What is a Company?
A company may be defined as an association where two or more persons come together for a common business goal. It has what is termed 'separate legal personality' meaning it is treated as an entity separate from its shareholders. Consequently, the liabilities of a company cannot be extended to its shareholders. The liability of shareholders is limited to the amount unpaid on their shares.
As a legal entity, a company has, subject to the Companies Act and to such limitations as are inherent in its corporate nature, the capacity, rights, powers and privileges of an individual. This entails that a company can own property, sue and be sued and enjoys perpetual succession, among others. However, since a Company, unlike a human being, is an artificial person, it can only act through an agent, namely, a Board of Directors.
Benefits of registering or incorporating a company
Registration or incorporating gives:-
1. Company legal status;
2. A company exclusive rights to the use of the company name;
3. Shareholders the pride of being honest enterpreneurs;
4. A company the right to enter with confidence into the competitive business arena using itscorporate identity; and,
5. Affords shareholders the opportunity to contribute to national economic development.
Types of Companies obtainable in Zambia
There are broadly two (2) types of companies in Zambia, namely:
1. Private Limited Companies; and,
2. Public Limited Companies (PLC).
Private Limited Company
This is a registered company formed and owned by individuals other than the Public. Its name will always end with the word "limited". The minimum number of Directors and Shareholders required for a private company is two (2). Private Companies do not invite the public to buy their shares or debentures.
The following are the types of private limited companies that can be incorporated:
1. Company limited by Shares;
2. Company limited by Guarantee; and
3. Unlimited Company.
Private Company Limited by shares
Companies limited by shares have a share capital and are formed or incorporated for purposes of carrying on business to derive a profit. Currently, the minimum required authorised capital for a private company other than banks, insurance and other financial institution, is K5,000,000 KR5,000.
A Private Limited Company may not have more than fifty (50) shareholders. It nevertheless may have the capacity to enter into any type of legal activities as long as its articles do not restrict it. As stated above, this type of company is prohibited from making any invitation to the public to purchase its shares or debentures. And in case it winds up and its assets are insufficient to cover its liabilities, the liability of its shareholders is limited to the amount left unpaid on their shares.
The application for incorporation of Private Company Limited by shares consist of a set of the following; “Companies Form 2, Form 5, and Form 11". These Forms should be typewritten and may be accompanied by Articles of Association.
Company limited by Guarantee
A company limited by guarantee does not have a share capital and is not permitted to carry on business for the purpose of making a profit for its members or for anyone concerned in its promotion or management. These are normally formed in order to help the community benefit from a certain project. Mostly, these are organisations such as churches, foundations, trusts etc.
At the time of formation, each member must sign a declaration of guarantee, specifying the amount he undertakes to contribute if the company is wound up. And in case it winds up and the assets are insufficient to cover its liabilities, the liability of its members is limited to the amount so guaranteed.
The application for incorporating a Company Limited by Guarantee is made on Companies Form 3, Form 5 and Form 11. As is the case with Companies Limited by Shares, these Forms should be typewritten and may be accompanied by Articles of Association specifically designed for this type of Company.
Unlimited Company
An Unlimited Company is one that has a share capital but whose members have unlimited liability for the company’s debts and liabilities. In other words, whatever is incurred by the company is also deemed to have been incurred by the members.
In terms of membership, it equally may not have more than fifty (50) shareholders. There are exceptions, however. In order to incorporate an Unlimited Company, Companies Form 4, Form 5, and Form 11 are used.
Public Limited Company
A Public Limited Company states in its articles of association that it is a" Public Limited Company". Its name always ends with the words "Public Limited Company" mostly abbreviated as "PLC". It has a share capital and its authorised minimum capital is K50,000,000 KR50,000. It has the capacity of entering into any business activity unless restricted by its articles.
This type of Company can invite the public to buy its shares. It can therefore list its shares on the Stock Exchange.
If it winds up and its assets are not sufficient to cover its liabilities, the liability of the shareholders is limited to the amount left unpaid on their shares.
In order to incorporate a Public Limited Company, Companies Form 1, Form 5, and Form 11" are used.
Click below for post incorporation requirements for Companies and on how to incorporate a company
