ZAMBIA Law and Practice Contributed by: Emmanuel Manda, Simon Kapampa, Innocent Mung’omba and Kaluwe Libeleki, Musa Dudhia & Co.
9.3 Common Defensive Measures Common defensive measures include directors mak - ing an offer to acquire shares under Section 165 or 166 of the Companies Act. Another common defensive measure is for the direc - tors to find an alternative purchaser in order to avert Where directors are acquiring the shares of the com - pany as a defensive measure, they have the duty to ensure that: • the acquisition is in the best interests of the com - pany and its shareholders; • the terms of the offer and the consideration offered for the shares are fair and reasonable to the com - pany and its shareholders; and • the board is not aware of any information that has not been disclosed to the shareholders which is material to an assessment of the value of the shares and as a result of which the terms of the offer and consideration offered for the shares are unfair to shareholders accepting the offer. the hostile tender offer. 9.4 Directors’ Duties The directors must set out in full, in their resolution to acquire the shares, the reasons for the board’s resolu - tions, and any directors who vote in favour of a resolu - tion to acquire the shares must sign a declaration as to the duties set out above. Additionally, the Takeover Rules place the following duties on directors of public companies: • directors must have regard to the interests of the shareholders as a whole, and not their own inter- ests or those derived from personal and family relationships; and • at no time after a bona fide offer has been com - municated to the board of an offeree company, or after the board of an offeree company has reason to believe that a bona fide offer might be immi - nent, may any action be taken by the board of the offeree company in relation to the affairs of the company, without the approval of shareholders in a general meeting, which could effectively result in any bona fide offer being frustrated or in the share -
advise the board as to whether the offer is, or is not, fair and reasonable. In a business combination, financial and legal advice is commonly sought and given to directors. 8.5 Conflicts of Interest Conflicts of interest of directors and advisers have been the subject of judicial scrutiny in Zambia. The Companies Act prescribes the circumstances under which a director will be considered to have a con - flict of interest, and the courts generally refer to these circumstances in determining the various conflict of interest cases. The circumstances under which a director would be considered to have an interest in a transaction to which the company is a party include the following: • if the director is likely to derive a material financial benefit from the transaction; • if the director has a material financial interest in or with another party to the transaction; or • if the director is the parent, child or spouse of another party to, or a person who is likely to derive a material financial benefit from, the transaction. Hostile tender offers are not expressly addressed under Zambian law. However, Section 189 of the Companies Act provides that, save for any limitation or restriction on the transfer of shares in the articlesor the Companies Act, shares in a company are transfer - able without restriction provided they are fully paid up. As such, hostile tender offers are generally permitted; however, they are not particularly common. 9.2 Directors’ Use of Defensive Measures Directors are allowed to use defensive measures to prevent a hostile takeover. However, there is no express legal provision to this effect. 9. Defensive Measures 9.1 Hostile Tender Offers
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