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The Definition Of A Company

According to Buckley as quoted in Tett and Chadwick (1896) the word company has no strict technical meaning it basically envisages two ideas...

According to Buckley as quoted in Tett and Chadwick (1896) the word company has no strict technical meaning it basically envisages two ideas – namely:

1. That the association is of persons so numerous as not be aptly described as a firm.
The consent of all other members is not required to the transfer of a member’s interest.

A company is a registered corporation with limited liability formed with the intention of benefiting its members.

Company law may be defined as that part of law that sets down (the conditions upon which personified aggregations of capital may operate in our society.

Zimbabwean Company Law is codified and governed by the Companies Act and the regulations. It is also governed by the various judicial decisions not only from Zimbabwe but from England and South Africa as well.

The main reason for forming a company is essentially to provide the means of raising large sums of money from a multitude of investors [that is shareholders]

Application of these large sums of money is left in the hands of a few managing directors [ who are normally shareholders themselves].
 The Definition Of A Company
When shareholders invest their money in shares they are guarding against personal liability. In theory they are not interested in the day to day running of the company but in the return of investment, that is, dividend declared.


TYPES OF COMPANIES / ASSOCIATIONS
When a person decides to form a company he must choose between the following :

1. Private company
2. Public company
3. Company limited by guarantee
4. Co-operative companies.
(Insurance Company, Best Companies, Management Company)

PRIVATE COMPANY
This type of a company is suitable for establishing a small business with few shareholders who usually constitute a family business.
Most members are actively involved in the management of the company and merely as an investment but also as a source of livelihood.
Private companies are usually far more numerous than public companies although they usually have a smaller total paid up capital.
Decision on whether to form a private company or a public company depends on the amount and source of capital to be raised. For example if a small share such as $ 100 000.00 is required and is to be raised from subscriptions by members of o family or specified families or a small group of families, then such a company is likely to be a private company.
Conversely if a large share capital is to be raised through the issue of shares to the public then the company will be a limited company.

There are no statutory limitations on the size of the share capital of private companies, the limittion is, however, on the size of membership.

Please read the following:
Section 33 – Defination of private company
Section 34 – Consequencies of default in complying with conditions for a private company.
Section 35 – Statement in lieu of prospectus on ceasing to be a private company.
Section 114 – Private company may commence business as soon as it is registered
Section 123(3) Annual returns made by company.
Section 124 (1) Does not have to hold statutory meetings.

· A private company must therefore comply with these provisions along with certain advantages and exemptions which private companies enjoy over public companies, for example.
· The right to commence business as soon as it is registered whereas a public company cannot do so unless all provisions of the Act in respect of starting a company has been complied with and registrar has certified that the company is entitled to start business.
· Private companies have the right to appoint directors of its own choice, even those who do not hold any shares in the company.
· A private company does not have to appoint an auditor if the number of members does not exceed 10 and none of the members is a public company or a subsidiary of a public company which itself has appointed an auditor.

PUBLIC COMPANY
According to section 2 (the interpretation section) a public company is :-

“any company that is not a private company”.

· This is fine as long a we know what a private company is.
· A promoter who wishes to float a company with a very large share capital is likely to open subscriptions of the shares off the proposed company to the public at large in order to form a company.
· A public company therefore refers to any company including a co-operative company which is not a private company licenced under 526.
· However this does not distinguish what a private company is but rather what it is not.
· A private company is thus only distinguishable from a public company by restrictions placed or imposed by its articles of association on the transferability of shares and of the offer of those shares to the public.
· Also there is no limit on the size of membership of a public company.
· Because the public company is entitled to offer shares to the public, there is need to protect the investor.

COMPANY LIMITED BY GUARANTEE
This is a company created for a charitable purpose. Section 26 states that the association must exist for purposes which are in the interest of the public.
Must comply with section 8 (1b) – memorandum of company limited by guarantee.
It is not intended to generate profit for its members and prohibits payment of dividend to its members.
In terms section 26 if the minister is satisfied that the association complied with the provision of that section, he may licence the registration of the association as a company without using the word (limited) at the end of its name.
Registrar of companies shall register the company accordingly.
Liability of the members of such a company is limited to the amounts they guaranteed to contribute on winding up of the company.

Read section 25 and 26.
A company limited by guarantee enjoys all priviledges of a company and is subject to the obligations thereof.
However it has certain exemptions which do not apply to other companies in addition to the exemptions from using the word “limited” and examples :-

Section 65 – prohibits allotment of share capital.
Section 71 - which relates to registers and returns as to allotment.
Section 123 – which focuses on statutory meetings.
Section 149 – which relates to balance sheets and auditors.
Section 171 – which restricts appointments.

CO-OPERATIVE COMPANY
· The company is formed in persuance of section 36 . Its main objective is to provide a service facilitating the production or market of agricultural produce or livestock or the sale of goods to its members.

· It restricts the transfer of its shares and has only one class of ordinary shares.
· Examples are Seedco, Farm and City, Seed Potato Company.
· Must comply with restriction on :-
1. The right to transfer of shares.
2. Creation of only one class of ordinary shares.
3. Limit the number of shares to be held by each member.
4. Regulation of voting rights.
5. Limiting dividend which may be paid on its shares.
6. Provision for the division of a part of the whole of its profits among it members of certain or all of their business.

The above requirements must be adhered to otherwise any default may cause the co-operative company to lose some of its priviledges and exemptions conferred by the Act since the provisions of the Company Act will apply to it as if it was not a co-operative company.

OTHER FORMS OF ASSOCIATIONS

CO-OPERATIVE SOCIETY
Unlike a co-operative company, co-operative society is not formed in terms of the Company Act but rather in terms of the Co-operative Society Act.
This is a small enterprise catering for people with limited financial means.
Its objectives must include the promotion of economic and social interests of its members in line with government policy.
A co-operative sociaty I therefore an association of persons who have voluntarily come together to promote their economic and social interests.
It is a legal person with limited liability.
It has a minimum of at least 10 persons and there is no maximum.

UNIVERSITAS
Common law corporation
A legal fiction
Is a legal person with capacity to acquire rights or obligations seperately from its members.
Has perpetual succession
Members must draw up a constitution. Examples include the church, burial society, football club.

STATUTORY CO-OPERATIONS
Created in terms of an enabling statute and answerable to a relevant minister.
No shareholders but financed by the government. Examples include Air Zimbabwe, ZESA, NRZ, PTC.

PARTNERSHIP
This is an unregistered association of 2 or more persons but not exceeding 20 according to section 6 (1) of the Companies Act.
The intention of the partners must be to benefit from each other from the joint venture hence their intention must be to make a profit.
They contribute in many ways, it could be money, skill or labour.
There is no limited liability and the partners are jointly and severally liable and is a risky form of business.