Year: 2022

Company Formation

Company Formation

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A company is defined as a legal entity formed by a group of individuals to engage in and operate a business. A company may be organised in various ways for tax and financial liability purposes depending on the laws of the country. It is important to register a company on order to formalise its running and avoid paying hefty penalties. Registering a company has its perks such as being able to bid for tenders in the public sector and easier access to loans. A company is a legal entity that can sue or be sued.

TYPES OF COMPANIES

The type of company that one registers depends on the amount and source of capital available amongst other factors. The types of companies are as follows:-

1. Private Business Corporation

Such a company is meant to cater to the smaller companies with a few members. Such a company is suitable for sole traders. The members of such a company are actively involved in the day to day running of the business. An advantage of registering such a business is that the company can start operating as soon as it is registered unlike a public company.

2. Private Limited Company

This is a company which if formally registered, with a requirement of directorship. You can have a minimum of two (2) directors and a maximum of twenty (20), who must have attained the age of majority. This company has a separate legal persona from its directors, and is capable of entering into contracts, suing and being sued. There are tax and financial obligations that are expected from this entity.  

3. Public Company

Such a company is suitable for a medium to large enterprise as it has no limit to the number of members. It is open to being listed on the Stock Exchange for trading, and members of the public may also invest in its shares.

4. Company Limited by Guarantee

Such a company is created for charitable purposes. The liability of members of such company boils down to the amounts that they had promised to contribute upon the dissolution of the company.

5. Co-operative Company

Where one produces or markets agricultural produce and or livestock they should register such a company. Such a company regulates the number of shares that one can own. An example of such is Seedco and Farm and City amongst others.

6. REGISTRATION PROCEDURE

The first step is to choose whether you want to register a public or a private enterprise. First of all you fill in and file your CR21 form. A party registering a public company must file such form in duplicate. This form is used to do a name search to see that the company name that you have provided has not been used by any other company. The applicant in this case must provide at least four possible names for the company. Once such name search is done, a CRV4 form is issued from the Registrar’s office (Registrar of Companies) rejecting or confirming the company name. Upon receipt of such form the applicant may now go ahead and draft their Memorandum and Articles of association in duplicate alongside their CR14 AND CR6 forms outlining the directorship and physical address of such respectively. The registrar when noting everything to be in order will issue a certificate of incorporation. The author highlights that all documentation submitted to the Registrar’s office must be submitted in duplicate. When registering a private business corporation applicant must fill and file a PBC1 form in duplicate for a name search and a CV4 form is issued. The form will highlight whether the company name proffered was accepted or rejected. Applicant must file PBC2 in duplicate which sets out the business address members and contributions amongst other factors and CV4 form in duplicate which outlines the approved name with the Registrar’s office. In the event that the Registrar does not have any queries the company is registered.

Notarial Bonds

Notarial Bonds

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A Notarial Bond is a form of security for a creditor and is registered in the Deeds office (in Bulawayo or Harare). A Notarial Bond is registered over the movable property of a debtor that they have put up as security for the obligations that they have to the creditor in terms of the loan agreement, attested to by a Notary Public. Notarial Bonds are a means of credit diversification as it enables some of the marginalized groups to get access to credit. It is common cause that not everyone owns immovable property hence Notarial Bonds aid these groups of people as they can use their movable property to gain access to credit. Notarial Bonds are placed in two broad categories:

  1. General Notarial Covering Bond  
  2. Special Notarial Covering Bond

WHAT YOU NEED TO KNOW ABOUT NOTARIAL BONDS

Prescription

A Mortgagee’s right to claim from the mortgagor in relation to a Special Notarial Covering Bond persists for a period of 30 years, n advantage for the creditor. These are not affected by the prescription of ordinary debts.

Registration Costs

The registration costs for the Bond are incurred by the Mortgagor, and are calculated against the value of the property in terms of a Tariff gazette from time to time.

Access to assets

The debtor offers their movable property as security, but remain with the use and enjoyment of their property, as long as they adhere to the payment terms of the loan. The creditor only gets access to the property in the event of default by the debtor.

 Secure in Law

 In the event of default by the debtor, the creditor may use the Notarial Bond as prima facie (on the face of it) evidence in Court to receive recourse in the Magistrate Court or High Court.

FREQUENTLY ASKED QUESTIONS ON NOTARIAL BONDS

A Notarial Bond is a form of security for a creditor and is registered in the Deeds Office. A Notarial bond is registered over the movable property of a debtor that they have put up as security for the obligations to the creditor in terms of the loan agreement.

Q:        WHO CAN DRAFT A NOTARIAL BOND?

A:        A Lawyer that is also registered as a Notary Public can draft a Notarial bond. This is exclusive   work that can only be done by a Notary Public.

Q:        CAN A NOTARIAL BOND BE REGISTERED IN RESPECT OF IMMOVABLE PROPERTY?

A:         Yes – although a Notarial Bond can only be registered in respect of immovable property over which the owner does not have real rights but only personal rights. An example of immovable property that can be used is property which is owned under a Cession Agreement.

Q:         WHY ARE NOTARIAL BONDS REGISTERED?

A:         They are a way of ensuring financial inclusion, as not every owns titled immovable property.

A:        Convenience created for the debtoras the property is not delivered to the creditor upon registration.

Q:         ARE THERE DISADVANTAGES WITH NOTARIAL BONDS?

A:        They rank lower than other forms of security – a Mortgage Bond is endorsed on Title Deeds to announce to the public that the property is encumbered and would need to be cancelled first before new actions were taken over the property, which is the converse of the level of security offered by a Notarial Bond.

A:         Confers personal rights which are only enforceable against the parties and no one else.

Q:         CAN A NOTARIAL BOND BE VARIED?

A:        Yes. A consent to variation must be drawn up and signed to highlight that position. Where the Notarial Bond is in favour of a Company, a resolution needs to be drawn and signed to the extent of the variation.

Q:        AFTER HOW LONG DO CLAIMS ARISING FROM NOTARIAL BONDS PRESCRIBE?A:         The rights of a party to claim against a Notarial Bond lapses after 30 years.

Alternative Dispute Resolution

Alternative Dispute Resolution

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There are five methods that can be used, associated with dispute resolution:

  1. NEGOTIATION

This is the informal bargaining that takes place directly between the parties to the dispute for the sole purpose of coming up with a solution for the situation at hand.  In some instances, parties may opt to have legal representation in a bid to find an amicable solution. In the event that parties do not reach an understanding the parties may then go on to the next stage which is MEDIATION.

2. MEDIATION

Is a process in which a neutral third party (one that has no direct interest in the outcome of the matter) known as a mediator helps the parties to negotiate and resolve their disputes. The mediation process is a very delicate one that requires the objective third party to continuously go back and forth between the parties relaying information in a bid to resolve the dispute. The success of the process is premised on the attitude of the parties as well as the element of confidentiality especially by the mediator. The mediator has two main roles

  • To identify the root cause of the dispute,
  • Prompt parties to reach a solution (mediator does not impose or suggest solutions but rather encourages the parties to reach a solution)

3. FACILITATION

This process is very similar to mediation however this process revolves around resolving the problems that are faced by groups of people

4. CONCILIATION

This is a process where parties to a dispute try to reach an agreement through the aid of a conciliator (impartial third party). The conciliator will advise both parties of their rights but leave the ultimate resolution of the matter in the hands of the parties.

5. ARBITRATION

This is a formal process of resolving a dispute. An arbitrator is appointed and parties have to present their case before the Arbitrator who will then weigh the facts and make a ruling which shall be binding on the parties. For some institutions arbitration is their port of call as compared to the courts and as such in the event of breach of either party to an agreement it may be disputed that the dispute shall be resolved by way of arbitration.