INCORPORATION
AND REGISTRATION
OF COMPANIES
Introduction:
What is a company?
Section
3 of the Companies Act No. 10
of 2017 defines “ corporate” to mean:
‘an entity, including a company or body
corporate, that is separate and distinct
from its owners and which is recognised
as such by law and acts as a single
entity.’
Introduction: (cont’d)
What is a company?
Alternatively,
a company could be
defined as:
‘An association of two or more
persons who come together to
conduct business in order to make
profit.’
Thus, from both definitions, it could
be said that Company Law is the law
relating to companies or corporate
bodies.
TYPES OF COMPANIES
INCORPORATED &
REGISTERED IN ZAMBIA
 Section
6 of the Act provides for four (4)
types of companies that may be
incorporated and registered in Zambia.
 They are as follows:
1. A public company;
2. A private company limited by shares;
3. A private company limited by guarantee;
4. An unlimited private company.
1. FEATURES OF PUBLIC
COMPANIES:
1.
2.
3.
4.
Section 7(1) of the Act places a mandatory
requirement for a public company to have
share capital/ shareholding.
This type of company has an unlimited
number of shareholders.
Section 7(2)(a) of the Act further provides
that the articles of association of a public
company must clearly state the rights,
privileges and other conditions attached to
each class of shares.
Section 7(3) of the Act also provides a general
rule that all shares in a public company are
equal, except where they consist of different
classes (More details in Unit 3)
1. FEATURES OF PUBLIC
COMPANIES:
5.
Section 7(4) of the Act states that
the concept of limited liability
applies to public companies in that
shareholders whose shares are
unpaid are liable to pay up their
balances in the event that the
company is wound-up.
2. FEATURES OF PRIVATE
COMPANY LIMITED BY
SHARES
This type of company is
required to have share capital/
shareholding.
2. Section 8(1) of the Act also
places a mandate on this type
of company in its articles of
association to limit the number
of shareholders to fifty (50).
1.
2. PRIVATE COMPANY
LIMITED BY SHARES
(CONT’D)
Like the public company, section 9(1)(a)
of the Act also states that the articles of
association of a private company limited
by shares must clearly state the rights,
privileges and other conditions attached
to each class of shares.
4. Section 9(2) of the Act also provides a
general rule to the effect that all shares in
a private company limited by shares are
equal, except where they consist of
different classes (More details in Unit 3)
3.
2. PRIVATE COMPANY
LIMITED BY SHARES
(CONT’D)
5.
Section 9(3) of the Act states that
the concept of limited liability
applies to private companies
limited
by
shares
in
that
shareholders whose shares are
unpaid are liable to pay up their
balances in the event that the
company is wound-up.
3. PRIVATE COMPANY
LIMITED BY GUARANTEE
1.
Unlike a public company, private
company limited by shares and an
unlimited private company which
have share capital / shareholding, a
private
company
limited
by
guarantee DOES NOT have share
capital
/
shareholding.
By
implication, this is illustrated by
section 10(6) of the Act.
3. PRIVATE COMPANY LIMITED
BY GUARANTEE (CONT’D)
2.
3.
Section 10(6) of the Act strictly
prohibits this type of private
company from conducting business
for purposes of making profit for the
benefit of its members or any other
person.
According to Section 10(7), failure by
the directors of the company to
adhere to the above law, is a criminal
offence. The consequence being that
they shall be fined for each day that
the law continues to be flouted.
3. PRIVATE COMPANY LIMITED BY
GUARANTEE (CONT’D)
4.
5.
Once
this type of company
is
incorporated, its owners are called
‘members’. This is according to section
10(2) of the Act
According to section 10(3), the concept of
limited liability applies to private
companies limited by guarantee in that
members are liable to pay up the
amounts they pledged to contribute
towards the company’s debts, in the
declaration of guarantee in the event that
the company is wound-up.
4. FEATURES OF AN
UNLIMITED PRIVATE
COMPANY.
Section 11(1) of the Act mandates this
type of company to have share capital/
shareholding.
2. The same section states that its articles
of association must clearly state the
rights, privileges and other conditions
attached to each class of shares.
3. According to section 11(2), as a general
rule all shares in company limited by
shares are equal, except where they
consist of different classes (More details
in Unit 3).
1.
4. FEATURES OF AN
UNLIMITED PRIVATE
COMPANY (CONT’D)
4.
Section 11(3) of the Act provides
that shareholders of this type of
company are liable to contribute
towards its indebtedness, without
limitation of liability in the event
that it is wound-up.
PRE-INCORPORATION PROCEDURE: NAME
CLEARANCE
 It goes without saying, that the applicants or
incorporators must suggest proposed names
by which the company will be known as, once
incorporated and registered.
 A maximum of three (3) names can be
proposed. The names will be considered in the
order of listing. If the first choice is turned
down the second or third name may be
considered. Once the name is accepted, it is
automatically reserved for a period of 30 days.
After 30 days the name clearance expires.
 An application for approval of a name can be
made in writing or on a name clearance form
(See materials tab on the portal)
PRE-INCORPORATION PROCEDURE:
NAME CLEARANCE (CONT’D)
The
name clearance procedure is done by
completing or filling in companies form 1
(see copy on the portal under materials
tab).
Please visit the link below for guidelines
on
name
clearance:
https://www.pacra.org.zm/#/html/NameCl
earanceHtml/
INCORPORATION AND REGISTRATION
PROCEDURE
Section
12(1) of the Act requires at
least two (2) persons to incorporate
any of the four (4) types of
companies discussed above, only for
a lawful purpose.
This is done by them filling in or
completing companies form 3, called
application for incorporation.
INCORPORATION AND REGISTRATION
PROCEDURE (CONT’D)
 Section
12(8)-Persons
prohibited
from
incorporating a company:
 According to section 12(8) of the Act, the following
persons cannot incorporate a company:
An individual who—
(a) Is below the age of eighteen (18) years; or
(b) Is bankrupt; or
(c) Has been certified by a court of law, as being
mentally disordered
 Section
12(9) of the
Act also forbids the
incorporation of a company for purposes of carrying
out religious or faith based activities.
INCORPORATION AND REGISTRATION
PROCEDURE OF COMPANIES.-Section 12(3)
When incorporating any of the four (4)
types of companies, the applicants or
incorporators must file the following
documents:
1. Section 12(4) provides that the application
for
incorporation
(companies form 3) must indicate the
following information:
(i) the name and address of the
individual lodging the
application;
INCORPORATION AND REGISTRATION
PROCEDURE OF COMPANIES (CONT’D)
(ii)The proposed name of the
company;
(iii) the physical address of the office
to be the registered office of the
company;
(iv)The registered postal address,
electronic mail address and phone
number of the company where
available;
(v) the type of company to be formed;
INCORPORATION AND REGISTRATION
PROCEDURE OF COMPANIES (CONT’D)
(vi)The particulars of persons who
shall be the first directors of the
company;
(vii)The particulars of persons who
shall be the first secretary or joint
secretaries of the company; and
(viii) the nature of the company’s
proposed business or proposed
activity.
INCORPORATION AND REGISTRATION
PROCEDURE OF COMPANIES (CONT’D)
 Section
12(5) states that:
Where a company being incorporated is
required to have share capital, the applicant
shall state on the application for
Incorporation the—
(a) amount of share capital of the company;
(b) the division of the share capital into
shares of a fixed amount; and
(c) number of shares each subscriber has
agreed to take.
INCORPORATION AND REGISTRATION
PROCEDURE OF COMPANIES (CONT’D)
 According
to section 12(6), an applicant or
incorporator must also specify, in the
application for incorporation, the date on
which the first financial year of the
company will end.
 This date must not exceed twelve months
from the date of incorporation
 Section 12(7) states that the application
for incorporation must be signed by each
subscriber (subsequent shareholder) in the
presence of at least one witness who attests
to the signature.
INCORPORATION AND REGISTRATION
PROCEDURE OF (CONT’D)
Section 12(3)(a) states that the
application for incorporation of a
company shall be accompanied by:
A copy of the company’s proposed
articles of association or a statement
that it has adopted the standard
articles of association;
INCORPORATION AND REGISTRATION
PROCEDURE OF COMPANIES (CONT’D)
In addition to the above, section
12(3)(b) states that declaration as to
compliance with the Companies Act
(part G of the form) must also be
completed stating that the requirements
of the Act relating to incorporation, have
been complied with.
INCORPORATION AND REGISTRATION
PROCEDURE OF COMPANIES (CONT’D)
Section 13(2) of the Act states that the
declaration must be made by either a—
(a)legal practitioner holding a valid
practicing certificate who was involved in
the formation of the company; or
(b) A person named, as a first director or
secretary of the company, in the application
for incorporation form.
(See part G of the form)
INCORPORATION AND REGISTRATION
PROCEDURE OF COMPANIES (CONT’D)
According
to section 12(4), it is a
criminal offence for any of the persons
mentioned above, to make a declaration
as to compliance with the Companies Act,
knowing fully well that the incorporation
requirements of the Act have not been
complied with.
INCORPORATION AND REGISTRATION
PROCEDURE OF COMPANIES (CONT’D)
4.
A statement of beneficial ownership
which MUST indicate the following
details about each beneficial owner:—
(i) their full names; (ii) their date of
birth;
(iii)
their
nationality
or
nationalities; (iv) their country of
residence; (v) their residential address;
INCORPORATION AND REGISTRATION
PROCEDURE OF COMPANIES (CONT’D)
 Where
the type of company being formed is
one with share capital/shareholding. the
applicant or incorporator must also indicate
in the application for incorporation form 3,
the following information—
 The amount of share capital of the company;
 The division of the share capital into shares
of a fixed amount; and
 The number of shares each subscriber
(subsequent shareholder) has agreed to take.
INCORPORATION AND REGISTRATION
PROCEDURE OF COMPANIES (CONT’D)
 The
applicant or incorporator must also
specify, in the application for incorporation
form 3, the date on which the first
financial year of the company will end.
 This date must not exceed twelve months
from the date of incorporation
 The application for incorporation form 3
must be signed by each subscriber
(subsequent shareholder) in the presence of
at least one witness who attests to the
signature.
INCORPORATION AND REGISTRATION
PROCEDURE OF COMPANIES (CONT’D)
2.
A copy of the company’s proposed
articles of association or a
statement that it has adopted the
standard articles of association.
(see section 7 of part A)
INCORPORATION AND REGISTRATION
PROCEDURE OF COMPANIES (CONT’D)
Section 12(3)(d) of the Act states that where
the type of company being incorporated is
one limited by guarantee, the applicants or
incorporators must fill in (part E-which is
titled guarantors) on the Application for
incorporation Form 3:
At the bottom of part E is a ‘declaration of
guarantee’ in which a subscriber to an application
for incorporation for a company limited by
guarantee must make a declaration of guarantee
specifying the amount of money or assets that the
subscriber undertakes to contribute to the
company in the event that it is wound up or
liquidated.
Successful incorporation and
registration of a company
 Once
the Registrar of Companies is satisfied
that an applicant or incorporator has met
the requirements of the Act as well as the
correct procedure for the incorporation of a
company of their choice, the following will
happen, according to section 14(1) of the
Act:
 The Registrar of Companies must
within five (5) days:
(a) register the proposed company in
the register of companies
Successful incorporation and
registration of a company
(b) issue a certificate of incorporation;
(c) issue a certificate of share capital,
(where the company in question, is a
type which has share capital /
shareholding); and
(d) Assign the company in question
with a unique company registration
number.
Successful incorporation and
registration of a company
However, according to section 14(2), where
a company is incorporated by an individual
who is either
(a) below the age of eighteen (18) years; or
(b) bankrupt; or
(c) certified as being mentally disordered
(d) Or one who has in the last five years prior
to the application, been convicted of an
offence involving fraud or dishonesty in
Zambia or elsewhere, such incorporation is
valid.
The certificate of incorporation
Based on section 15 of the Act, a certificate
of incorporation signifies the birth of the
company and is conclusive evidence that—
(a) the requirements of this Act
regarding the incorporation of the
company have been complied with; and
(b) from the date of registration stated
in the certificate, the company is
incorporated in accordance with the
Act.
The certificate of incorporation
(cont’d)
Section 18 strictly requires a company
once successfully incorporated and
registered, to display its certificate of
incorporation in a visible place at its
business premises.
Legal status of an incorporated
& registered company
Section 16 of the Act clearly states that
from the moment a company is successfully
incorporated and registered in accordance
with the Act, it acquires a separate legal
status, with the name by which it is
registered, and shall continue to exist as a
corporate entity until it is removed from
the Register of Companies.
Contractual effect of
incorporation
According to section 17 of the Act, the
incorporation of a company represents a
contract under seal which exists between
the company and its members/shareholders
as well as a contract under seal which
exists between the members/shareholders
themselves in which they agree to conduct
the business of a company in accordance
with the articles of association and the
Companies Act 2017.
Characteristics of
incorporation & registration
Separate Corporate Personality /
Separate
Legal
Personality
(Salomon doctrine)
The
incorporated
company
exists
independent of the shareholders /members
(as the case may be). It is from this key
characteristic that all other characteristics
stem from.
1.
Characteristics f incorporation &
registration (cont’d)

In Salomon v Salomon & Co. (1897) ACC 22, a trader
sold a solvent business to a limited company with a
nominal capital of 40,000 shares of 1 Pound each, the
company consisting only of the vendor. 20,000 shares
were also issued to him and were paid for out of the
purchase money. These shares gave the vendor the
power of outvoting the 6 other shareholders. No shares
other than these 20,000 were ever issued. All the
requirements of the Companies Act, 1862 were
complied with. The vendor was appointed Managing
Director, bad times came; the company was wound-up,
and after satisfying the debentures, there was not
enough to pay the ordinary creditors.
Characteristics of incorporation &
registration (cont’d)
 Held:
that the proceedings were not contrary
to the true intent and meaning of the
Companies Act 1862; that the Company was
duly formed and registered and was not the
mere “alias” or agent of or trustee for the
vendor; that he was not liable to indemnify
the Company against the creditors’ claims;
that there was no fraud upon creditors or
shareholders; and that the Company (or the
liquidator suing in the name of the Company)
was not entitled to rescission.
Characteristics of incorporation &
registration (cont’d)
The corporate veil:
separates the personality of the company
from its shareholders and directors.
It exists as a result of the principle in the
case of Salomon v Salomon and Co Ltd
(1897).
Characteristics of incorporation &
registration (cont’d)
Limited Liability:
The liabilities of the company do not
extend to shareholders and if so is limited
to the amount on unpaid shares. The
limitation of liability relate solely to the
members/shareholders while the liability of
the company is unlimited. The limitation of
liability will arise in the event that the
company is being wound-up or liquidated.
2.
Characteristics of incorporation &
registration (cont’d)
Limited Liability in a public
company:
Where a public company is wound up or
liquidated, a shareholder is liable to
contribute, an amount not exceeding the
amount, if any, unpaid on the shares held
by that shareholder.
a)
Characteristics of incorporation &
registration (cont’d)
b) Limited Liability in a private
company limited by shares:
Where a private company limited by shares
is wound up or liquidated a shareholder
shall be liable to contribute an amount not
exceeding the amount, if any, unpaid on the
shares held by that shareholder.
Characteristics of incorporation &
registration (cont’d)
c) Limited Liability in a private
company limited by guarantee:
Where a company limited by guarantee is
wound up or liquidated, a member is liable
to contribute an amount not exceeding the
amount specified in the declaration of
guarantee made by that particular member.
Characteristics of incorporation &
registration (cont’d)
Perpetual Succession:
An incorporated company enjoys perpetual succession, i.e.
the company can in theory exist in perpetuity or until
liquidation, independent of the shareholders who may die,
sale shares, or get bankrupt.
In ZCCM & Ndola Lime Ltd v Sikanyika & Others SCZ
Judgment No. 24 of 2002, the respondents were unionized
employees of the second appellant which was a wholly
owned subsidiary of the first appellant. The workers
launched proceedings in the Industrial Relations Court
against their employee and the holding company
requesting for a declaratory relief that they were entitled
to payment of terminal benefits prior to transferring their
contracts of employment to those that would buy the
second appellant under the privatization programme.
3.
Characteristics of incorporation &
registration (cont’d)
The court held that a change of ownership
of shares cannot result in the corporate
becoming a new employer as the corporate
character of a company continues despite
changes in the shareholders. This is based
on the separateness of the corporate entity
from those behind it, owning it and
directing its affairs. Therefore, the company
will still be the same employer and will be
bound by the contracts of employment.
Characteristics of incorporation &
registration (cont’d)
Property Ownership:
The corporate character of a company enables the company to
own property independent of the shareholders. In Macaura v
Northern Assurance Co. Ltd (1925) AC 619, the owner of a
timber estate sold the whole of the timber thereon to a timber
company in consideration of fully paid up shares in the
company. Subsequently by policies effected in his own name
with several insurance companies, he insured this timber against
fire. The greater part of the timber having been destroyed by
fire, he sued the insurance companies to recover the loss, but
the actions were stayed and the matter was referred to
arbitration in pursuance of the conditions contained in the
policies. The claimant was the sole shareholder in the company
and was also a creditor of the company to a large extent.
4.
Characteristics of incorporation &
registration (cont’d)
The Court held that if a trader sells his
business to a company, he will cease to have
an insurable interest in its assets even
though he is the beneficial owner of all the
shares.
Characteristics of incorporation &
registration (cont’d)
The rights and obligations of the company are distinct
from those of the shareholders:
A corporate entity is entitled to pursue its own actions independent
of shareholders. A company can enter into a legally valid contract
with its shareholders. It is also possible for one person to be principal
of a company and also to be its servant. In Lee v Lees’ Air Farming
Ltd (1961) AC 12, Lee was the governing director and qua chief pilot
of the company at a salary. He held 2,999 out of the 3,000 shares in
the company which he himself had formed. Lee was killed in an air
crash whilst working for the company.
His widow claimed
compensation under the New Zealand Workmen’s Compensation Act
1922 for personal injuries to her husband in the course of his
employment. A workman was defined by this Act as an employee
under a contract of Service and it was argued that no compensation
was payable because Lee and Lee’s Air Farming Co. Ltd were one and
the same person. The Privy Council applying Salomon’s case .held
that Lee was a separate person from the company and could perform
the actions of both director and employee; that therefore,
compensation was payable.
5.
Characteristics of
incorporation & registration
(cont’d)
6. The company can sue and be sued
in its own name:
Since the company exists as a legal person
distinct from its shareholders, it can sue
persons or other companies for wrongs
perpetrated by them against it. Similarly, the
company can also be sued by persons or
other companies for wrongs perpetrated
by it, against them.
Characteristics of incorporation &
registration (cont’d)
7. Borrowing or raising of finance:
Limited companies do have advantages when it
comes to borrowing. A company can borrow
money and create debentures or floating charges to
secure the debt. Only a company can create a
floating charge. (Floating charge is a kind of security
for a loan.) The charge “floats” because it does not
attach any particular asset, but floats over the
company’s assets as they exist from time to time.
Certain events cause the charge to “crystallize” and
attach to whatever assets the company has at the
time.
Characteristics of incorporation &
registration (cont’d)
8. Taxation:
Because a company is a person at law once it is
formed, it is required to pay corporate taxes to
ZRA. At times a company would enjoy tax
benefits which may not be available to
partnerships or sole traders. There may be tax
exemptions on capital, or tax heavens.
Lifting the corporate veil
 Once
a company is formed it becomes a person
at law with a personality which is separate from
its shareholders and directors. The company’s
personality is separated from its shareholders and
directors by ‘a corporate veil’ which gives the
shareholders limited liability, depending on
whether or not they have paid for their shares in
full.
 However, the corporate veil may be lifted by the
courts in certain circumstances. This means that
the shareholders of the company will be held
liable for the debts and liabilities of the company.
When the corporate veil may
be lifted
WHERE THE COMPANY IS A FRAUD: Where the
company is formed for the purposes of committing fraud,
the court will most likely lift the corporate veil in order to
make the shareholders liable for the company’s debts and
liabilities. For example see the case of:
 Jones v Lipman:
Mr Lipman had entered into a contract to sell certain land to
Mr Jones. After changing his mind and in an attempt to avoid
the sale, he transferred the land to a company that he
controlled. The court found that the company had been used by
Mr Lipman solely for the purpose of evading his obligations
under the sale contract and therefore granted an order against
both Mr Lipman and his company that the sale contract should
be performed with the land being sold to Mr Jones.

Pre-incorporation contracts
A
pre-incorporation contract is a contract
which promoters would have entered into
before the company is formed., which sets
the scene for the formation of the company.
 According to section 20(1) of the Act,
Where a promoter enters into a contract
which is not in writing in the name or on
behalf of a proposed company before it is
incorporated, the promoter will be bound by
the contract and entitled to the benefits.
Pre-incorporation contracts
(cont’d)
However, under section 20(2), where a
promoter enters into a contract which is in
writing in the name or on behalf of a proposed
company before it is incorporated, the
promoter will be bound by the contract and
entitled to the benefits thereof, except if the
contracts clearly states that the promoter
who purported to act in the name or on
behalf of the company before it was
incorporated shall not be bound by the
contract nor entitled to the benefits.
Adoption of pre-incorporation
contracts by the company
Section 20(3) states that a company may
adopt pre-incorporation contracts entered
into by the promoters of the company, not
more than fifteen (15) months after its
incorporation. Such adoption is done
through an ordinary resolution.
Effects of adoption of preincorporation contracts by the
company
Section 20(3) provides the following
effects of adoption of pre-incorporation
contracts by a company:
 (a) The company will be bound by the
contract and also enjoy the benefits as if
it had already been incorporated at the
date of the contract and as if it had been
a party to the contract.

Effects of adoption of preincorporation contracts by the
company (cont’d)

(b) The promoter who entered into the
contract on behalf of the company, will
cease to be bound by it or enjoy the
benefits of the contract.
END OF LECTURE
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