DBA COMPANY LAW & SECRETARIAL ASSIGNMENT – 2019.

FUNCTIONS OF THE COMPANY SECRETARY

The company secretary is a person who is qualified in terms of subsection 2 and has the
requisite knowledge and experience to discharge the functions of secretary of the company
and who is responsible for the effective and smooth administration of a company particularly
with regard to ensuring compliance with statutory and regulatory requirements conduct of
board meetings, including annual general meetings. They ensure that decisions of the Board
of Directors are implemented. Despite the name, their role is not clerical or secretarial. They
must be able to provide impartial, frank and fearless guidance and advice.

The secretary is responsible for the maintaining the company’s statutory books including a
register of any changes on the company assets, filing confirmation statements and other
company returns which are annual accounts, director’s report and auditor's report where
applicable. They also deal with management of shareholder administration and
communication, strategic advice to the company’s Board of Directors. They are also
responsible for arrangement of board meetings, drafting the agenda, circulating supporting
papers and notices and producing minutes of all meetings.

Through the company secretary the company must be informed of any significant changes to
the company’s share capital of administration which are appointments and resignations and
changes to director’s addresses and other details. They maintain the registered off addresses
as the addresses for formal communication and for informing company when the addresses
changes. They ensure that the registered office addresses and other company’s details are
accurate on business statutory, company websites, emails and order forms.

As it is essential for the company secretary to have a good working knowledge of the
company’s articles of Association (which is the regulation giving the internal management of
the company) they should ensure that the company is compliant with the Companies Act
chapter 24.03 and other legal matters. The security of company’s legal documents such as the
certificate of incorporation, Memorandum of Association, share certificates and directors
service contracts are another important tool that would normally fall to the company
secretary. They act as the first point on contact in the company circulation of announcements,
correspondences regarding dividends, registration of share ownership, transfers and all areas
relating to shareholding.

They may be asked to act as a signatory to legal documents on behalf of the company’s
directors, this includes authorising the company’s confirmation statement and signing
cheques and other bank documents. The secretary may be disqualified if they are a minor or
any other person under legal disability, convicted in Zimbabwe or any other country.
A share is a part or portion of a large amount which is divided among a number of people or
to which a number of people contribute. The owner of shares in the corporation or company
is called a shareholder. A share certificate which specifies the shares held by the member and
which is (prima facie) face value evidence of his tittle to the shares is issued to a shareholder.

Ordinary shares
These carry no special rights or restrictions. They rank after preference shares as regards
dividends and return of capital but carry voting rights (usually one vote per share) not
normally given to holders of preference shares (unless their preferential dividend is in
arrears). these carry no special rights or restriction. They rank after preference shares as
regards dividends and return a capital but carry voting rights( usually one vote per share) not
normally given to holders of preference shares. They carry equal rights to voting, capital and
dividends.

. If each share had the right to one vote (and assuming the shares were issued at their nominal
value),

Deferred ordinary shares

A company can issue shares which will not pay a dividend until all other classes of shares
have received a minimum dividend. Thereafter they will usually be fully participating. On a
winding up they will only receive something once every other entitlement has been met.

Non-voting ordinary shares

Voting rights on ordinary shares may be restricted in some way for example they only carry
voting rights if certain conditions are met. Alternatively, they may carry no voting rights at
all. They may also preclude the shareholder even attending a General Meeting. In all other
respects they will have the same rights as ordinary shares.

Redeemable shares
The terms of redeemable shares give the company the option to buy them back in the future;
occasionally, the shareholder may (also) have the option to sell them back to the company,
although that’s much less common.

The option may arise at or after a specific date, between two dates or be effective at any time
the shares are in issue. The redemption price is usually the same as the issue price, but can be
set differently. A company can only redeem shares out of profits or the proceeds of a new
share issue, which may restrict its ability to redeem shares even if the directors would like to
exercise the option.
If a company chooses to have redeemable shares, it must also have non-redeemable shares in
issue. At no point can all of its share capital be made up of redeemable shares.

Preference shares
These shares are called preference or preferred since they have a right to receive a fixed
amount of dividend every year. This is received ahead of ordinary shareholders. The amount
of the dividend is usually expressed as a percentage of the nominal value. So, a $1, 5%
preference share will pay an annual dividend of 5c. The full entitlement will be paid every
year unless the distributable reserves are insufficient to pay all or even some of it. On a
winding up, the holders of preference shares are usually entitled to any arrears of dividends
and their capital ahead of ordinary shareholders. Preference shares are usually non-voting (or
only have a vote only when their dividend is in arrears).

Cumulative preference shares

If the dividend is missed or not paid in full then the shortfall will be made good when the
company next has sufficient distributable reserves. It follows that ordinary shareholders will
not receive any dividends until all the arrears on cumulative preference shares have been
paid.

By default, preference shares are cumulative but many companies also issue non-cumulative
preference shares.

Redeemable preference shares

Redeemable preference shares combine the features of preference shares and redeemable
shares. The shareholder therefore benefits from the preferential right to dividends (which may
be cumulative or non-cumulative) while the company retains the ability to redeem the shares
on pre-agreed terms in the future.

B) TYPES OF CAPITAL THAT CAN BE HELD IN AN ORGANIZATION BY THE

SHAREHOLDERS.

DEBENTURES – is a medium to long term debt instrument used by large companies to

borrow money at a fixed rate of interest. They are issued by a company and secured against
assets. Example an interest bearing bond issued by a power company. This is a popular
means of raising funds by a company. The documents grants lenders a charge over a
borrower’s assets, giving them a means of collecting debt if the borrower’s defaults and they
are part of loans.

Debenture holder is only a creditor of the company. Shareholders are invited to attend the
annual general meetings of the company. If a company needs funds for extension and
developments purpose without increasing its share capital, it can borrow from the general
public issuing certificates for a fixed period of time and at a fixed rate of interest. Debenture
are liabilities or expenses of the company because they represent debts that will have to be
repaid in the future and they are shown on the balance sheet as either current liabilities or
long term liabilities.

FIXED CAPITAL – it is a capital invested in fixed assets and capital investments such as
property ,plant and equipment that are tangible and needed to start up and conduct business
even at minimal stage. They are for long term use and not easily liquidated. The assets are
considered fixed in that they are not consumed or destroyed during the actual production of a
good or service but have a re-usable value. They are typically depreciated on the company’s
account statements used for a long period of time.

The concept of fixed capital was first introduced by the political economist David Ricardo as
he referred the fixed capital to any kind of real or physical asset that was consumed in
production of product. Investments in fixed capital include the addition of new tools and
equipment.

FLOATING OR CIRCULATIN CAPITAL – it comprises the materials and components,

constantly supplied in the effecting of all manufacturers, currency used for the purpose of
transactions, wages and salaries, products in the transportation or in the process of being
stored in the prospect of being eventually utilizes for this purpose and the working.

They are calculated by subtracting current liabilities from current assets.it is invested in
current assets of the organisation, it is also used for the purpose of meeting current
expenditure and include raw materials , intermediate goods and operating expenses.
RESERVE CAPITAL– means the part of profit reserved by the company for a particular
purpose such as to finance long term projects or to write off capital expenses.it shows the part
of the authorised capital that has not yet called up by the company and is available for
drawing if necessary. They are maintained as an account in the Balance Sheet that can be
used only for special purposes. It is made out of capital profits earned due to the sale of fixed
assets. There are two types of reserves which are revenue and capital taken from different
sources of income and are usually set aside for different purposes.
PERSONS DISQUALIFIED FROM HOLDING THE OFFICE OF A DIRECTOR IN
TERMS OF THE COMPANY’S ACT CHAPTER 24:03

According to section 69(7) it lists certain categories of persons who are expressly ineligible to
be company directors and these are as mentioned below,

 Juristic persons (like companies and close corporations or a trust), therefore only
natural persons can be directors of a company.
 Minors who are have not been granted majority status
 Persons suffering from some legal disability, like being declared by a court of law as
incapable of managing their own affairs or the underage persons according to the law
 A person who does not satisfy such minimum requirements set out in the
Memorandum of Association (the company’s MOA has such requirements)
 A person disqualified in terms of any other additional grounds of ineligibility as may
be set out in the company’s MOA)
 On the other hand, a person may be disqualified from being a director in any one of
the following instances:
 Where a person has been prohibited by a court or any other public regulation from
becoming a director
 Where a person has been declared delinquent by court in terms of section 162 of the
Act if a person is an unrehabilitated insolvent.
 If a person who was has been removed from an office of trust on grounds of
misconduct involving dishonesty:
 If a person has been convicted and imprisoned without an option of a fine, or has been
fined more than the prescribed amount for theft , fraud, forgery ,perjury or other
offences specified in section 69(8)(b)(iv) of the Act.
 In addition to the grounds set out in the Act, the company’s MOA may provide
additional grounds and a director may also be disqualified if the conditions set out in
the MOA are met
 For example the MOA may provide that a director will be disqualified if they fail to
attend a certain number of boards meetings
 If a person has been disqualified or is ineligible to be a director such a person cannot
be validly appointed as a director of the company and should such a person have been
 occupying the position already at the time that they become ineligible or disqualified,
they can no longer continue to act as a director.

As stated above, with regards to disqualification on the basis of insolvency or criminal

conviction , section 69(11) of the Act grants a court a discretion to exempt a person from
such disqualification .if a person was disqualified on the aforesaid grounds ( insolvency and
criminal conviction ) the disqualification will last a period of 5 years, unless the court directs
otherwise.

Conclusion – it is important that , before a person is appointed to the board of directors of a

company or appointed as s prescribed officer or member of a board committee, proper
background checks must be done to ensure that no ineligible or disqualified persons are
appointed to these positions. Even when the person is already acting as a director, should that
person be disqualified or become ineligible, they can no longer act in their capacity as
directors of the company.

DOCUMENTS PRESCRIBED BY THE COMPANY’S ACT TO BE LODGED WITH

THE REGISTRAR OF COMPANIES FOR THE PURPOSE OF REGISTERING A
COMPANY.

The most important document in the incorporation of a company is the Memorandum of

Association. The second being the Articles of Association that needs to be registered by any
company for its incorporation, registration and subsequent operation. Articles of Association
is a public document laying down the rules for the internal management of the company or it
can be a document which contains the rules ,regulations and bye-laws that govern the
management of the internal affairs of the company and the conduct of its business.

The subscribers to the memorandum of association are also the signatories to the articles and
are given a free hand to decide and determine its contents. This is to ensure that maximum
flexibility is granted to the companies in determining how to operate in the best possible
manner and to keep statutory intervention to the minimum. Both the articles and
memorandum are closely connected although the former is considered subordinate to the
latter. This is because while the memorandum states the purpose of the establishment of the
company, the articles provide the manner in which such purposes are to be achieved.
The articles determine how the powers conferred on the company by the memorandum of
association shall be exercised. The memorandum and articles of association are filed with the
Registrar of Companies and the Registrar of Companies must be notified of the appointments
of the company’s directors and secretaries. This is done by filing the particulars of (a)
register of directors and secretaries and any changes therein or a list of directors and principal
officers (form CR 14), these documents must be accompanied by a duplicate original or a
printed copy. The CR6 form must also be completed, it contains the physical and postal
address of the company

When registering the company with the Chief Registrar of Companies, a form CR21 is
completed and lodged in duplicate according to section 24 of the Companies Act. The form is
used for application of name search. When name is approved, the applicant submit
memorandum and articles of association and the form CR21 which contains the voting,
dividends and winding rights.

After the name search is completed a CV4 form is issued which confirms the acceptance or
rejection of the name. After finding the appropriate name the documents for incorporating a
company are lodged with the Registrar of Companies and they contain the following details:

 Corporate name it wishes to be registered

 Its name under which it propose to trade
 Whether it is a public or private company
 The authorised share capital, the number of shares and the nominal value of each of
the shares
 Main purpose or intended business of the company
 Declaration that the liability of the members is limited
 The maximum number of directors the company proposes to have. A public company
must have at least two and a private company one. Thier names, nationality and
contact details must be provided as well.
THE COMPANY IS AT LAW A DIFFERENT PERSON ALTOGETHER.

In general a company is considered a separate legal entity from its members and shareholders
and is treated as an ‘artificial’ human being in law. Upon incorporation the law states a new
and separate artificial entity comes into existence. At law a corporation is a distinct person
with its own personality separate from and independent of the persons who formed it, who
invest money in it and who direct and manage its operations. The rights and duties of a
corporation are not the rights and duties of its directors or members who are most of the time
obscured by a corporate veil surrounding the company.

The company being a legal entity independent of its members , can enter into contracts and
own property inits own right, can sue and be sued and also taxed in its own name. The
principle of corporate entity was established in the case of Salomon v A.Salomon. at the
House of Lords they stated that the company was also not be regarded as an agent of the
owner, as the company is at law a different person altogether from the subscribers to the
memorandum and the company is not in law the agent of the subscribers or a trustee for them.

A company because it is a corporation, is a person in a separate from any and all of the
individual involved in the company whether those individuals are its owners / shareholders,
its managers or directors or are involved in some other way. The company has the same
rights as a natural person and can incur debts, sue and be sued in its own name, holds its own
property and is liable of the debts it incurred. A legal entity has legal capacity to enter into
agreements or contracts, assume obligations, and incur debt .may be setup in the case of a
corporation or limited liability Company to separate the actions of the entity from those of the
individual or other company.

The principle of separate corporate personality has been firmly established in the common
law since there decision in the case of Salomon V A .Salomon whereby a corporation has a
legal personality , rights , obligations totally distinct from those of its shareholders. The
house of the lord held that there is a separation of liability between a company and its
shareholders, hence the shareholders of a company could not be sued for the failure of
liability of its company after it was derived from the Salon principle. The consequences of
this separate legal personality are several as a person separated from its members. It is the
company that conducts its business, own its property, enter into contracts, incurs debt, sues
and it is sued not its members.