ZIMBABWE Law and Practice Contributed by: George Gapu, Fidelis Manyuchi and Tapiwa John Chivanga, Scanlen & Holderness
hoc committee made up of legal expects can be set up to look at the legality of the combination. These ad hoc committees are sometimes used when some directors have a conflict of interest. However, even without the use of ad hoc committees, directors who have a conflict are required by the law to disclose their interest and to abstain from voting on an issue on which they conflict. 8.3 Business Judgement Rule Although not specifically in takeover situations, Zim - babwean courts have generally deferred to the judg - ment of the board of directors in matters concerning company affairs. The courts have maintained that there is a need for them to generally stay clear of the internal affairs of companies. Examples of this are found in the cases of Stalap Investments (Pvt) Ltd & three others v Willoughby’s Investments (Pvt) Ltd & two others (HH 726-19, HC 11164/17) [2019] ZWHHC 726-19 (7 November 2019) and Matanda v CMC Pack - aging (Pvt) Ltd & Ors (HH 113 of 2003) [2003] ZWHHC 113 (19 August 2003). 8.4 Independent Outside Advice Directors often rely on the information, opinions, reports or statements (including financial statements) of independent auditors or legal practitioners, or of experts in the industry of the target entity, as well as on the opinions, statements and/or information of the employees of the registered business entity who the person reasonably believes are reliable and compe - tent to issue such information, opinions, reports or statements. In addition, Section 230 of the Companies and Other Business Entities Act (Chapter 24:31) states that the board of directors of a private company may, and the board of a public company must, obtain an opinion of an independent professional financial adviser on the terms of the contract for the merger and the proposed merger, in which the adviser shall state: • the adviser’s analysis and an explanation of all the terms of the contract for the merger, including the method or methods used to arrive at any proposed share exchange ratio and the values arrived at using each method; and
• an opinion as to the fairness of the merger to the shareholders and, if there is more than one type or class of shareholders, to each type or class of shareholders and creditors of the merging compa - nies. The opinion stated in the foregoing must accompa - ny, where one public company is a party to merger proceedings, the notice of the provisional contract of merger to the shareholders of each of the merging companies. 8.5 Conflicts of Interest Conflicts of interest of directors, managers, share - holders or advisers have been the subject of scru - tiny in this jurisdiction. In addition to scrutiny by the courts, the legislature has taken preventive measures by enacting Sections 56–58 of the Companies and Other Business Entities Act (Chapter 24:31). In terms of Section 57 of the Act, where a director has a personal financial interest in respect of a mat - ter to be considered at a meeting of the board of the company, or knows that an associate has a personal financial interest in the matter, he or she: • (a) must disclose the interest and its general nature before the matter is considered at the meeting; • (b) must disclose to the meeting any material information relating to the matter, and known to the person; • (c) may disclose any observations or pertinent insights relating to the matter if requested to do so by the other persons; • (d) if present at the meeting, must leave the meet - ing immediately after making any disclosure con - templated in points (b) or (c); • (e) must not take part in the consideration of the matter, except to the extent contemplated in points (b) and (c); and • (f) while absent from the meeting in terms of this subsection (i) is to be regarded as being present at the meeting for the purpose of determining whether sufficient directors are present to consti - tute the meeting, (ii) is not to be regarded as being present at the meeting for the purpose of determin - ing whether a resolution has sufficient support to be adopted and (ii) must not execute any docu -
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