further, the target, whether publicly traded or not, is required to notify the Registrar of Companies of any changes in shareholding or beneficial ownership with - in 14 days of the change. Generally, a beneficial owner is a natural person who directly or indirectly owns at least 5% of the shares in the company or benefits from at least 5% of the distributed dividends. In practice, however, it is difficult for a publicly traded company to notify the Registrar of Companies of changes in its shareholding where its shareholding is subject to frequent changes. 4.3 Hurdles to Stakebuilding A company may introduce, through its articles of incorporation, higher reporting thresholds but can - not introduce lower reporting thresholds than those provided for by legislation. Another hurdle to stake - building in Zambia is the pre-emptive rights provided for under Zambia’s companies legislation. Under the existing legislation, a company is required to offer shares proposed to be issued and that rank equally with shares already issued to the existing sharehold - ers in a manner and on terms that would, if accepted, maintain the existing voting or distribution rights, or both, of those shareholders. Further, it is also common for the articles of incorpora - tion or the shareholders’ agreement to provide that an existing shareholder cannot transfer its shares without first offering the shares to other existing sharehold - ers. As such, stakebuilding may be hindered by the need to have other existing shareholders waive their pre-emptive rights prior to any acquisition occurring. However, in practice, the pre-emptive rights can be waived fairly easily through the issuance of a letter or the waiver can be included in the shareholder reso - lution approving the allotment of the shares or the transfer of the shares. 4.4 Dealings in Derivatives Dealings in derivatives are permissible in Zambia. Derivatives are considered as securities under the
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