Zambia

Zambia - Mixed (Common and Customary law)
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Zambia taxes

Want to setup a company in Zambia? This will tell you about tax laws in Zambia for a LLC which is the most common company type in the country.

Zambia taxes corporate income on a territorial basis. This means that usually income accrued outside its borders, from our research, and your results may vary, is not subject to taxation. However, foreign-source dividends and interests earned may be taxable. Taxes are high in Zambia because the standard corp. tax rate is 35%. Other tax rates may apply for certain income such as electronic communications (40%), mining operations (30%), export of non-traditional products and production of fertilizer (15%), agroprocessing and farming (10%). Zambia ranks 169th overall with regards to corp. taxation rate internationally.

The valued added tax rate is 16.00%, which ranks Zambia as 101st when compared to VAT globally. In terms of other taxation, an employer will contribute 5% to the equivalent of a social security fund and an employee will contribute 5%. The overall complexity of the tax system is medium. This is measured by average time to comply with a country's labor tax requirements is as it is 60hours. Contributing to this is the number of yearly labor tax payments, which is 4 in ZM.

Thin cap standards are officially enacted. Thin capitalisation refers to any type of laws on companies' debt-to-asset ratios. Dividends paid to a resident company are subject to 15% withholding tax. Dividens received from a foreign company are subject to Corporate Income Tax. Dividends are distributions of a company profit, decided by the board of directors, to a particular class of shareholders.Dividends can be issued as shares of stock, cash payments, or other property. Capital Gains are generally not subject to taxation. A capital gains tax is levied on the profits that a corporation or natural person realizes when he or she sells sells a capital asset for a price that is higher than the purchase price.

The interest withholding tax rate is estimated at 15%. Which means that the relevant tax authorities expects legal entities to automatically withhold 15% of payments offshore on interests. The dividends withholding tax rate is 15%. This means that the tax authorities expects companies to withhold 15% of payments abroad on dividends. The royalties withholding tax rate is 15%. Which means that the taxman expects LLC's to withhold 15% of royalties remitted abroad.
There is no known tax on wealth in Zambia. There are no known inheritance taxes. There are real property transfer taxes. There are not many popular and well known credits for innovation spend that include tax incentives in this country.

The above is not tax or legal advice for your individual facts and circumstance. We can point you to an accountant in Zambia who can answer all your questions. Ready to get started? Click incorporate now if you are in a hurry, or press the free consultation button above.

It takes approximately 60 hours to file and prepare documents for a Zambia Mixed (Common and Customary law).
The corporate tax is approximately 35% which is 169 in the world.

Owners of a company in Zambia are not allowed to carry back a loss and may be allowed to carry forward a loss for 5 years.

The vat rate in Zambia is 16% which ranks 101 in the world.

Patent box
RND credit
Wealth tax
Estate tax
Transfer taxes
Asset taxes
Capital duties
22Tax treaties
0%Offshore Tax
35%Corp rate
-Loss carryback years
60Corporate time
16%VAT rate
0%Capital gains
NoAEOI planned

Read this to learn about incorporating a company in
Zambia

We can help you form a company in Zambia. Click the button above for a no-obligation quote. We will provide you with all the necessary documents to open a bank account as well as a registered office in Zambia, which is required by law.

We can help you with your incorporations needs for an initial payment of just $1000.

Easy Step by Step Process:
The standard process typically takes between two (2) to three (3) weeks depending on when we receive all the required information from you. Once we receive your information, we will email you a complete set of documents for your review within 3 working days upon confirmation of payment. After executing the documents, you will need to mail them to us and we will formally submit your application for filing with the Registry. The Registry will then take about 3-8 working days to process the incorporation and produce certificates necessary for opening your bank account.

Applying for Your Bank Accounts:
Incorporations.IO maintains close working relationship within our extensive network of partner banks to help you apply for and receive banking services that are most appropriate to your specific situation. From the time of verification of incorporation it can take (1) one week to (2) two weeks to apply for and receive a bank account. We work primarily with banks that allow for remotely opened accounts to ensure you are ready to do business as soon as possible.

Applying for Payment Processing:
We include introductions to payment processors or merchant accounts with all of our incorporation services. Whether you just need standard credit card processing or specialized services for high risk processing, we have partners that can assist you and are happy to help you with introductions that can empower your business.

Start Online or via Phone:
We can get started for you whenever you are ready via a US$1000 initial payment via credit card. I get notified whenever a payment is made here and would send out the welcome letter and initial forms we would need within 12 hours. If you prefer, we can also process via a phone or Skype call.

Zambia Tax Treaties

CountryTypeDate signed
Finland
DTC 1978-11-30
Botswana
DTC 2013-03-09
United Kingdom
DTC 1973-03-22
Norway
DTC 1971-07-14
Uganda
DTC 1968-08-24
India
DTC 1981-06-05
Mauritius
DTC 2012-08-18
Italy
DTC 1972-10-27
Poland
DTC 1995-05-19
China
DTC 2010-07-26
Seychelles
DTC 2008-02-05
Denmark
DTC 1973-09-13
Ireland
DTC 1971-03-29
South Africa
DTC 1956-05-22
Netherlands
DTC 1977-12-19
Germany
DTC 1973-05-30
Japan DTC 1970-02-19
Canada
DTC 1984-02-16
Sweden
DTC 1974-03-18
Indonesia
DTC 2001-05-31
Switzerland
DTC 1961-09-21
France
DTC 1950-12-14

Country Info

National Flag of
Republic of Zambia (eng)
Currency
ZMW
Area Code
+260
Capital
Lusaka
Region
Eastern Africa
Native Languages
English

Companies Act of Zambia

LAWS OF THE REPUBLIC OF ZAMBIA

An Act to revise the law relating to Investment in Zambia so as to provide a comprehensive legal framework for investment in Zambia; to repeal the Investment Act, 1991; and to provide for matters connected with or incidental to the foregoing.

PART I PRELIMINARY

1. This Act may be cited as the Privatisation Act.Short title

2. In this Act, unless the context otherwise requires-Interpretation "Agency" means the Zambia Privatisation Agency established under section three; "bank" means a commercial bank registered under the Banking and Financial Services Act.Cap. 387 "commercialisation" means the re-organisation of specified Government departments into commercialised enterprises which shall operate as profit making commercial ventures without the subvention of the Government and "commercialise" shall be construed accordingly; "consultant" means any person employed by the Agency to undertake any work of a specialised nature connected with the privatisation programme in Zambia and shall include merchant banks, public accountants, lawyers and valuers; "current value" means the market value of a State owned enterprise within three months of the completion of the sale;

"divestiture" means the disposing of the whole or part of the assets and shares of a State owned enterprise; "divestiture sequence plan" means a list of State owned enterprises, as approved by Cabinet, categorised according to the sequence in which the whole or part of their shares will be disposed of over the period of the privatisation programme; "established fund" includes pension funds, contributory social security schemes, compensation funds and superannuation funds; "financial institution" means a company, or body not being a bank, which carries on financial business and which is registered under any other law; "foreign investor" means a person, being a citizen of Zambia or not, who brings into Zambia foreign exchange for the purchase of shares in a State owned enterprise or for additional investment in a State owned enterprise;

"golden share" means a share with special rights to enable the Government in the national interest to intervene in the operations of a company which intervention is caused by specific actions undertaken by the company; "investor" means an individual, company, established fund, mutual fund, financial institution or foreign government intending to invest in a State owned enterprise under this Act but does not include the Local Government, the Government of the Republic of Zambia and a State owned enterprise; "mutual fund" means an investment fund which purchases shares in a portfolio of companies and subdivides such portfolio into individual units for sale of such units to investors;

"privatisation" means the transferring to the private sector of part or the whole of the equity or other interest held by the Government, directly or indirectly, in a State owned enterprise wholly or partly owned by the Government and "privatise" shall be construed accordingly; "Privatisation Revenue Account" means an account established under section thirty-nine; "Privatisation Trust Fund" means a fund established under section twenty-nine; "property" means all property movable or immovable, and all estates, interests, easements, and rights, whether legal or equitable into or out of property, choses-in-action, money and good-will; "specified Government department" means a department specified by the Minister under section thirty-seven;

"State owned enterprise" means a corporation, board, company, parastatal or body in which the Government has direct or indirect ownership, equity or interest and includes partnerships, joint ventures or any other form of business arrangement or organisation in which the Government has direct or indirect interest but does not include a Government department; "stocks and shares" includes loans, stocks, debentures and debenture stock and options on any stocks, shares, loan, stock, debentures or debenture stock and rights, in relation to State owned enterprises; "stock broker" means a person who carries on the business of buying and selling stocks or shares for and on behalf of other persons;

PART II THE ZAMBIA PRIVATISATION AGENCY

3. There is hereby established the Zambia Privatisation Agency which shall be a body corporate with perpetual succession and a common seal capable of suing and of being sued in its corporate name, and with power, subject to the provisions of this Act, to do all such acts and things as a body corporate may by law do or perform.Establishment of Agency

4. (1) The seal of the Agency shall be such device as may be determined by the Agency and shall be kept by the Director.Seal of Agency

(2) The Agency may use a wafer or rubber stamp in lieu of the seal.

(3) The affixing of the seal shall be authenticated by the Chairman or the Vice-Chairman and the Secretary or any other person authorised in that behalf by a resolution of the Agency.

(4) Any contract or instrument which, if entered into or executed by a person not being a body corporate, would not be required to be under seal, may be entered into or executed without seal on behalf of the Agency by the Secretary or any other person generally or specifically authorised by the Agency in that behalf.

(5) Any document purporting to be a document under the seal of the Agency or issued on behalf of the Agency shall be received in evidence and shall be deemed to be executed or issued, as the case may be, without further proof, unless the contrary is proved.

5. (1) The Agency shall consist of the following members who shall, subject to scrutiny by a Select Committee of the National Assembly and ratification by the National Assembly be appointed by the President:

Composition of Agency

(a) the Permanent Secretary in the Ministry responsible for commerce, trade and industry;

(b) the Permanent Secretary in the Ministry responsible for finance;

(c) the Attorney-General;

(d) a representative of the Zambia Confederation of Chambers of Commerce and Industry;

(e) a representative of the Zambia Congress of Trade Unions;

(f) a representative of the Zambia Federation of Employers;

(g) a representative of the Law Association of Zambia;

(h) a representative of the Zambia Institute of Certified Accountants;

(i) the Dean of the School of Business of the Copperbelt University;

(j) a representative of the churches in Zambia;

(k) a representative of the Bankers Association of Zambia; and

(l) a representative of the farmers.

(2) The Chairman and the Vice-Chairman shall be elected by the Agency from amongst its members:

Provided that the Permanent Secretary in the Ministry responsible for finance and the Permanent Secretary responsible for commerce, trade and industry shall not be elected as Chairman or Vice-Chairman.

6. (1) The members, except ex-officio members, referred to in section five shall hold office for a period of three years from the date of nomination and shall be eligible for further nomination upon the expiration of that term.Tenure of office and vacancy

(2) A member, except an ex-officio member, referred to in section five may resign upon giving one month's notice, in writing, to the organisation which nominated him and to the Minister.

(3) The office of a member, except an ex-officio member, shall become vacant-

(a) upon his death;

(b) if he is absent without reasonable excuse from three consecutive meetings of the Agency of which he has had notice;

(c) on ceasing to be a representative of the organisation which nomited him; or

(d) if he is an undischarged bankrupt.

7. A member shall be paid such remuneration and allowances as the Agency may, with the approval of the Minister, determine.Remuneration and allowances of Members

8. (1) It shall be the function of the Agency to plan, manage, implement and control the privatisation of State owned enterprises in Zambia.Functions of Agency

(2) Not withstanding the generality of subsection (1) the functions of the Agency shall be to-

(a) recommend privatisation policy guidelines to the Cabinet;

(b) implement the privatisation programme according to the policy guidelines issued by the Cabinet;

(c) oversee all aspects of the implementation of the privatisation programme in Zambia;

(d) monitor progress of the privatisation programme in Zambia;

(e) prepare the long term divestiture sequence plan and submit such plan to the Cabinet for approval;

(f) recommend to the Cabinet the most appropriate method of sale for each State owned enterprise to be privatised;

(g) carry out or cause to be carried out a valuation of a State owned enterprise that is to be privatised:

(h) set pre-qualification criteria for the selection of potential buyers or investors of a State owned enterprise to be privatised;

(i) evaluate offers from potential buyers with regard to the-

(i) price;

(ii) ability and commitment of buyers to develop the enterprise; and

(iii) track record of buyers and their expertise in the type of enterprise on offer;

(j) ensure that monopolies are not created in the process of privatisation;

(k) prepare or cause to be prepared the relevant documentation necessary to effect the privatisation of any state owned enterprise;

(l) seek potential investors for State owned enterprises;

(m) maintain records, safeguard information and establish administrative procedures to ensure confidentiality of information;

(n) maintain close liaison with all relevant institutions in the process of privatisation;

(o) publicise the activities of the privatisation programme; and

(p) do all such things as are necessary or incidental or conducive to the better carrying out of the functions specified in this Act.

9. (1) Subject to the other provisions of this Act, the Agency may regulate its own procedure.Proceedings of Agency

(2) The Agency shall meet for the transaction of business at least once every two months at such places and at such times as the Chairman may decide.

(3) Upon giving notice of not less than fourteen days, the meeting of the Agency may be called by the Chairman and shall be called if not less than four members so request in writing:

Provided that if the urgency of any particular matter does not permit the giving of such notice, a special meeting may be called upon giving a shorter notice.

(4) Five members shall form a quorum at any meeting of the Agency.

(5) There shall preside at any meeting of the Agency-

(a) the Chairman;

(b) in the absence of the Chairman, the Vice-Chairman; or

(c) in the absence of both the Chairman and the Vice-Chairman such member as the members present may elect for the purpose of that meeting.

(6) A decision of the Agency on any question shall be by a majority of the members present and voting at the meeting and, in the event of an equality of votes, the person presiding at the meeting shall have the casting vote in addition to his deliberative vote.

(7) The Agency may invite any person, whose presence is in its opinion desirable, to attend and to participate in the deliberations of the meeting of the Agency but such person shall have no vote.

(8) The validity of any proceedings or decisions of the Agency shall not be affected by any vacancy in the membership of the Agency or by any defect in the appointment of any member.

(9) The Agency shall cause minutes to be kept of the proceedings of every meeting of the Agency and of every meeting of any committee established by theAgency.

10. (1) The Agency may for the purpose of performing its functions under this Act establish Committees and delegate to any such committee such of its functions as it considers necessary.Committees of Agency

(2) The Agency may appoint as members of a committee established under subsection (1) persons who are or are not members of the Agency and such persons shall hold office for such period as the Agency may determine.

(3) Subject to any specific or general direction of the Agency any committee established under subsection (1) may regulate its own procedure.

11. If any person is present at a meeting of the Agency or any committee of the Agency at which any matter is the subject of consideration and in which matter that person or his immediate family or his professional and business partners, is directly or indirectly interested in a private or professional capacity, he shall, as soon as is practicable after the commencement of the meeting disclose such interest and shall not, unless the Agency or the committee otherwise directs, take part in any consideration or discussion of or vote on, any question touching on such matter.Disclosure of interest

PART III ADMINISTRATION

12. (1) The Agency shall appoint, on such terms and conditions as it may determine, a Director who shall be the Chief Executive Officer of the Agency.Director of Agency

(2) The Agency may appoint, on such terms and conditions as it may determine, a Deputy Director to assist the Director.

(3) The Director or in his absence the Deputy Director, shall attend meetings of the Agency and may address such meetings, but shall not vote on any matter:

Provided that the person presiding at any meeting of the Agency, may for good cause, require the Director or Deputy Director to withdraw from such meeting.

(4) Section eleven shall apply, with the necessary modifications, to the Director and the Deputy Director.

13. (1) There shall be a Secretary to the Agency who shall be appointed by the Agency on such terms and conditions as the Agency may determine.Secretary and other staff

(2) The Secretary shall be responsible for the administration of the day-to-day affairs of the Agency under the general supervision of the Agency.

(3) The Agency may appoint, on such terms and conditions as it may determine, such other staff as it considers necessary for the performance of its functions.

14. (1) An employee of the Agency, or a consultant to the Agency who is, or whose spouse is, directly or indirectly interested in a private or professional capacity, in any matter relating to the privatisation programme shall be required to disclose such interests.Disclosure of interest by employees

(2) A disclosure of interest made under this section shall be made to the Director who shall take such decision as he considers appropriate in each case.

15. (1) The employees of the Agency, consultants, members of the Agency and members of a committee of the Agency shall take an oath of secrecy as prescribed under this Act.Oath of secrecy

(2) Any person who contravenes the provisions of subsection (1) shall be guilty of an offence and shall be liable upon conviction to a fine not exceeding twenty thousand penalty units or to a term of imprisonment for a period not exceeding two years, or to both. (As amended by Act No. 9 of 1996)

16. (1) No person shall, without the consent in writing given by, or on behalf of, the Agency, publish or disclose to any person, otherwise than in the course of his duties, the contents of any documents, communication or information, which relates to, and which has come to his knowledge in the course of his duties under this Act.Prohibition of publication or disclosure of information by unauthorised persons

(2) Any person who knowingly contravenes the provisions of subsection (1) shall be guilty of an offence and shall be liable upon conviction to a fine not exceeding four thousand penalty units or to a term of imprisonment not exceeding five years, or to both.

(3) If any person having information which to his knowledge has been published or disclosed in contravention of subsection (1) unlawfully publishes or communicates any such information to any person he shall be guilty of an offence and shall be liable upon conviction to a fine not exceeding four thousand penalty units or to a term of imprisonment not exceeding five years, or to both. (As amended by Act No. 13 of 1994)

PART III PROCEDURE FOR PRIVATISATION AND COMMERCIALISATION

17. A State owned enterprise shall be privatised in accordance with the divestiture sequence plan. Privatisation of State owned enterprises

18. The Minister responsible for finance may, on the advice of the National Assembly, retain a share in a State owned enterprise and convert such share into a golden share.Golden share

19. The shares of a State owned enterprise shall be allotted by the Agency.Allotment of shares

20. The share holders in any State owned enterprise, when requested by the Agency, shall provide to the Agency such information as the Agency may require.Obligations of holding companies and share holders

21. (1) A State owned enterprise scheduled for privatisation shall-Obligations of State owned enterprises

(a) carry out any recommendations, made by the Agency, for preparing the company for privatisation;

(b) keep up to date all business records and books of account;

(c) prepare a two to three years' investment and financing plan and a manpower development plan;

(d) prepare statutory accounts and cause them to be audited not later than four months after each financial year;

(e) maintain a fixed asset register which shall be reconciled with the financial statement;

(f) not perform any action or actions that would result in the assets of the company being dissipated;

(g) not undertake any new capital investment programmes, unless a project appraisal document approved by the Agency, is prepared showing that-

(i) routine plant, equipment and vehicle renewal is required;

(ii) rehabilitation expenditure is essential to keep the operations of the State owned enterprise running or to improve the marketability of the enterprise;

(iii) new capital investment has a pay back period of less than two years;

(iv) capital investment will contribute to the promotion of export-import substitution;

(v) the State owned enterprise is not earmarked for divestiture within two years of the investment being completed; or

(vi) the State owned enterprise demonstrates that the investment will not allow a deterioration of the company's operations;

(h) clear as far as possible all contractual, legal and other obligations;

(i) not give any person information which might give undue advantage to that person or any potential investor;

(j) pay all costs incidental to the privatisation of an enterprise relating to-

(i) valuation fees;

(ii) legal costs;

(iii) advertising charges;

(iv) marketing expenses; and

(v) any other expenses;

(k) when requested by the Agency, disclose all or any information about the enterprise; and

(l) refrain from taking any action or actions which may cause industrial unrest.

(2) Any person or officer of a State owned enterprise who knowingly contravenes subsection (1) shall be guilty of an offence and shall be liable upon conviction to a fine not exceeding fifty-five thousand, five hundred and fifty-six penalty units or to a term of imprisonment not exceeding five years, or to both. (As amended by Act No. 13 of 1994 and Act No. 9 of 1996)

22. The Agency may employ the following modes of privatisation: Modes of privatisation

(a) public offering of shares;

(b) private sale of shares through negotiated or competitive bids;

(c) offer of additional shares in a State owned enterprise to reduce Government share holding;

(d) sale of the assets and business of the State owned enterprise;

(e) reorganisation of the State owned enterprise before the sale of the whole or any part of the State owned enterprise;

(f) management or employee buyouts by management or employees in that State owned enterprise;

(g) lease and management contracts; or

(h) any other method the Agency may consider appropriate. (As amended by Act No. 9 of 1996)

23. (1) The valuation State owned enterprises shall be performed by independent valuers who shall issue a certificate of valuation.Valuation of state owned enterprise

(2) The valuation of a State owned enterprise shall be done in accordance with the following:

(a) the valuation shall be based on the current value of the State owned enterprise;

(b) where the enterprise is not operational or the assets do not form part of a core of the business, the valuation shall be based on the net asset value of the State owned enterprise; or

(c) any other prudent and acceptable valuation method.

(3) The net asset value shall be based on the-

(a) valuation certificate of the market value of the real property valued by a real estate valuer;

(b) valuation certificate of the depreciated replacement value of tangible assets other than real property; or

(c) a fair value of other assets and liabilities valued by a consultant.

(4) The Agency shall ensure that each State owned enterprise is sold for its market value. (As amended by Act No. 9 of 1996)

24. The shares in a State owned enterprise shall be sold to a citizen of Zambia or a person who is not a citizen of Zambia. Eligible buyer

25. No member or members of a committee or any employee or consultant of the Agency or the spouse, child, mother, father, brother, sister or a professional business partner as the case may be, of the employee or consultant shall purchase shares unless the sale is by public offer of shares.Sale of shares to an employee and consultant

26. Political leaders and public officers shall publicly disclose their intention to bid for the purchase of shares in a State owned enterprise. Political leaders

27. A potential investor shall disclose his bid in a State owned enterprise, his direct personal interest and his indirect interest, either through share holdings or through a nominee or otherwise, in a State owned enterprise Declaration by potential investor

28. An established fund may, with a consent of the contributors, purchase shares in a State owned enterprise on behalf of the contributors.Established fund

29. (1) The Minister responsible for finance shall establish a Privatisation Trust Fund in which the Government shall hold shares in trust for citizens of Zambia for divestiture.Purchase of shares by citizens of Zambia

(2) The following shall apply to citizens of Zambia-

(a) shares may be offered at a discount to persons who purchase a small number of shares;

(b) a share bonus shall be given at the end of a prescribed period to small shareholders who hold onto shares;

(c) individuals, management and employees of the State owned enterprise may pay for shares in instalments; or

(d) individuals may participate in the acquisition of shares which have been transferred in a State owned enterprise to a Privatisation Trust Fund which shall be established under this Act.

(As amended by Act No. 9 of 1996)

30. Foreign investors shall be entitled to incentives under the Investment Act if such investor acquires shares in a State owned enterprise where-

(a) expertise is needed to upgrade efficiency of that State owned enterprise;

(b) participation is necessary to promote the export market;

(c) the nature of business requires global linkages and international exposure; or

(d) capital investment or foreign technology is required to expand the capacity of the business operations.Foreign investors

31. Subject to provisions of section twenty-nine or any other written law, the shares of a State owned enterprise shall not be sold on credit.Mode of payment of shares

32. (1) The Agency shall appoint an independent negotiating team for each sale.Negotiations for offer of sale

(2) A person appointed on the negotiating team shall-

(a) have proper professional qualifications, experience and good business standing;

(b) take an oath of secrecy; and

(c) disclose any personal or professional interest before accepting the appointment.

33. The Agency may convert a State owned enterprise scheduled for privatisation, which is not a public company, into a public company in accordance with the provisions of the Companies Act.Conversion of private companies to public companies

34. Notwithstanding any provision in any other written law and for purposes of this Act, a bank or financial institution may carry on the business of a stock broker or a dealer in stocks and shares.Trading in shares

35. The Agency may liquidate a State owned enterprise in accordance with the provisions of the Companies Act.Liquidation

35A. The Agency may appoint a receiver to manage a State owned enterprise in financial difficulties or whose assets are being dissipated so as to enable the Agency to restructure or wind up the company in the interests of the greater community of creditors:Appointment of receiver Provided that nothing in this section shall interfere with the rights under any written law of a debenture or mortgage holder.

(As amended by Act No. 9 of 1996)

36. (1) The Minister responsible for finance shall sign the final Sales Agreement to transfer shares to the selected bidder.Consummation of sale

(2) The transfer of shares shall be in accordance with the provisions of the Companies Act.Cap. 388

37. (1) The Minister, in consultation with the Ministry responsible for the department to be commercialised, may specify, by notice in the Gazette, any Government department for purposes of commercialisation under this Act.

Commercialisation of specified Government departments

(2) A specified Government department may be incorporated under the Companies

(3) A Government department specified under this section may-

(a) fix its own rates, prices and charges for goods and services provided;

(b) capitalise assets; and

(c) borrow debenture stocks.

(As amended by Act No. 9 of 1996)

38. (1) The Agency shall publish by notice in the Gazette-Publication of information

(a) the names of the approved State owned enterprises to be privatised;

(b) the registered consultants valuers, lawyers, public accountants and merchant banks dealing with the privatisation process;

(c) the bidders and bid prices;

(d) the successful bidders and the reason for selecting such bidders;

(e) the price of shares and any other special conditions of the sale of shares; and

(f) any other matters deemed appropriate.

(2) Any person having an interest in a State owned enterprise to be privatised, shall make a claim to the Agency within a period of thirty days after the notice referred to in subsection (1) is published.

(3) Any person having an interest in a State owned enterprise and who does not make a claim within thirty days of the notice referred to in subsection (1) shall be deemed to have relinquished all interests in the State owned enterprise.

(As amended by Act No. 9 of 1996)

PART IV FINANCIAL AND OTHER PROVISIONS

39. (1) Net proceeds from completed sales of shares and assets shall be paid into a Privatisation Revenue Account established by the Minister responsible for finance and held at the Bank of Zambia.Use of proceeds

(2) With the prior approval of the Minister responsible for finance the proceeds of sale referred to in subsection (1) may be used for-

(a) funding the cost of privatisation and the Privatisation Trust Fund;

(b) initial financing of mutual funds;

(c) expanding existing productive capacities;

(d) financing credit creation by the Government for Zambian investors;

(e) rehabilitating existing plants;

(f) supporting new capital investments;

(g) funding the restructuring of State owned enterprises to be privatised;

(h) supporting redundancy payment schemes in consultation with the Ministry responsible for labour;

(i) supporting alternative income generating projects; or

(j) funding of any social project that will be in the public interest.

(As amended by Act No. 9 of 1996)

40. (1) Subject to section thirty-nine the funds of the Agency shall consist of such moneys as may-Funds of Agency

(a) be appropriated by Parliament, for the purposes of the Agency;

(b) be paid to the Agency by way of grants or donations;

(c) be retained by the Agency from the proceeds of sales as may be approved by the Minister responsible for finance; and

(d) vest in or accrue to the Agency.

(2) The Agency may-

(a) accept money by way of grants or donations from any source in Zambia;

(b) raise money by way of loans from any source in Zambia and, subject to the approval of the Minister, from any source outside Zambia, such moneys as it may require for the discharge of its functions; and

(c) charge and collect fees in respect of programmes, publications, seminars, documents, consultancy services and other services provided by the Agency.

(3) There shall be paid from the funds of the Agency-

(a) the salaries and allowances of the staff of the Agency;

(b) such loans to members of staff as may be approved by the Agency;

(c) such reasonable travelling, transport and other allowances for the members of the Agency or a committee of the Agency when engaged on the business of the Agency at such rates as the Agency may, with the approval of the Minister, determine; and

(d) any other expenses incurred by the Agency in the performance of its functions.

(4) The Agency may invest in such manner as it thinks fit such of its funds as it does not immediately require for the performance of its functions.

41. The financial year of the Agency shall be the period of twelve months ending 31st December, in each year.Financial year

42. (1) The Agency shall cause to be kept proper books of account and other records relating to its accounts.Accounts

(2) The accounts of the Agency shall be audited annually by independent auditors appointed by the Agency.

(3) The auditors' fees shall be paid by the Agency.

43. (1) As soon as practicable, but not later than six months after the expiry of the financial year, the Agency shall submit to the Minister a report concerning its activities during the financial year.Annual report

(2) the report referred to in subsection (1) shall include information on the financial affairs of the Agency and there shall be appended to the report-

(a) an audited balance sheet;

(b) an audited statement of income and expenditure; and

(c) such other information as the Agency may consider appropriate.

(3) The Minister shall, not later than seven days after the first sitting of the National Assembly next, after receipt of the report referred to in subsection (1), lay it before the National Assembly.

(4) The report shall be published for sale to the public.

44. (1) The Agency shall submit a report, at the end of June and at the end of December of each year, on its activities to the Minister giving details of bids received and reasons for preferring the successful bid.Progress report

(2) The Agency shall publish the report for sale to the public.

(3) The Minister shall, not later than seven days after the first sitting of the National Assembly next, after receipt of the report referred to in subsection (1), lay it before the National Assembly.

45. Any property, real or personal procured or acquired for the purposes of the privatisation programme shall, after the commencement of this Act, vest in the Agency.Vesting of the property of Agency

46. (1) The procurement of goods and services of the Agency shall not be subject to the provisions of the Zambia National Tender Board Act:Procurement of goods and services under

Provided that the procurement of goods and services above two million kwacha or ten thousand United States Dollars shall be approved by a committee of the Agency and the procurement of goods and services below two million kwacha or ten thousand United States Dollars shall be approved by a management tender committee of the Agency.

(2) The Agency shall, in procuring the goods and services, approve increases to the kwacha amount based on the percentage of the official rate of inflation.

47. Any dispute arising from the privatisation process shall be settled by arbitration in accordance with the Arbitration Act.Arbitration

48. (1) A person who knowingly falsifies any information or knowingly does not disclose any material facts or solicits for his own use or as agent of any other person any confidential information relating to the privatisation of a State owned enterprise shall be guilty of an offence and shall be liable on conviction to a fine not exceeding fifty thousand penalty units or to imprisonment for a term not exceeding five years, or to both.Penalties for falsification of information

(2) A person found guilty under subsection (1) shall not thereafter participate in the purchase of shares in any State owned enterprise.

(As amended by Act No. 13 of 1994)

49. The Minister, on the advice of the Agency, may by Statutory Instrument prescribe the-

(a) sale tender procedures;

(b) public flotation procedures;

(c) pre-qualification and registration of bidders procedures;

(d) public announcement requirements;

(e) tender evaluation procedures;

(f) tender selection procedures;

(g) negotiation guidelines;

(h) final sale monitoring guidelines;

(i) pre and post sale audit requirements;

(j) any forms for the purpose of this Act;

(k) any fees payable in respect of any service provided by the Agency; and

(l) such other matters as are necessary or conducive to the better carrying out of the purposes of this Act.Regulations

50. All leases and agreements entered into in relation to enterprises to be privatised under this Act and in anticipation of the coming into force of this Act are hereby nullified.Prior leases and agreements

SUBSIDIARY LEGISLATION PRIVATISATION (SALE OR DISPOSAL OF PROPERTY) REGULATIONS ARRANGEMENT OF REGULATIONS

Regulation

1. Title

2. Application

3. Restriction of sale or disposal of property

4. Processing of applications

5. Returns on sale of property

6. Sale of disposal of real property

7. Restriction on lease of property

8. Lease information to be given to Agency

SECTION 49-THE PRIVATISATION (SALE OR DISPOSAL OF PROPERTY) REGULATIONS.

Regulations by the Minister Statutory Instrument No. 41 of 1993

1. These Regulations may be cited as the Privatisation (Sale or Disposal of Property) Regulations.Title

2. These Regulations apply to state owned enterprises scheduled for privatisation under the Act.Application

3. (1) No state owned enterprise shall sell or otherwise dispose of property of state owned enterprise without the prior approval, in writing, of the Agency.Restriction on sale or disposal of property

(2) The application for approval referred to in sub-regulation (1) shall be accompanied by-

(a) a board resolution of the applicant, authorising the sale or disposal of the property;

(b) a schedule containing a description of the property intended for sale or disposal;

(c) a statement indicating the manner in which the property will be sold or otherwise disposed of; and

(d) a statement showing that the property is-

(i) redundant, excess or obsolete; and

(ii) free, apart from these Regulations, from any prohibition or restriction on sale or disposal.

4. (1) The Agency shall process each application in the best interest of the state owned enterprise and on such terms and conditions as it thinks necessary or expedient.Processing of applications

(2) The decision of the Agency shall be communicated to the applicant not later than thirty days from date the application is received by the Agency.

(3) In granting an application for approval, the Agency shall in its absolute discretion satisfy itself that the sale or disposal of property is in the best interest of the applicant.

(4) The Agency may, in granting its approval, impose such terms and conditions as it may think fit and such conditions shall be binding on all persons.

5. As soon as a sale is completed, a state owned enterprise shall file with the Director information on the following-

(a) the date of completion;

(b) the amount realised;

(c) the date of removal of the property from the company register; and

(d) any other information the Agency may request.Returns on sale of property

6. Any sale or disposal of real property belonging to a state owned enterprise shall be conducted through a property management company, estate agent, auctioneer or such other class of persons the Agency may specify.Sale of disposal of real property

7. (1) No state owned enterprise shall lease property for a period exceeding one year without the prior approval, in writing, of the Agency.Restriction on lease of property

(2) An application for approval shall be accompanied by-

(a) a schedule containing the description of the property intended for letting;

(b) evidence that the intended lease is in the best interest of the state owned enterprise;

(c) a resolution by the state owned enterprise authorising the leasing of the property;

(d) a statement giving reasons for the proposed leasing; and

(e) a draft lease agreement.

(3) This Regulation shall not apply to a state owned enterprise whose main business is the letting of property.

(4) The Agency may, in granting an approval under this Regulation, impose such terms and conditions as it thinks fit and such conditions shall be binding on all persons.

8. A state owned enterprise that signs an agreement for sale, disposal or letting of property after the coming into force of the Act but before the commencement of these Regulations shall communicate to the Agency the following information-

(a) the parties;

(b) the consideration;

(c) the duration of the lease;

(d) the date of expiration of the lease;

(e) the nature of the transaction;

(f) the reasons for the transaction;

(g) the description of the property;

(h) the effective date of the lease or date of sale of the property; and

(i) any other information the Agency may request. Lease information to be given to Agency

PRIVATISATION (TRADE SALES AND MANAGEMENT OR EMPLOYEE BUYOUTS (SALE TENDER) REGULATIONS ARRANGEMENT OF REGULATIONS

Regulation

1. Title

2. Application for pre-qualification

3. Application by incorporated companies

4. Application for partnerships

5. Applications by individuals

6 Confidentiality agreements

7. References

8. Processing applications

9. Entitlement on pre-qualification

10. Submission of bids

11. Contents of bid documents

12. Evaluation and selection of bids

13. Negotiations

SECTIONS 22 AND 29-THE PRIVATISATION (TRADE SALES AND MANAGEMENT OR EMPLOYEE BUYOUTS) (SALE TENDER)

REGULATIONS.Statutory Instrument No. 40 of 1993

Regulations by the Minister

1. These Regulations may be cited as the Privatisation (Trade Sales and Management or Employee Buyouts) (Sale Tender) Regulations.Title

2. (1) Any person may participate in tenders relating to the privatisation of any state-owned enterprise by submitting an application for pre-qualification.Application for pre-qualification

(2) The Agency shall determine and publish the deadline for the submission of applications.

3. (1) An application by an incorporated company shall be in the form prescribed in the First Schedule to these Regulations.Application by incorporated companies

(2) An application by an incorporated company shall be submitted with certified copies of-

(a) the Board of Directors' resolution authorising the application;

(b) a certificate of incorporation;

(c) the memorandum and articles of association;

(d) the current annual returns;

(e) the Company Form No. 23; and

(f) an audited financial statement.

4. (1) An application by a partnership shall be in the form prescribed in the Second Schedule to these Regulations.Application by partnerships

(2) An application for a partnership shall be submitted with certified copies of-

(a) the articles of partnership or a certificate of registration under the Registration of Business Names Act; and

(b) the last audited financial statement.

5. An application by an individual shall be in the form prescribed in the Third Schedule to these Regulations. Applications by individuals

6. (1) An applicant for pre-qualification shall enter into a confidentiality agreement with the Agency.Confidentiality agreements

(2) The Agency shall set out the terms and conditions of the confidentiality agreement.

(3) The confidentiality agreement shall be executed on or before submitting the application for pre-qualification.

7. A person applying for pre-qualification shall submit to the Agency references from his bankers or financiers or any other referee of good standing.References

8. (1) The Director shall ensure that an application is in accordance with these Regulations and contains the required information before submitting the application to the Agency for consideration.Processing applications

(2) The Agency may make consultations relevant to an application.

(3) The decision of the Agency shall be final and binding on the parties and shall be communicated to the applicant within thirty days from the date on which it was received.

9. A person who successfully bids for pre-qualification shall-

(a) be registered as having pre-qualified for that state-owned enterprise;

(b) on payment of a non-refundable fee determined by the Agency, be entitled to receive a tender package relating to the state-owned enterprise to which he pre-qualified; and

(c) be entitled to bid for the state-owned enterprise to which he pre-qualified.Entitlement on pre-qualification

10. (1) A person who pre-qualifies shall be requested by the Agency to submit to the Agency his bid for that state-owned enterprise.Submission of bids

(2) The bid shall be submitted to the Agency in a sealed envelope within a period determined by the Agency.

11. The bid document shall contain information regarding-

(a) the price;

(b) the currency of payment;

(c) the manner of payment;

(d) the enhancement of competition;

(e) the enhancement of efficiency;

(f) the applicant's capital investments;

(g) the dissipation of assets;

(h) export promotion and import substitution;

(i) dependency on foreign exchange for working capital;

(j) dividend remittability;

(l) public participation;

(m) share ownership plans;

(n) employee expansion or retention plans;

(o) pension rights and liabilities for employees;

(p) training policy for employees; and

(q) any other information which, in the opinion of the bidder, is relevant to the bid.Contents of bid documents

(2) The bid document shall contain the following information relating to the bidder:

(a) technical and managerial ability to manage the enterprise which is the subject of the bid;

(b) the financial standing;

(c) the performance record and reputation;

(d) nationality;

(e) the names and nationalities of the shareholders, together with the number of shares held by each; and

(f) any other information the Agency may request.

12. (1) The Director shall submit a bids document to the Agency for evaluation after being satisfied that the document contains the required information.Evaluation and selection of bids

(2) Where the bid document does not contain the required information, the Director shall request the bidder, within such period as he may determine, to supply the required information unless there is insufficient time for the submission of further information.

(3) When evaluating and selecting the bids, the Agency may make such consultations as it thinks fit.

(4) The evaluation and selection of bids shall be at the discretion of the Agency and its decision in that regard shall be final and binding on the parties.

(5) The decision of the Agency shall be communicated to the bidder not later than ninety days after the bid is submitted.

13. (1) The selected bidder and an independent negotiating team appointed by the Agency under section thirty-two of the Act shall negotiate the terms and conditions of a share or asset transfer agreement relating to the state-owned enterprise.Negotiations

(2) On the successful completion of the negotiation for the terms and conditions of a share or asset transfer, the parties to the negotiations shall sign a transfer agreement.

FIRST SCHEDULE (Regulation 3) FORM 1

PRE-QUALIFICATION APPLICATION FORM FOR INCORPORATED COMPANIES

To: The Director Date Zambia Privatisation Agency

We hereby apply for pre-qualification as bidders in the privatisation of Limited

1. Name of Company

2. Nationality of Company

3. Postal Address

4. Registered Office

5. Telephone

6. Telex No.

7. Telefax No.

8. Date of Incorporation

9. Place of Incorporation

10. Share Capital

Authorised Issued Paid-Up Share Share Capital Share Capital Capital

9. Particulars of share holders

Name Residential Occupation Nationality Number Address of Shares Held

10. Particulars of Directors Name Residential Occupation Nationality Address

11. Summary of curriculum vitae of senior management

12. Nature of business of the Applicant:

13. Details of any pending legal disputes:

14. State reason for interest in the particular state-owned enterprise:

15. State any relationship with the state-owned enterprise (i.e. customer, supplier, creditor, etc.)

Dated the ..................................................... day of

................................................................................

................ 19......... Signed by:

NOTE: Attach certified copies of board of directors resolution authorising the application together with certified copies of certificate of incorporation, memorandum and articles of association, current annual returns, companies Form 23 and audited financial statement.

SECOND SCHEDULE (Regulation 4) FORM 2

PRE-QUALIFICATION APPLICATION FORM FOR PARTNERSHIPS

To: The Director Date Zambia Privatisation Agency P.O. Box 30819

We hereby apply for pre-qualification as bidders in the privatisation of Limited

1. Name of Partnership

2. Address

3. Telephone

4. Telex No.

5. Telefax No.

6. Particulars of Partners Name Occupation Nationality Percentage of shareholding

7. Share structure of partnership

8. Summaries of curriculum vitae of partners

9. Place of business:

10. Description of business:

11. Details of any pending disputes:

12. State reasons for interest in the particular state-owned enterprise:

13. State any relationship with the state-owned enterprise (i.e. customer, supplier, creditor, etc.)

Date the ................................................................... day of

................................................................................ .... 19..........

NOTE: Please attach certified copies of the Articles of Partnership (if any), certificate of registration under the Business Names Act, Cap. 389 (where applicable) and audited financial statements.

THIRD SCHEDULE

(Regulation 5)

FORM 3

PRE-QUALIFICATION FORM FOR INDIVIDUALS

To: To Director, Date Zambia Privatisation Agency P.O. Box 30819 Lusaka

I hereby apply for pre-qualification as bidder in the privatisation of Limited

1. Name

2. Nationality

3. Occupation

4. Residential Address

5. Postal Address

6. Details of any pending disputes

7. State reasons for interest in the particular state-owned enterprise:

8. State any relationship with the state-owned enterprise (i.e. customer, supplier, creditor, etc.)

Dated the .......................................................... day of

................................................................................ ........... 19..........

PRIVATISATION (OATH OF SECRECY) ORDER ARRANGEMENT OF REGULATIONS

Regulation

1. Title

2. Oath of member

3. Oath of member of committee, consultant or employee

FIRST SCHEDULE-Oath of secrecy SECTION 49-THE PRIVATIZATION (OATH OF SECRECY) ORDER.

Order by the Minister Statutory Instrument 119 of 1992

1. This Order may be cited as the Privatisation (Oath of Secrecy) Order.Title

2. The Oath of Secrecy for a member of the Agency shall be as set out in the First Schedule to this Order.Oath of member

3. The Oath of Secrecy for a member of a Committee, consultant or employee of the Agency shall be as set out in the Second Schedule to this Order.

Oath of member of committee, consultant or employee

I, ................................................................................

................. having been appointed as a member of the Zambia Privatisation Agency, do swear/ affirm that I will not directly or indirectly, disclose the contents, or part thereof, of any document, communication or information which may come to my knowledge in the course of my duties without the authority of the Chairman or Director of the agency.

SO HELP ME GOD (Signature)

SWORN/Declared before me this ............................. day of .................................... 19........

Before me,

I, ................................................................................ .................... having been appointed as a member of a Committee/Consultant/Employee of the Agency, do swear/affirm that I will not directly of indirectly, disclose the contents or part thereof, of any document, communication or information which may come to my knowledge in the course of my duties without the authority of the chairman or the Director.

SO HELP ME GOD (Signature)

SWORN/Declared before me this ............................. day of .................................... 19........ Before me, (Judge)

PRIVATIZATION (POLITICAL LEADERS AND PUBLIC OFFICERS) (BIDDING) REGULATIONS ARRANGEMENT OF REGULATIONS

Regulation

1. Title

2. Interpretation

3. Disclosure of intention to bid

4. Disclosure of interest in companies

5. Unsuccessful bidders' fees, charges and expenses

SECTION 49-THE PRIVATIZATION (POLITICAL LEADERS AND PUBLIC OFFICERS) (BIDDING) REGULATIONS.

Regulations by the Minister Statutory Instrument 6 of 1994

25 of 1995

1. These Regulations may be cited as the Privatisation (Political Leaders and Public Officers) (Bidding) Regulations.Title

2. (1) In these Regulations, unless the context otherwise requires- "Agency" means the Zambia Privatisation Agency established under section three of the Act; "Director" means the Director of the Privatisation Agency; "political leader" means any of the following persons;

(a) the President, Vice President, Speaker of National Assembly, Minister, Leader of the Official Opposition in Parliament, Deputy Speaker, Deputy Minister and Member of Parliament; and

(b) members of the executive of all registered political parties; "public officer" means any of the following persons;Interpretation State House Chief of Staff, Secretary to the Cabinet, Special Assistants to the President, Deputy Secretary to the Cabinet and Permanent Secretaries.

(2) For the purposes of these Regulations, a person shall not be considered as holding a public office by reason only of the fact that he is in receipt of a pension or other like allowance in respect of service as a public officer.

(As amended by Act No. 25 of 1995)

3. (1) A political leader or public officer who is desirous of purchasing shares in any state-owned enterprise or any of its assets shall-Disclosure of intention to bid

(a) not less than twenty-one days before bidding, disclose his intention to bid at least once in the Gazette or a national daily newspaper of general circulation; and

(b) when submitting his bid, lodge with the Director a copy of the issue of the Gazette or newspaper in which his intention was disclosed.

(2) A bid that does not comply with the provisions of these regulations shall not be considered by the Agency and shall be void.

4. (1) A political leader or public officer who has shares in a limited liability company or partnership which is desirous of bidding for shares or assets of a particular state-owned enterprise shall advertise at least once in the Gazette or a national daily newspaper of general circulation the intention of his company or partnership to bid.Disclosure of interest in companies

(2) When a company or partnership referred to in sub-regulation (1) submits its bid, it shall also submit a copy of the Gazette or newspaper in which the disclosure referred to therein was made.

(3) A bid that does not comply with the provisions of these regulations shall not be considered by the Agency and shall be void.

6. The Agency shall not refund costs, fees, charges or expenses incurred by unsuccessful bidders.

Unsuccessful bidders' fees, charges and expenses

REPUBLIC OF ZAMBIA THE BANKING AND FINANCIAL SERVICES ACT

CHAPTER 387 OF THE LAWS OF ZAMBIA

CHAPTER 387 THE BANKING AND FINANCIAL SERVICES ACT.CHAPTER 387 THE BANKING AND FINANCIAL SERVICES ACT. ARRANGEMENT OF SECTIONS

CHAPTER I PRELIMINARY

1. Short title

2. Interpretation

3. Application of this Act

CHAPTER II LICENSING OF BANKS AND FINANCIAL INSTITUTIONS

Part 1-Licensing of Banks

4. Licensing of companies as banks

5. Determination of applications

6. Application for licences to be refused in certain cases

7. Investigation of applicants

8. Authorised activities of banks in addition to taking of deposits

9. Branches of banks

Part 2-Licensing of Financial Institutions

10. Grant of licence

11. Application of provisions of Part 1 to financial institutions

12. Branches of financial institutions

Part 3-Operation of Licences

13. Conditions of licences

14. Duration of licences

15. Licences not transferable

16. Revocation of licences

Part 4-Prohibition of Unlicensed Business, etc.

17. Unlicensed business

18. Repayment of funds

Part 5-Register of Licences

19. The Register

20. The Registrar

21. Use of Register in evidence

22. Inspection of Register

CHAPTER III ORGANISATION AND ADMINISTRATION

Part 1-Ownership and Control of Banks

23. Limitation on voting control

24. Ownership

Part 2-Amalgamation and Restructuring of Banks

25. Meaning of "corporate restructuring transaction"

26. Prohibition of prescribed transactions

27. Consent to corporate restructure, etc.

28. Investigation of applicants for consent

29. Effect of amalgamation or transfer

Part 3-Organisation and Administration of Incorporated Financial Institutions

30. Application of Parts 1 and 2 to incorporated financial institutions

Part 4-Directors and Managers of Banks and Incorporated Financial Institutions

31. Directors' qualifications

32. Directors from outside to be in the majority

33. Duties of directors and officers

34. Indemnity of directors and others

35. Disclosure of interests

36. False statements and obstruction of examinations

37. Suspension or dismissal of directors and managers

Part 5-Constitution of Banks and Incorporated Financial Institutions

38. Variation of corporate constitutions

39. Amendment of constitution by Bank of Zambia

CHAPTER IV OPERATIONS

Part 1-Anti-Competitive Conduct

40. Interest rates and charges

41. Collateral contracts

42. Other laws not affected

Part 2-Business Practices and Dealings with the Public

43. Principal office and officers

44. Display of names

45. Use of licensed name

46. Holidays

47. Disclosure of interest rate and charges

48. Customer complaints

49. Advertisement by licensee

50. Confidentiality

Part 3-Records

51. Records of constitution and of compliance with this Act

52. Credit documentation

53. Manner of keeping records

54. Retention of records

55. Maintenance of records

CHAPTER V FINANCIAL ACCOUNTABILITY

Part 1-Financial Statements of Banks

56. Annual financial statement

57. Statement as to subsidiaries

58. Bad debts

59. Approval of statement

60. Monthly statements

61. Publication of financial statements

Part 2-Audit of Accounts of Banks

62. Appointment of auditor

63. Disqualification of auditor

64. Auditor's report

65. Statement of auditor

66. Immunity of auditor

67. Audit committee

Part 3-Audit of Accounts of Financial Insitutions

68. Application of Part 2 to financial institutions

CHAPTER VI SUPERVISION AND PRUDENTIAL REGULATIONS

Part 1-Provisions Relating to Banks

69. Reserves

70. Liquid assets

71. Deficiency of liquid assets

72. Prohibition of unsecured borrowing

73. Limitations on granting advances

74. Constraints on contracts with related persons

75. Investments

76. Unclaimed funds

77. Unsafe and unsound practices

78. Examination of banks

79. Scope of examination

80. Publication of information

81. Disciplinary measures

82. Special reserve or liability insurance

83. Capital adequacy

Part 2-Provisions Relating to Financial Institutions

84. Application of Part 1 to financial institutions

CHAPTER VII INSOLVENCY AND LIQUIDATION OF BANKS

Part 1-Preliminary

85. Conflict of laws

86. Meaning of "insolvent"

87. Acceptance of deposits by insolvent banks

Part 2-Voluntary Winding up and Liquidation

88. Approval of Bank of Zambia required for voluntary winding up

89. Duties of bank on voluntary liquidation

90. Notice of voluntary winding up and liquidation

91. Rights of depositors and creditors

92. Distribution of assets on voluntary liquidation

93. Powers of Bank of Zambia if assets insufficient or completion unduly delayed

PART3-SEIZURE OF BANKS

94. Seizure of bank by Bank of Zambia

95. Notice of seizure

96. Appeal for termination of seizure

97. Powers and duties of receiver upon seizure

98. Effect of seizure

99. Restriction of rights of creditor as to execution and garnishee

100. Limitation on duration of seizure

101. Compulsory liquidation

102. Reorganisation

103. Refusal of reorganisation plan

104. Powers and duties of Bank of Zambia in effecting compulsory liquidation

105. Limitation of filing of claims

106. Objections to liquidation schedule

107. Priority of creditors

108. Account to court and revocation of licence in compulsory liquidation

109. Unclaimed funds

110. Final distribution in compulsory liquidation

CHAPTER VIII APPEALS

111. Reasons for decisions and right to be heard

112. Right of appeal

113. Convening of Tribunal

114. Powers of Tribunal

115. Decision of Tribunal

CHAPTER I MISCELLANEOUS

116. Investigations

117. Use of the word "bank"

118. Misleading and unlicensed names

119. Certain incorporations prohibited

120. Validity of certain acts by banks

121. Documents

122. Extension of time limits

123. Immunity of Bank of Zambia officials, etc.

124. Regulations

125. Guidelines

126. Bank of Zambia's report

127. False documents

128. General offence

129. Offences by bodies corporate

130. Exemptions

131. Repeal of Cap. 700 and savings

CHAPTER 387 BANKING AND FINANCIAL SERVICES ACT

An Act to provide for the regulation of the conduct of banking and financial services; to provide safeguards for investors in and customers of banks and financial institutions; and to provide for matters connected with or incidental to the foregoing.

CHAPTER I PRELIMINARY

1. This Act may be cited as the Banking and Financial Services Act.Short title

2. (1) In this Act, unless the context otherwise requires- "bank" means a company that holds a banking licence; "banking licence" means a licence granted under section four; "Bank of Zambia" means the Bank of Zambia established under the Bank of Zambia Act. "banking business" means the business of receiving deposits from the public and the use of such deposits, either in whole or in part, for the account of and at the risk of the person carrying on the business, to make loans, advances or investments, and includes any custom, practice or activity prescribed by regulation as banking business; "branch" means any place of business of a bank or financial institution that is open to the public, and includes a mobile office and a banking machine installation; "company" means a body corporate incorporated under the Companies Act or the Cooperative Societies Act; "Court" means the High Court; "deposit" means subject to subsection (2), a payment of a sum of money-

(a) on terms that it is to be repaid, with or without interest or premium of any kind, and either on demand or at a time or in circumstances agreed by or on behalf of the person making the payment and the person receiving it; and

(b) that is not referable to the provision of property or services or the giving of security, whether or not evidenced by any entry in a record of the person receiving the sum, or by any receipt, certificate, note or other document; "de facto control" of a company by a person means direct or indirect influence of a kind that, if exercised, would result in the person's controlling the company in fact, and includes any such influence exercisable by virtue of any such influence over, or the de jure control of, another company or other companies; "de jure control" of a company means beneficial ownership of more than fifty per centum of any class of the issued voting shares of the company; "financial institution" means a person that holds a financial institution's licence; "financial institution's licence" means a licence under section ten; "financial service" means any one or more of the following services:

(a) commercial or consumer financing services;

(b) credit reference services;

(c) deposit brokering;

(d) factoring, with or without recourse;

(e) financial leasing;

(f) financing of commercial transactions, including forfeiting;

(g) the issue and administration of credit cards, debit cards, travellers' cheques or bankers' drafts;

(h) the issue of guarantees, performance bonds or letters of credit;

(i) lending on the security of or dealing in mortgages or any interest in real property;

(j) merchant banking services;

(k) money transfer or transmission services or the payment of cheques or other demand payment orders drawn or issued by customers and payable from deposits held by the payer;

(l) purchase and sale of foreign exchange;

(m) secured or unsecured credit services, and includes any other activity or service designated by regulation as a financial service, but does not include-

(i) the underwriting, marketing or administration of contracts of insurance or reinsurance; or

(ii) any services that are excluded from the scope of this definition by a provision of this Act or the regulations under this Act; "financial service business" means the business of performing or offering to perform any financial service to the public, but does not include banking business; "licence" means a licence in force under this Act and "licensed" and "licensee" have corresponding meanings; "non-performing loan" means a loan in respect of which any payment of principal or interest is in arrears in excess of ninety days; "person" includes an individual, a company, a partnership, an association and any group of persons acting in concert, whether or not incorporated;

"Register" means the Register of Banks and Financial Institutions established under this Act; "Registrar" means the person holding office or acting as the Registrar of Banks and Financial Institutions under this Act; "Registrar of Companies" means the person holding office or acting as Registrar under the Companies Act; "regulated financial service" means a financial service of a kind prescribed by regulation:

"regulated financial service business" means the business of performing or offering to perform any regulated financial services to the public; "voting shares" means common shares in the capital of the share issuer and any other shares of any designation or description that carry the right to vote on any general resolution at a general or special meeting of the share issuer.Interpretation

(2) In this Act, except as otherwise provided by regulation, "deposit" does not include a sum paid-

(a) by a bank;

(b) by one company to another at a time when the companies are associated with each other or affiliated;

(c) to a person by another person who, at the time it is paid, is by virtue of this section an associated person;

(d) by a person who, at the time it is paid, is a director, controller, manager or shareholder of the person receiving it;

(e) which is not to be repaid and may not be demanded within five years following the date of its payment;

(f) as the purchase price of a security, having a face amount of one million kwacha or greater, the issue or trading in which is lawful under the Securities

(g) between persons or in circumstances prescribed by regulation.

(3) For the purposes of this Act-

(a) where two or more persons, each of whom beneficially owns shares of the same company, are associated with each other, each of them shall be regarded as a single person who beneficially owns the aggregate number of shares of the company;

(b) two persons are associated if-

(i) one person is a company of which the other person is an officer or director;

(ii) one person is a company that is controlled de jure or de facto by the other person;

(iii) one person is a partnership of which the other person is a partner;

(iv) both persons are members of a voting trust or other arrangement relating to the shares of a share issuer; or

(v) one person is the spouse, parent, child, brother or sister of the other person, or of the other person's parent, child, brother or sister,

(c) two or more persons are affiliated if all are companies that are controlled, de jure or de facto, by the same person; and

(d) a company is the subsidiary of another company if more than fifty per centum of the issued voting shares of the company (except any qualifying directors' shares) are owned directly or indirectly by the other company.

3. This Act applies to all banks and financial institutions, whether or not constituted by any Act:Application of this Act Provided that the requirements of this Act are not binding on the Bank of Zambia, except in so far as this Act expressly imposes a duty on that Bank.

(c) the Development Bank of Zambia;

(d) the Export and Import Bank; or

(e) the Bank of Zambia, except in so far as this Act conters or imposes any powers or functions on that bank.

CHAPTER II LICENSING OF BANKS AND FINANCIAL INSTITUTIONS

Part 1-Licensing of Banks

4. (1) Upon application by a company, the Registrar, in consultation with the Minister, may grant a licence authorising the company to conduct banking business.Licensing of companies as banks

(2) The application shall be in such form and accompanied by such fees as may be prescribed by regulation, and the form of application shall require at least the following particulars to be supplied:

(a) the memorandum and articles of association of the company;Cap. 388

(b) the address where its head office is located and the names and permanent residential addresses of its directors and the name and permanent residential address of its chief executive officer, chief financial officer or chief operating officer;

(c) the name and permanent residential address of every subscriber for any class or series of shares issued by the company in a number that will exceed one per centum of all the shares of that class or series, whether such shares carry the right to vote in all circumstances or not;

(d) the addresses of each branch proposed to be opened by the company and, in the case of a mobile office, the area proposed to be served:

(e) full particulars of the business it proposes to conduct under the authority of the licence;

(f) the amount of its capital; and

(g) such assurances and evidence of the foregoing as the Registrar may require to be given by the applicant.

(3) An appeal shall lie under Chapter VIII against a decision of the Registrar to refuse to grant the application.

5. (1) Within one hundred and twenty days after the Registrar's receipt of a completed application for a banking licence, the Registrar shall determine the application.Determination of applications

(2) If within that time no reply is received by the applicant from the Registrar, the application shall be deemed to have been granted.

6. The Registrar shall refuse to grant a banking licence if the memorandum and articles of association of the applicant do not contain such provisions as may be prescribed by regulation in order to ensure adequate participation by the shareholders in the affairs of the bank.Application for licence to be refused in certain cases

7. In deciding whether or not to grant a banking licence, and in deciding what conditions should be attached to such a licence, the Registrar shall have regard to-

(a) the capital adequacy of the applicant;

(b) the financial condition, resources and history of the applicant and the applicant's associates and affiliates;

(c) the character and experience of the directors and major shareholders and of persons proposing to be concerned in the management of the business to be undertaken under the authority of the licence;

(d) the convenience and needs of the community intended to be served by that business; and

(e) the prospects for profitable operation of that business.Investigation of applicants

8. (1) Except where the conditions attached to a particular licence otherwise provide, a banking licence shall be taken to authorise its holder to engage in any of the following activities in addition to banking business:

Authorised activities of banks in addition to taking of deposits

(a) making loans and extending credit to any person on the security of property of any kind or unsecured;

(b) dealing as a principal or as an agent in-

(i) bills of exchange, promissory notes, cheques, travellers' cheques and like instruments;

(ii) the currency of Zambia and, subject to the regulations made under this Act, in the currency of any other country and foreign exchange transactions; and

(iii) gold, silver or platinum bullion or coins;

(c) providing money transfer services and facilities;

(d) the issue and administration of payment, credit or debit cards and, in co-operation with others, the operation of payment, credit card and debit card systems;

(e) providing guarantees, letters of credit and other assurances of payment:

(f) financial leasing;

(g) factoring, with or without recourse;

(h) acting as a trustee of any trust, executor or administrator of any estate or in any fiduciary capacity for any person;

(i) acting as a financial agent for any person;

(j) acting as a selling agent in connection with any equity or debt securities that are in the course of distribution by the Privatisation Agency established under the Privatisation Act, or as an advisor to that Agency with respect to any aspect of the privatisation of any parastatal organisation;

(k) provide safekeeping and custodial services for financial assets and securities;

(l) providing merchant banking advice and services; and

(m) dealing as a principal or as an agent for its customers in financial futures and options and in exchange, currency and interest rate swap agreements.

(2) Any service or activity that a bank may provide or perform by virtue of this section it may provide or perform through a subsidiary.

(3) The Minister, on the recommendation of the Bank of Zambia, may by regulation prescribe the meaning to be given to any expression used in this section and not otherwise defined for the purposes of this Act.

9. (1) Unless the conditions of the licence limit or restrict the bank to one or more specific sites or locations, a bank may conduct at any place or places in Zambia any business it is licensed to conduct.Branches of banks

(2) Within fourteen days after opening a new branch, a bank shall notify the Bank of Zambia in writing of the fact and of its location.

(3) At least sixty days before closing a branch, a bank shall notify the Bank of Zambia in writing of its intention to do so.

(4) No bank shall, whether of itself or by a subsidiary, open a branch or any office outside Zambia without the prior consent of the Bank of Zambia, which consent may be granted on such terms as the Bank of Zambia may determine.

Part 2-Licensing of Financial Institutions

10. (1) Upon application by any person, the Registrar, in consultation with the Minister, may grant a licence authorising the applicant to conduct any regulated financial service business.Grant of licence

(2) The application shall be in such form and accompanied by such fees as may be prescribed by regulation.

(3) An appeal shall lie under Chapter VIII against a decision of the Registrar to refuse to grant the application.

11. The Minister, on the recommendation of the Bank of Zambia, may by regulation make provision for or with respect to the application, with such modifications as may be prescribed, of the provisions of Part 1 of this Chapter to all or to any class or description of incorporated financial institutions in connection with any financial institution's licence or any application for such a licence.Application of provisions of Part 1 to financial institutions

12. (1) Unless the conditions of the licence limit or restrict the financial institution to one or more specific sites or locations, a financial institution may conduct at any place or places in Zambia any financial service that it is licensed to conduct.Branches of financial institutions

(2) Within fourteen days after opening a new branch, a financial institution shall notify the Bank of Zambia in writing of the fact and of its location.

(3) At least sixty days before closing a branch, a financial institution shall notify the Bank of Zambia in writing of its intention to do so.

Part 3-Operation of Licences

13. (1) A licence is subject to such conditions as the Bank of Zambia thinks fit to specify in the licence when it is granted and, where those conditions are varied under this section, is subject to the conditions attached to the licence for the time being.Conditions of licences

(2) Without limiting the generality of subsection (1) the conditions of a licence may:

(a) contain such restrictions as to the nature and scope of the business to be conducted by the licensee as the Bank of Zambia thinks fit to impose; and

(b) provide for the payment, on such terms and calculated in such manner as the conditions may specify, of annual or other periodic licence fees.

(3) Upon application made by a licensee, the Bank of Zambia may, by order in writing, vary the conditions for the time being attached to a licence.

(4) In deciding whether to grant the variation, the Bank of Zambia is to have regard to such of the provisions of section seven as it considers relevant and to the public interest.

(5) An appeal shall lie under Chapter VIII against a decision of the Bank of Zambia to impose a particular condition on grant of a licence or to refuse a variation of the conditions pursuant to an application under this section.

14. A licence remains in force until revoked by the Registrar under this Part.Duration of licences

15. There is no property in a licence, and a licence is not capable of being bought, sold, leased, mortgaged or in any manner transferred, demised or encumbered:Licences not transferable Provided that a licence may be transferred, in the event of an amalgamation of banks in accordance with this Act, on such terms and conditions as the Bank of Zambia may approve.

16. (1) The Registrar may, after consultation with the Minister, revoke a licence if it appears to the Registrar that-Revocation of licences

(a) the application for the licence was fraudulent or contained a materially false statement;

(b) the licensee has failed to comply with any condition or qualification of its licence or with any order of the Bank of Zambia under this Act;

(c) the licensee is seriously or persistently in breach of any provision of this Act or the regulations under this Act or any of the conditions of its licence; or

(d) the licensee fails to commence to conduct the business authorised by the licence within a period of twelve months following the grant of the licence or ceases or announces its intention to cease to conduct that business.

(2) An appeal shall lie under Chapter VIII against a decision of the Registrar to revoke a licence.

(3) When a licence is revoked, the licensee shall surrender to the Registrar each copy of the licence that is on display in every place of business of the licensee and the Registrar shall, as soon as practicable, publish notice of the revocation in the Government Gazette and in a newspaper of general circulation in Zambia, and may take any additional steps which, in his opinion, are necessary to inform the public of the revocation.

Part 4-Prohibition of Unlicensed Business Etc.

17. (1) A person other than a bank shall not conduct or offer to conduct banking business.Unlicensed business

(2) A person other than a bank or financial institution shall not conduct or offer to conduct any regulated financial service business.

(3) A bank or financial institution shall not conduct any banking business or regulated financial service business-

(a) that it is not authorised, by this Act or the terms and conditions of its licence, to conduct; or

(b) in contravention of the conditions of its licence.

(4) A person who contravenes this section shall be guilty of an offence and shall be liable on conviction to a fine not exceeding one hundred thousand penalty units or to imprisonment for a period not exceeding five years, or to both.

(As amended by Act No. 13 of 1994)

18. (1) A person holding funds obtained by conducting any banking business or regulated financial service business in contravention of this Part shall repay such funds in accordance with the Bank of Zambia's directions.Repayment of funds

(2) A person who fails to repay funds as required under this section shall be guilty of an offence and shall be liable on conviction to a fine not exceeding one hundred thousand penalty units or to imprisonment for a term not exceeding five years, or to both.

(3) To the extent that any funds repayable under this section remain unpaid at the end of the time limited by the directions of the Bank of Zambia for their repayment, they are a debt due to the Bank of Zambia upon trust for any persons appearing to the Bank of Zambia to be lawfully entitled to them and are recoverable at the suit of the Bank of Zambia in any court of competent jurisdiction.

(4) Nothing in this section relieves any person from liability to criminal proceedings under the other provisions of this Act arising out of the person's contravention of any provision of this Act.

(As amended by Act No. 13 of 1994)

Part 5-Register of Licences

19. The Registrar shall create and maintain a register, to be known as the Register of Banks and Financial Institutions, in which shall be entered the particulars of all licensees and of the licences they hold.The Register

20. (1) The Minister, on the recommendation of the Bank of Zambia, shall appoint a Registrar of Banks and Financial Institutions to administer the Register and to exercise and perform such other functions as are conferred or imposed upon him by or under this or any other Act or by the Governor of the Bank of Zambia, and may designate an employee of the Bank of Zambia as the Deputy Registrar of Banks and Financial Institutions who shall be subject to the control and directions of the Registrar and be competent to exercise and perform any of the powers and functions of the Registrar.The Registrar

(2) The Registrar and Deputy Registrar shall each hold office for a term of five years unless removed for negligence of duty or misconduct, and shall be eligible for reappointment.

(3) The Registrar shall enter into the Register the name, the head office address and such other particulars as the Registrar considers appropriate concerning each person granted a licence, and shall remove from the Register the name and particulars of every person whose licence is revoked.

(4) Except as otherwise provided by this Act, the Registrar and Deputy Registrar, in the exercise and performance of their powers and functions, are subject to the control and direction of the Bank of Zambia.

21. (1) For the purpose of ascertaining the facts concerning the licensing, or unlicensed status, of any person, entries made in the Register shall be prima facie evidence as to those facts.Use of Register in evidence

(2) A document certified by the Registrar as a true copy or extract from the Register shall be admissible in any court as prima facie evidence of the contents of the Register.

22. The Register or a copy of the Register shall be available for inspection by the public at the head office of the Bank of Zambia during regular business hours upon payment of such fee as may be prescribed by regulation.Inspection of Register

CHAPTER III ORGANISATION AND ADMINISTRATION

Part 1-Ownership and Control of Banks

23. (1) Shares issued by a bank shall be only of such classes or series as may be approved by the Bank of Zambia. Limitation on voting control

(2) A person shall not, without the prior approval in writing of the Bank of Zambia-

(a) acquire any beneficial interest in the voting shares of a bank; or

(b) enter into any voting trust or other agreement, that would enable the person to control more than twenty-five per centum of the total votes that could be cast on any general resolution at a general or special meeting of the bank.

(3) No bank shall register any transfer of its voting shares to any person if, as a result of the transfer, the person would contravene subsection (2).

(4) Where a person (in this subsection referred to as the "shareholder") acquires an interest in or control over voting shares in contravention of subsection (2), a person shall not, in person or by proxy, exercise the voting rights of any voting share owned or controlled by the shareholder other than such shares as are registered in the name of the shareholder on the share register of the bank.

(5) Where, on the date this section comes into force, a person owns or controls or is deemed, by the operation of any provision of this Act, to own or control shares in contravention of subsection (2), the person may retain any such shares or control, but may not sell or otherwise dispose of the same except in such a manner that no transferee from or successor to the person will thereby contravene that subsection.

(6) Any person acting in contravention of this section shall be guilty of an offence and shall be liable on conviction to a fine not exceeding one hundred thousand penalty units or to imprisonment for a period not exceeding five years, or to both.

(As amended by Act No. 13 of 1994)

24. (1) A person who has de jure control or de facto control of a bank shall not own any share in the capital of, or acquire or maintain de jure or de facto control of, any other bank.Ownership

(2) This section does not preclude any person from acquiring all the voting shares in the capital of a bank for the purpose of implementing an amalgamation of two or more banks in accordance with this Act.

(3) Any person acting in contravention of this section shall be guilty of an offence and shall be liable on conviction to a fine not exceeding one hundred thousand penalty units or to imprisonment for a period not exceeding five years, or to both.

(As amended by Act No. 13 of 1994)

Part 2-Amalgamation And Restructuring Of Banks

25. In this part, "corporate restructuring transaction" means-

(a) the amalgamation of a bank with another company; or

(b) the transfer by a bank to any other company of the whole or more than the prescribed part of its assets or liabilities in Zambia otherwise than in the ordinary course of its business.Meaning of "corporate restructuring transaction"

26. (1) A bank shall not effect a corporate restructuring transaction with another company that is not a bank.Prohibition of corporate restructuring transactions

(2) A bank shall not effect a corporate restructuring transaction with another bank without the prior written consent of the Bank of Zambia.

(3) A bank that contravenes this section shall be guilty of an offence and shall be liable on conviction to a fine not exceeding one hundred thousand penalty units.

(As amended by Act No. 13 of 1994)

27. (1) An application for any consent of the Bank of Zambia to a corporate restructuring transaction shall include-Consent to corporate restructure etc.

(a) a statement of the nature of the transaction proposed to be entered into;

(b) the text of all material documents intended to evidence or implement the transaction; and

(c) such other information, in such form, as the Bank of Zambia may reasonably require for the purposes of an informed consent or as may be prescribed by regulation.

(2) Each bank involved in the proposed corporate restructuring transaction shall be named in the application and is an applicant for the purposes of this Part.

28. (1) In considering an application for consent to a corporate restructuring transaction, the Bank of Zambia shall have regard to-Investigation of applicants for consent

(a) the adequacy of the capital of each applicant in relation to the transaction;

(b) the general financial condition, resources and history of each such applicant;

(c) the character and experience of the directors and persons concerned in the management of each such applicant;

(d) the prospects of each such applicant for profitable operation if the transaction is permitted; and

(e) the probable effects of the transaction upon competition in the banking business or the financial services business likely to be affected by the transaction.

(2) If the Bank of Zambia decides to grant its consent, it shall specify a date on which the corporate restructuring transaction will take effect.

(3) An appeal shall lie under Chapter VIII against a decision of the Bank of Zambia to refuse to grant the application.

29. (1) In this section:Effect of amalgamation or transfer

(a) a bank formed by an amalgamation, or to which assets and liabilities are transferred, in accordance with a corporate restructuring transaction to which consent has been given by the Bank of Zambia is referred to as "the new bank";

(b) an amalgamating bank or a bank transferring assets in accordance with such a transaction is referred to as " the old bank";

(2) When the corporate restructuring transaction takes effect-

(a) all assets and liabilities of the old bank or, in the case of a transfer of assets and liabilities, those assets and liabilities agreed to be transferred, shall vest in and become binding upon the new bank or transferee;

(b) the new bank shall have the same rights and shall be subject to the same obligations as were, immediately before the transaction took effect, binding upon the old bank or, in the case of a transfer of assets and liabilities, the same rights and obligations as were applicable to the old bank with respect to the assets and liabilities transferred;

(c) all agreements, appointments, transactions and documents relating to the subject-matter of the transaction and made, entered into, drawn or executed by, with or in favour of the old bank, and in force immediately before the transaction took effect, shall remain of full force and effect and shall be deemed to have been made, entered into, drawn or executed by, with or in favour of the new bank; and

(d) any mortgage, bond, pledge, guarantee or other instrument relating to the subject-matter of the transaction and made or given to secure future advances facilities or services by the old bank, which was in force immediately before the transaction took effect, shall remain of full force and effect and shall be deemed to be a mortgage, bond, pledge, guarantee or instrument given to or in favour of the new bank or transferee, as security for future advances, facilities or services by that bank.

(3) The Registrar of Companies, the Registrar of Lands and Deeds and every officer in charge of an office in which is registered any title to property belonging to, or any mortgage, bond or other right in favour of, the old bank shall-

(a) upon being satisfied that the Bank of Zambia has under this Part consented to the corporate restructuring transaction and that the transaction has been duly effected; and

(b) upon the production to him of any relevant deed, instrument, mortgage, charge, bond, certificate, letter of appointment, licence or other document, make such endorsements in the register concerned and such alterations thereto as may be necessary to record the transfer thereof and of any rights or liabilities thereunder from the old bank to the new bank.

(4) No transfer fees, stamp duty, registration fees, licence fees or other charges shall be payable in respect of the transfer or any endorsement or alteration made under subsection (3).

(5) The provisions of this section shall not affect the rights of any creditor of the old bank or of the new bank, except to the extent provided by this section.

Part 3-Organisation and Administration of Incorporated Financial Institutions

30. The Minister, on the recommendation of the Bank of Zambia, may by regulation make provision for or with respect to the application, with such modifications as may be prescribed, of the provisions of the foregoing Parts of this Chapter to all or to any class or description of incorporated financial institutions.

Part 4-Directors and Managers of Banks and Incorporated Financial

InstitutionsApplication of Parts 1 and 2 to incorporated financial institutions

Notwithstanding anything in the Companies Act, a person shall not be a director or an officer of a company that proposes to obtain a licence and shall not be elected as a director or an officer concerned in the management of a bank or incorporated financial institution-Directors' qualifications

(a) if the person is not a natural person of or above the age of twenty-one years;

(b) if the person is an undischarged bankrupt;

(c) if the person has been convicted of a felony or any offence involving dishonesty and has not been fully pardoned for such offence;

(d) if the person has been declared or otherwise adjudged in any official proceedings to be mentally incompetent to manage affairs; or

(e) if the person is under suspension or has been removed from office by order of the Bank of Zambia under this Act.

(2) Any person who is a director or an officer concerned in the management of a bank or incorporated financial institution shall forthwith cease to hold office upon-

(a) becoming bankrupt, suspending payments or compounding or proposing a compromise with that person's creditors generally;

(b) being charged with a felony or any offence involving dishonesty;

(c) being declared or otherwise adjudged in any official proceedings to be mentally incompetent to manage affairs; or

(d) being suspended or removed from office by order of the Bank of Zambia under this Act.

(3) A person who has been a director or an officer concerned in the management of a licensee whose licence has been revoked shall not, without the approval of the Bank of Zambia, act or continue to act as a director or be directly concerned in the management of any bank or incorporated financial institution.

(4) A person shall not be a director of more than one bank or incorporated financial institution.

(5) Any person acting in contravention of subsection (1) or (2) shall be guilty of an offence and shall be liable on conviction to a penalty not exceeding one hundred thousand penalty units or to imprisonment for a term not exceeding five years, or to both.

(As amended by Act No. 13 of 1994)

32. (1) A majority of the members of the board of directors of a bank shall be persons who are not officers or employees of the bank.Directors from outside to be in the majority

(2) The Minister, on the recommendation of the Bank of Zambia, may by regulation provide for the application of subsection (1) to any other class or type of incorporated financial institution.

33. Every director or officer concerned in the management of a bank or incorporated financial institution, in exercising the powers and discharging the duties of that person's office, shall-

(a) act honestly and in good faith and in the best interests of the bank or institution as a whole; and

(b) exercise the care, diligence and skill that a prudent person would exercise in comparable circumstances.Duties of directors and officers

34. (1) Except in respect of an action by or on behalf of the bank or institution concerned or the Bank of Zambia to procure a judgment in its favour, a bank or incorporated financial institution may, subject to subsection (2) and to the constitution, and the terms of any resolution, of the bank or institution, indemnify-Indemnity of directors and others

(a) a director or officer of the bank or institution;

(b) a former director or officer thereof; or

(c) any person who acts or acted at the request of the bank or institution as a director or officer of a company of which the bank or institution is or was a shareholder or creditor, against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment, reasonably incurred by the person in respect of any civil, criminal or administrative action or proceeding to which the person is made a party by reason of being or having been a person referred to in any of paragraphs (a) to (c).

(2) An indemnity referred to in subsection (1) is void unless-

(a) the director, officer or person acted in good faith and in the best interests of the bank or financial institution concerned; and

(b) in the case of a criminal or administrative action or proceeding enforced by a monetary fine, the director, officer or person was substantially successful.

35. (1) A director or officer of a bank or incorporated financial institution who-Disclosure of interests

(a) is a party to, or has a material interest in, a contract or a proposed contract with the bank or institution; or

(b) is a director or officer of, or has a material interest in or a material relationship to, any person who is a party to a contract or a proposed contract with the bank or institution, shall disclose in writing to the bank or institution the nature and extent of his interest or relationship

(2) Subject to subsection (3), the disclosure required by this section shall be made by the director or officer forthwith after the contract or proposed contract comes to the attention of the director or officer.

(3) A general notice in writing to the board of directors by a director or officer, disclosing from time to time, and at least once annually, the names and addresses of his associates together with reasonably full particulars of every material commercial, financial, agricultural, industrial or other business or family interest that he has at the time, and stating that he is to be regarded as having a material interest in any contract between the bank or institution and any person named in the disclosure, shall be a sufficient declaration of his interest in relation to any such contract.

(4) A director who has a material interest or a material relationship within the scope of this section shall leave any meeting at which the contract concerned is discussed, and shall refrain from voting on any matter related thereto which becomes the subject of action by the board of directors of the bank or institution, but such an interest, if so disclosed, shall not disqualify the interested person for the purposes of constituting a quorum.

(5) For the purposes of this section.

(a) an interest is material if it is material with reference to the wealth, business or family interests of the person having the interest and, without limiting the generality of the foregoing, a person has a material interest in-

(i) any company of which he owns, directly or indirectly, more than ten per centum of any class of the voting shares, or of which he is a director; and

(ii) any partnership in which the person is a partner; and

(b) persons have a material relationship with each other if, by virtue of paragraph (b) of subsection (3) of section two, they are associates.

(6) Where a director or officer fails to disclose a material interest in accordance with this section-

(a) the Court may, on the application of the bank or institution concerned, any of its shareholders or the Bank of Zambia, set aside the contract on such terms as it thinks fit; and

(b) the Bank of Zambia may, by order under section thirty-seven, suspend the director or officer from office.

36. A director, officer, employee, agent, appraiser, accountant or legal adviser of a bank or incorporated financial institution who-

(a) with intent to deceive, makes any false or misleading statement or entry, or omits any statement or entry that should be made in any book, account report or statement of the bank or institution; or

(b) obstructs or endeavors to obstruct-False statements and obstruction of examinations

(i) the proper performance by an auditor of his duties in accordance with the provisions of this Act; or

(ii) a lawful examination of the bank or institution by a duly authorised examiner appointed by the Bank of Zambia, shall be guilty of an offence and shall be liable on conviction to a fine not exceeding twenty thousand penalty units or to imprisonment for a term not exceeding one year, or to both.

(As amended by Act No. 13 of 1994)

37. (1) The Minister may, on the recommendation of the Bank of Zambia, by order in writing served on him, suspend from office for any period not exceeding six months, any director or officer concerned in the management of a bank or incorporated financial institution who fails to take all reasonable steps to secure compliance by the bank or institution with the requirements of this Act.Suspension or dismissal of directors and managers

(2) At any time before the expiry of the period of six months referred to in subsection (1), the Bank of Zambia may apply to the Court for an order extending the suspension and the Court may, by order, suspend from office the director or officer concerned for such period as it thinks fit or, if the Court is satisfied that such an order is justified, remove the director from office permanently.

(3) A director or officer who exercises or performs any power or duty pertaining to his office during any period of suspension imposed, or after removal from office, under this section shall be guilty of an offence and shall be liable on conviction to a fine not exceeding one hundred thousand penalty units or imprisonment for a term not exceeding five years, or to both.

(As amended by Act No. 13 of 1994)

Part 5-Constitution of Banks and Incorporated Financial Institutions

38. Notwithstanding anything to the contrary in the Companies Act, the Registrar of Companies shall not approve nor accept any document, the effect of which is to add, vary or delete any provision of or change in any way the legal effect of the memorandum or articles of association of a bank or incorporated financial institution unless the same is submitted together with written evidence of the knowledge and approval of the Registrar.Variation of corporate constitutions

39. Where the Bank of Zambia notifies a bank or incorporated financial institution in writing that the Bank of Zambia considers that any specified provision in its memorandum, articles of association or other corporate documents is inappropriate for a company carrying on a business for which it is licensed or has applied to be licensed, the bank or institution shall, before the conclusion of its next annual or special meeting of shareholders, amend its corporate documents so as to remove the offending provision or amend it according to the directions of the Bank of Zambia.Amendment of constitution by Bank of Zambia

CHAPTER IV OPERATIONS

Part 1-Anti-Competitive Conduct

40. (1) A bank shall not make any agreement or arrangement with another bank with respect to-Interest rates and charges

(a) the rate of interest on a deposit by any person;

(b) the rate of interest or charge on a loan to any person;

(c) the amount of any charge to any person for the provision of a financial service; or

(d) the provision of, or refusal to provide any financial service to, any person.

(2) Any bank acting in contravention of this section shall be guilty of an offence and shall be liable on conviction to a fine not exceeding one hundred thousand penalty units.

(3) Subsection (1) does not apply to an agreement or arrangement-

(a) for the performance of a financial service by one bank to another;

(b) evidencing a syndication or other agreement for the provision of credit and other banking services to a person by two or more banks;

(c) for the underwriting or distribution of any security by a bank or a group of persons including a bank; or

(d) for the exchange of statistics or audit information, the development and use of systems, forms, methods, procedures and standards, the use of common facilities, joint research and development or any matter in connection therewith.

(As amended by Act No. 13 of 1994)

41. Any bank or financial institution that requires any person to contract to receive any financial service as a condition of being permitted to contract with it or any other person to receive any other financial service, or any goods or other service shall be guilty of an offence and shall be liable on conviction to a fine not exceeding one hundred thousand penalty units or imprisonment for a term not exceeding five years, or to both.

(As amended by Act No. 13 of 1994)Collateral contracts

42. The provisions of this Part are in addition to, and do not limit the operation of, any other law in force for the promotion of competition and free trade.

Part 2-Business Practices and Dealings With The PublicOther laws not affected

43. (1) Every bank shall maintain a principal administrative office in Zambia and shall have a chief executive officer and a chief financial officer.Principal office and officers

(2) In the case of a bank, one person may not hold more than one such office.

(3) Every bank shall inform the Bank of Zambia in writing of the location of its principal administrative office and of the name of each officer appointed as required by this section, and of any change thereof, within twenty-one days following their appointment or any such change.

44. (1) Every bank and financial institution shall, in easily legible letters in the English language, display its name and a statement of its licensed status as a bank or financial institution, as the case may be-Display of names

(a) prominently at the entrance to every place where it carries on any part of its business;

(b) on every letter, advertisement or other communication published or issued by or on its behalf; and

(c) in every written contract that it enters into or offers to enter into and in every receipt that it issues.

45. (1) A bank or financial institution shall not, without the prior written consent of the Bank of Zambia, alter the name under which it is licensed, or in the course of or for any purpose connected with its business, use or refer to itself by-Use of licensed name

(a) a name other than the name under which it is licensed; or

(b) an abbreviation of that name.

(2) Nothing in this section shall prevent a bank or financial institution, with the consent of the Bank of Zambia, from using or referring to itself in conjunction with its licensed name by the name of a business or undertaking with which it has been amalgamated or, in the case of a change of name authorised under this section, by the name by which it was previously known.

46. (1) The Minister, on the the recommendation of the Bank of Zambia, may by regulation prescribe one or more days to be a bank holiday on which no bank or financial institution may be open for business with the public, whether or not such a day is also a public holiday:

Holidays Provided that branches at airports and border posts shall remain open throughout.

(2) A bank or financial institution shall remain open for business with the public during hours agreed to by the Bank of Zambia.

(3) A private obligation that-

(a) can be discharged only with a designated bank or financial institution; and

(b) falls due on a day on which that person's premises are not open for business, shall be deemed to fall due on the first following business day.

47. (1) When a bank or financial institution opens a new account for a person, it shall, at the same time, provide the person in writing with-Disclosure of interest rate and charges

(a) a statement of all charges for maintaining the account and accessing the funds on account;

(b) a statement of the interest to be paid by the bank or institution; and

(c) a statement of how the bank or institution will advise the person of any new charges or changes in the charges or interest disclosed.

(2) A bank or financial institution that agrees to make a loan or credit available to a person shall, at the same time, disclose the cost of borrowing to the person in writing.

(3) The Minister, on the recommendation of the Bank of Zambia, may by regulation prescribe the form, content, method of calculation and of disclosure, and the means and frequency of publishing, any information or change of information required by this section to be disclosed.

48. A bank or incorporated financial institution shall-

(a) establish, and make available in writing to its customers in the public portion of each branch, procedures for dealing with complaints made by customers concerning their relations with the bank or institution;

(b) designate an officer or employee to be the customer service officer and to be responsible for implementing and administering those procedures, including receiving, dealing with or otherwise disposing of all complaints received; and

(c) create and maintain for two years, or such longer period as may be prescribed by regulation, a record of every complaint received and how it was dealt with or disposed of.Customer complaints

49. (1) A bank or financial institution that publishes or permits the publication of any advertisement concerning any financial service offered by it or by any other bank or financial institution, or quoting a fee, rate or charge for any such service, that is false or misleading in a material particular shall be guilty of an offence.Advertisement by licensee

(2) Notwithstanding subsection (1), no licensee may be fined or penalised in any way for a contravention of that subsection if, after receiving written notice from the Bank of Zambia directing it to do so, and in accordance with any directions contained in the notice, it republishes the offending advertisement or within two business days takes reasonable steps to withdraw the offending advertisement and to correct its false or misleading particular.

(3) For the purposes of this section, an "advertisement" includes a paid radio or television announcement, a poster, billboard or handbill, and a paid advertisement in a regularly published newspaper or magazine.

50. (1) A bank or financial institution and every director, officer and employee thereof shall maintain the confidentiality of all confidential information obtained in the course of service to the bank or institution and shall not divulge the same except-Confidentiality

(a) in accordance with the express consent of the customer, or the order of a court; or

(b) where the interest of the licensee itself requires disclosure.

(2) For the purposes of this section, confidential information about a person includes information that is not public, concerning-

(a) the nature, amount or purpose of any payment made by or to the person;

(b) the recipient of a payment by the person;

(c) the assets, liabilities, financial resources or financial condition of the person;

(d) the business or family relations of the person; or

(e) any matter of a personal nature that the person disclosed to the bank in confidence.

(3) Notwithstanding the provisions of any law to the contrary, in any case where evidence of commission of an offence is to be found in the books, accounts or records of a bank or financial institution, such evidence shall not be sought or obtained from the bank or institution otherwise than in accordance with the provisions of any other written law.

51. (1) Every bank or incorporated financial institution shall prepare and maintain at its head office records containing-Records of constitution and of compliance with this Act

(a) its articles and memorandum of association and all amendments thereto;

(b) a register of its shareholders, including the number of shares registered in the name of each shareholder;

(c) minutes of meetings and resolutions of the directors;

(d) minutes of meetings and resolutions of the shareholders;

(e) accounting records exhibiting clearly and correctly the state of its business affairs, explaining its transactions and financial position in such a way as to enable the Bank of Zambia conveniently to determine whether the bank has complied with all the provisions of this Act;

(f) records showing, for each customer of the bank or institution on a daily basis, particulars of its transactions with or for the account of the customer and the balance owing to or by the customer; and

(g) such other records as are required by the regulations under this Act or by order of the Bank of Zambia served on the bank or institution.

(2) At all reasonable times, the records described in this section-

(a) shall be open to inspection by the directors; and

(b) shall (except for records described in paragraphs (c), (f) and (g) of subsection (1)) be open to inspection by the shareholders and creditors of the bank and their personal representatives.

52. (1) Every bank or financial institution shall cause to be created and shall maintain in its principal office in Zambia proper credit documentation and any other information concerning its business relations with its customers and other persons that the Minister, on the recommendation of the Bank of Zambia, may by regulation prescribe.Credit documentation

(2) For the purposes of this section, "credit documentation" means, with respect to a contract entered into by a bank or financial institution with any other person for the provision of a financial service, or in respect of a financial service performed or to be performed by the bank or institution-

(a) reasonably current financial statements of the indebtedness of the borrower and any guarantor of the borrower to the bank or institution;

(b) a description of any collateral over which the bank or institution has any mortgage or charge as security for the due payment of the indebtedness to it;

(c) a statement of the terms of the credit, including the principal amount, rate of interest, schedule of repayments and the borrower's objective or purpose for borrowing; and

(d) the signature of each person who authorised the credit on behalf of the bank or institution.

53. A register or record required or authorised by this Act or the regulations under this Act to be prepared and maintained by a bank or financial institution-

(a) may be in bound or loose-leaf form or in photographic film form; or

(b) may be entered or recorded by any system of mechanical or electronic data processing or any other device or process that is capable of reproducing any required information in intelligible written form within a reasonable time; and

(c) if kept in any one form, may be converted to any other form authorised by this Act.Manner of keeping records

54. The Minister, on the recommendation of the Bank of Zambia, may by regulation prescribe the length of time that a register or record required or authorised by this Act to be prepared and maintained shall be retained by the bank or financial institution that prepared it.Retention of records

55. (1) Every bank or financial institution, and every officer, employee and agent thereof, shall take reasonable precautions to-Maintenance of records

(a) prevent loss or destruction of;

(b) prevent falsification of entries in;

(c) facilitate detection and correction of inaccuracies in; and

(d) ensure that no unauthorised person obtains access to or the use of information in, every register and record required or authorised by this Act to be prepared and maintained by the bank or institution.

(2) A bank or financial institution may destroy any register or record kept under this Part at any time after the register or other record has been converted to another form.

CHAPTER V FINANCIAL ACCOUNTABILITY

Part 1-Financial Statements of Banks

56. (1) The directors of a bank shall place before the shareholders at every annual meeting-Annual financial statement

(a) a comparative annual financial statement (in this Act referred to as an "annual statement") showing separately-

(i) the financial year immediately preceding the meeting; and

(ii) the financial year, if any, immediately preceding the financial year referred to in subparagraph (i);

(b) a balance sheet as at the end of each such financial year;

(c) a statement of income and expenses for each such financial year;

(d) a statement of change of financial position for the last financial year; and

(e) a statement of changes in the shareholders' equity for the last financial year.

(2) The information and particulars referred to in subsection (1) shall contain what in the opinion of the directors is necessary to present fairly, in accordance with generally accepted accounting principles consistently applied, the financial position of the bank as at the end of the financial year to which it relates and the results of the operations and changes in the financial position of the bank for that financial year.

(3) The directors shall also place before the shareholders at every such meeting-

(a) the report of the auditor of the bank; and

(b) any additional information concerning the financial position of the bank and the results of its operations that is required by regulation to be placed before the shareholders at the annual meeting.

57. A bank shall include with its annual statement-

(a) a list of subsidiaries, other than subsidiaries acquired upon a realisation of security, showing with respect to each subsidiary-Statement as to subsidiaries

(i) its name and the address of its head or principal office;

(ii) the book value in the aggregate of any shares of the subsidiary beneficially owned by the bank and any other subsidiaries of the bank; and

(iii) the percentage of the voting shares of the subsidiary that is beneficially owned by the bank and by other subsidiaries of the bank; and

(b) such other information as the Minister, on the recommendation of the Bank of Zambia, may by regulation prescribe.

58. In preparing its annual statement, a bank shall comply with any regulations relating to the creation of appropriate reserves for bad and doubtful debts.Bad debts

59. The directors shall approve the annual statement and their approval shall be evidenced by the signatures of the chief executive officer and the chief financial officer of the bank.Approval of statement

60. (1) Every bank shall deliver to the Bank of Zambia such number of copies, in such form and within such time after the end of each calendar month, as may be prescribed by regulation, of-Monthly statements

(a) a statement showing, as at the close of the last business day of that month-

(i) its liabilities to the public; and

(ii) the amount of each of the liquid assets specified in the First Schedule to this Act which it holds, its aggregate holding of such assets and the proportion that the aggregate holding of such assets bears to its liabilities to the public;

(b) a statement showing its assets and liabilities as at the close of the last business day of that month;

(c) the amount of its regulatory capital (as defined by regulation) and reserve funds and the ratio that the amount of its liabilities to the public bears to the amount of its regulatory capital (as so defined) and reserve funds;

(d) a statement showing those of its loans that are non-performing or that have been restructured or the terms of repayment of which have been extended; and

(e) such other statements concerning its operations, financial condition and resources as may be prescribed by regulation.

(2) The Bank of Zambia may require any bank to supplement with further details or evidence any information provided by the bank in accordance with subsection (1).

61. (1) A bank shall, not later than twenty-one days before the date of each annual meeting, send to each shareholder and to the Bank of Zambia, a copy of its annual statement.Publication of financial statement

(2) Where a bank fails to send a copy of the annual statement to the Bank of Zambia and to each shareholder in accordance with subsection (1), the annual meeting of the bank shall be adjourned until such time as that requirement has been complied with.

(3) The Bank of Zambia shall cause to be published in a newspaper of general circulation throughout Zambia a copy of each annual statement provided to it by each bank.

(4) The Bank of Zambia shall cause to be published in a newspaper of general circulation throughout Zambia four times each year, a copy of monthly statements provided to it by each bank.

(5) Every bank shall display in a conspicuous place in each branch, at all times when it is open for business-

(a) a copy of the monthly statement last published in accordance with this Part; and

(b) a copy of the annual statement last published in accordance with this Part.

Part 2-Audit of Accounts of Banks

62. (1) Every bank shall appoint annually, at the beginning of each financial year, an auditor approved by the Bank of Zambia who shall be a member in good standing of a professional association of auditors recognized by the Bank of Zambia. Appointment of auditor

(2) The auditor's duties shall be to audit the accounts and to make a report to the shareholders of each such bank upon the annual balance sheet, profit and loss account and other matters as required by this Act.

(3) An auditor may be re-appointed from time to time.

(4) If a bank fails to appoint an auditor satisfactory to the Bank of Zambia, the Bank of Zambia shall have power to appoint such an auditor.

(5) The remuneration of the auditor, whether appointed by the bank or by the Bank of Zambia, shall be paid by the bank and, in the case of an auditor appointed by the Bank of Zambia, shall be fixed by the Bank of Zambia.

(6) The auditors of the subsidiary of any bank in Zambia shall be the same as the auditors of the bank unless the Registrar gives approval for different auditors.

(7) An auditor who does not meet the requirements of subsection (1) but who:

(a) was engaged by a bank on the enactment of this Act; and

(b) is an otherwise professionally qualified person satisfactory to the Bank of Zambia, may continue his engagement until it terminates in accordance with its terms.

63. A person shall not be qualified for appointment or to act as auditor of a bank if he is-

(a) a director, officer or employee of that bank or of any person associated or affiliated with it,

(b) the spouse, parent, child or partner of a director, officer or employee of that bank;

(c) a body corporate;

(d) an officer or servant of a company that is controlled by the bank; or

(e) a person who by himself, or his partner or his employee, regularly performs the duties of secretary or bookkeeper to the bank.Disqualification of auditor

64. (1) Every auditor of a bank shall have the right of access at all times to all books, accounts and records of the bank, and shall be entitled to require from its directors, officers and agents such information and explanations as the auditor requires to perform the auditor's duties under this Act.Auditor's report

(2) In every report made for the purposes of this Act by an auditor, the auditor shall-

(a) express whether, in his opinion, the bank made available all necessary information to enable the auditors to comply with the requirements of this Act:

(b) state whether, in his opinion, the balance sheet and profit and loss account are fully, fairly and properly drawn up, whether they exhibit a true and fair statement of the bank's financial condition and, if the auditor has called for explanation or information from the directors, officers or agents of the bank, whether a satisfactory response was received; and

(c) report any transactions or conditions that have come to the attention of the auditor affecting the well-being of the bank that, in the opinion of the auditor, are not satisfactory and require rectification and, without limiting the generality of the foregoing, shall, as occasion requires, report on-

(i) any transaction of the bank that has come to the attention of the auditor and which, in the opinion of the auditor, has not been within the powers of the bank or which was contrary to this Act or any other law; and

(ii) any loan owing to the bank by any person that is a non-performing loan, or that has been restructured or the terms of repayment of which have been extended, if the principal amount of the loan exceeds five per centum of the regulatory capital (as defined by regulation) of the bank.

(3) A copy of the report of the auditor, together with copies of the balance sheet and profit and loss account referred to in subsection (1), shall be sent to the Bank of Zambia and a copy of the opinion of the auditor as expressed in the auditor's report shall be sent to each shareholder of each bank within such period as may be prescribed by regulation.

65. (1) If the auditor resigns from being the auditor of a bank the auditor shall prepare and deliver to the Bank of Zambia within ten days after the delivery of the auditor's resignation a written statement of the reasons therefor. Statement of auditor

(2) If a bank does not renew the appointment of its auditor the auditor shall prepare and deliver to the Bank of Zambia, within ten days after being informed of the non-renewal, a written statement setting forth, to the extent known to the auditor, the reasons for the non-renewal and the auditor's comments thereon.

66. No person shall have any claim against an auditor for or with respect to any oral or written statement or report made by the auditor in good faith in the performance of the auditor's functions under this Act.Immunity of auditor

67. (1) The directors of each bank shall establish an audit committee of at least three directors, a majority of whom are persons who are not officers or employees of the bank or of any company that is associated or affiliated with it.Audit committee

(2) The audit committee shall-

(a) review the annual financial statement of the bank before it is approved by the directors;

(b) review or cause to be reviewed such other informational returns as the bank shall have made in accordance with the requirements of this Act and the regulations under this Act;

(c) ensure that appropriate internal control procedures are in place;

(d) review such investments and transactions that could materially adversely affect the financial condition of the bank as the auditor or any officer may bring to the attention of the committee;

(e) meet with the auditor to discuss the annual statement, the returns, investments and transactions referred to in this subsection; and

(f) meet with the chief internal auditor or the officer or employee of the bank acting in a similar capacity, and with the management, to discuss the effectiveness of the internal control procedures as practised in the bank.

(3) To ensure the proper discharge of its responsibilities under subsection (2), the audit committee or any member thereof may initiate inquiries and, upon majority vote of the committee, retain at the expense of the bank any expert legal, accounting and auditing advisers that the committee may reasonably require and the audit committee shall report in writing to the board of directors the findings of any such inquiry undertaken by it.

(4) The audit committee shall report to the directors before any approval required by this Act or the regulations under this Act is given by the board to any financial statement of the bank.

(5) The audit committee may call a meeting of the board to consider any matter of concern to the committee.

(6) The audit committee shall meet at least once per quarter and at such other times as the board of directors may by resolution require, or as any member of the committee may request.

(7) A resolution of the audit committee shall require the affirmative votes of two members in order to pass.

(8) A member of the committee who votes against a resolution that is carried by a majority vote shall provide a written statement to the board of directors explaining the reasons for that dissent.

Part 3-Audit of Accounts of Financial Institutions

68. The Minister, on the recommendation of the the Bank of Zambia, may by regulation make provision for or with respect to the application, with such modifications as may be prescribed, of the provisions of Part 2 of this Chapter to all or to any class or description of financial institutions.Application of Part 2 to financial institutions

CHAPTER VI SUPERVISION AND PRUDENTIAL REGULATION

Part 1-Provisions Relating to Banks

69. (1) A bank shall maintain a reserve account and before declaring any dividend shall transfer to its reserve account, out of the net profits of each year after due provision has been made for taxation, the minimum amount prescribed by regulation.Reserves

(2) The Bank of Zambia may by regulation prescribe the amount required to be transferred to the reserve account, the method of computing that amount, the form of the reserve account and any other matter it considers necessary to give effect to this section.

(3) No bank shall declare, credit or pay any dividend or make any other transfer from surplus if to do so would result in an impairment of the capital adequacy requirements of this Act.

(4) No bank shall, without the approval of the Bank of Zambia, declare, credit or pay any dividend or make any transfer from surplus if to do so would result in the impairment of the reserve account requirements of this Act.

(5) The Bank of Zambia may permit a reduction of the reserve account when the relevant payment or transfer is made for the purpose of increasing the capital, and when the Bank of Zambia is satisfied that that is the only practicable means of preventing an impairment of the bank's capital or of enabling the bank to make provisions that the Bank of Zambia considers to be necessary.

70. (1) Every bank shall at all times maintain liquid assets amounting to not less than such percentage of its total or such portion of its liabilities to the public in Zambia as the Bank of Zambia may by instrument in writing prescribe specifically for it or, in default of such prescription, as the Minister, on the recommendation of the Bank of Zambia, may by regulation prescribe for banks of its class or description:

Liquid assets Provided that-

(a) the percentage in either manner prescribed shall not be greater than fifty per centum;

(b) the distribution of amounts between the various classes of liquid assets may be made at the discretion of each bank; and

(c) no bank may be required to maintain any higher percentage than any other bank of the same class or type.

(2) Any variation in a regulation made for the purposes of subsection (1) shall take effect-

(a) if it provides for a decrease, immediately; or

(b) if it provides for an increase, only after reasonable notice thereof has been given in writing to each bank affected by the variation, and only if the variation does not increase the liquid asset requirement of any bank by more than fifteen per centum.

(3) Notwithstanding subsection (1), no bank shall be required to augment its liquid assets during any month of the year by an amount in excess of ten per centum of the aggregate of its liabilities as at the close of the last business day of the preceding month.

(4) For the purpose of this section, "liquid assets" means assets that are transferable free of any charge or lien whatsoever and that are of the classes described in the First Schedule to this Act.

71. Where the liquid assets of a bank are less than the amount for the time being prescribed in respect of it, the Bank of Zambia may order the bank to pay to the Bank of Zambia, as a fine, interest on the amount of the deficiency, with respect to each day or part of a day that the deficiency continues, at an annual rate not exceeding the highest annual rate fixed, at the time of the offence, by the Bank of Zambia under the Bank of Zambia Act for any of its operations. Deficiency of liquid assets

72. A bank shall not-

(a) mortgage, charge or grant security to any person over any asset of the bank otherwise than-Prohibition of unsecured borrowing

(i) in the ordinary course of business; or

(ii) to the Bank of Zambia to secure short-term liquidity advances made by it under the Bank of Zambia Act; or

(b) acquire an asset that is subject to a mortgage, charge or other security interest in favour of any person, except to satisfy a debt or other liability to it.

73. (1) A bank shall not, directly or indirectly, except-Limitations on granting advances

(a) as provided in the Second Schedule to this Act; or

(b) with the prior written approval of the Bank of Zambia and on such terms and conditions as the Minister, on the recommendation of the Bank of Zambia, may by regulation prescribe, grant any advance or credit, or make any guarantee of the debts of any person, so that the total value of any such grants, advances and guarantees with or in respect of any one person is at any time more than twenty-five per centum of the regulatory capital (as defined by regulation) of the bank.

(2) A bank shall not, directly or indirectly, except with the prior written approval of the Bank of Zambia and on such terms and conditions as the Minister, on the recommendation of the Bank of Zambia, may by regulation prescribe, grant any advance against the security of its own shares.

(3) A bank shall not, directly or indirectly, except with the prior written approval of the Bank of Zambia and on such terms and conditions as the Minister, on the recommendation of the Bank of Zambia, may by regulation prescribe, grant or permit to be outstanding any secured or unsecured advances to-

(a) its directors, whether such advances are obtained by them jointly or severally;

(b) any person who has de jure control or de facto control of the bank; or

(c) any person of which any one or more of its directors has de jure or de facto control or is a director, partner, manager, agent or member, in an aggregate amount in excess of one hundred per centum of its regulatory capital (as defined by regulation):

Provided that any person who contravenes the foregoing provisions of this subsection by permitting any security to be outstanding, being a security that, at the time it was granted, was lawfully granted, shall have two years (or such longer period as the Bank of Zambia may allow) within which to comply with this paragraph in respect of the outstanding security.

(4) A bank shall not, directly or indirectly, except with the prior written approval of the Bank of Zambia and on such terms and conditions as the Minister, on the recommendation of the Bank of Zambia, may by regulation prescribe, grant or permit to be outstanding to an officer or employee of the bank unsecured advances, which in aggregate exceed the annual remuneration of the officer or employee.

(5) A bank shall not, directly or indirectly, except with the prior written approval of the Bank of Zambia and on such terms and conditions as the Minister, on the recommendation of the Bank of Zambia, may by regulation prescribe, engage in any trade or business except the business or businesses for which it is licensed, except in so far as may be necessary for a temporary period (and in any event for not longer than twelve months or such longer period as the Bank of Zambia may allow) necessary in the conduct of its business or to obtain the satisfaction of debts due to it.

(6) A bank shall not, directly or indirectly, except with the prior written approval of the Bank of Zambia and on such terms and conditions as the Minister, on the recommendation of the Bank of Zambia, may by regulation prescribe, acquire ownership of or any interest in any commercial, agricultural, industrial or other business undertaking, except such interest as it may acquire for the purpose of securing or satisfying a debt or other liability payable to it and which is disposed of within two years or subsequently continued with the prior consent of the Registrar.

(7) A bank shall not, directly or indirectly, except with the prior written approval of the Bank of Zambia and on such terms and conditions as the Minister, on the recommendation of the Bank of Zambia, may by regulation prescribe, purchase, lease or otherwise acquire interests in real property except-

(a) as may be reasonably necessary for the purpose of conducting its business, including provision for future expansion and providing housing accommodation for its officers and employees; or

(b) as may be reasonably necessary for the purpose of securing or satisfying a debt or other liability to it and which is disposed of within two years or subsequently continued with the prior consent of the Registrar.

(8) A bank shall not, directly or indirectly, except with the prior written approval of the Bank of Zambia and on such terms and conditions as the Minister, on the recommendation of the Bank of Zambia, may by regulation prescribe, lease or otherwise contract to make available to any person, in consideration of periodic payments of rent or other instalment payment terms, any tangible personal property owned by it:

Provided that this paragraph shall not prevent a bank from lending on the security of any tangible personal property and taking title thereto for such purpose, including the purpose of satisfying a debt or obligation to it, if the lease or other arrangement is disposed of within two years or subsequently continued with the prior consent of the Registrar.

(9) In the application of the limitations imposed by subsections (1) and (3), if the Bank of Zambia determines that a group of two or more persons to whom any grants, advances or guarantees have been or are to be made are so inter-related that they should be considered as a unit, the total indebtedness of that group shall, if the Bank of Zambia by notice served on the bank concerned so provides, be combined and shall be deemed to be the indebtedness of a single person:

Provided that a bank shall not be taken to have contravened subsection (1) or (3) by virtue of a determination under this subsection, if the bank disposes of the indebtedness of the group, to the extent that it exceeds the relevant limitation, within such reasonable time as the Bank of Zambia may determine.

74. (1) For the purposes of this section, each person referred to in subsection (3) of section seventy-three is designated a "related person".Constraints on contracts with related persons

(2) A bank may enter into a contract with a related person only if-

(a) the board of directors approves of the contract in advance and the contract is on terms no less favourable to the bank than the terms of similar contracts that are entered into by the bank with persons who are not related; or

(b) the contract is for a nominal sum or is of a class or type exempted by regulation from the operation of this section.

75. (1) A bank shall not acquire an equity interest in any person, property or project in an amount greater than fifteen per centum of the total of all equity interests in the person, property or project.Investments

(2) A bank shall not invest, in the aggregate, more than seventy per centum of its regulatory capital (as defined by regulation) in equity interests in any person, property or project.

(3) Subsections (1) and (2) do not apply to an investment or investments by a bank in the shares of a subsidiary, if the aggregate of all such investments by the bank does not exceed one hundred per centum of its regulatory capital (as defined by regulation).

(4) Subsection (1) does not apply to an acquisition by a bank of an equity interest in realisation of any part of the collateral provided to the bank in a credit transaction with any person, if the bank, within two years following its acquisition or such longer period as the Bank of Zambia may allow, disposes of any equity interest in excess of the limits imposed by this section.

(5) In this section- "equity interest in a person" means-

(a) in the case of a company, any share issued by the company, whether or not a voting share, and any other security issued by the company, the terms of which entitle the registered holder or bearer to a share in the profits of the company; and

(b) in the case of a partnership, association or other group of persons acting in concert, any right to share in the profits of the person; "equity interest in a property or project" means an ownership interest and includes any right to share in the profits of operation or proceeds of disposition of the property or project.

76. (1) For the purposes of this section, any funds held or owing by a bank shall be presumed abandoned upon the expiration of the period of time provided in paragraph (a), (b) or (c) if the person in whose name the funds were held does not respond to a notice in writing sent by the bank by prepaid registered post to the last-known address for the person in the records of the bank, and the funds consist of-Unclaimed funds

(a) any demand, savings or matured time deposit together with any interest or dividend thereon, excluding any charges that may lawfully be withheld, in respect of which the owner has not, within the last ten years-

(i) increased or decreased the amount of the deposit, or presented the passbook or other similar evidence of the deposit for the crediting of interest or dividends;

(ii) corresponded in writing with the bank; or

(iii) otherwise indicated an interest in the deposit as evidenced by a memorandum on file with the bank;

(b) any funds paid toward the purchase of a share or other interest in a security issued by a bank and any interest or dividends thereon, excluding any charges that may lawfully be withheld, in respect of which the owner has not, within the last ten years-

(i) increased or decreased the amount of the funds or deposit, or presented an appropriate record for the crediting of interest or dividends; or

(ii) corresponded in writing with the bank; or

(iii) otherwise indicated an interest in the funds as evidenced by a memorandum in the records of the bank; or

(c) any funds or other personal property, tangible or intangible, removed from a safe deposit box or any other safekeeping facility on which the lease or rental period has expired due to non-payment of rental charges or by reason of some other default by the lessee, or any surplus amounts arising from the sale thereof in accordance with law, that have been unclaimed by the owner for more than ten years from the date on which the lease or rental period expired.

(2) A bank holding funds presumed abandoned under this section shall report to the Bank of Zambia on the amount and nature of such funds in such form and at such time as may be prescribed by regulation, and shall pay such funds to the Bank of Zambia upon expiration of the time provided by this section for the presumption of abandonment to arise.

(3) The bank shall retain its records concerning funds paid by it under subsection (2) for six years after making the payment and may thereafter destroy them.

(4) A person whose funds have been paid to the Bank of Zambia in accordance with this section may claim them from the Bank of Zambia only before the end of the sixth year following receipt of the funds by the Bank of Zambia.

(5) No action to recover, and no other action in respect of, any funds that have been presumed abandoned and paid in accordance with this section may be brought against the paying bank or against the Bank of Zambia after the sixth year following payment to the Bank of Zambia, but where the Bank of Zambia considers it desirable, to avoid hardship or injustice, the Bank of Zambia may make a payment to a claimant in respect of funds presumed abandoned.

77. (1) Where, in the opinion of the Bank of Zambia, a bank or any person on behalf of a bank is committing or pursuing or is about to commit or pursue on behalf of the bank any act or course of conduct that is considered by the Bank of Zambia as unsafe or unsound practice, the Bank of Zambia may enter into one or more written agreements with the bank or its board of directors to establish a programme of action to counteract the unsafe or unsound practice and to establish or maintain safe and sound practices in the conduct of the business of the bank.Unsafe and unsound practices

(2) Where the Bank of Zambia is unable to obtain an agreement under subsection (1) within a time, and in a form and content, satisfactory to the Bank of Zambia, or where the Bank of Zambia considers that the need for prompt action makes the negotiation of such an agreement impractical, the Bank of Zambia may direct the bank or any director, manager or other person concerned in its management to do either or both of the following:

(a) cease or refrain from doing the act or pursuing the course of conduct;

(b) perform such acts as, in the opinion of the Bank of Zambia, are necessary to rectify the situation.

(3) In particular, but without limiting the generality of subsection (2), the Bank of Zambia may-

(a) direct the bank to refrain from adopting or pursuing a particular course of action or to restrict the scope of its business in a particular way;

(b) impose any limitation on the bank's acceptance of deposits, the granting of credit, the making of investments or the payment of dividends;

(c) prohibit the bank from soliciting deposits either generally or from specified persons or classes or persons;

(d) prohibit the bank from entering into any other transaction or class of transactions, or from commencing or continuing any activity which it is permitted under this Act to carry on; or

(e) require the suspension or removal from office of any director, officer or other person.

(4) Directions given under this section shall be given by notice in writing to the bank or person concerned and may in like manner be varied or revoked.

(5) A direction given under this section shall be effective immediately and shall remain in effect in accordance with its terms unless discontinued on appeal.

(6) Any person acting in contravention of the provisions of an agreement made or direction given under this section shall be guilty of an offence and shall be liable on conviction to a penalty not exceeding one hundred thousand penalty units or to imprisonment for a term not exceeding five years, or to both.

(7) An appeal lies under Chapter VIII against a decision of the Bank of Zambia to give a direction under this section. (As amended by Act No. 13 of 1994)

78. (1) The Bank of Zambia may cause an examination to be made of a bank to determine whether it is in a sound financial condition and operating safely and that the requirements of this Act, the Bank of Zambia Act and other laws of Zambia have been complied with in the conduct of its business.Examination of banks

(2) When, in conducting an examination of a bank under this section, the Bank of Zambia considers it necessary to do so, the Bank of Zambia may at the same time cause a like examination to be made of any other company in Zambia that is a subsidiary, associate or affiliate of the bank concerned.

79. (1) A bank shall:

Scope of examination

(a) produce, and cause each company that is a subsidiary affiliate or associate of the bank to produce, for the inspection of any examiner appointed by the Bank of Zambia, at such times as the examiner specifies, all books, accounts and records relating to its business in Zambia; and

(b) supply all information concerning its business in Zambia as may reasonably be required by the examiner within such time as the examiner specifies.

(2) Where the most recent report of the auditor of a bank contains information that the Bank of Zambia reasonably considers justifies an examination of the bank to be conducted, the auditor shall co-operate with officials of the Bank of Zambia or the examiner to investigate, and in that connection, the auditors shall, at the request of the Bank of Zambia, produce any books, accounts and records in the possession of the auditor that, in the auditor's or the Bank of Zambia's opinion, would be of assistance in the investigation.

(3) The Bank of Zambia may from time to time arrange meetings with the auditor, or with the auditor and officers of the bank, to discuss any matters relevant to the Bank of Zambia's supervisory responsibilities which may have arisen in the course of the statutory audit of the bank.

80. (1) The Bank of Zambia may publish in whole or in part at such time as it may determine any information or data furnished under this Act:

Publication of information Provided that no information or data shall be published which might disclose the particular affairs of a bank or of a customer of a bank unless the consent of every interested party has been obtained in writing prior to such publication.

(2) The Bank of Zambia shall not, unless lawfully required to do so, reveal to any person any information as to the affairs of any individual customer of a bank obtained in the exercise of its powers under this Act.

81. (1) Where-Disciplinary measures

(a) a bank refuses to comply with an order of the Bank of Zambia under this Act;

(b) a bank refuses to permit an examination to be made as provided by this Act or has otherwise obstructed such an examination; or

(c) in the opinion of the Bank of Zambia, an authorised examination shows-

(i) that the bank concerned conducts its business in an unlawful manner or engages in a course of conduct that is unsafe or unsound; or

(ii) that for any reason (other than insolvency) the bank is unable or is likely to become unable to continue its operations in the ordinary course, the Bank of Zambia may take disciplinary measures against the bank.

(2) The disciplinary measures the Bank of Zambia may take include-

(a) appointing a person (in this section called a curator) who in its opinion has had proper training and experience, to advise the bank on the implementation of such measures as may be specified by the Bank of Zambia to rectify the matter (and whose remuneration, as fixed by the Bank of Zambia, shall be paid by the bank concerned); or

(b) suspend the bank's licence for a period not exceeding six months; or

(c) revoke or restrict the bank's licence.

(3) For the purposes of paragraph (c) of subsection (2), the Bank of Zambia may, by notice in writing served on a bank, vary the conditions of its licence so as to impose any restriction.

(4) When a curator is appointed under this section, the bank and every director, officer, agent and employee of the bank shall act in accordance with every instruction given by the curator concerning the bank or any part of its property, administration, operations or business that is regulated by or under this Act.

(5) If a bank fails to comply with an instruction of a curator appointed under this section, disciplinary measures may be taken against the bank under paragraph (b) or (c) of subsection (2).

(6) The curator shall comply with any written instruction of the Bank of Zambia, and in all other matters shall act honestly and in good faith in what the curator reasonably believes to be the best way to restore the bank to a sound financial and operating condition.

(7) Acts or omissions of the bank in accordance with a direction of the curator shall be binding upon the bank, but no person shall have any right or claim against the curator or the Bank of Zambia as a result of any direction given by the curator in good faith in accordance with this Act.

(8) The curator shall advise the Bank of Zambia within six months following the curator's appointment whether in his opinion the bank can be restored to a safe operating condition within a reasonable time, or should be wound up.

(9) The Bank of Zambia shall not be bound to accept the advice of a curator under subsection (8).

82. A bank shall-

(a) maintain a special reserve account, to an amount which the Bank of Zambia considers adequate, reserved exclusively for the purpose of making good any loss resulting from the negligency or dishonesty of any of its directors, officers or employees;

(b) insure itself against such loss, to an amount which the Bank of Zambia considers adequate, with a person approved by the Bank of Zambia carrying on insurance business or the business of guranteeing against such loss; or

(c) undertake such other commitment as the Bank of Zambia may consider acceptable for the purpose of this section.Special reserve or liability insurance

83. (1) The Minister, on the recommendation of the Bank of Zambia, may by regulation prescribe the minimum required capital for every class or description of bank.Capital adequacy

(2) A bank shall maintain capital in an amount at least equal to the minimum amount prescribed by regulation in accordance with subsection (1).

(3) The minimum required capital of a bank-

(a) shall be of such kinds, computed in such manner and of such amount as the Minister, having due regard to internationally accepted guidelines and the nature of the bank's business, may be regulation prescribe;

(b) may include such part of the bank's reserve account, undivided profits, retained income and other reserves as may be specified by regulation; and

(c) may be fixed with reference to such of the assets and contingent liabilities or other exposures of the bank, or to such portion, type or class thereof, as may be prescribed by regulation.

(4) The minimum required capital to be prescribed shall be not less than six per centum of the bank's assets, contingent liabilities and other exposures calculated as may be specified by regulation.

(5) A bank shall not issue any share in its capital or other security (other than a bonus share or share in lieu of dividend or other prescribed security) unless it receives the full face amount thereof in Zambian kwacha or the foreign currency equivalent in kwacha at the time of issue.

(6) Any person acting in contravention of this section shall be guilty of an offence and shall be liable on conviction to a fine not exceeding one hundred thousand penalty units or to imprisonment for a period not exceeding five years, or to both.

(As amended by Act No. 13 of 1994)

Part 2-Application of Part 1 To Financial Institutions

84. The Minister, on the recommendation of the Bank of Zambia, may by regulation make provision for or with respect to the application, with such modifications as may be prescribed, of the provisions of Part 1 of this Chapter to all or to any class or description of financial institutions.Application of Part 1 to financial institutions

CHAPTER VII INSOLVENCY AND LIQUIDATION OF BANKS

Part 1-Preliminary

85. In the event of a conflict between the provisions of this Chapter and those of any other law of Zambia, the provisions of this Chapter shall prevail to the extent of the inconsistency.Conflict of laws

86. For the purposes of this Chapter, a bank is insolvent when it ceases to be able to meet its obligations as they fall due or when its assets are insufficient to meet its liabilities.Meaning of "insolvent"

87. (1) A bank shall not, while insolvent:Acceptance of deposits by insolvent banks

(a) receive any deposit; or

(b) enter into any new, or continue to conduct any existing, banking or financial service business.

(2) A director, officer or employee of a bank who knows or, in the proper performance of his duties, could reasonably be expected to know of the insolvency of the bank and who causes or permits any act in contravention of this section shall be guilty of an offence and shall be liable on conviction to a fine not exceeding one hundred thousand penalty units or to imprisonment for a term not exceeding five years, or to both.

(As amended by Act No. 13 of 1994)

Part 2-Voluntary Winding up and Liquidation

88. (1) A bank shall not, except with the approval of the Bank of Zambia, pass any resolution for voluntary winding up under the Companies Act.Approval of Bank of Zambia required for voluntary winding up

(2) The Bank of Zambia shall grant approvals to a voluntary winding up on such terms and conditions as it may determine and only if it appears to the Bank of Zambia that the bank is solvent and has sufficient liquid assets to repay its depositors and all its other creditors in full and without delay.

89. (1) When a bank has received approval from the Bank of Zambia for voluntary winding up, it shall-Duties of bank on voluntary liquidation

(a) immediately surrender its licence to the Registrar, cease to do business and thereafter exercise its powers only to the extent necessary to effect its orderly liquidation;

(b) repay in full its depositors and other creditors; and

(c) wind up all operations undertaken prior to the receipt of the approval.

(2) A director, officer or employee of a bank who knows or, in the proper performance of his duties, could reasonably be expected to know of the insolvency of the institution and who causes or permits any act in contravention of this section shall be guilty of an offence and shall be liable on conviction to a fine not exceeding one hundred thousand penalty units or to imprisonment for a term not exceeding five years, or to both.

(As amended by Act No. 13 of 1994)

90. (1) Within fourteen days after receiving approval for its voluntary winding up, a bank shall by registered mail notify-Notice of voluntary winding up and liquidation

(a) every depositor and other creditor of the bank; and

(b) any person otherwise entitled to any funds or property held by the bank as a trustee, fiduciary, lessor of a safe-keeping facility or bailee, of its intention to wind up.

(2) A notice for the purposes of subsection (1) shall set forth such information as the Bank of Zambia may require by notice to the bank concerned.

(3) A copy of the bank's notice shall be kept displayed in a conspicuous place in the public part of each branch of the bank and the bank shall publish it in the Government Gazette and in a newspaper of general circulation throughout Zambia.

91. (1) The approval by the Bank of Zambia under this Part for the voluntary winding-up of a bank shall not prejudice the rights of a depositor or other creditor to payment in full of a claim nor the right of an owner of funds or other property held by the bank to the return thereof.Rights of depositors and creditors

(2) All lawful claims shall be paid promptly and all funds and other property held by the bank shall be returned to their rightful owners within such maximum period as the Bank of Zambia may in writing direct.

92. (1) When in the judgment of the Bank of Zambia a bank has discharged all the obligations referred to under section eighty-nine, the remainder of its property shall be distributed to its rightful owner or owners.Distribution of assets on voluntary liquidation

(2) Distribution under subsection (1) shall not be made before-

(a) all claims of depositors and other creditors have been paid in full or, in the case of a disputed claim, the bank has turned over to the Bank of Zambia funds sufficient, in the opinion of the Bank of Zambia, to meet any liability that may be judicially determined; and

(b) any funds payable to a depositor or other creditor who has not claimed them have been turned over to the Bank of Zambia to be dealt with as unclaimed funds in accordance with this Act.

93. If the Bank of Zambia finds that the assets of a bank whose voluntary winding-up or liquidation it has approved will not be sufficient for the full discharge of all its obligations or that completion of the winding-up or liquidation is unduly delayed, it may, if it considers it proper to do so, take possession of the bank or petition the Court for the continuance of the winding-up to become subject to the supervision of the Court.

Part 3-Seizure of Banks Powers of Bank of Zambia if assets insufficient or completion unduly delayed

94. (1) An officer of the Bank of Zambia, or any person acceptable to the Bank of Zambia and willing to act, may be a receiver for the purposes of this Part.Seizure of bank by Bank of Zambia

(2) The Bank of Zambia may by resolution appoint and direct a receiver to take possession of any bank that in the opinion of the Bank of Zambia, is insolvent.

95. When taking possession of a bank, the receiver shall post in each branch of the bank a notice announcing its action and specifying the date and time at which such possession shall take effect, and shall transmit a copy of the notice to the Court.Notice of seizure

96. Within a period of twenty-one days after the date on which the receiver has taken possession of a bank, the bank or any interested person acting on its behalf may institute proceedings in the Court to require the Bank of Zambia to show cause why the seizure should not be terminated.Appeal for termination of seizure

97. (1) A receiver that takes possession of a bank is vested with the full and exclusive powers of management and control of the bank including, without limiting the generality of the foregoing, the power-Powers and duties of receiver upon seizure

(a) to continue or discontinue any operations;

(b) to borrow money, whether on the security of the assets of the bank or otherwise;

(c) to stop or limit the payment of any obligation;

(d) to employ any necessary officer, employee or professional advisor:

(e) to execute any instrument in the name of the bank and to initiate or defend and conduct in its name any action or legal proceeding; and

(f) to terminate possession by restoring the bank to the control of its board of directors or owners, as the case may be.

(2) After taking possession of a bank the receiver shall promptly make an inventory of the assets and property of the bank and transmit a copy thereof to the Registrar of the Court who shall make a copy available for examination by the public at the office of the Registrar of the Court.

98. (1) When a receiver has taken possession of a bank-Effect of seizure

(a) any term, statutory, contractual or otherwise, on the expiration of which a claim or right of the bank would expire or be extinguished, shall be extended by six months from the date of such expiration or extinction;

(b) any attachment or lien (except an attachment or lien existing six months prior to the seizure of the bank) shall be vacated, and no attachment or lien except an attachment or lien created by the Bank of Zambia in the application of section ninety-seven shall attach to any of the assets or property of the bank so long as such possession continues; and

(c) every payment or transfer of an asset or property of the bank made-

(i) within a period of one hundred and twenty days before the receiver takes possession of the bank; or

(ii) to an affiliate or associate of the bank within a period of two hundred and seventy days before the receiver takes possession of the bank, with the intent to effect a preference of the recipient over other creditors of the bank is void and of no effect.

(2) Where a payment or transfer referred to in paragraph (c) of subsection (1) has the effect of preferring the recipient it shall be presumed to have been made with that intent, except in the case of-

(a) a payment made by a bank to a creditor in the ordinary course of business to discharge in whole or in part a debt or other liability of the bank to the recipient; or

(b) a transfer of an asset or property by the bank made in a current exchange for valuable consideration equal to the fair market value of the asset or property transferred.

99. No writ of execution or garnishee order shall be issued or made against the assets or property of a bank in possession of a receiver except, in thediscretion of the Court, a writ of execution or garnishee order issued or made under a judgment given prior to the date of the seizure by the receiver for an amount not exceeding one million kwacha. Restriction of rights of creditor as to execution and garnishee

100. (1) When a receiver has taken possession of a bank the Bank of Zambia shall, within ninety days after the effective date of seizure specified under section ninety-five-Limitation on duration of seizure

(a) make an order for compulsory liquidation under section one hundred and one; or

(b) commence reorganisation under section one hundred and two; or

(c) terminate the seizure.

(2) Notwithstanding the provisions of subsection (1), the Bank of Zambia may, if it considers it proper to do so-

(a) propose a plan to reorganise the bank by arranging with persons and on terms acceptable to the Bank of Zambia to increase its capital, add new shareholders or reconstitute its board of directors or management; or

(b) if a bank that is acceptable to the Bank of Zambia is willing, on terms that are acceptable to the Bank of Zambia, authorise the amalgamation of the two banks in accordance with this Act.

101. (1) Compulsory liquidation of a bank may be ordered by resolution of the Bank of Zambia.Compulsory liquidation

(2) Upon making an order under subsection (1), the Bank of Zambia shall notify each director, shareholder, other owner, depositor and other creditor of the bank and every other interested party of such order by written notice to such of those persons for whom the Bank of Zambia discovers a name and address, and by published or other form of public notice.

(3) Each person notified shall have a period of thirty days to file an objection or appeal to the Court.

(4) The Court shall render its decision in any such application or appeal within a period of thirty days after the end of the period during which objections to the liquidation were admissible and in so doing may make any order it considers just in the circumstances.

102. (1) If the Bank of Zambia, acting under subsection (1) of section one hundred, decides to commence the reorganisation of a bank, the Bank of Zambia shall, after granting a reasonable opportunity for a hearing of all interested parties, send a copy of the reorganisation plan to each depositor and other creditor who, under the plan, would not receive full payment. Reorganisation

(2) The copy of the reorganisation plan shall be accompanied by a notice stating that, if the reorganisation plan is not refused in writing within a period of thirty days by persons holding at least one-third of the aggregate amount of deposits and creditors comprising at least one-third in value of the aggregate of the claims of creditors (other than subordinated creditors), or if within the same period of thirty days the Court does not order a stay of proceedings, the Bank of Zambia will proceed to carry out the reorganisation plan.

103. When depositors and other creditors refuse a reorganisation plan prepared by the Bank of Zambia under this Part, or when in the course of reorganisation it appears to the Bank of Zambia that circumstances render the plan inequitable or its execution impossible or undesirable, the Bank of Zambia may-

(a) modify the plan; or

(b) order the compulsory liquidation of the bank in accordance with the provisions of this Part.Refusal of reorganisation plan

104. (1) In effecting compulsory liquidation of a bank under this Act, the Bank of Zambia may exercise any of the powers of the bank, whether express or implied, except that it shall obtain approval from the Court for any of the following actions:

Powers and duties of Bank of Zambia in effecting compulsory liquidation

(a) the sale of any asset of the bank having a value in excess of five million kwacha or such higher amount as the Minister may by statutory instrument prescribe;

(b) the creation of a security interest in any asset of the bank in favour of a creditor who extends new credit to the institution in an amount exceeding five million kwacha, or such higher amount as the Minister may by statutory instrument prescribe;

(c) the compromise or release of any claim if the amount of the claim exceeds five hundred thousand kwacha, or such higher amount as the Minister may by statutory instrument prescribe;

(d) the payment of any claim other than a claim in respect of an obligation incurred by the Bank of Zambia in the exercise of its powers in liquidation before the liquidation schedule filed with the Court under this Part has been approved by the Court.

(2) Within a period of six months after the date of its order for the compulsory liquidation of a bank, the Bank of Zambia may terminate-

(a) the contracts of employment of any person with the bank;

(b) any contract for services to which the bank was a party; or

(c) any obligation of the bank as a lessee of real property:

Provided that a lessor, who shall have received ninety days' notice that the Bank of Zambia is exercising its discretionary powers to terminate the lease, shall have no claim for rent other than rent accrued on the date of termination of the lease, nor any claim for damages by reason of such termination.

(3) As soon as possible after the decision to liquidate a bank, the Bank of Zambia shall-

(a) take any necessary steps to terminate all fiduciary functions performed by the bank, return all assets and property held by the bank as a fiduciary to the owner thereof, and settle its fiduciary account; and

(b) send by registered mail, at the address shown in the bank's records, to all depositors, other creditors, safe-keeping services customers and bailors of property held by the bank, a statement (in this Part called "the customer's statement") of the nature and amount for which their claim is shown in the bank's records.

(4) The customer's statement shall note that any claim must be filed with the Bank of Zambia before a specified date not earlier than sixty days thereafter and shall call upon safe-keeping services customers and bailors to withdraw their property.

(5) Any property held in safe-keeping on the premises of the bank that has not been withdrawn before the date specified in the customer's statement shall be taken into possession by the Bank of Zambia in the manner prescribed by regulation.

(6) Any unclaimed funds and property held by the bank as a bailee, together with inventories pertaining thereto, shall be deemed to be unclaimed funds for the purposes of the provisions of this Act dealing with unclaimed funds and shall be dealt with accordingly.

(7) No action of the Bank of Zambia that is otherwise valid shall be invalidated by reason of a failure to obtain any approval of the Court under this section.

105. Within six months after the last day specified in the customer's statement for the filing of claims the Bank of Zambia shall-

(a) defer payment of any claim that is out of time and reject any claim that appears to be of doubtful validity;

(b) determine the amount, if any, owing to each known depositor or other creditor and the priority class of his claim in accordance with this Part;

(c) prepare for filing with the Court a Schedule of the steps it proposes to take (in this Part called a "liquidation schedule"); and

(d) notify each person whose claim has not been allowed in full and publish once a week for three consecutive weeks, in a newspaper of general circulation in every place in Zambia where the bank had a branch, a notice of the date and place where the liquidation schedule will be available for inspection, and the date, not earlier than thirty days after the date of the third publication of the notice, on which the Bank of Zambia will file the schedule with the Court.Limitation of filing of claims

106. (1) Within twenty days after the filing of the liquidation schedule, any depositor, other creditor or owner of a bank, and any other interested party, may file with the Court an objection to any step proposed.Objections to liquidation schedule

(2) Any objection so filed shall be considered by the Court, upon such notice to the Bank of Zambia and interested parties as the Court may by order direct to be given.

(3) If an objection is sustained, the Court shall direct that appropriate modification of the schedule be made.

(4) After filing the schedule the Bank of Zambia may, from time to time, make partial distribution to the holders of the claims which are undisputed or which have been allowed by the Court, on condition that a proper reserve is established for the payment of disputed claims.

(5) As soon as possible after all objections have been decided upon, the Bank of Zambia shall make final distribution.

107. (1) In any compulsory liquidation of a bank there shall be paid in priority to all other debts in the following order:Priority of creditors

(a) necessary and reasonable expenses incurred by the Bank of Zambia in the application of the provisions of this Part;

(b) taxes and rates due, whether payable to the Government or to a local authority;

(c) wages and salaries of officers and employees of the bank for the three-month period preceding the effective date of seizure, within the limit of an amount not exceeding one hundred thousand kwacha per person or such higher amount as may be prescribed by regulation;

(d) fees and assessments due to the Bank of Zambia;

(e) deposits up to an amount not exceeding five hundred thousand kwacha per depositor or such higher amount as may be prescribed by regulation;

(f) other deposits; or

(g) other claims against the bank in such order of priority as the Court may determine upon application by the Bank of Zambia.

(2) After payment of all claims filed, with interest thereon at a rate to be fixed by the Bank of Zambia, remaining claims which were not filed within the time allowed under this Part shall be paid.

(3) If the amount available for payment for any class of claims listed under subsection (1) is insufficient to provide payment in full, the said claims shall abate in equal proportions.

(As amended by Act No. 28 of 1995)

108. (1) Once all assets of a bank have been distributed under a compulsory liquidation, the Bank of Zambia shall render an account to the Court.Account to Court and revocation of licence in compulsory liquidation

(2) Upon approval of this account by the Court, the licence of the bank shall be revoked and the Bank of Zambia shall be relieved of any liability in connection with the liquidation.

109. Any unclaimed funds remaining after a final distribution provided for under this Part shall be taken into possession and held by the Bank of Zambia and subsequently dealt with in accordance with this Act.Unclaimed funds

110. Any assets remaining after all claims have been paid upon compulsory liquidation of a bank shall be distributed among the owners in accordance with their respective rights and interests.Final distribution in compulsory liquidation

CHAPTER VIII APPEALS

111. (1) Where the Registrar or the Bank of Zambia makes any decision against which, as provided by this Act, an appeal lies under this Chapter, the Registrar or the Bank of Zambia as the case may require, shall, by notice in writing-Reasons for decisions and right to be heard

(a) inform the applicant or other person affected by the decision of the reasons for the decision; and

(b) invite the applicant or person to make such written representations as he wishes within a time limited by the notice.

(2) The decision of the Registrar or of the Bank of Zambia, as the case may be-

(a) does not take effect until the expiry of the time limited by a notice under paragraph (b) of subsection (1) for making representations; and

(b) where representations are made in that time, is further stayed pending expiry of the time limited by this Chapter for lodgment of an appeal to the Minister.

(3) The Registrar or the Bank of Zambia may, on receipt of any representations referred to in paragraph (b) of subsection (1), reaffirm, revoke or vary his or its decision and shall notify the applicant or other person accordingly.

112. (1) If, after receipt of any representations from the applicant or person affected by its decision, the Registrar or the Bank of Zambia reaffirms his or its decision, the applicant or other person (hereinafter called the "appellant") may, within seven days of receipt of the notice reaffirming the decision, notify the Minister that he desires to appeal against the decision.Right of appeal

(2) The decision of the Registrar or of the Bank of Zambia, as the case may be-

(a) does not take effect until the expiry of the period limited by subsection (1) for giving notice of an appeal; and

(b) where a notice of appeal is lodged within that time, is further stayed pending the outcome of the appeal.

113. Within seven days after receipt of a notice of appeal, the Minister shall convene an Appeal Tribunal, consisting of a Chairman who is an advocate of the Court of not less than seven years' standing and two other persons having such qualifications as may be prescribed by regulation in relation to the kind of appeal concerned or, in default of such prescription, as the Minister may consider appropriate.Convening of Tribunal

114. (1) The Appeal Tribunal is to determine the appeal on its merits, having regard to the provisions of this Act and the public interest, and may confirm, vary or quash the decision the subject of the appeal.Powers of Tribunal

(2) The Tribunal may determine its own procedure and is not bound by the rules of evidence, and may inform itself of any matter in such manner as it sees fit.

(3) The Appeal Tribunal shall afford the appellant the right to appear by himself or by counsel or agent.

115. The decision of the Tribunal is final and binding on the parties to the appeal except as to any point of law, and in cases where the appeal is allowed, it is the duty of the Registrar or the Bank of Zambia, as the case may require, to give effect to the decision of the Tribunal.Decisions of Tribunal

CHAPTER IX MISCELLANEOUS

116. (1) Whenever the Bank of Zambia has reason to believe that any person is carrying on banking business or regulated financial service business on any premises without a licence or in contravention of the conditions of a licence, or for the purpose of ascertaining whether the provisions of this Act or the regulations under this Act are being complied with, the Bank of Zambia shall have the right by its servants or agents to enter the premises to ascertain the facts of the matter and may for that purpose-Investigations

(a) require any person apparently having access to them to deliver to the Bank of Zambia the books, accounts and records of the person; and

(b) examine any such books, accounts and records and take copies of or make extracts from them.

(2) A person who refuses to make available for examination the person's books, accounts and records within five business days after having been duly requested to do so by the Bank of Zambia shall be guilty of an offence and shall be liable on convition to a fine not exceeding one hundred thousand penalty units or imprisonment for a term not exceeding five years, or to both.

(As amended by Act No. 13 of 1994)

117. (1) A person other than a bank shall not, without the consent of the Bank of Zambia, use the word "bank" or any of its derivatives in any language, or any other word or symbol indicating the transaction of banking business, in its name or in any prospectus, advertisement or statement of any kind published or made to describe its business in ZambiaUse of the word "bank"

(2) A person shall not falsely represent to the public or any member of the public-

(a) that the person holds a licence to conduct any financial service business; or

(b) that the person is licensed to conduct any financial service business of a particular kind.

(3) Any person acting in contravention of this section shall be guilty of an offence and shall be liable on conviction to a fine not exceeding one hundred thousand penalty units or to imprisonment for a term not exceeding five years, or to both.

(As amended by Act No. 13 of 1994)

118. A licence shall not be granted to any person under a name that so closely resembles the name of an existing licensee as would be likely, in the opinion of the Registrar, to mislead the public, unless the person is associated or affiliated with the licensee or otherwise has the consent of the licensee.Misleading and unlicensed names

119. Notwithstanding anything in the Companies Act to the contrary, the Registrar of Companies shall, upon being notified by the Bank of Zambia that any company-

(a) incorporated under a name that includes the word "bank" or any of its derivatives in any language; or

(b) whose memorandum of articles prescribed, as its object or one of its objects, carrying on a banking business or a regulated financial service business, or a particular kind of banking or financial service business, is in fact not licensed to carry on such a business and is not going to be granted a licence of the appropriate kind, the Registrar of Companies is hereby empowered to, and shall forthwith, take such steps as are necessary to dissolve and deregister the company.Certain incorporations prohibited

120. (1) A transaction entered into in contravention of this Act is not void or ineffective by reason only of the contravention, and is not voidable at the instance of the bank, except in a court's discretion.Validity of certain acts by banks

(2) Subject to its memorandum and articles, it shall not be necessary for a bank to pass a by-law in order to exercise any power conferred by this Act.

121. A bank does not comply with a provision of this Act requiring it to furnish or supply a document to the Bank of Zambia unless-

(a) in the case of a document prepared by that bank, the form of which has not been prescribed by regulation, the document is-Documents

(i) signed by the chief executive officer and the chief accounting officer of the bank; or

(ii) signed by such other person as is required by a provision of this Act to sign or certify the document; and

(b) in the case of a document prepared by that bank, the form of which has been prescribed by regulation, the document is signed by the person holding the office or offices required by the text of the prescribed form.

122. At the request of a bank or financial institution or other person, the Bank of Zambia may extend from time to time any period within which a bank or financial institution is, in accordance with the provisions of this Act, obliged to furnish any document or information.Extension of time limits

123. No act, matter or thing done by any officer or person employed by the Bank of Zambia or by any other person in the exercise or performance or purported exercise or performance, in good faith, of any power or function under this Act shall give rise to any action, claim, liability, suit or demand against the officer or person concerned.Immunity of Bank of Zambia officials, etc.

124. (1) The Minister, on the recommendation of the Bank of Zambia, may make regulations for or with respect to any matter that by this Act is required or permitted to be prescribed by regulation or that is necessary or convenient to be so prescribed for carrying out or giving effect to this Act.Regulations

(2) The regulations may provide for fines not exceeding fifty thousand penalty units, and for terms of imprisonment not exceeding two years, or both, for any contravention of the regulations.

(As amended by Act No. 13 of 1994)

125. The Bank of Zambia shall have power to prescribe and publish such guidelines, bulletins or other regulatory statements as the Bank of Zambia may consider necessary or desirable for the administration or execution of this Act.Guidelines

126. (1) The Bank of Zambia shall, within six months from the 1st day of January in each year, submit to the Minister a report on the operations of banks and financial institutions in Zambia during the twelve months ended on the preceding 31st December.Bank of Zambia's report

(2) The Minister shall lay a copy of the report before the National Assembly within fourteen days of its receipt by him or, if the National Assembly is not then in session, within fourteen days after the commencement of its next sitting.

127. (1) Subject to subsection (2), if a person issues or takes part in the issue of a document referred to in this Act which is false in any material particular, that person and every other person who signed it shall be guilty of an offence and liable on conviction to a fine not exceeding fifty thousand penalty units or to imprisonment for a term not exceeding two years, or to both False documents

(2) A person shall not be guilty of an offence under this section if the person did not know and could not reasonably be expected to have known that the document was false when the person signed it, issued it or took part in its issue as the case may be.

(As amended by Act No. 13 of 1994)

128. A person who-

(a) contravenes a provision of this Act that is not expressly stated to be an offence but for which no other fine or sanction is provided; or

(b) fails to comply with any direction given to the person under this Act, shall be guilty of an offence and is liable on conviction to a fine not exceeding fifty thousand penalty units or to imprisonment for a term not exceeding two years, or to both.

(As amended by Act No. 13 of 1994)General offence

129. If a body corporate is convicted of an offence against this Act or the regulations, every person-

(a) who is a director of the corporation; or

(b) who is concerned in the management of the corporation, shall be deemed to have committed the same offence if the person knowingly authorised or permitted the act or omission constituting the offence.Offences by bodies corporate

130. The Minister, on the recommendation of the Bank of Zambia, may by regulation, on such terms and conditions as the Minister considers appropriate, exempt any financial institution from all or any of the provisions of this Act and may provide for the variation or revocation, by regulation or by notice in writing to the affected person or persons, of any such exemption at any time.Exemptions

131. (1) The Banking Act is hereby repealed.Repeal of Cap. 700 and savings of the 1971 Edition

(2) Notwithstanding the repeal of the Banking Act-

(a) a commercial bank, within the meaning of that Act, that was, immediately before the commencement of this Act, registered as a bank under that Act shall be deemed to be the holder of a licence under section four of this Act that is subject to the same limitations and conditions as pertained to its registration;

(b) a financial institution, within the meaning of that Act, that was, immediately before the commencement of this Act registered as such under that Act shall be deemed to be the holder of a licence under section ten of this Act that is subject to the same limitations and conditions as pertained to its registration;

(c) any applications pending under that Act shall be deemed to have been made under the corresponding provisions of this Act, and shall be dealt with under this Act;

(d) any right or benefit accruing, or liability incurred, under that Act shall continue in accordance with and subject to this Act; and

(e) any regulation, order, notice or direction made or given and in force, immediately before the commencement of this Act, under that Act shall, unless contrary to this Act, continue in force until revoked, as if made or given under this Act.

(3) The Minister may by regulation make such savings and transitional provisions as he may consider just or expedient in consequence of the enactment of this Act and the repeal of the Banking Act.

The following are the classes of assets that qualify as liquid assets for the purposes of this Act:

(1) Notes and coins constituting the currency of Zambia and such foreign exchange in the form of currency notes as may from time to time be prescribed by regulation for the purposes of this clause.

(2) Reserves in excess of those required under the Bank of Zambia Act, 1985 that are held by way of demand deposits in current account in the Bank of Zambia.

(3) The net balance by which all credit balances held at branches in Zambia or at any branch in a country prescribed by regulation for the purposes of this clause exceed all debit balances so held.

(4) Treasury bills and other securities issued by the Government and with an original term to maturity of not more than one hundred and eighty-two days.

(5) Bills of exchange, promissory notes and other negotiable instruments eligible for re-discount by the Bank of Zambia, within such limits as may be prescribed by regulation for the purposes of this clause.

The prohibition in section 73 (1) (a) of this Act does not apply to the following transactions:

(1) A transaction-

(a) secured by a pledge of bills of exchange or promissory notes that have been issued for the price of goods purchased and sold in the ordinary course of trade; and

(b) having an original term to maturity no greater than one hundred and eighty-two days or such longer period as may be prescribed by regulation.

(2) A transaction having an original term to maturity not greater than two hundred and seventy days and which is-

(a) secured by readily marketable assets, covered to their full insurable value by all perils insurance and having an ascertainable market or other value, as security, as found in good faith by an officer of the bank concerned, of at least fifty per centum more than the amount of the obligations thereby secured;

(b) secured in some other manner satisfactory to the Bank of Zambia; or

(c) a loan made to or guaranteed by the Government, a board or agency of the Government or a local authority that is enforceable by the bank within sixty days after demand following default.

SUBSIDIARY LEGISLATION BANKING (DESIGNATION OF URBAN AND RURAL AREAS) ORDER ARRANGEMENT OF REGULATIONS

Regulation

1. Title

2. Designation of rural and urban areas

THE BANKING AND FINANCIAL INSTITUTIONS (DESIGNATION OF URBAN AND RURAL AREAS) ORDER.

Statutory Instrument 92 of 1989

1. This Order may be cited as the Banking and Financial Services (Designation of Rural and Urban Areas) Order.Title

2. (1) The areas specified in the First Schedule to this Order are hereby designated as urban areas.Designation of rural and urban areas

(2) The area specified in the Second Schedule to this Order are hereby designated as rural areas.

RURAL AREAS

Those areas not specified in the First Schedule.

BANKING REGULATIONS ARRANGEMENT OF REGULATIONS

Regulation

1. Title

2. Interpretation

3. Application for registration as commercial bank or financial institution

4. Registered commercial bank to submit monthly statements to Registrar

5. Registered financial institution to submit monthly and quarterly statements to Registrar

6. Rate of conversion of non-Zambian money to Zambian currency to be stated

Continued in force by virtue of Section 15 of the Interpretation and General Provision Act.

*THE BANKING REGULATIONS

Regulations by the Minister * Continued in force by virtue of Section 15 of the Interpretation and General Provision Act.Statutory Instrument 226 of 1973

1. These Regulations may be cited as the Banking Regulations.Title

2. In these Regulations, unless the context otherwise requires-Interpretation "form" means the appropriate form prescribed in the Schedule.

3. An application for registration as a commercial bank or a financial institution made in terms of paragraphs (a) and (b) of subsection (1) of section four, or of section five of the Act shall be in revised Form ZBK No. 1 and shall be accompanied by the following documents:

(a) a true copy, certified by the chairman and a director of the applicant, of the memorandum and articles of association, or other document relating to the incorporation or registration of the applicant as a body corporate, and regulating the conduct of the business of the applicant; and

(b) a true copy, certified by the Registrar of Companies, of the certificate of incorporation of the applicant, issued in terms of the law relating to companies; and

(c) a statement certified by the chairman, a director and the auditors of the applicant showing the authorised and paid-up capital of the applicant at a date not earlier than thirty days before the date of the application.Application for registration as commercial bank or financial institution

4. (1) The monthly statement which a registered commercial bank is required to prepare and submit to the Registrar in terms of-Registered commercial bank to submit monthly statements to Registrar

(a) paragraph (a) of subsection (1) of section sixty of the Act shall be in revised Form ZBK No. 2;

(b) paragraph (b) of subsection (1) of section sixty of the Act shall be in revised Form ZBK No. 3.

(2) For the purposes of paragraph (c) of subsection (1) of section sixty of the Act, a registered commercial bank shall prepare and submit to the Registrar within twenty-eight days after the last day of every calendar month a supplementary statement of the assets and liabilities of its offices and branches in Zambia at the close of the last business day of that month.

(3) The supplementary statement referred to in sub-regulation (2) shall be in revised Form ZBK No. 3.

  • Continued in force by virtue of Section 15 of the Interpretation and General Provisions Act.

5. (1) The monthly statement which a registered financial institution is required to prepare and submit to the Registrar in terms of paragraph (a) of subsection (1) of section sixty of the Act shall be in revised Form ZBK No.

4.(2) The quarterly statement which a registered financial institution is required to prepare and submit to the Registrar in terms of paragraph (b) of subsection (1) of section sixty of the Act shall be in revised Form ZBK No.

5.Registered financial institution to submit monthly and quarterly statements to Registrar

(3) For the purposes of paragraph (c) of subsection (1) of section twenty-nine of the Act, a registered financial institution shall prepare and submit to the Registrar within thirty-five days after the last day of each quarter ending on the 31st March, the 30th June, the 30th September and the 31st December a supplementary statement of the assets and liabilities of its offices and branches in Zambia at the close of the last business day of that quarter.

(4) The supplementary statement referred to in sub-regulation (3) shall be in revised Form ZBK No. 5.

6. If in a document furnished to the Registrar in terms of these Regulations a sum of money is not stated in the currency of Zambia, the appropriate rate of conversion of the sum of money to Zambian currency shall be stated in the document or in an annexure thereto. Rate of conversion of non-Zambian money to Zambian currency to be stated

PRESCRIBED FORMS

Form ZBK No. 1 (Revised):

Application for registration as a commercial bank or financial institution.

Form ZBK No. 2 (Revised): Monthly Statement of-

(a) Liabilities to the Public; and

(b) Liquid Assets; of a Commercial Bank in Zambia.

Form ZBK No. 3 (Revised):

Monthly Statement of Assets and Liabilities and Supplementary Statement of a Commercial Bank in Zambia.

Form ZBK No. 4 (Revised):

Monthly Statements of-

(a) Liabilities to the Public;

(b) Capital; and

(c) Liquid Assets; of a Financial Institution in Zambia.

Form ZBK No. 5 (Revised):

Quarterly Statement of Assets and Liabilities and Supplementary Statement of a Financial Institution in Zambia.

Form ZBK No. 1 (Revised) REPUBLIC OF ZAMBIA

THE BANKING AND FINANCIAL SERVICES ACT (Section 4)

THE BANKING REGULATIONS (Regulation 3)

APPLICATION FOR REGISTRATION AS A COMMERCIAL BANK OR A FINANCIAL INSTITUTION

1. Name (The name under which the applicant(s) wants/want to be registered)

2. Nature of business (The business in respect of which the application is made)

3. Address of applicant's head office

4. Address of applicant's principal administrative office

5. In the case of a Commercial Bank:

(a) Names of Directors

(b) Names of Local Directors (These must be Zambian citizens and/or established residents of Zambia)

(c) What is the proposed authorised capital and paid-up capital of the Commercial Bank to be registered?

6. In the case of a Financial Institution:

(a) What is the proposed authorised capital and paid-up capital of the Financial Institution to be registered? K

(b) State the amount of unimpaired reserve funds which the Financial Institution to be registered intends to maintain K

7. Name of General Manager

8. Name of Chief Executive Officer

9. Name of Chief Accounting Officer

10. Name and qualifications of applicant's auditors

11. Please lodge with your application the following documents:

(a) Memorandum and Articles of Association;

(b) Statement of paid-up capital; and

(c) Certificate of incorporation under the Companies Act of Zambia.

12. I/We hereby certify that to the best of my/our knowledge and belief the information given above is correct and true.

Form ZBK No. 2 (Revised) REPUBLIC OF ZAMBIA

THE BANKING AND FINANCIAL SERVICING (Section 60 (1) (a)

THE BANKING REGULATIONS (Regulations 4 (1) (a)

MONTHLY STATEMENT OF

(a) LIABILITIES TO THE PUBLIC

(b) LIQUID ASSETS OF A COMMERCIAL BANK IN ZAMBIA REPORTING COMMERCIAL BANK

DATE TO WHICH THIS RETURN REFERS ,19 .......

I. Liabilities to the Public

1. Demand Deposits . . . . . . . . . . . . . .

2. Savings Deposits . . . . . . . . . . . . . .

3. Time Deposits . . . . . . . . . . . . . .

4. Bills payable . . . . . . . . . . . . . .

TOTAL LIABILITIES TO THE PUBLIC . .

II. Liabilities to the Public at the end of the previous month . . . . . .III. Liquid Assets

(a) Gold coin and bullion . . . . . . . . . . . .

(b) Notes and coin in the currency of Zambia . . . . . . . .

(c) Balances at the Bank of Zambia including the minimum reserve balances referred to in paragraph (b) of subsection (1) of section thirty-nine of the Bank of Zambia Ordinance No. 33 of 1964 . . . . . . . .

(d) Money at call with any bank. . . . . . . . . . . . . . (e) Treasury Bills issued by the Government . . . . . . . .

(f) Bills of exchange and promissory notes eligible for discount at the Bank of Zambia

(g) Local registered securities which are issued or guaranteed by the Government and which have a final maturity date of not more than six years (at book value) and such other securities as the Minister may have approved. . .

(h) Items in transit between banks, between branches of banks and between branches of head office of banks . . . . . . . .

(i) Other assets approved by the Minister under paragraph (e) of subsection (3) of section twenty-one of the Banking Act, 1971 . . . . . . . . . . TOTAL LIQUID ASSETS . . . .K

Total liquid assets as a percentage of total liabilities to the public . . . . . . .................per cent Total liquid assets (as stated above) as a percentage of total liabilities to the public at the end of the previous month . . . . . . . . . . . . . . . . .................per cent

Form ZBK No. 3 (Revised) REPUBLIC OF ZAMBIA

THE BANKING AND FINANCIAL SERVICING (Section 60 (1) (b) and (c))

THE BANKING REGULATIONS (Regulations 4 (1) (b), (2) and (3))

MONTHLY STATEMENT OF ASSETS AND LIABILITIES AND SUPPLEMENTARY STATEMENT OF A BANK OF ZAMBIA REPORTING BANK

DATE TO WHICH THIS RETURN REFERS ,19 .......

Supplementary statement in terms of section 28 (1) (c) of the Act Statement in terms of section 28 (1) (b) of the Act. (For publication where applicable in the Government Gazette)

ASSETS

1. Notes and coin

(a) Zambian notes . . . . . .

(b) Zambian coin . . . . . .

(c) Other notes and coin . . . . . .

2. Balances held with the Bank of Zambia

(a) Statutory Reserves . . . . . .

(b) Other balances . . . .

3. Balances held with registered Commercial Banks in Zambia

(a) Assets in transit . . . . .

(b) Other items . . . . . . . .

4. Balances held with Banks abroad

(a) head office and/or branches in-

(i) Britain . . . . . . . .

(ii) Zimbabwe . . . . . .

(iii) Malawi . . . . . . . .

(iv) Republic of South Africa . . . .

(v) Other countries . . . . . .

(b) Other banks in-

(i) Britain . . . . . . . .

(ii) Zimbabwe .. .. . .

(iii) Malawi . . . . . . . .

(iv) Republic of South Africa . . . .

(v) Other Sterling Area countries. . . .

(vi) Dollar Area countries . . . .

(vii) Other countries . . . . . .

5. Government of Zambia Securities (at book value)

6. Other investments in Zambia (at book value)

7. Treasury Bills issued by the Government of Zambia

Supplementary statement in terms of section 28 (1) (c) of the Act Statement in terms of section 28 (1) (b) of the Act. (For publication where applicable in the Government Gazette)ASSETS

8. Bills of Exchange

(a) discounted and purchased. . . . . .

(b) receivable. . . . . . . . . .

9. Loans and advances to

(a) The public . . . . . . . .

(b) Government . . . . . . . .

(c) Statutory Bodies, Municipalities, T.M.B.s, Local Authorities, etc. . . . . . .

(d) Non-residents. . . . . . . .

(e) Parastatal organisations . . . .

10. Balances held with branches

(a) Assets in transit . . . . . .

(b) Other items . . . . . . . .

11. Bank premises

12. Acceptances

13. Other Assets

TOTAL ASSETS LIABILITIES

1. Demand Deposits

(a) Public Deposits . . . . . .

(b) Government Deposits . . . . . .

(c) Deposits of Statutory Bodies, Municipalities, T.M.B.s, Local Authorities, etc. . . . .

(d) Non-residents' Deposits . . . .

(e) Parastatal organisations . . . .

2. Savings Deposits

(a) Public Deposits . . . . . .

(b Government Deposits . . . . . .

(c) Deposits of Statutory Bodies, Municipalities, T.M.B.s, Local Authorities, etc. . . . .

(d) Non-residents' deposits . . . .

(e) Parastatal organisations . . . .

3. Time Deposits

(a) Public Deposits . . . . . .

(b) Government Deposits . . . . . .

(c) Deposits of Statutory Bodies, Municipalities, T.M.B.s, Local Authorities, etc. . . . .

(d) Non-residents' deposits . . . .

(e) Parastatal organisations

Supplementary statement in terms of section 28 (1) (c) of the Act Statement in terms of section 28 (1) (b) of the Act. (For publication where applicable in the Government Gazette)LIABILITIES

4. Amounts owing to registered Commercial Banks in Zambia

(a) Liabilities in transit . . . . . .

(b) Other items. . . . . . . .

5. Amounts owing to banks abroad

(a) Head office/or branches in-

(i) Britain . . . . . . . .

(ii) Zimbabwe . . . . . .

(iii) Malawi . . . . . . . .

(iv) Republic of South Africa . . . .

(v) Other countries . . . . . .

(b) Other banks in-

(i) Britain . . . . . . . .

(ii) Zimbabwe . . . . . .

(iii) Malawi . . . . . . . .

(iv) Republic of South Africa . . . .

(v) Other Sterling Area countries

(vi) Dollar Area countries . . . .

(vii) Other countries . . . . . .

6. Bills Payable

7. Amounts owing to branches

(a) Liabilities in transit . . . . . .

(b) Other items . . . . . . . .

8. Capital

9. Reserves

10. Acceptances

11. Amounts owing to Bank of Zambia

12. Other Liabilities

TOTAL LIABILITIES Form ZBK No. 4 (Revised) REPUBLIC OF ZAMBIA

THE BANKING AND FINANCIAL SERVICES ACT (Section 60 (1) (a))

THE BANKING REGULATIONS (Regulation 5 (1))

MONTHLY STATEMENT OF

(a) LIABILITIES TO THE PUBLIC

(b) CAPITAL

(c) LIQUID ASSETS OF A FINANCIAL INSTITUTION IN ZAMBIA REPORTING FINANCIAL INSTITUTION DATE TO WHICH THIS RETURN REFERS 19 .......

I. Liabilities to the Public Deposits repayable

(a) at seven days' notice . . . . . . . . . . . .

(b) at thirty days' notice . . . . . . . . . . . .

(c) at more than thirty days' but more than six months' notice . . . . (d) at more than six months' but not more than twelve months' notice .

(e) after twelve months' notice . . . . . . . . . .

TOTAL LIABILITIES TO THE PUBLIC . .

II. Liabilities to the Public at the end of the previous month . . . .

III. Capital

1. Paid up equity capital . . . . . . . . . . . .

2. Unimpaired reserve funds . . . . . . . . . . . .

TOTAL CAPITAL . .

IV. Liquid Assets

1. Notes and coin in the currency of Zambia . . . . . . . .

2. Balances with registered commercial banks in Zambia . . . . .

3. Money at call with any bank. . . . . . . . . . . .

4. Treasury Bills issued by the Government . . . . . . . .

5. Bills of exchange and promissory notes accepted, endorsed or made, as the case may be, by a bank, maturing in not more than ninety days exclusive of days of grace and payable at any place in Zambia. . . . . . . . . .

6. Local registered securities which are guaranteed by the Government and which have a final maturity date of not more than six years and such other securities as the Minister may have approved. . . . . . . . . . .

TOTAL LIQUID ASSETS ...K

Total liabilities to the public (net of liquid assets) as a percentage of paid-up equity capital and unimpaired reserve funds . . . . . . . . . . . . .................per cent

Total liquid assets as a percentage of total liabilities to the public . . . . . . .................per cent

Total liquid assets (as stated above) as a percentage of total liabilities to the public at the end of the previous month . . . . . . . . . . . . . . .................per cent

Form ZBK No. 5 (Revised) REPUBLIC OF ZAMBIA

THE BANKING AND FINANCIAL SERVICES ACT (Section 60 (1) (b) and (c))

THE BANKING REGULATIONS (Regulation 5 (2), (3) and (4))

QUARTERLY STATEMENT OF ASSETS AND LIABILITIES AND SUPPLEMENTARY STATEMENT OF A FINANCIAL INSTITUTION IN ZAMBIA REPORTING FINANCIAL INSTITUTION

................................................................................

............................

DATE TO WHICH THIS RETURN REFERS

................................................................... 19

..............................

Supplementary statement in terms of section 29 (1) (c) of the Act Statement in terms of section 29 (1) (b) of the Act. (For publication where applicable in the Government Gazette)KK ASSETS

1. Notes and Coin . . . . . . . . . .____

2. Balances held with registered Commercial Banks in ____ Zambia . . . . . . . . .

3. Money at call with any bank . . . . . .____

4. Treasury Bills issued by the Government of Zambia . .____

5. Amounts owing under agreement for Hire Purchase ____ under the Laws of Zambia . . . . . .

6. Bills receivable . . . . . . . . . .____

7. Notes receivable . . . . . . . .____

8. Advances . . . . . . . . . .____

(a) internal-

(i) individuals . . . . . . . .

(ii) companies . . . . . . . .

(b) external . . . . . . . . . .

9. Securities . . . . . . . . . .____

(a) of the Government of Zambia . . . . . .

(b) of Zambian Municipalities .. . . . .

(c) Other . . . . . . . . . .

(10) Other investments . . . . . . . .____

11. Other assets . . . . . . . .____

(a) buildings and premises . . . . . .

(b) other . . . . . . . . . .

TOTAL ASSETS

Supplementary statement in terms of section 29 (1) (c) of the Act Statement in terms of section 29 (1) (b) of the Act. (For publication where applicable in the Government Gazette)KK LIABILITIES

1. Deposits . . . . . . . . . .___

(a) internal-

(i) individuals . . . . . . . .

(ii) companies . . . . . . . .

(b) external . . . . . . . . . .

2. Loans, advances and acceptances . . . . . .___(a) loans from shareholders- (i) individuals in Zambia . . . . . . (ii) companies in Zambia . . . . . . (iii) external shareholders . . . . . .

(b) other loans, advances and acceptance: . . . .

3. Amounts owing to registered Commercial Banks in ____Zambia . . . . . . . . . .

4. Other liabilities . . . . . . . . . .____

(a) paid-up equity capital-

(i) internal . . . . . . . .

(ii) external . . . . . . . .

(b) other paid-up capital-

(i) internal . . . . . . . .

(ii) external . . . . . . . .

(c) Reserves and unappropriated profits . . . .

(d) Other liabilities . . . . . .

TOTAL LIABILITIES

SECTIONS 124 AND 47-THE BANKING AND FINANCIAL SERVICES (COST OF BORROWING) REGULATIONS

Statutory Instrument 179 of 1995

Regulations by the Minister

1. These Regulations may be cired as the Banking and Financial Services (Cost of Borrowing) Regulations.Title

2. In these Regulations, unless the context otherwise requires-Interpretation "borrower" includes a person to whom a loan is proposed to be made; "cost of borrowing" includes administrative charges for services or transactions and any similar changes, but exludes-

(a) a charge for arranging or renewing the loan;

(b) a charge for the issuance of a certificate of search, the provision for examination or the making of copies or a registered document, or the provision of similar services;

(c) a charge for a survey;

(d) a charge or disbursement for the services of a lawyer or notary;

(e) a charge for an appraisal or inspection of assets;

(f) a charge for insurance;

(g) an administrative charge in respect of an overdrawn account, including a charge for honouring a cheque written on an overdrawn account;

(h) a charge for making a pre-payment on the loan; or

(i) a commitment fee as compensation for funds being made available by the lender for use by the borrower and which could be deployed elsewhere. "principal" means the amount of money borrowed and outstanding at any time, but does not include any portion of the cost of borrowing.

3. These Regulations shall not apply to-

(a) a loan in respect of which the principal amount is less than K250,000 and the cost of borrowing on that loan is disclosed to the borrower as an amount expressed in Kwacha and ngwee;

(b) a loan made under any Act of Parliament where the rate of interest or the discount that may be charged to the borrower is prescribed under that Act and is disclosed to the borrower;

(c) a loan resulting from the discount or negotiation by a bank or financial institution of a promissory note or other instrument payable by a person other than the borrower; and

(d) a loan made pursuant to a letter of credit. Application

4. (1) For loans obtained through the use of a line of credit, an overdraft, a payment, credit or charge card, a bank or financial institution shall express the rate of interest charged to a customer as "the annual effective rate of interest" or the annual percentage rate (APR).Determination of annual rate of interest

(2) The annual percentage rate shall be determined as follows:

APR = (1 + r) q - 1

q

Where: q = the frequency of compounding in a year, and

r = the nominal rate of interest

5. (1) For loans repayable in equal instalments, the cost of borrowing is determined by the following formula:Cost of borrowing for loans repayable in equal instalments

R = C

T x P .

where:

"C" is the total cost of borrowing over the term of the loan, expressed as an amount and includes interest plus all other charges of borrowing;

"P" is the average of the principal of the loan that is outstanding at the end of each interest calculation period before applying any payment due at that time;

"R" is the cost of borrowing over the term of the loan, expressed as a rate per annum; and

"T" is the term of the loan, expressed in years.

(2) For the purpose of the calculation set out in sub-regulation (1)-

(a) the rate per annum of the cost of borrowing shall be rounded off to the nearest eighth of a per cent; and

(b) a year shall be calculated as having 365 days.

6. (1) For the purposes of regulations 7 to 9, where information is to be disclosed by means of a written statement, the information shall be delivered to the borrower personally or sent to the last address of the borrower shown in the records of the bank or financial institution.Disclosure requirements

(2) The statement through which the disclosure is made shall contain the information set out in the Schedule.

7. (1) A bank or financial institution shall disclose the cost of borrowing to the borrower, at or before the time at which the loan is made. Disclosure of cost of borrowing

(2) The disclosure referred to in sub-regulation (1) shall-

(a) in the case of an overdraft, be made by means of a written statement or by a notice displayed in each branch of the bank or financial institution; and

(b) in the case of a loan made under the security of a letter of credit or any other arrangement, or where the loan is repayable on demand in amounts that are not fixed or on dates that are not fixed, by means of-

(i) a written statement in the loan agreement or proposed loan agreement;

(ii) a separate written statement; or

(iii) a notation on the promissory note signed or to be signed by the borrower; and

(c) in any other case, by means of a written statement disclosing the information set out in the attached Schedule.

(3) Where a loan referred to in paragraph (b) or sub-regulation (2) is made, the bank or financial institution shall also disclose to the borrower in the manner described in clauses (i) to (iii) of that paragraph-

(a) the manner of calculating the cost of borrowing and determining it as a rate per annum; and

(b) in the case of a loan made pursuant to a line of credit or other arrangement, the maximum principal that can be borrowed under the line of credit or other arrangement.

(4) Where the cost of borrowing in respect of a loan is subject to variation, the bank or financial institution shall by means of a written statement or by a notice displayed in each branch of the bank or financial institution, and within a reasonable time, disclose to the borrower any variation that affects the amount of any periodic payments to be made by the borrower.

8. A bank or financial institution shall disclose to the borrower the information required by sub-section (2) of section forty-seven of the Act, at or before the time at which the loan is made-

(a) by means of a written statement in the loan agreement or proposed agreement between the bank or financial institution and the borrower; or

(b) through a separate statement in writing,Manner of disclosure of information

9. (1) A bank or financial institution shall disclose to each holder of a payment, credit or charge card, at or before the time at which the card is issued-Payment, credit or charge card

(a) the particuars of the holder's rights and obligations relating to-

(i) the credit limit authorised under the card and the maximum amount of indebtedness that may be outstanding at any time;

(ii) the period of time for which each statement of account is issued;

(iii) the manner, if any, in which the holder may use the card and avoid any charge;

(iv) the minimum amount, if any, that must be paid at the end of each statement period, which amount may be stated as a percentage of the amount outstanding; and

(v) the maximum amount of the card-holder's liability for authorised use of the card where it is lost or stolen;

(b) the amount of any charge for which the holder is responsible by reason of accepting or using the card and the manner in which the charge is calculated;

(c) the cost of borrowing and the manner in which it is calculated; and

(d) any charges or penalties to be paid by the borrower as a result of the failure to repay or pay in accordance with the contract governing the loan.

(2) Where a bank or financial institution intends to change any of the matters disclosed to a card-holder in accordance with sub-regulation (1), other than a disclosure under clause (i) of paragraph (a), the bank or financial institution shall send or deliver to the card-holder a written statement of the change at least fourteen days before the effective date of the change.

10. (1) A bank or financial institution shall not impose on a borrower any charge or penalty as a result of the failure by the borrower to repay or pay in accordance with the contract governing the loan other than-No charge or penalty for failure to pay

(a) interest on an overdue payment on a loan;

(b) legal costs incurred in collecting or attempting to collect a payment on a loan; or

(c) costs, including legal costs, incurred in protecting or realising the security on a loan.

(2) A bank or financial institution shall not impose a charge or penalty on a borrower for making a pre-payment of the principal or an instalment of the principal before its due date where-

(a) the amount of the repayment exceeds K50,000 or extinguishes the debt;

(b) the loan is made to a natural person; and

(c) the loan is not secured by a mortgage on real property.

11. A bank or financial insitution may disclose an estimate of an amount or of other information required to be disclosed under these Regulations instead of the actual amount or information where-

(a) at the time of disclosure, the amount or information is unknown or unavailable to the bank or financial institution;

(b) the bank or financial instutition has made all reasonable efforts to ascertain the amount or information;

(c) the estimate is clearly identified as such; and

(d) the estimate is based on the best information available.Disclosure of estimates

CONTENTS OF DISCLOSURE STATEMENT

1. The name and address of the bank or financial institution.

2. The name and address of the borrower.

3. A description of any property to be used as security and its location.

4. A description of any guarantees and/or other collateral.

5. The date when the first payment on the loan is due.

6. In the case of a mortgage, whether it is first, second, etc.

7. The principal of the loan, including:

(a) the total amount of all charges to be financed; and

(b) the net amount of money to be paid to the borrower or to be disbursed at the borrower's direction.

8. The rate of interest expressed as a rate per annum, if that rate does not vary.

9. The initial rate of interest expressed as a rate per annum, if the rate varies from time to time.

10. A description of any factors that would cause the rate of interest to vary.

11. The length of the term of the loan.

12. The period during which an offer letter to a customer is valid, before it expires.

13. A description of any factors that would cause the term of the loan to vary.

14. The total cost of borrowing over the term of the loan, expressed as a rate per annum.

15. A list of each charge to be financed.

16. A description of any terms and conditions applicable to pre-payment of the principal.

17. A description of any charge or penalty that would be imposed for failure to make a payment or to repay the loan when due.

18. The date of the statement.

19. The name and signature of the representative of the bank or financial institution.

SECTIONS 124, 4, 10, 13 AND 22-THE BANKING AND FINANCIAL SERVICES (PAYMENT OF FEES) REGULATIONS

Statutory Instrument 180 of 1995

Regulations by the Minister

1. These Regulations may be cited as the Banking and Financial Services (Payment of Fees) Regulations.Title

2. The fees set out in the Schedule, shall be paid in respect of the services set out in that Schedule.Fees

3. Fees payable under these Regulations shall be paid by a bank certified cheque, postal order or money order in favour of the Bank of Zambia, provided that such payments may be allowed where the fee is deliverd by hand.Method of payment of fees

4. The fees paid under these Regulations shall not be refundable.Fees non-refundable

5. (1) A bank or financial institution which is operational during the month of January of a particular year shall pay the annual licence fee not later than the 31st of January of that year.Annual licence fee

(2) A bank or financial institution which is registered after the 31st of January of a particular year shall, before the end of the month in which it is so registered, pay a proportion of the annual licence fee equivalent to the number of full months it would be in operation for that year, multiplied by the annual licence fee.

6. A bank or financial institution which fails to pay the full amount of the applicable licence fee prescribed for a particular period shall, in addition to such licence fee, pay for each month or part thereof during which it remains in contravention, a penalty calculated at the rate of twenty per centum of the licence fee remaining upaid from the date the payment became due.Penalty for failure to pay a fee

7. Fees and penalties collected under these Regulations shall accrue to the Bank of Zambia and shall be used for the benefit of the Bank of Zambia.Fees and penalties to accrue to Bank of Zambia

Fee Units

1. Application for a licence to conduct banking services 50,000

2. Application for a licence to conduct a regulated financial service business 30,000

3. Annual licence fee-banking business 25,000

4. Annual licence fee-financial service business 15,000

5. Inspection of the Register of Banks and Financial Institutions 10,100

SECTIONS 124 AND 76-THE BANKING AND FINANCIAL SERVICES (RETURN OF UNCLAIMED FUNDS) REGULATIONS

Statutory Instrument 181 of 1995

Regulations by the Minister

1. These Regulations may be cited as the Banking and Financial Services (Return of Unclaimed Funds) Regulation.Title

2. A bank or financial institution shall, within sixty days of the end of each calendar year, submit to the Registrar annual returns in the form set out in the First and Second Schedules, in respect of all funds in Zambian currency in that bank or financial institution for which no transaction has taken place and no statement of account has been requested or acknowledged by the person in whose name the funds were being held, for a period of ten years or more.Annual returns of unclaimed funds

3. The period of 10 years referred to in regulation 2 shall commence-

(a) in the case of a deposit made for a fixed period, from the day on which the fixed period terminated; or

(b) in the case of other funds, from the day on which the last transaction by customer took place or a statement of account was last requested or acknowledged by the person in whose name the funds were held, whichever is the later. Computation of the period

4. An annual return made under regulation 2 shall indicate, in so far as is known to the bank or financial institution-

(a) the name of each person for whom funds are held;

(b) the recorded address of each person for whom funds are held;

(c) the classification of funds;

(d) the outstanding amount;

(e) the date on which the bank last transaction took place in respect of the funds; and

(f) the branch of the bank or financial institution in which transactions took place in respect of these funds.Content of return

5. The information required under regulation 4 may be excluded from the annual returns when the total amount outstanding in the name of a person is less than ten thousand Kwacha. Amounts under ten thousand kwacha

Return of Unclaimned Funds (Section 76(2)) Name of Bank

This return relates to the calendar year ended 31st December, 19 ...........

1. Total amount of items reported in detail on attached sheets numbered 1 to of Second Schedule

2. Total of accounts and instruments under K1,000 not reported in detail

3. Interest accrued on interest bearing accounts not added to individual accounts

4. Total amount of unclaimed funds as at 31st December, 19 ........

We declare that, having regard to the latest information available to us, this return is, to the best of our knowledge and belief, correct according to the books and records of the bank and presents fairly the information required by the Banking and Financial Services Act.

Dates at this ....................... day of ........................ 19

Return of Unclaimed Funds (Section 76(2)) for Calendar year ended 31st December, 19 ........... .

(1) Classify as a, b orc according to the following:

(a) Demand, savings or matured time deposit (Section 76 (1)(a));

(b) Funds paid toward the purchasing of a share or other interest in a security issued by the bank (Section 76 (1)(b));

(c) Funds or other personal property tangible or intangible removed from a safekeeping facility (Section 76 (1)(c)).

SECTIONS 69 AND 124-THE BANKING AND FINANCIAL SERVICES (RESERVE ACCOUNT) REGULATIONS

Statutory Instrument 182 of 1995

Regulations by the Minister

1. These Regulations may be cited as the Banking and Financial Services (Reserve Account) Regulations.Title

2. In these Regulations, unless the context otherwise requires-Intepretation "reserve fund" means a fund of a bank or financial institution generated from actual earnings or by way of recoveries, or a surplus on the realization of the scale of capital assets, but does not include any surplus resulting from a revaluation of assets.

3. A bank or financial institution shall maintain a reserve fund and shall, out of its retained earnings of distributable profits from the current financial year, before any dividend is declared, transfer to that fund a sum equal to not less than-

(a) fifty per centum of such profits, whenever the amount of the reserve fund does not exceed half of its paid-up equity capital; or

(b) twenty per centum of such profits or such sum as shall make the amount of the reserve fund equal to the paid-up equity capital, whenever the amount of the reserve fund exceeds half of its paid-up equity capital, but is less than the paid-up equity capital.Transfers to a reserve fund

SECTION 47-THE BANKING AND FINANCIAL SERVICES (DISCLOSURE OF DEPOSIT CHARGES AND INTEREST) REGULATIONS

Statutory Instrument 183 of 1995

Regulations by the Minister

1. These Regulations may be cited as the Banking and Financial Services (Disclosure of Deposit Charges and Interest) Regulations.Title

2. (1) A bank or financial institution shall, by means of a written statement, disclose to its customers and to the public all charges on deposit accounts with that bank or financial instutition for any of the following services in respect of such deposit accounts, namely-

Disclosure of charges

(a) acceptance of deposits;

(b) acceptance of coins, cheques or Bank of Zambia notes for deposit;

(c) issuance of cheques;

(d) certification of cheques;

(e) handling of a cheque presnted or issued by a customer that is subsequently returned because there are no sufficient funds, or for technical reasons such as where words and figures do not agree, etc;

(f) holding of a cheque for deposit;

(g) handling of a cheque or negotiable item, such as a draft or a money order drawn in a foreign currency;

(h) processing of a stop payment on a cheque or other instrument;

(i) handling of overdrafts;

(j) transfers between accounts;

(k) supplying of account statements;

(l) handling of account confirmations;

(m) conducting searches related to an account;

(n) providing information in regard to an account balance; and

(o) closing of an account.

(2) A bank or financial institution shall display and make available copies of the written statement referred to in sub-regulation (1) to customers and to the public at each branch of the bank or financial institution at which such account is kept.

(3) The written statement referred to in sub-regulations (1) and (2) may be in the form of a tariff and shall indicate that the statement-

(a) sets out all charges for services provided in respect of deposit accounts with the bank or financial institution; or

(b) does not set out all of the charges for services in respect of deposit accounts with the bank or financial institution and that charges for services not included in the statement shall be disclosed on request or at the time the service is offered.

3. (1) Where a bank or financial institution increases a charge on a service referred to in sub-regulation (1) of regulation 2, it shall disclose the increased charge in a notice:

Disclosure of increased charge Provided that this Regulation shall not apply to a customer who has agreed in writing that the bank or financial institution shall charge an amount, other than an amount required to be disclosed under sub regulation (1) or regulation 2.

(2) The notice referred to in sub-regulation (1) shall be displayed for a period of at least 30 days immediately before the effective date of the increase at all branches of the bank or financial institution.

4. A bank or financial institution shall-

(a) maintain, at each branch, a list of all charges applicable to deposit accounts and services provided by the bank or financial institution to its customers and to the public; and

(b) on request, make available at each branch the list requested to in paragraph (a) to its customers and to the public for inspection during business hours.Maintenance of list of charges

5. (1) A bank or financial institution shall disclose to a person who wishes to open an interest bearing deposit account with it, the rate of interest applicable to the account and the manner in which the amount of interest shall be calculated.Disclosure of interest rates

(2) The disclosures referred to in sub-section (1) shall-

(a) be in writing, copies of which shall be made available and displayed in each branch of the bank or financial institution where such accounts are kept; or

(b) be made by way of a general notice displayed in each branch of the bank or financial institution where such account is kept.

(3) The disclosure referred to in sub-regulation (1) shall include-

(a) the annual rate of interest;

(b) the frequency of payment of interest;

(c) the manner, if any, in which the balance in the interest bearing deposit account will affect the rate of interest; and

(d) any other circumstances that affects the rate of interest.

6. Where there is a change in the rate of interest, or in the manner of calculating the amount of interest on an interest bearing deposit account, the bank or financial institution shall disclose the changes by means of-

(a) a written statement, delivered to the person in whose name the account is maintained;

(b) a written statement, copies of which are available and displayed in each branch of the bank or financial institution where such account is kept;

(c) a general notice that is displayed in each branch of the bank or financial institution where such account is kept; or

(d) an advertisement in a daily newspaper.Changes in rate of interest

7. Where a bank or financial institution renews a fixed term deposit account, it shall disclose the rate of interest and the manner of calculating the amount of interest on the deposit account in accordance with sub-regulation (1) of regulation (5) and clauses (1) and (ii) of paragraph (b) of sub-regulation 2 of regulation 5.Renewal of fixed term deposit account interest.

8. Where a bank or financial institution makes an advertisement in respect of interest bearing deposits or debt obligations, a bank or financial institution shall disclose how the amount of interest applicable to each deposit and debt obligation shall be calculated by clearly indicating in the advertisement-

(a) in respect of interest-bearing deposits, the manner, if any, by which the balance of the account shall affect the rate of interest;. and

(b) any other circumstances that may affect the rate of interest.Disclosure of advertisement

SECTIONS 83 AND 84-THE BANKING AND FINANCIAL SERVICES (CAPITAL ADEQUACY) REGULATIONS

Statutory Instrument 184 of 1995

Regulations by the Minister

1. These Regulations may be cited as the Banking and Financial Services (Capital Adequacy) Regulations.Title

2. In these Regulations, unless the context otherwise requires- "associate" means a company in which more than 20 per cent but not more than 50 per cent of the outstanding voting shares (except any qualifying directors' shares) are owned directly or indirectly by the reporting bank or financial institution and the business activities and financial affairs of which the reporting bank or financial institution or its subsidiaries are able to materially influence; "capital deficiency" means a shortfall in the minimum capital required by these Regulations.

"common shareholders equity" includes common shares and related contributed surplus, retained earnings, general reserves and the statutory reserve fund; "goodwill" means the difference between cost and the acquired company's interest in the identifiable net assets; "off balance sheet risks" means all items not shown on the balance sheet where the bank's or financial institution's capital is potentially at risk, and includes letters of credit, guarantees, commitments to re-purchase loans or securities, acceptances, performance bonds and other items deemed to constitute credit risk by the Bank of Zambia;

"regulatory capital" means instruments comprising the capital resources of a bank or financial institution, and the total of which is used by the Bank of Zambia for compliance by a bank or financial institution with the minimum capital standard and for assessing capital adequacy; "general reserves" means an appropriation of retained earnings to reflect additional potential losses based on an assessment of the bank's overall situation by management;

"revaluation reserves" means the increment in the recorded or book value of a bank or financial institution's own premises, fixed assets or long term equity investments arising from a formal revaluation to reflect their current value or an amount closer to their current value than historical cost; "subordinated debt" means a security which is, by its terms, subordinated in right of payment to all deposit liabilities and all other liabilities of the entity that issued the security other than liabilities that, by their terms, rank equally with, or are subordinated to, that security; "subsidiary" means a company in which more than 50 per cent of the issued voting shares of the company (except any qualifying director's shares) are owned directly or indirectly by the reporting bank or artificial institution. Interpretation

3. (1) Every bank shall commence operations with primary paid-up capital of not less than two thousand million kwacha, or such other higher amount as may be prescribed by the Bank of Zambia from time to time and shall maintain this mimimum amount at all times.Minimum capital of a bank

(2) A bank which does not meet the minimum capital requirement at the coming into force of these Regulations shall enter into negotiations with the Bank of Zambia to progressively build up its primary capital to at least one billion, two hundred and fifty million kwacha by not later than 30th June, 1996, and to two billion by 31st December, 1996.

4. (1) Every financial institution shall, subject to such other higher amounts as may be prescribed by the Bank of Zambia commence operations with primary paid-up capital of not less than, for-Minimum capital of a financial institution

(a) deposit-taking insitutions, two thousand million kwacha;

(b) leasing companies, two hundred and fifty million kwacha; and

(c) other types of financial institutions, an amount prescribed by the supervisory authority, to be not less than twenty-five million kwacha; and shall maintain that minimum amount at all times.

(2) A financial institution which is operational at the coming into force of these Regulations which does not meet the applicable minimum capital requirment at the coming into force of these Regulations shall enter into negotiations with the Bank of Zambia to progressively build up its primary capital to at least the level prescribed by the Bank of Zambia by not later than 12 months after the coming into force of these Regulations.

5. Regulation 4 applies to a bank or financial instutition which is a subsidiary of an adequately capitalised bank or other financial institution, irrespective of the amount of control exercised by the holding bank.Application of regulation 4 to subsidiary

6. (1) Every bank and financial institution shall at all times maintain a minimum total capital equivalent of not less than 10 per cent of its total risk-weighted assets and off balance sheet exposures.Minimum capital ratio

(2) Primary or tier one capital shall be a minimum of 5 per cent of the bank's or financial institution's total risk-weighted assets.

(3) A bank or financial institution operating at or near the level referred to in sub-regulation (2) but which has serious weaknesses in the quality of its assets, diversification of risk, liquidity or earnings, shall maintain capital levels well in excess of those prescribed in sub-regulation (1).

7. (1) In determining which funds should be included in the capital base of a bank or financial institution for purposes of the required minimum capital and for measuring capital adequacy, three criteria shall be considered, namely-Determination of regulatory capital

(a) permanence;

(b) being free of mandatory fixed charges against earnings; and

(c) the subordinated legal position to the rights of depositors and other creditors of the bank or financial institution.

(2) Regulatory capital shall be determined in accordance with the Second Schedule.

8. For purposes of assessing capital adequacy for regulatory purposes, a bank's or financial institution's primary or tier one capital includes-

(a) common shareholders' equity; and

(b) the following categories of preferred shares-Primary or tier one capital

(i) perpetual preferrers;

(ii) compulsory convertible preferrers, where conversion to securities which would qualify as primary capital represents the only redemption option; and

(iii) preferrers which have an original term to maturity of 20 years or more, where no redemption occurs within the first ten years, and where the maximum redemption obligation in any one year is restricted to five per cent or less of the original amount.

9. Minority interests or common shareholders' equity attributable to consolidated subsidiaries shall qualify as primary or tier one capital if they possess the three essential criteria for capital and shall be designated as a legitimate add-on component of the consolidated primary or tier one capital.Conditions for securities of subsidiaries to qualify as primary or tier one capital

10. For purposes of assessing capital adequacy for regulatory purposes, a bank's or financial institution's secondary or tier two capital includes preferred shares issued by a bank or financial institution which meet the requirements under regulation 13.Secondary or tier two capital

11. Failure by a bank or financial institution to meet a preferred dividend payment shall not constitute grounds for bankruptcy, but an omission or an interest payment on any form of debt shall constitute grounds for bankruptcy.Failure to meet preferred dividend payment not to constitute grounds for bankruptcy

12. Notwithstanding the separate legal status of secondary or tier two capital, securities of subsidiaries shall qualify for inclusion in consolidated secondary or tier two capital for measuring capital adequacy for regulatory purposes, provided that:

(a) there are no parent guarantees or other contractual features governing the issue that could in effect rank the investors' claims equal to or ahead of the claims of depositors; and Conditions for securities of subsidiaries to qualify as secondary or tier two capital

(b) they are fully subordinated to the other liabilities of the subsidiary;

(c) they meet the minimum criteria referred to in paragraph (b) of sub-reguations (1) and (3) of regulation 13 for qualifying debentures.

13. (1) A preferred share shall qualify as secondary or tier two capital if-Qualifications for inclusion in secondary or tier two capital

(a) there is subordination to all of the deposit obligations of the bank; and

(b) it has an initial term greater than five years, with no redemptions permitted in the first five years.

(2) A share referred to in sub-regulation (1) may be redeemed before maturity only with the prior written approval of the Bank of Zambia.

(3) A loan stock or capital and other subordinated debentures issue shall not be included in secondary capital unless it meets the standards set in sub-regulation (1) and is free of restrictive covenants which could potentially interfere with a bank's or financial institution's ability to conduct normal banking operations, such as covenants mandating accelerated redemption in the event of failure to meet particular earnings coverage tests or in the event of missing dividend.

14. Any bank or financial institution intending to issue capital instruments shall seek the opinion of the Bank of Zambia as to whether or not these instruments qualify as capital.Bank's opinion to be sought

15. (1) For purposes of determining adequacy under these regulations, a bank or financial instutition shall submit to the Bank of Zambia its state of affairs, and the results of its operations and those of all of its subsidiaries and associates which conduct banking or financial services business.Submission of state of affairs and results of operations to bank

(2) A bank or financial institution shall provide the Bank of Zambia with details of the activities of each subsidiary and associate to enable the Bank of Zambia to verify which enterprises, if any, should not be considered.

16. Primary or tier one capital includes-

(a) paid-up common shares;

(b) qualifying preferred shares referred to in regulation 8;

(c) contributed surplus (including premium on issues of shares, less any payments of premium on redemption; and capital contribution by shareholders without the issuance of shares);

(d) retained earnings;

(e) general reserves;

(f) statutory reserves; and

(g) minority interests (in the equity of subsidiaries which are less than wholly owned).Components of primary or tier one capital

17. Secondary or tier two capital is composed of residual financial instruments which possess some of the features of capital and which meet the standards set out in regulation 13 and any other form of capital as may be determined and announced by the Bank of Zambia, and includes-

(a) forty per cent of the reserves arising from the revaluation of tangible fixed assets;

(b) subordinated term debt, or loan stock or capital with a minimum original term of maturity of over five years, subject to a straight-line amortization during the last five years leaving no more than 20 per cent of the original amount outstanding in the final year before redemption; and Components of secondary or tier two capital

(c) other instruments or forms of capital which the Bank of Zambia may allow:

Provided that no part of accumulated goodwill shall be considered as capital.

18. In determining the amount of available capital for purposes of computing the minimum capital and the capital ratio required under these Regulations, the following items shall be deducted from the amount of capital derived under regulations 16 and 17:

(a) goodwill and other intangible assets;

(b) investments in unconsolidated subsidiaries and associates where the bank or financial institution has a direct and indirect ownership of 20 per cent or more;

(c) lending of a capital nature to subsidiaries and associates;

(d) holdings of other banks' or financial instutitions' capital instrument; and

(e) the value of assets pledged to secure liabilities if such assets are not available to meet the liabilities of the bank or financial institution.Deductions from primary or tier one capital

19. In computing the minimum total capital required under regulation 6-

(a) part of revaluation reserves shall not be considered as primary capital;

(b) the total of secondary or tier two capital shall be limited to a maximum of 100 per cent of primary or tier one capital;

(c) revaluation reserves shall only qualify as secondary capital if-Limitations and restrictions

(i) they relate to the revaluation of long-term investments and immovable fixed assets which have been formally identified as strategic long term investments by the board of directors of the bank of financial instutitions;

(ii) the revaluation is made by an independent appraiser or another appropriate independent party, whose qualifications are considered appropriate by the respective bank's auditors, at intevals in accordance with the accounting policy of the reporting institution and generally accepted accounting practice;

(iii) the assets being revalued are of a similar nature, e.g., investments in premises, and the revaluation of all such assets is undertaken at the same time;

(iv) a reduction in the value of any such assets is taken into account where current market values are no longer supportive of balance sheet values; and

(v) details of all such revaluations are disclosed in the annual financial statements of the reporting insitution.

20. (1) Eligible supplementary capital described in sub-regulation (b) of regulation 17 components shall be subject to straight-line amoritization in the final five years prior to maturity or the effective dates governing shareholders' retraction rights.Amortization of outstanding balances

(2) When subordinated debentures and qualifying subsidiary debt instruments approach maturity, redemption or retraction, outstanding balances shall be amortized on the basis of the following criteria:

AMOUNT INCLUDED YEARS TO MATURITY IN CAPITAL

5 years or more 100%

4 years but less than five years 80%

3 years but less than 4 years 60%

2 years but less than 3 years 40%

1 year but less than 2 years 20%

Less than 1 year 0%

21. (1) For the purposes of this regulation, risk assets in relation to a bank or financial institution means assets that are normally recorded on the balance sheet and obligations which are assumed by the bank or financial institution and which are recorded off balance sheet.Risk weighted assets

(2) For the purposes of calculating the risk-weighted capital ratio, risk assets are classified into the following categories-

(a) cash and equivalent items, generally considered risk less, carrying a risk weight of zero per cent;

(b) assets with little risk and a high degree of liquidity, carrying a risk weight of twenty per cent;

(c) assets with a moderate degree of risk and having more credit and liquidity risk than those in paragaphs (a) and (b), carrying a risk weight of fifty per cent;

(d) the remaining assets typically found in the portfolio of a bank or financial institution, carrying a risk weight of one hundred per cent.

(3) Assets and their associated risk weights are as set out in parts 1 and 2 of the First Schedule.

22. (1) Any guarantees made by a bank or financial institution applicable to the liabilities of a subsidiary and which are already incorporated into the consolidated balance sheet shall be excluded to avoid double counting.Guarantees made by bank

(2) The inclusion for off-balance sheet items shall apply to arms' length contingent liabilities of the bank or financial institution and its subsidiaries, and shall exclude corresponding inter-company commitments.

23. The Bank of Zambia shall, in implementing capital adequacy standards, do so on an individual institution basis and shall rely on the criteria set out below:

(a) the size of the institution;

(b) the diversification of its assets and liabilities;

(c) degree of risk exposures;

(d) level of profitability; and

(e) management strength including liquidity management.Implements of capital adequacy standards

24. The total risk-weighted assets of each bank or financial institution shall be determined by multiplying the outstanding book value of its assets, net of allowance for losses and depreciation, by the prescribed risk weight factors of such assets, and aggregating the risk adjusted values of those assets following the format shown in Parts 1 and 2 of the First Schedule.Calculation of risk weighted assets

25. If the Bank of Zambia, after conducting a review of both on and off balance sheet risks, finds that a bank or financial institution has insufficient capital to meet the requirements under regulation 6, the Bank of Zambia, in accordance with its powers to correct unsafe and unsound practices under Section seventy-seven of the Act, shall direct that such bank or financial institution effect an increase of its capital or a reduction of its assets and off-balance sheet exposures, within a period of three months.Capital deficiency

26. (1) Any bank or financial institution which, for a continuous period of fourteen days, incurs capital deficiencies shall automatically stop to grant new loans and other credit facilities, including the issuance of letters of credit and guarantees, without the prior approval of the Bank of Zambia.Suspension of banks or financial institutions, branch networks, etc.

(2) A bank or financial institution to which sub-regulation (1) applies shall have its branch network and all capital expenditures suspended.

(3) The suspension of a bank's or financial institution's lending privilege, branch expansion and capital expenditures shall remain in force for as long as the bank or financial institution is unable to increase its capital or reduce its assets or off-balance sheet exposures as directed by the Bank of Zambia, or to restucture its balance sheet risks to the satisfaction of the Bank of Zambia.

27. (1) Any director, officer or employee of a bank or financial insitution who sanctions or votes for the approval of any loan or credit facility, branch expansion or capital expenditure while the bank remains under suspension as provided under regulations 25 and 26 shall be considered automatically suspended from office.Suspension of Director

(2) The suspension referred to in sub-regulation (1) shall be without prejudice to any other punitive measures which may be applied against the director, officer or employee and which have been provided for in the Act.

28. Every bank and financial institution shall maintain suitable records to facilitate verification of its capital position.Maintenance of records

29. For the purpose of computing its capital position, the principal office of each bank or financial institution in Zambia, all of its branches, agencies, subsidiaries, and associated companies regardless of country of domicile, shall be considered as a single unit.Consolidated reports

30. Every bank and financial institution shall-

(a) submit to the Bank of Zambia a monthly report on its capital position within 21 days following the reference month, in the form set out in the First and Second Schedules; and

(b) require its external auditors-Submission of reports

(i) to compute its capital position at the end of each financial year taking into account the requirements of the Act and all relevant prudential guidelines and regulations issued by the Bank of Zambia; and

(ii) to render a statement to the bank or financial institution on the adequacy or inadequacy of its capital and send a copy to the Bank of Zambia.

PART 1 CALCULATION OF RISK-WEIGHTED ASSETS

Name of Bank/Financial Institution

As at

(1) (2) (3) Balance (Net RiskRisk of allowance Weighted weight for losses) assets (1 2) % (K millions) (K million)s

ASSETS

Notes and Coins

-Zambian notes and coins 0

-other notes and coins 0

Balances held with the Bank of Zambia

-statutory reserves 0

-other balances 0

Balances held with commercial banks in Zambia

-with residential maturity of up to 12 months 20

-with residential maturity of more than 12 months 100 Abroad

-with residential maturity of up to 12 months 20

-with residential maturity of more than 12 months 100 Assets in transit

-from other commercial banks 50

-from branches of reporting bank 20 Investment in Debt Securities

-treasury bills

-other government securities 20

-issued by Local Government Units 100

-Private securities 100 Bills of Exchange

-portion secured by cash or treasury bills

-others 100 Loans and Advances

-portion secured by cash or treasury bills

-loans to or guaranteed by the Government of Zambia 50

-loans repayable in instalments and secured by a mortgage on owner occupied residential property 50

-loans to or guarantted by local Government Units 100

-loans to parastatals 100 Inter-bank advances and loans/ advances guaranteed by other banks

-with a residual maturity of 12 months 20

-with a residual maturity of morethan 12 months 100

Bank premises 100

Acceptances 100

Other assets 100

Investment in equity of other companies 100

TOTAL RISK-WEIGHTED ASSETS __ __ (on balance sheet)

PART 2 OFF-BALANCE SHEET OBLIGATIONS

(1) (2) (3) Balance (Net Risk Risk of allowance Weighted weight for losses) assets (1 2) % (K millions) (K millions) Letters of Credit

-sight import Letters of credit 20

-portion secured by Cash/Treasury bills

-standby Letters of credit 100

-portion secured by Cash/Treasury bills

-export Letters of credit confirmed 20 Guarantees and Indemnities

-guarantees for loans, trade and securities 100

-portion secured by Cash/Treasury bills

-performance bonds 50

-portion secured by Cash/Treasury bills

-securities purchased under resal agreement 100

-other contingent liabilities 100

-net open position in foreign currencies 100

TOTAL RISK-WEIGHTED ASSETS __ __

(off balance sheet)

TOTAL RISK-WEIGHTED ASSETS __ __

(on and off balance sheets)

COMPUTATION OF CAPITAL POSITION

As at Name of Bank/Financial Institution

I. PRIMARY (TIER 1) CAPITAL (K millions)

(a) Paid-up common shares

(b) Eligible preferred shares

(c) Contributed surplus

(d) Retained earnings

(e) General reserves

(f) Statutory reserves

(g) Minority interests (common shareholders' equity

(h) Sub-total LESS

(i) Goodwill and other intangible assets

(j) Investments in unconsolidated subsidiaries and associates

(k) Lending of a capital nature to subsidiaries and associates

(l) Holding of other bank's or financial institution's capital instruments

(m) Assets pledged to secure liabilities

(n) Sub-total

(o) Total primary capital (h-n)

II. SECONDARY (TEIR 2) CAPITAL

(a) Eligible preferred shares (regulations 13 and 17)

(b) Eligible subordinated term debt (regulation 23 (b))

(c) Eligible loan stock\capital (regulation 23 (b))

(d) Revaluation reserves (regulation 23 (a))

(e) Other (regulation 23 (c)) specify

(f) Total secondary capital

III. ELIGIBLE SECONDARY CAPITAL (the maximum amount of secondary capital is limited to 100% of primary capital)

IV. ELIGIBLE TOTAL CAPITAL (I (o) + III) (Regulatory capital)

V. MINIMUM CAPITAL REQUIREMENT:

(10% of total on and off balance sheet risk-weighted assets as established in the First Schedule, or K2,000 million, whichever is the higher)

VI. EXCESS (DEFICIENCY) (IV minus V)

SECTION 124-THE BANKING AND FINANCIAL SERVICES (FIXED ASSETS INVESTMENT) REGULATIONS

Statutory Instrument 185 of 1995

Regulations by the Minister

1. These Regulations may be cited as the Banking and Financial Services (Fixed Assets Investment) Regulations.Title

2. In these Regulations, unless the context otherwise requires-Interpretation "fixed assets of a bank or financial institution" include bank premises (including land), furniture, fixtures, equipment and vehicles, whether such assets are owned or leased, and any leasehold improvements; "primary capital" includes-

(a) paid up common shares;

(b) the following qualifying preferred shares;

(i) perpetual preferreds;

(ii) compulsory convertible preferreds, where conversion to securities which would qualify as primary capital represents the only redemption option; and

(iii) preferreds which have an original term to maturity of 20 years or more, where no redemption occurs within the first ten years, and where the maximum redemption obligation in any one year is restricted to five per cent or less or the original issued amount;

(c) contributed surplus (including premium on issues of shares, less any payments of premium on redemption; and capital contribution by shareholders without the issuance of shares);

(d) retained earnings;

(e) general reserves;

(f) statutory reserves; and

(g) minority interests (in the equity of subsidiaries which are less than wholly owned).

"secondary capital" means residential financial instruments that possess some of the features of capital and which meet the standards set out in regulation 13 of the Banking and Financial Services (Capital Adequacy) Regulations, and any other form of capital as may be determined and announced from time to time by the Bank of Zambia, and, subject to a limit which shall not exceed 100 per cent of primary capital and includes the following:

(a) forty per cent of the reserves arising from the revaluation of tangible fixed assets;

(b) subordinated term debt, or loan stock or capital with a minimum original term of maturity of over five years, subject to a straight-line amortization during the last five years leaving no more than 20 per cent of the original amount outstanding in the final year before redemption;

(c) other instruments or forms of capital which the Bank of Zambia may allow, provided that no part of accumulated goodwill shall be considered as capital; "regulatory capital" means those instruments which comprise the capital resources of a bank or financial institution, and the total of which is used by the Bank of Zambia for compliance by a bank or financial institution with the minimum capital standard and for assessing capital adequacy, and is calculated in accordance with the Second Schedule of the Banking and Financial Services (Capital Adequacy) Regulations.

3. A bank or financial institution shall not, without the approval of the Bank of Zambia-

(a) invest directly in fixed assets;

(b) invest in the stock, bonds, debentures or obligations of any corporation holding the fixed assets of such bank or financial institution; or

(c) make loans to or on the security of the stock of any such corporation; if the aggregate of all such investments and loans exceed the amount of the regulatory capital of such bank or financial institution.Prohibition of investments without Bank of Zambia approval

4. A bank or financial institution shall obtain the approval of the Bank of Zambia before making any investment in fixed assets which will result in all such investments exceeding the amount of its regulatory capital.Approval before investment in fixed assets

5. Where a bank or financial institution whose fixed assets exceed regulatory capital at the coming into force of these Regulations, such excess shall be covered, within a reasonable period of time to be determined by the Bank of Zambia, either by a reduction of such assets or an increase in capital which will result in its fixed assets being in compliance with these Regulations.Covering of excess assets

6. All fixed assets acquired by a bank or financial institution shall be booked at cost, and shall be stated in the balance sheet of the bank or financial institution at cost less accumulated depreciation or amortization.Fixed assets to be booked at cost

7. For book purposes, a bank or financial institution shall depreciate assets over their useful life, using a straight line method.Method of depreciation of assets

8. (1) A bank or financial institution shall capitalise all leases relating to fixed assets in its report to the Bank of Zambia. Capitalisation of leases

(2) In reports to the Bank of Zambia, the Bank shall require that the amount of all leases pertaining to fixed assets obligations be capitalized.

(3) The amount capitalized under sub-regulation (2) shall be the present value of the minimum required payments over the non-cancellable term of the lease and the rate of interest shall be not more than the bank or financial insitution's prime lending rate.

9. A bank or financial institution which contravenes these Regulations shall be liable to a penalty of one thousand penalty units per day for the period during which the contravention continues.Penalty for contravening Regulations

10. (1) A bank or financial institution shall report, twice a year to the Bank of Zambia, as at the end of June and December, the amount of its fixed assets and how these relate to regulatory capital.Report on fixed assets

(2) The report referred to in sub-regulation (1) shall be made in the form set out in the Schedule.

STATEMENT OF INVESTMENTS IN FIXED ASSETS OF A BANK OR FINANCIAL INSTITUTION INCORPORATED IN ZAMBIA

Name of Bank/Financial Institution (K'000) At close of business on 19 ......

1. TOTAL REGULATORY CAPITAL

(As calculated by using the Second Schedule of the Banking and Financial Services (Capital Adequacy) Regulations, Attach calculation.

2. FIXED ASSETS

(a) Bank Premises (including land)

(b) Furniture and Fixtures

(c) Equipment

(d) Vehicles

(e) Leasehold improvements

(f) Other

Total

3. INVESTMENTS IN CORPORATION HOLDING FIXED ASSETS OF THE REPORTING BANK OR FINANCIAL INSTITUTION

(a) Stock

(b) Bonds

(c) Debentures

(d) Obligations

Total

4. ADVANCED/LOANS MADE TO OR ON THE SECURITY OF THE STOCK OF THE REPORTING BANK OR FINANCIAL INSTITUTION

(a) Advances

(b) Loand

Total

5. TOTAL INVESTMENT IN FIXED ASSETS (Items 2 + 3 + 4)

6. TOTAL REGULATORY CAPITAL (line 1) A A PERCENTAGE OF FIXED ASSETS (line 5)

Authorised Signature Authorised Signature

SECTIONS 73 AND 124-THE BANKING AND FINANCIAL SERVICES (INSIDER LENDING)

REGULATIONS Statutory Instrument 97 of 1996

Regulations by the Minister

1. These Regulations may be cited as the Banking and Financial Services (Insider Lending) Regulations.Title

2. In these Regulations, unless the context otherwise requires-Interpretation "control" in relation to a company, bank or financial institution means a situation where one or more persons, acting in concert, directly or indirectly-

(a) own, control, or have the power to vote twenty-five per centum or more of any class of voting shares of another person;

(b) control in any manner the election of a majority of the directors of a company, bank or financial institution; or

(c) have the power to exercise controlling influence over the management policies of a company, bank or financial institution; but does not include a person who has control or ability to exercise a controlling influence over the management policies of a company, bank or financial institution solely by virtue of his position as an officer or director of the company, bank or financial institution; "director" means-

(a) any person who occupies the position of a director in accordance with the Companies Act;

(b) any director of a bank or financial institution, whether or not receiving compensation;

(c) any director of a holding company of which the bank or financial institution is a subsidiary;

(d) any director of any other subsidiary of a holding company of a bank or financial institution; or

(e) any person who participates, or who has the authority to participate, other than in that person's capacity as a director, in major policy making functions of a company, bank, or financial institution, whether or not-

(i) that person is an employee of the company, bank or financial institution; or

(ii) that person is serving without a salary or compensation; "holding company" in relation to a bank or financial institution means any company which has control over a bank or financial institution; "immediate family" means the spouse and children of a person; "insider" means-

(a) any officer, director or principal shareholder of a company, bank or financial institution;

(b) any person who participates or has the authority to participate in major policy-making functions of a company, bank or financial institution whether employed or not by that institution;

(c) a company where an insider of a bank or financial institution owns, directly or indirectly, alone or together with one or more other insiders, more than twenty per centum of the shares of the company or exercises control over the management of the company; or

(d) a company where the bank or financial institution owns more than ten per centum of the outstanding shares of the company or, in the opinion of the Bank of Zambia, is likely to exercise influence over the management of the company; "large loan" means an exposure of a bank or financial institution to any person in an amount equal to, or exceeding, ten per centum of the bank's or financial institution's regulatory capital; "loans and extensions of credit" means-

(a) any direct or indirect advance of funds to an insider-

(i) made on the basis of any obligation of that insider to repay the funds; or

(ii) repayable from specific property pledged by that insider or by any other person on behalf of that insider;

(b) all credit risk arising from actual claims, potential claims of all kinds and credit substitutes; or

(c) commitments to extend credit and any commitment to acquire a debt security or other right to payment of a sum of money; "principal shareholder" means a person that directly or indirectly, or acting through or in concert with one or more persons, owns, controls or has the power to vote more than ten per centum of any class of voting shares of a company, bank or financial institution; "regulatory capital" means those instruments which comprise the capital resources of a bank or financial institution, and the total of which is used by the Bank of Zambia for compliance by a bank or financial institution with the minimum capital standard and for assessing capital adequacy, and is calculated in accordance with the Second Schedule to the Banking and Financial Services (Capital Adequacy) Regulations; "related interest" means a company that is controlled by a person, the funds or services of which will benefit that person; "subsidiary" means any company which is controlled by another company, bank or financial institution.

3. These Regulations shall apply to-Application

(a) all banks and financial institutions licenced under the Act, and all directors and principal shareholders of these banks and financial institutions;

(b) the holding company of which a bank or financial institution is a subsidiary, and to any other subsidiary of that holding company;

(c) any company included within the meaning of an insider as defined in these Regulations; and

(d) a political or campaign committee that benefits or is controlled by an insider.

4. A bank or financial institution shall not make a loan or extend credit to any of its directors, principal shareholders or any related interest of that person or to any persons included within the meaning of an insider as defined in these Regulations, unless the loan, advance or extension of credit-Credit worthiness

(a) is made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions by the bank or financial institution with other persons that are not covered by these Regulations and who are not employed by the bank or financial institution; and

(b) does not involve more that the normal risk of repayment.

5. A bank or financial institution shall not extend credit to any insider or the insider's related interest, when-Lending limits

(a) the aggregate of any new and outstanding loans, advances or extensions of credit to that person and his related interests exceeds ten per centum of the bank's or financial institution's regulatory capital; or

(b) the aggregate of all loans, advances or extensions of credit, including any proposed new extension of credit, to all insiders and their related interests, exceeds one hundred per centum of the bank's or financial institution's regulatory capital.

6. (1) A bank or financial institution shall not make any loans, advances or extensions of credit to any of its directors, or principal shareholders or to any related interest of that person if the aggregate of any new extension of credit and all outstanding loans and extensions of credit to that person and his related interests exceeds five per centum of that bank's or financial institution's regulatory capital unless-Prior approval

(a) all outstanding amounts of loans or extensions of credit have first been acknowledged, in writing, by the Board of Directors of the bank or financial institution;

(b) the new loans or extensions of credit have been approved in advance by a majority of the members of the Board of Directors of the bank or financial institution; and

(c) the interested party has abstained from participating directly or indirectly in the voting.

(2) Any participation in the discussion, or any attempt to influence the voting by the Board of Directors of a bank or financial institution regarding a loan, advance or extension of credit to any director, principal shareholder, or to any related interest of that person shall constitute indirect participation in the voting by the Board of Directors and shall nullify the authorization by the Board of Directors of the loan, advance or extension of credit.

7. The total amount of credit extended by a bank or financial institution to a partnership shall be deemed to be extended to any member of the partnership.Partnership interests

8. Any director of a bank or financial institution who becomes indebted to any bank or financial institution other that the bank or financial institution of which he is a director, in an aggregate amount greater than five per centum of the regulatory capital of the bank or financial institution of which he is a director shall, within ten days from the date the indebtedness reached that level, make a written report to the Board of Directors of the bank or financial institution of which he is a director, which report shall state-Reports by directors

(a) the lender's name;

(b) the date of the loan;

(c) the amount of the loan, advance or extension of credit;

(d) the intended use of the proceeds;

(e) the source of repayment; and

(f) security pledged as collateral.

9. Any loan, advance or extension of credit by a bank or financial institution to an insider shall be approved in advance, and in writing, by a majority of the members of the Board of Directors of the bank or financial institution or by a special committee consisting of a majority of the members of the Board of Directors specially constituted for that purpose.Credit approval

10. (1) Every bank or financial institution shall-Submission of reports

(a) submit to the Bank of Zambia within ten working days following its month-end, in the Form prescribed in the Schedule, a monthly report of its insider loans;

(b) if requested by the Bank of Zambia submit further detailed information on all or any outstanding exposure to an insider; and

(c) report to the Bank of Zambia any loan, advance or extension of credit which is outstanding to an insider-

(i) where that loan, advance or extension of credit is outstanding on the date of coming into force of the Regulations and that loan, advance or extension of credit has a balance owing that would have contravened these Regulations if the loan had been made on or after the date of the coming into force of these Regulations;

(ii) if the aggregate of the loans or extensions of credit to insiders exceeds the maximum amount authorised under regulation 5.

(2) The report referred to in sub-regulation (1) shall be made not later than twenty-one days from the date of coming into force of these Regulations and shall set out details of the exposure and a period, not exceeding one year, within which the exposures shall be brought within the limits set by regulation 5.

11. Any renewal of a loan, advance or extension of credit on or after the date of coming into force of these Regulations shall be made only on such terms as shall bring the facility into compliance with the limits prescribed by regulation 5.Renewal of loan, advance or extension of credit

12. (1) A bank or financial institution which contravenes these Regulations shall be guilty of an offence and liable, for every day that the contravention continues, to a fine assessed by the Bank of Zambia not exceeding six hundred penalty units or, on conviction, to a fine not exceeding the fine prescribed in the Act, and all its insiders, including directors and shareholders, and any person concerned in the management of the bank or financial institution shall be personally liable to the same fine and upon conviction, to imprisonment for a term not exceeding two years, or to both. Penalty for non-compliance

(2) Any director or any person referred to in sub-regulation (1) shall, in addition to the penalties prescribed in that sub-regulation, be liable for removal from office and barred from holding office in the banking and financial sector.

BANK OF ZAMBIA INSIDER LENDING EXPOSURE REGULATIONS

Reporting Bank:

Month ending:

Regulatory Capital (item IV of Regulatory Capital Calculation):

Total

SECTIONS 73 AND 124-THE BANKING AND FINANCIAL SERVICES (LARGE LOAN EXPOSURES) REGULATIONS

Statutory Instrument 96 of 1996

Regulations by the Minister

1. These Regulations may be cited as the Banking and Financial Services (Large Loan Exposures) Regulations.Title

2. In these Regulations, unless the context otherwise requires-Interpretation "common enterprise" means-

(a) two or more persons constituting a single risk arising from the direct or indirect control of one of those persons over the others; or

(b) two or more persons having no relationship of control over one another, but who constitute a single risk as a result of being interconnected to the extent that if one of them experienced financial problems, the other or all of them would, in the opinion of the Bank of Zambia encounter repayment difficulties; "control" in relation to a common enterprise, means a situation where-

(a) one or more persons acting in concert, directly or indirectly, own, control or have the power to vote twenty-five per centum or more of any class of voting shares of another person;

(b) one or more persons, acting in concert, control in any manner, the election of a majority of the directors, trustees, or other persons exercising similar functions, of another person; or

(c) any circumstances exist which indicate that one or more persons acting in concert, directly or indirectly, exercise a controlling influence over the management, policies or affairs of another person; "corporate group" means-

(a) a corporation and all its subsidiaries; or

(b) a subsidiary of any person which directly or indirectly owns or controls more than fifty per centum of the voting shares of a corporation; "large loan" means an exposure of a bank or financial institution to any person or common enterprise which equals or exceeds ten per centum of the bank's or financial institution's regulatory capital; "loans and extension of credit" means-

(a) any direct or indirect advance of funds to a person or common enterprise-

(i) made on the basis of an obligation of that person or common enterprise to repay the funds; or

(ii) repayable from specific property pledged by, or on behalf of, a person or common enterprise;

(b) all credit risk arising from actual claims, potential claims of all kinds and credit substitutes; or

(c) commitments to extend credit and any commitment to acquire a debt security or other right to payment of a sum of money; "regulatory capital" means those instruments which comprise the capital resources of a bank or financial institution, and the total of which is used by the Bank of Zambia for compliance by a bank or financial institution with the minimum capital standard and for assessing capital adequacy, and is calculated in accordance with the Second Schedule to the Banking and Financial Services (Capital Adequacy) Regulations.

3. These Regulations shall apply to all banks and financial institutions licensed under the Act, and which accept deposits, money market instruments or the equivalent of deposits or money market instruments.Application

4. A bank or financial institution shall not incur an exposure to any single person in an amount which, in the aggregate, exceeds twenty-five per centum of the bank's or financial institution's regulatory capital.Limit on single exposures

5. Where a loan or an extension of credit has been made to a common enterprise, the total exposure of the bank or financial institution to that group shall be aggregated and considered as a single exposure and shall not exceed, in the aggregate, twenty-five per centum of the bank's or financial institution's regulatory capital.Limit on exposures to a common enterprise

6. Notwithstanding the limits prescribed in regulations 4 and 5, a bank's or financial institution's large loans exposures to persons and common enterprises shall not exceed, in the aggregate, six hundred per centum of the bank's or financial institution's regulatory capital.Limit on the aggregate of large loans exposures

7. (1) There shall be no limits on loans and extensions of credit to the Government.Exceptions, exemptions and other limits

(2) There shall be a limit of fifty per centum of the bank's or financial institution's regulatory capital on loans and extensions of credit to the following organisations:

(a) a foreign government, its agencies and instrumentality; and

(b) the International Monetary Fund and the World Bank.

(3) The limit referred to in sub-regulation (2) shall apply to the aggregate of the loans and extensions of credit to each of the organisations referred to in that sub-regulation.

(4) In the case of loans, advances and extensions of credit in the inter-bank market-

(a) there shall be no limit where the inter-bank exposure is fully secured by the Government, including treasury bills and Government bonds with a residual maturity of less than one year.

(b) a bank or financial institution may grant another bank or financial institution a loan and an extension of credit on the security of a Government bond with a residual maturity of one year, but not more than five years, for any amount not exceeding seventy-five per centum of the face value of the pledged securities; and

(c) there shall be an exposure limit of fifty per centum of a bank's or financial institution's regulatory capital in respect of unsecured exposures.

(5) The loans, advances or extensions of credit referred to in sub-regulation (4) shall comprise repayment terms which shall not exceed five working days.

(6) Any treasury bills and Government bonds pledged as security against loans, advances or extensions of credit shall be deducted from the bank's or financial institution's holdings reported to the Bank of Zambia and shall not be counted towards the calculation of the minimum liquidity requirements of the bank.

8. Where a bank or financial institution agrees with one or more other banks or financial institutions to collectively make a loan or extend credit to a person, only that portion of the loan or credit which is actually advanced by the bank or financial institution and representing its pro rata share of the syndicated loan shall be subject to the loan limits prescribed by regulations 4, 5, 6 and 7.Loan syndications

9. The lending limits prescribed by regulations 4, 5, 6 and 7 shall not apply to any portion of a loan, advance or extension of credit that represents accrued or discounted interest, unless such interest has been capitalised or is, in any other manner, converted to principal.Interest or discount on loans

10. The Bank of Zambia shall have the authority-

(a) to determine whether or not, and if so determined, when a loan, advance or extension of credit made to one person shall be attributed to, or combined with, those of another person;

(b) to combine the loans, advances or extensions of credit of one or more persons with those of another person when-Combining of loans to separate borrowers

(i) the proceeds of the loans or extensions of credit are used for the direct benefit of the other person;

(ii) a common enterprise is deemed to exist between the persons.

11. All large loans, advances and extensions of credit together with any other loans, advances or extensions of credit which, added to an already existing facility equals or exceeds ten per centum of a bank's or financial institution's regulatory capital shall be approved in advance, and in writing, by a majority of the members of the Board of Directors of the bank or financial institution or a special committee consisting of a majority of the members of that Board specially constituted for that purpose.Credit approval

12. Every bank or financial institution shall-

(a) within ten days following its month-end and in the Form prescribed in the Schedule, submit to the Bank of Zambia a monthly report of its large loans; and

(b) if requested by the Bank of Zambia, submit further detailed information on all or any other credits.Submission of reports

13. (1) Every loan, advance or extension of credit which is outstanding on the coming into force of these Regulations and which would violate these Regulations if the loan, advance or extension of credit was made after that date shall be reported to the Bank of Zambia not later than twenty-one days following the coming into force of these Regulations. Compliance with limits of these Regulations

(2) Subject to sub-regulation (3), the report referred to in sub-regulation (1) shall set out the details of the loan, advance or extension of credit and a period, not exceeding one year or such other period as may be provided for in the original loan agreement, within which to progressively bring the loan, advance or extension of credit within the limits of these Regulations.

(3) Notwithstanding sub-regulation (2), any renewal of a loan, advance or extension of credit done on or after the effective date of these Regulations shall be made only on such terms as shall bring the renewal of a loan, advance or extension of credit into compliance with the limits of these Regulations.

14. (1) A bank or financial institution which contravenes these Regulations shall be guilty of an offence and liable, for every day during the contravention continues, to a fine assessed by the Bank of Zambia not exceeding six hundred penalty units or, on conviction, to a fine not exceeding the fine prescribed in the Act, and every director, and any person concerned in the management of the bank or financial institution shall be personally liable to the same fine, or upon conviction, to imprisonment for a term not exceeding two years, or both.Penalty for non compliance

(2) Any director or any person referred to in sub-regulation (1) shall, in addition to the penalties prescribed in that sub-regulation, be liable for removal from office and barred from holding office in the banking and financial sector.

BANK OF ZAMBIA LARGE LOAN EXPOSURES REGULATIONS

Reporting Bank:

Month ending:

Regulatory Capital (item IV of Regulatory Capital Calculation):

Total

SECTIONS 58 AND 124-THE BANKING AND FINANCIAL SERVICES (CLASSIFICATION AND PROVISIONING OF LOANS) REGULATIONS

Regulations by the Minister Statutory Instrument 142 of 1996

PART I PRELIMINARY

1. These Regulations may be cited as the Banking and Financial Services (Classification and Provisioning of Loans) The Banking and Financial Services (Classification and Provisioning of Loans) Regulations came into operation on the 1st January, 1997.Regulations. *The Banking and Financial Services (Classification and Provisioning of Loans) Regulations came into operation on the 1st January, 1997.Title

2. In these Regulations, unless the context otherwise requires-Interpretation "allowance for loan losses" means a balance sheet valuation account established, through charges to the income statement, to absorb anticipated losses in respect of a bank's or a financial institution's on-balance sheet and off-balance sheet loans and commitments; "Board" means the Board of Directors of a bank or a financial institution; "capitalisation of interest" means-

(a) the process whereby accrued but uncollected interest is added to the unpaid principal balance at the payment date or maturity of a loan; or

(b) interest which is refinanced or rolled-over into a new loan facility; "in the process of recovery" means that the efforts of collecting a debt are proceeding on course with the final recovery not expected to exceed one hundred and twenty days, either through-

(a) legal action against the borrower; or

(b) collection efforts which do not involve legal action, but which, in the near future, are expected to result in the repayment of the loan, including interest or, in its restoration to current status through payment of all the principal and the interest due; "loan" means-

(a) any direct or indirect advance of funds, whether secured or unsecured, made on the basis of any obligation of the recipient or on the recipient's behalf to repay the funds; or

(b) leasing, and all credit risks, arising from actual claims and potential claims of all kinds, overdrafts, credit substitutes or commitments to extend credit and to acquire a debt security or other right of payment of a sum of money; "non-accrual loan" means a loan-

(a) on which interest is no longer being taken into income unless paid by the borrower in cash;

(b) which has been placed on a cash basis for the purpose of financial reporting;

(c) on which principal or interest is due and unpaid for ninety days or more; or

(d) on which interest payments equal to ninety days' interest or more have been capitalised, refinanced, or rolled-over; "non-performing loan" has the same meaning as in the Act; "past due loan" means a loan where payment of principal or interest in contractually past due, but which has not yet been included in non-accrual loans; "provision for loan losses" means a charge against income which is added to the Allowance for Loan Losses Account to ensure that the account is maintained at an adequate level in order to cover all anticipated loan losses, after taking into account any write-offs or recoveries of specific loans;

"renegotiated loan" means a loan which has been refinanced, rescheduled, rolled-over, or otherwise modified on such terms and conditions as may have been agreed by the parties thereto because of the weakened financial condition of the borrower resulting in the borrower's inability to repay in accordance with the original terms of the loan; "senior management" means the officers responsible for the administration of a bank or a financial institution; "well secured" means securing a loan by-

(a) collateral in the form of perfected liens on, or pledges of, real or personal property;

(b) securities that have realisable value net of realisation costs which is documented in writing and available for examination and which is sufficient to repay the debt and accrued interest in full; or

(c) the guarantee of a financially responsible party, irrevocable guarantees issued by banks which are internationally rated as "first class" banks, multi-national companies, and governments where the beneficiary bank has performed the financial analysis necessary to determine that the issuer is financially sound, well-capitalised, and able to pay the guarantee on demand or upon the default of the borrower and which guarantee is properly acknowledged by the issuer through independent confirmation.

3. These Regulations shall apply to all banks and financial institutions licensed under the Act.Application

PART II LOAN REVIEW SYSTEM AND RELATED POLICIES AND PROCEDURES

4. The Board shall adopt a loans policy which shall specify, at a minimum-

(a) standards for loans and extensions of credit; and

(b) the bank's or financial institution's functions of lending and approving of loans, delegation of responsibilities, and the process of reviewing the quality of loans.Loans policy

5. (1) The Board shall establish, in writing, a loan review system which shall identify risk, assure the adequacy of the Allowance for Loan Losses Account, and properly reflect such result in its financial statements.Loan review system

(2) The loan review system referred to in sub-regulation (1) shall, at a minimum, ensure that-

(a) the loan portfolio and lending function of a bank or a financial institution conforms to the loans policy referred to in regulation 4;

(b) the executive management and the Board are at all times adequately informed about portfolio risk;

(c) all loans are regularly evaluated using an objective grading system which is consistent with these Regulations;

(d) loans which have, or are likely to have, a problem are properly identified, classified and placed on non-accrual status, in accordance with these Regulations;

(e) timely, appropriate provisions and write-offs of identified losses are made to the Allowance for Loan Losses Account, so as to maintain the account at a level which will-

(i) accurately reflect the fair and realisable value of the loans in the balance sheet; and

(ii) meet the overall minimum provisioning levels specified in these Regulations;

(f) allowances and provisions are properly reflected in the bank's or the financial institution's financial statements.

(3) The loan review system referred to in sub-regulation (1) shall be reassessed on a regular basis in the light of current circumstances and shall be submitted to the Board at least once a year, for review and approval.

6. (1) There shall be a Loans Review Committee in every bank or financial institution which shall consist of not less than three members.Loans Review Committee

(2) The Chief Executive Officer of the bank or the financial institution shall be a member of the Loans Review Committee referred to in sub-regulation (1).

(3) The members of the Loans Review Committee referred to in sub-regulation (1) shall be appointed by the Board from among st the members of the Board.

(4) A bank or a financial institution shall, through the Loans Review Committee and at least once every calendar quarter, review the quality and collectability of all loans in its loan portfolio, including any accrued and unpaid interest.

(5) The Loans Review Committee shall, immediately after the review referred to in sub-regulation (4), make a detailed report of such review directly to the Board, which shall take appropriate action on the report.

(6) A bank or a financial institution shall at all times maintain reasonable records in support of the evaluations and related entries of those records and shall make the records available for inspection as and when requested by the Bank of Zambia.

PART III DETERMINATION AND TREATMENT OF NON-ACCRUAL LOANS AND RELATED ACCOUNTS

7. (1) A bank or a financial institution shall place a loan in non-accrual status if-

(a) there is reasonable doubt about the ultimate collectability of the principal or the interest;

(b) a specific provision has already been established on the loan;

(c) except in the case of a restructured loan, the loan has been partially or entirely written off; or

(d) the principal or the interest has been in default for a period of ninety days or more, or the account has been inactive for ninety days and deposits are insufficient to cover the interest capitalised during the period.Transfer to non-accrual status

8. Where a loan is placed in non-accrual status under these Regulations-

(a) all previously accrued but uncollected interest taken into income shall be reversed, at the latest, by the end of the quarter in which the loan was placed in non-accrual status;

(b) interest which has accrued during a current quarter shall be reversed against the income of that quarter; and

(c) interest accrued in periods other than the current quarter shall be charged to the Allowance for Loan Losses Account.Treatment of income on non-accrual loans

9. (1) Where a loan is placed in non-accrual status, any cash payments received shall first be applied to reduce the amount of the principal outstanding and due.Treatment of cash payments on non-accrual loans

(2) Where the principal outstanding of the loan which is due has been fully recovered, any further excess payments may be taken into income, provided the amount of income recognised is limited to the amount which would have been due to the bank or the financial institution if the loan had been current at its contractual rate.

(3) Any further excess payments referred to in sub-regulation (1) shall be applied against any additional balance outstanding on the loan.

(4) Where a renegotiated or a restructured loan exists, payments shall be taken into income on the basis of the revised terms of the loan agreement.

(5) Any determination by senior management or the Board that a loan is ultimately collectable shall be supported by-

(a) a current, well-documented credit evaluation of the borrower's financial condition and prospects for repayment; and

(b) a consideration of the borrower's historical repayment performance.

10. (1) A non-accrual loan shall only be restored to accrual status when-

(a) all payments of the principal and interest become fully current and senior management has determined that there is no reasonable doubt the ultimate collectability of the principal or the interest of the loan; or Restoration to accrual status

(b) when the loan otherwise becomes well-secured and is in the process of recovery.

(2) For the purposes of paragraph (a) of sub-regulation (1), a bank or financial institution shall have received repayment of all the principal and the interest in arrears, unless the loan has been formally restructured and qualifies for accrual status.

(3) Until a loan is restored to accrual status, any cash payments received shall be treated in accordance with the provisions of regulation 9.

11. (1) A renegotiated loan shall return to performing status-

(a) When the rate charged for the loan is equivalent to the rate that would be charged on a new fully preforming loan of similar merit; and

(b) where all payments are fully current and senior credit management has determined, based on available and documented information, that there is no reasonable doubt about ultimate collectability of the principal or the interest.Renegotiated loans

(2) Where a loan is reclassified from non-current to performing status, all existing specific provisions shall be extinguished prior to that reclassification.

12. Where a bank or a financial institution has a number of loans outstanding to a single borrower, and one of those loans meets the criteria from non-accrual status, the bank or the financial institution shall evaluate all other loans to that borrower and if the bank or the financial institution considers it appropriate, place one or more of such other loans in non-accrual status.Treatment of multiple loans to one borrower

13. (1) A bank or a financial institution shall maintain at all times a balance, in the Allowance for Loan Losses Account, that is the best possible estimate of probable loan related losses existing in the portfolio of on-and off-balance sheet items in the light of current conditions.Allowance for Loan Losses Account

(2) The Allowance for Loan Losses Account shall-

(a) in the case of balance sheet assets, except for acceptances, appear as deduction from the applicable asset; and

(b) in the case of acceptances and off-balance sheet items such as guarantees or letters of credit, appear as a separate item with other liabilities.

14. (1) Any additions to, or reductions from, the Allowance for Loan Losses Account shall be made through charges or credits to the Provision for Loan Losses Account in the income statement, and all loan write-offs or recoveries shall be charged or credited directly to the Allowance for Loan Losses Account.Additions and reductions to the Allowance for Loan Losses Account

(2) A loan loss or recovery shall not be charged or credited directly to "retained earnings" or to any other capital related account.

15. (1) The amount of the provision for loan losses that is charged to the income statement shall be the amount that is required to establish a balance in the Allowance for Loan Losses Account which management considers adequate to absorb all credit related losses in its portfolio of on-and off-balance sheet items and which, at a minimum, meets the provisioning requirements specified in these Regulations.Provision for loan losses

(2) All loans that are written off shall be charged directly to the Allowance for Loan Losses Account.

(3) Where no provisions are established, a provision shall be made in an amount sufficient to cover the loan amount that is to be written off, and shall be written off against the Allowance for Loan Losses Account.

PART IV DETERMINATION OF AMOUNT OF POTENTIAL LOSS AND CLASSIFICATION OF LOANS

16. (1) In determining the amount of potential loss related to individual loans and to the aggregate of the loans portfolio of a bank or a financial institution, the following factors shall be considered:

(a) the historical loan loss experience;

(b) the current economic conditions;

(c) the delinquency trends;

(d) the effectiveness of the bank's or financial institution's lending policies and collection procedures; and

(e) the timeliness and accuracy of the bank's or financial institution's loan review function.Determination of amount of potential loss

17. (1) Subject to regulation (2), all loans of a bank or a financial institution shall be classified by the bank or the financial institution in one of the categories outlined in sub-regulations (3) to (6).Classification of loans

(2) Notwithstanding sub-regulation (1), an adverse classification may be warranted and appropriate where-

(a) a significant departure from the intended source of repayment develops even if a loan is current and supported by underlying collateral value; or

(b) where repayment terms originally were too liberal or a delinquency has been cured by modifications, refinancing, or additional advances.

(3) A loan shall be classified in the "pass" category if it is-

(a) considered current and performing in accordance with its contractual terms and expected to continue doing so; and

(b) fully protected by the current sound worth and paying capacity of the borrower or of the collateral pledged.

(4) A loan shall-

(a) be classified "standard" if it-

(i) is inadequately protected by the current sound worth and paying capacity of the borrower or of the collateral pledged; or

(ii) has well-defined weaknesses that may jeopardize the orderly repayment of the debt.

(b) at a minimum, be classified "substandard" if it is in arrears as to the principal or interest for ninety days or more, but less than one hundred and twenty days.

(5) A loan shall-

(a) be classified "doubtful" loan if-

(i) it is considered to have all the weaknesses inherent in a substandard loan; and

(ii) collection or orderly repayment in full, on the basis of currently existing facts, conditions and values, is highly questionable.

(b) at a minimum, be classified "doubtful" if it is in arrears as to principal or interest for one hundred and twenty days or more, but less than one hundred and eighty days.

18. (1) The loan classification set out in the First Schedule shall apply to the corresponding minimum percentages set out in that Schedule.Minimum provisioning requirements

(2) Any loan or portion of a loan which is fully secured by cash, by a segregated deposit in the lending bank, or by a security issued by the Government of Zambia shall be exempt from the provisioning requirements referred to in sub-regulation (1).

(3) Any loan or portion of a loan which is assigned a "Loss" classification shall be fully provisioned at the time the loss is identified.

(4) The Bank of Zambia may, under exceptional circumstances, with its prior written approval and under such terms and conditions as it may consider necessary, vary a provisioning level for a period not exceeding one year.

19. (1) A bank or a financial institution shall maintain reasonable records in support of its evaluation of potential loan losses and of the entries made to ensure that an adequate provisioning level is maintained in the Allowance for Loan Losses Account.Examiner review

(2) The records and entries referred to in sub-regulation (1) shall be made available to the Bank of Zambia for review in order to enable it to assess management's estimation procedures, the reliability of the information on which estimates are based, and the adequacy of the Allowance for Loan Losses Account.

20. A bank or a financial institution shall, within ten days after the last day of every month, or such other reporting period as may be determined by the Bank of Zambia, submit to the Bank of Zambia-

(a) a balance sheet which reflects the Allowance for Loan Losses Account in an amount which is adequate to absorb potential losses within the bank's or the financial institution's on-and-off-balance sheet exposures;

(b) an income statement which reflects the provision for loan losses which is necessary to maintain the Allowance for Loan Losses Account at an adequate level;

(c) details of the classification of its loan portfolio in the Form set out in the Second Schedule; and

(d) such other information, report or detailed information as may be requested by the Bank of Zambia in the format and within such time as the Bank of Zambia may request. Reporting requirements

BANK OF ZAMBIA MINIMUM PROVISIONING PERCENTAGES APPLYING TO LOAN CLASSIFICATION

Loan Classification Provisioning Percentage

Pass At bank discretion Substandard Twenty per centum (90-119 days) Doubtful Fifty per centum (120-179 days) Loss One hundred per centum (180 days +)

BANK OF ZAMBIA CLASSIFICATION OF LOANS AND PROVISIONS

Name of institution:

As at: (month/year):

(in K'000)

Total of Specific

Total Gross and General Net

(I) PASS Balances Provisions Balances

Number of accounts

(II) SUBSTANDARD

(a) List names of accounts (K10m and above)

(b) Others (number of accounts below K10m)

Sub-total (II) (a + b)

(III) DOUBTFUL

(a) List names of accounts (K10m and above)

(b) Others (number of accounts below K10m)

Sub-total (III) (a + b)

(V) LOSS

(a) List names of accounts (K10m and above)

(b) Others (number of accounts below K10m)

Sub-total (IV) (a + b)

TOTAL (I) to (IV)

NOTES: The total of the "Total Gross Balances" column must agree with the Loans account balance appearing in a bank's or financial institution's balance sheet. The total of the "Net Balances" column must agree with the net of the Loans account balance less the Allowance for the Loan Losses Account in a bank or financial institution's balance sheet.

SECTION 124-THE BANKING AND FINANCIAL SERVICES (FOREIGN EXCHANGE RISK MANAGEMENT AND EXPOSURE) REGULATIONS

Statutory Instrument

Regulations by the Minister

1. These Regulations may be cited as the Banking and Financial Services (Foreign Exchange Risk Management and Exposure) Regulations.Title

2. In these Regulations, unless the context otherwise requires-Interpretation "currency" means the legal tender of any country and includes precious metals and other similar tradeable commodities; "fixed forward contract" means a foreign exchange bought or sold forward in advance for delivery on a fixed value date longer than spot, at a pre-determined specified rate of exchange; "option forward contract" means a forward exchange contract which gives the counter party the right to exercise the contract over a defined period instead of solely on one value date;

"foreign exchange option contract" means a contract which gives the holder the right, but not the obligation, to sell or buy an agreed sum of money on an agreed date, or at any time between agreed dates at an agreed price or rate, on payment of a non-refundable fee or premium to the writer of the option; "long position" means the excess of assets over liabilities in a particular currency;

"net forward position" means all amounts to be received less all amounts to be paid in the future as a result of foreign exchange transactions which have already taken place; "open position" means a situation where assets in a particular currency do not equal liabilities in that currency, including unhedged forward commitments to purchase or sell the currency; "overnight position" means the holdings of any open positions in foreign currencies of a bank or financial institution at the close of each business day; "regulatory capital" means those instruments which comprise the capital resources of a bank or financial institution, and the total of which is used by the Bank of Zambia for compliance by a bank or financial institution with the minimum capital standard and for assessing capital adequacy, and is calculated in accordance with the Second Schedule to the Banking and Financial Services (Capital Adequacy) Regulations;

"short position" means the excess of liabilities over assets in a particular currency; "sport exchange rate" means the latest market price for a currency; "spot foreign exchange contract" means an agreement with a counter party to buy or sell a given amount of one currency against the agreed counter value of another, usually for settlement in two working days' time.

3. These Regulations shall apply to all banks and financial institutions licensed under the Act.Application

4. (1) Every bank or financial institution shall manage its foreign exchange risk exposures within the framework of a comprehensive risk management plan, setting out its policies, procedures and other safeguards necessary to prudently manage and control exposure to foreign exchange risk.Foreign exchange risk management plan

(2) The risk management plan referred to in sub-regulation (1) shall be drawn in the context of other risks and considerations and shall-

(a) take into account the ability of the bank or financial institution to absorb a potential loss;

(b) at a minimum, include-

(i) the establishment and implementation of sound and prudent foreign exchange risk management policies; and

(ii) the development and implementation of appropriate and effective foreign exchange risk management and control procedures.

(3) The policies and control procedures referred to in sub-regulation (2) shall be reviewed and reassessed at least once in a year and shall be submitted to the board of directors of the bank or financial institution for review and approval.

(4) The bank or financial institution shall, after the policies and control procedures referred to in sub-regulation (3) have been dealt with by its board of directors in accordance with that sub-regulation, refer them to the Bank of Zambia.

5. (1) Every bank or financial institution engaged or proposing to engage in foreign exchange activities shall set forth in its risk management plan a well-articulated policy of the objectives of its foreign exchange risk management strategy, and shall include, at a minimum-

(a) a statement of risk principles and objectives governing the extent to which the bank or financial institution is willing to assume foreign exchange risk;

(b) subject to the limits specified in regulation 7, explicit and prudent limits on the bank's or financial institution's exposure to foreign exchange risk;

(c) the currency or currencies in which the institution is prepared to incur exposure; and

(d) clearly defined levels of delegation of trading authorities.Foreign exchange risk management policies

6. (1) Every bank or financial institution engaged or proposing to engage in foreign exchange activities shall-

(a) as part of its risk management plan, develop, implement and oversee procedures to manage and control foreign exchange risk in accordance with its foreign exchange risk management policies; and

(b) be of a level of sophistication commensurate with the size, frequency and complexity of the institution's foreign exchange activities.Foreign exchange risk management and control procedures

(2) The foreign exchange risk management and control procedures referred to in sub-regulation (1) shall include, at a minimum-

(a) the use of accounting and management information systems to measure, monitor and reconcile, on a daily basis, foreign exchange positions, foreign exchange risk and foreign exchange gains or losses;

(b) regular monitoring and reporting techniques to senior management;

(c) controls governing the management of foreign currency activities; and

(d) regular independent inspections or audits to assess compliance with, and the integrity of, the foreign exchange policies and procedures.

7. A Bank or financial institution's foreign exchange positions and exposures shall be calculated in accordance with the First, Second and Third Schedules.Foreign exchange exposure limits

8. (1) The Bank of Zambia may, where it considers that the financial institution of a bank or financial institution warrants a lower limit, prescribe such lower limit as it may consider appropriate.Overall currency exposure

(2) Notwithstanding sub-regulation (1), every bank or financial institution shall-

(a) maintain its overall foreign exchange risk exposure as at the close of each business day to a maximum of twenty-five percentum of its regulatory capital; and

(b) ensure that its intra-day overall foreign exchange risk exposure is maintained within the objectives set out in its risk management policies and managed prudently and responsibly; Provided that at no time shall the total of the foreign exchange risk exposure exceed forty percentum of the bank's or financial institution's regulatory capital.

9. (1) The Bank of Zambia may, where it considers that the financial situation of a bank or financial institution warrants a lower limit, prescribe such lower limit as it may consider appropriate.Single currency exposure

(2) Notwithstanding sub-regulation (1), every bank or financial institution shall-

(a) maintain its foreign exchange risk position as at the close of each business day in any single currency to a maximum of twenty percentum of its regulatory capital; and

(b) ensure that its intra-day foreign exchange risk position in any single currency is maintained within the objectives set out in its risk management policies and managed prudently and responsibly:

Provided that at no time shall the total in any single currency exceed thirty percentum of the bank's or financial institution's regulatory capital;

(3) In this regulation-

"overall foreign exchange risk exposure" means the sum of the domestic currency equivalent amount, currency by currency, of all foreign currency denominated assets and liabilities, including the net forward or off balance sheet currency, of all net short and net long positions in currencies in which the bank or financial institution has positions, at the currently prevailing spot foreign exchange rates in connection with which the bank or financial institution shall be subject to gain or loss if there is a variation in the exchange rate of these currencies.

"foreign exchange risk" in any given single currency is the domestic currency equivalent amount, including the net forward position in that currency, at the currently prevailing spot foreign exchange rate of the foreign currency amount in connection with which the bank or financial institution will be subject to gain or loss if there is a variation in the exchange rate of that currency.

10. Every bank and financial institution which engages in foreign exchange operations shall submit to the Bank of Zambia, within ten working days following the reference month, a report of its foreign exchange positions and exposures, in the forms set out in the First, Second and Third Schedules. Submission of reports

1. Total Regulatory Capital (as calculated by using the Second Schedule of the Banking and Financial Services (Capital Adequency) Regulations, . Attach calculation

2. Overall Foreign Currency Exposure Item 3 of the Second Schedule As a percentage of Regulatory Capital (item 1 above) %

3. Foreign Currency Exposure on a Per Currency Basis Currency Long (short)As a percentage of Regulatory Capital DEMFFRZARGBPUSD OTHERS (specify)

Positions in Domestic Currency Equivalent of the Spot and Forward Positions of Foreign Currencies (1) (using prevailaing rates quoted in the third schedule)Currency Balance SheetForwardOverallLongShortLongShortLongShortDEMFFRZARGBPUSDOTHERS (SPECIFY)NET POSITION OVERALL EXPOSURE

(1) Report all unhedged positions, including interest rate hedges, forward contracts, derivatives, etc.

(2) The net position is the difference between the " total long" and " total short" positions.

(3) The overall foreign currency exposure is the sum total of all long and short positions.

Positions in Foreign Currencies and Net Domestic Currency Equivalent Positions (- sign indicates a short position) Currency Net Balance Off Balance Sheet *(Forward)

Total Prevailing Spot Forex Rate (at Date of this Return)Net Domestic Currency Equivalent PositionDEMFFRZARGBPUSDOTHERS (SPECIFY) *Report all unhedged positions, including options, interest rate hedges forward contracts, derivatives, etc.

CHAPTER 388

COMPANIES 26 of 1994

An Act to provide for the formation, management, administration and winding-up of companies; to provide for the registration of charges over the undertakings or properties of companies; to provide for the registration of foreign companies doing business in Zambia; and to provide for matters connected with or incidental to the foregoing. [12th July, 1994]

PART I PRELIMINARY

1. This Act may be cited as the Companies Act.Short title

2. In this Act, unless the context otherwise requires-Interpretation "accounting records" includes-

(a) invoices, receipts, orders for the payment of money, bills of exchange, cheques, promissory notes, vouchers and other documents of prime entry; and

(b) such working papers and other documents as are necessary to explain the methods and calculations by which the accounts are made up; "accounts" means profit and loss accounts and balance sheets together with any statements, reports and notes attached to or intended to be read with any of those profit and loss accounts or balance sheets, but, subject to section one hundred and seventy-four, does not include the auditors' reports or directors' reports;

"alternate director" means an alternate director of a company referred to in section two hundred and thirteen; "annual accounts" means the annual accounts referred to in section one hundred and sixty-four; "annual general meeting" means an annual general meeting of a company referred to in section one hundred and thirty-eight; "annual return" means the return referred to in section one hundred and eighty-four, together with any document required by this Act to accompany the return; "articles" means the articles of a company described in section seven; "auditors' report" means the report of the auditors of a company referred to in section one hundred and seventy-three;

"body corporate" means a company or corporation incorporated under or by virtue of the laws of Zambia or of any other country, other than a corporation sole; "book" includes accounts, deed, writing, register, document, accounting record, and any clear record of information, however compiled and whether recorded or stored in written or printed form or by electronic or photographic process or otherwise; "branch register" means a branch register of a company established under section fifty-one;

"capital redemption reserve" means the reserve referred to in section sixty; "certificate of incorporation" means a certificate of incorporation of a company issued by the Registrar under section ten, or a replacement of such a certificate issued under this Act; "certificate of share capital" means a certificate of share capital of a company issued by the Registrar under section ten, or a replacement of such a certificate issued under this Act; "certified copy" means a copy of a document of a company which has endorsed thereon or annexed thereto-

(a) a certificate by a notary public; or

(b) a declaration made and signed by an officer of the company or by some person interested therein otherwise than on behalf of the company; to the effect that it is a true and complete copy of the original, together with, in the case of an original in a language other than English, an English translation similarly certified to the effect that it is an accurate translation of the original; "charge" means a charge created in any way and includes-

(a) mortgage;

(b) an agreement to give or execute a charge or mortgage whether on demand or otherwise; and

(c) until such time as the whole of the purchase price is paid, an agreement for sale and purchase of land under which the seller remains in occupation; "class meeting" means a meeting of those members of a company who, under the articles, belong to a particular class; "committee of inspection" means a committee of inspection appointed in the course of a winding-up under section two hundred and ninety-five or three hundred and fifteen; "company" means-

(a) a company incorporated under this Act; or

(b) subject to section four and Division 14.3, an existing company; "company limited by guarantee" means a company incorporated as such, being a company satisfying section nineteen; "company with share capital" means a public company, a private company limited by shares or an unlimited company; "court" means the High Court for Zambia; "creditors' voluntary winding-up of" means a voluntary winding-up with respect to which no declaration of solvency was made in accordance with section three hundred and eight; "current liability", means a liability that would in the ordinary course of events be payable within twelve months after the end of the financial year to which the accounts or group accounts concerned relate;

"debenture" means a document issued by a body corporate that evidences or acknowledges a debt of the body corporate, whether or not it constitutes a charge on property of the body corporate, in respect of money that is or may be deposited with or lent to the body corporate, other than a document of the following kinds-

(a) a document acknowledging a debt incurred by the body corporate in respect of money that is or may be deposited with or lent to the body corporate by a person-

(i) in the ordinary course of a business carried on by the person; and

(ii) in the ordinary course of such business of the body corporate as is not part of a business of borrowing money and providing finance;

(b) a document issued by a bank in the ordinary course of its banking business that evidences or acknowledges indebtedness of the bank arising in the ordinary course of that business;

(c) a cheque, order for the payment of money or bill of exchange;

(d) a document of a kind prescribed, and in the circumstances prescribed in the regulations for the purposes of this paragraph; and includes-

(a) a unit of a debenture;

(b) debenture stock; and

(c) bonds and any other securities issued by a company, whether constituting a charge on the assets of the company or not; "debenture holder" includes a debenture stockholder; "declaration of guarantee" means a declaration of guarantee made under section nineteen; "declaration of solvency" means a declaration made in accordance with section three hundred and eight; "default" means, in reference to a person who is "in default," that the person wilfully authorised or permitted an act or omission that constitutes a contravention by a body corporate of the provision of this Act in which the expression appears;

"designating number" means the number assigned to a company or foreign company by the Registrar for the purposes of identification; "director" means a person appointed as a director of a company under section two hundred and six; and "the directors" means the directors acting collectively as described in section two hundred and three; "director- report" means the report by the directors of a company referred to in section one hundred and seventy-six; "document" includes-

(a) any paper or other material on which there is writing or printing or on which there are marks, figures, symbols or perforations having a meaning for persons qualified to interpret them;

(b) a disc or tape or other article, or any material, from which sounds, images, writings or messages are capable of being reproduced with or without the aid of any other article or device; and without limiting the generality of the foregoing, includes any summons, order and other legal process and any notice; "equity share" means a share comprised in the equity share capital of a body corporate; "equity share capital" means the issued share capital of a body corporate,

excluding any part thereof which neither as respects dividends nor as respects capital carries any right to participate beyond a specified amount in a distribution; "executive director" means a director to whom has been delegated any of the powers of the directors to direct and administer the business and affairs of the company; "executive officer" means a person, by whatever name called and whether or not a director of a body corporate, who is concerned, or takes part, in the management of the body corporate; "existing company" means a body corporate which immediately prior to the commencement of this Act was a company under the former Act;

"expert" includes an engineer, valuer, accountant, assayer, and any other person whose profession or calling gives authority to a statement by the person on the subject matter concerned; "extraordinary general meeting" means a general meeting of a company that is not an annual general meeting; "extraordinary resolution" means an extraordinary resolution for the purposes of section one hundred and fifty-six; "financial year"

(a) in relation to a company, means the financial year of the company under section forty-two;

(b) in relation to a foreign company, means the financial year of the foreign company under section two hundred and forty-two; and

(c) in relation to any other body corporate, means a period in relation to which the body corporate, in conformity with the law of the place of its incorporation, produces accounts; "former Act" means the Companies Act repealed by section four hundred and two; of the 1971 Edition "former name" does not include-

(a) a name changed or disused before the person bearing the name attained the age of eighteen years;

(b) a name changed or ceased to be used more than twenty years previously; or

(c) the name by which a married woman was known prior to her marriage; "general meeting" means an annual general meeting or an extraordinary general meeting; "general accounts" means the accounts of a group of companies referred to in section one hundred and sixty-five; "group of companies" means a company that is a holding company together with all its subsidiaries;

"holding company" means a body corporate that is a holding company under section forty-three; "invitation to the public" means an invitation described in section one hundred and nineteen; "limited company" means a company limited by shares or a company limited by guarantee; "liquidator" includes a provisional liquidator; "managing director" means the managing director of a company appointed under section two hundred and fourteen; "member" means a member of a company under section forty-five; "members voluntary winding-up" means a voluntary winding-up with respect to which a declaration of solvency was made in accordance with section three hundred and eight;

"monetary unit" means an amount of one thousand kwacha; "non-current liability" means a liability that is not a current liability; "number", in relation to shares, includes an amount of stock; "officer" includes-

(a) a director, secretary or executive officer of a body corporate;

(b) a local director of a foreign company;

(c) a receiver of any part of the undertaking of a body corporate appointed under a power contained in any instrument; and

(d) a liquidator of a body corporate appointed by the members in a voluntary winding-up; but does not include-

(i) a receiver of any part of the undertaking of a body corporate appointed by the court;

(ii) a liquidator of a body corporate appointed by the court or by the creditors of the body corporate; or

(iii) an auditor of a body corporate; "official receiver" means-

(a) an official receiver appointed under the Bankruptcy Act; or

(b) an officer appointed for the purpose by the Minister, if no such official receiver is appointed; "ordinary resolution" means an ordinary resolution for the purposes of section one hundred and fifty-six; "prescribed" means prescribed in the regulations made under this Act; "private company" means a private company limited by shares, a company limited by guarantee or an unlimited company; "private company limited by shares" means a company incorporated as such, being a company satisfying section seventeen;

"profit and loss account" includes income and expenditure account, revenue account or any other account showing the results of the business of a company for a period; "public company" means a company incorporated as such, being a company satisfying section fourteen; "receiver" includes an official receiver and a receiver and manager; and any reference to a receiver of the property of a company includes a reference to a receiver of part only of that property and to a receiver only of the income arising from that property, or from part thereof;

"register of foreign companies" means the register referred to in section two hundred and forty-four; "registered accountant" means a registered accountant for the purposes of the Accountants Act; "registered member" means a person registered as a member of a company under section forty-eight; "registered office" means-

(a) in relation to a company, the registered office of the company under section one hundred and ninety; and

(b) in relation to a foreign company, the registered office of the company under section two hundred and forty-five; "registered records office" means the registered records office of a company referred to in section one hundred and ninety-one; "Registrar" means the Registrar of Companies established by section three hundred and sixty-six; "related" means related for the purposes of section forty-three; "resolution for reducing share capital" means a resolution described in section seventy-six; "seal" means the common seal of a company or other body corporate; "secretary"-

(a) in relation to a company, means a person appointed as the secretary pursuant to section two hundred and five;

(b) in relation to a body corporate other than a company, means a person occupying the position of secretary, by whatever name called; "share" includes stock; "shareholder" includes a stockholder; "share premium account" means the share premium account referred to in section sixty-one; "share warrant" means a share warrant issued pursuant to section sixty-nine; "special resolution" means a special resolution for the purposes of section one hundred and fifty-six; "Standard Articles" means the Standard Articles in the First Schedule;

"subsidiary" means a body corporate that is a subsidiary of another body corporate for the purposes of section forty-three; "unlimited company" means a company incorporated as such, being a company satisfying section twenty; "waiting period" means the period of seven days after the first publication of a prospectus which has been registered, or such longer period after that date as may be stated in the prospectus as the period before the expiration of which applications, offers, or acceptances in response to the prospectus will not be accepted or treated as binding; "wholly owned subsidiary" means a body corporate that is the wholly owned subsidiary of another body corporate for the purposes of section forty-three.

3. A declaration made for the purposes of paragraph (b) of the definition of certified copy in section two shall be deemed to be a statutory declaration.Effect of declaration in certified copy

4. Subject to this Act, this Act applies to an existing company as if it had been duly incorporated under this Act as-

(a) a public company, if it was a public company under the former Act;

(b) a private company limited by shares, if it was a private company limited by shares under the former Act; or

(c) a company limited by guarantee, if it was a private company limited by guarantee under the former Act.Application of Act to existing companies

5. (1) Subject to this section, an association or partnership that-Prohibition of large partnerships

(a) consists of more that twenty persons; and

(b) is not a body corporate; shall not carry on any business for gain by the association or partnership or individual members of the association or partnership.

(2) Subsection (1) shall not apply to a partnership-

(a) formed for the purpose of carrying on a prescribed profession or calling; and

(b) having not more than the number of partners prescribed for the purposes of that profession.

(3) If an association or partnership contravenes this section, each member of the association or partnership shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding five hundred monetary units.

PART II INCORPORATION AND MODIFICATION OF COMPANIES

Division 2.1-Incorporation

6. (1) Subject to this Act, any two or more persons associated for any purpose may form an incorporated company by subscribing their names to an application for incorporation that satisfies this section and lodging it with the Registrar, together with-Application for incorporation

(a) any proposed articles of the company;

(b) a statutory declaration in accordance with section nine;

(c) a signed consent from each person named in the application as a director or secretary of the company to act in the relevant capacity; and

(d) a declaration of guarantee by each subscriber, if the company is to be limited by guarantee.

(2) An application for incorporation shall be in the prescribed form, shall be signed by each subscriber and shall specify-

(a) the proposed name of the company;

(b) the physical address of the office to be the registered office of the company;

(c) a postal address to be the registered postal address of the company;

(d) the type of company to be formed;

(e) if the company is to have share capital-

(i) the amount of share capital of the company;

(ii) the division of the share capital into shares of fixed amount; and

(iii) the number of shares each subscriber agrees to take;

(f) the particulars referred to in subsection (2) of section two hundred and twenty-four of at least two persons who are to be the first directors of the company;

(g) the particulars referred to in subsection (3) of section two hundred and twenty-four of the person or persons who are to be the first secretary or joint secretaries of the company;

(h) the name and address of the individual lodging the application; and

(i) such other information respecting the application, the company and the nature of its proposed business as the prescribed form may require.

(3) The application for incorporation may also specify a date, being a date not more than fifteen months after the date of lodgement of the application, on which the second financial year of the company will begin.

(4) The application for incorporation and the documents lodged with it shall be printed or typewritten.

(5) The application for incorporation shall be signed by each subscriber in the presence of at least one witness who attests to the signature.

(6) An individual shall not subscribe to an application for incorporation if he-

(a) is under eighteen years of age;

(b) is an undischarged bankrupt under the laws of Zambia;

(c) subject to an order by the court, is an undischarged bankrupt under the laws of another country; or

(d) is of unsound mind and has been declared to be so by the court or a court of competent jurisdiction of another country.

(7) The incorporation of a company shall not be invalid by reason only that an individual or individuals subscribed to the application for incorporation in contravention of subsection (6).

7. (1) A company may have articles regulating the conduct of the company.The articles of a company

(2) The articles may contain restrictions on the business that the company may carry on.

(3) Where a provision in the articles is inconsistent with this Act or any other written law, the provision is invalid to the extent of the inconsistency.

(4) The articles of a company may adopt the regulations of the Standard Articles, or any specified regulations thereof.

(5) The articles of a public company or a private company limited by shares shall be deemed to have adopted the regulations of the Standard Articles except insofar as the articles exclude or modify those regulations.

(6) The articles of a company shall be divided into paragraphs numbered consecutively.

8. (1) Subject to this Act, and to its articles, a company may amend its articles if it passes a special resolution approving the amendment.Amendment of articles

(2) If a company passes a special resolution approving the amendment of its articles, it shall within twenty-one days after the date of the resolution lodge a copy of the resolution with the Registrar together with a copy of each paragraph of the articles affected by the amendment, in its amended form.

(3) The articles have effect in their amended form on and from the day of their lodgment with the Registrar or such later date as may be specified in the resolution.

(4) If a company fails to comply with subsection (2), the company, and each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding three monetary units for each day that the failure continues.

9. (1) An application for incorporation shall be accompanied by a statutory declaration that the requirements of this Act in respect of registration and of matters precedent and incidental thereto have been complied with, made by-Statutory declaration as to compliance with the Act

(a) a legal practitioner having a practising certificate who was engaged in the formation of the company; or

(b) a person named in the application as a first director or secretary of the company.

(2) The Registrar may accept the declaration as prima facie evidence of compliance.

10. (1) Where an application for incorporation and the documents referred to in section six have been duly lodged, the Registrar shall, subject to this Act, issue a certificate in the prescribed form stating that the company is, on and from the date specified in the certificate, incorporated and that the company is the type of company specified in the application for incorporation.Certificates of incorporation and of share capital

(2) If the company has share capital, the Registrar shall, at the same time, issue a certificate stating-

(a) the amount of share capital of the company; and

(b) the division of the share capital into shares of a fixed amount.

(3) The Registrar shall keep a copy of each certificate issued under this section, and this Act shall apply to the copies as if they were documents lodged with the Registrar.

11. On and from the date of incorporation specified in the certificate of incorporation, but subject to this Act, there shall be constituted an incorporated company by the name set out in the certificate.Incorporation of the company

12. (1) The Registrar shall maintain a register of companies in which is entered, in respect of each company-Register of companies

(a) a chronological record of the prescribed particulars, and of any other particulars which the Registrar thinks fit, in relation to the company; and

(b) a record of the documents lodged under this Act in respect of the company, other than documents whose only effect is to change particulars recorded under paragraph (a).

Division 2.2-Types of company

13. A company incorporated under this Act shall be-

(a) a public company; or

(b) a private company being-Types of company

(i) a private company limited by shares;

(ii) a company limited by guarantee; or

(iii) an unlimited company

14. (1) A public company shall have share capital.Public companies

(2) The articles of a public company shall state-

(a) the rights, privileges, restrictions and conditions attaching to each class of shares, if there are two or more classes; and

(b) the authority given to the directors to determine the number of shares in, the designation of, and the rights, privileges, restrictions and conditions attaching to each series in a class of shares, if the class of shares may be issued in series.

(3) All shares shall rank equally apart from differences due to their being in different classes or series.

(4) Where a public company is wound-up, a member shall be liable to contribute, in accordance with Part XIII, an amount not exceeding the amount, if any, unpaid on the shares held by him.

(5) The articles of a public company shall not impose any restriction on the right to transfer any shares of the company other than-

(a) a restriction on the right to transfer any shares on which there is unpaid liability; or

(b) a restriction on the right to transfer shares issued to directors or other officers or employees exercising any rights or options granted under section seventy-three, or issued in pursuance of any scheme adopted under that section; or

(c) a provision for the compulsory acquisition, or rights of first refusal, of shares referred to in paragraph (b), in favour of other members of the company or trustees appointed under any scheme adopted under section seventy-three.

15. (1) A public company shall not transact any business, exercise any borrowing powers or incur any indebtedness, except for a purpose incidental to its incorporation or to the obtaining of subscription to, or payment for, its shares, unless the Registrar has issued it with a certificate under this section.Public company may not operate until certificate issued that minimum capital requirements are satisfied

(2) The Registrar shall issue a company with a certificate for the purposes of this section if, on an application made to him in the prescribed form by the company and accompanied by a statutory declaration complying with subsection (3), he is satisfied that the nominal value of the company's allotted share capital is not less than the authorised minimum.

(3) The statutory declaration shall be in the prescribed form and signed by a director or secretary of the company and shall state-

(a) that the nominal value of the company's allotted share capital is not less than the authorised minimum;

(b) the amount paid up at the time of the application on the allotted share capital of the company; and

(c) the amount, or estimated amount of the preliminary expenses that have been paid or are payable.

(4) For the purposes of this section, a share allotted in pursuance of an employee's share scheme shall be disregarded in determining the nominal value of the company's allotted share capital unless it is paid up at least as to one-quarter of the nominal value of the share and the whole of any premium on the share.

(5) The Registrar may accept the statutory declaration as prima facie evidence of the matters stated therein.

(6) A certificate under this section in respect of a company is conclusive evidence that the company is entitled to do business and exercise any borrowing powers.

(7) If a company does business or exercises borrowing powers in contravention of this section, the company, and each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding thirty monetary units for each day that the company does business or remains indebted.

(8) If a company enters into a transaction in contravention of this section and fails to comply with its obligations in connection therewith within thirty days after being called upon to do so, the directors of the company shall be jointly and severally liable to indemnify the other party to the transaction in respect of any loss or damage suffered by him by reason of the failure of the company to comply with those obligations.

(9) The liability imposed by subsection (8) shall be in addition to any liability of the company.

(10) In this section "the authorised minimum" means one million kwacha or such larger or smaller amount as may be prescribed instead.

(11) A regulation which increases the authorised minimum may specify a period within which any public company having an allotted share capital of which the nominal value is less than new authorised minimum shall be required to increase that value to not less than the new authorised minimum or apply to be converted into a private company.

(12) Where a regulation is made increasing the authorised minimum and specifying a period under subsection (11), the authorised minimum that applied immediately before the entry into effect of the regulation shall continue to apply in relation to a company which, at that time, had an allotted share capital less than the new authorised minimum until-

(a) the company increases its allotted share capital above the new authorised minimum; or

(b) the end of the specified period; whichever is earlier.

(13) Where a regulation is made increasing the authorised minimum and specifying a period under subsection (11), the authorised minimum that applied immediately before the entry into effect of the regulation shall continue to apply in relation to a company which, at that time, had an allotted share capital less than the new authorised minimum until the company increases its allotted share capital above the new authorised minimum.

16. (1) Subject to this section, the articles of a private company shall limit the number of its members to a specified number, being a number not more than fifty.Private companies

(2) The regulations may provide that the articles of an unlimited company may, subject to any specified conditions, limit the number of its members to a number larger than fifty.

(3) The articles of a private company shall not impose any restriction on the transferability of shares after they have been issued unless all the shareholders have agreed in writing.

(4) For the purposes of subsection (1)-

(a) joint holders of shares are counted as one person; and

(b) a member is not counted if he is in the employment of the company or of a related body corporate, or if he was a member while previously in the employment of the company or a related body corporate and has been a member continuously since that time.

(5) If a private company-

(a) has more members than permitted by its articles; or

(b) invites the public to acquire shares or debentures in the company in contravention of section one hundred and twenty-two; the Registrar may give notice to the company requiring the company to give reasons why the company should not be converted into a public company.

(6) If, one month after the issue of the notice, the contravention concerned has not been rectified, the court may, on the application of the Registrar, if not satisfied that the contravention was inadvertent and not likely to be repeated, order-

(a) that the company shall be deemed to have made an application for conversion to a public company, or conversion to a private company followed by conversion to a public company, as appropriate, and to have passed any resolutions necessary for such an application or applications in the form specified in the order; and

(b) that the directors, or any of them, shall be liable for the costs of the application of the Registrar and the conversion of the company.

17. (1) The articles of a private company limited by shares shall state-Private companies limited by shares

(a) the rights, privileges, restrictions and conditions attaching to each class of shares, if there are two of more classes; and

(b) the authority given to the directors to determine the number of shares in, the designation of, and the rights, privileges, restrictions and conditions attaching to each series, if a class of shares may be issued in series.

(2) All shares shall rank equally apart from differences due to their being in different classes or series.

(3) Where a private company limited by shares is wound-up, a member shall be liable to contribute, in accordance with Part XIII, an amount not exceeding the amount, if any, unpaid on the shares held by him.

18. (1) A private company limited by shares shall not transact any business, exercise any borrowing powers or incur any indebtedness, except for a purpose incidental to its incorporation or to the obtaining of subscription to, or payment for, its shares, unless-Minimum capital for private company limited by shares

(a) consideration (whether in cash or otherwise) to the value of not less than fifty thousand kwacha, or such larger or smaller amount as may be prescribed instead, has been paid to it for the issue of its shares; and

(b) it has furnished to the Registrar a declaration signed by one of the directors or by the secretary, stating that the requirement of paragraph (a) has been compiled with.

(2) For the purposes of subsection (1), the value of-

(a) the goodwill of a business; or

(b) services rendered or to be rendered to the company; shall not be counted.

(3) Where a new amount is prescribed for the purposes of subsection (1), a private company that satisfied this section immediately before the new amount was prescribed shall be deemed to continue to satisfy it.

19. (1) Each subscriber to an application for incorporation as a company limited by guarantee shall sign a declaration of guarantee specifying the amount that he undertakes to contribute to the assets of the company in the event of its being wound-up.Companies limited by guarantee

(2) Each subscriber to the application for incorporation shall, on the incorporation of the company, be a member of the company.

(3) Subject to any additional requirements imposed by the articles of the company-

(a) a person shall become a member of the company, on approval by a resolution of the company, by signing a declaration of guarantee and delivering it to the company; and

(b) a person shall cease to be a member on delivering to the company a signed notice in writing to that effect.

(4) Within seven days after a person becomes a member or ceases to be a member of the company, the company shall lodge with the Registrar a notice in the prescribed form, together with, in the case of a person's becoming a member, the declaration of guarantee by the person.

(5) The company shall not carry on business for the purpose of making profits for its members or for anyone concerned in its promotion or management.

(6) Where a company limited by guarantee is wound-up, a member shall be liable to contribute, in accordance with Part XIII, an amount not exceeding the amount specified in the declaration of guarantee made by him.

(7) If the company carries on business for the purpose of making profits for its members or for anyone concerned in its promotion or management-

(a) those officers and members of the company who wilfully authorise or permit the business to be carried on for that purpose shall be jointly and severally liable for the payment and discharge of all debts and liabilities of the company incurred in carrying on the business so authorised or permitted; and

(b) each of the officers and members referred to in paragraph (a) shall be guilty of an office, and shall be liable on conviction to a fine of not more than thirty monetary units for each day on which that business is carried on.

(8) If the company fails to comply with subsection (4), the company, and each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding three monetary units for each day that the failure continues.

20. (1) An unlimited company shall have share capital and its articles shall state-Unlimited companies

(a) the rights, privileges, restrictions and conditions attaching to each class of shares, if there are two or more classes; and

(b) the authority given to the directors to determine the number of shares in, the designation of, and the rights, privileges, restrictions and conditions attaching to each series, if a class of shares may be issued in series.

(2) All shares shall rank equally apart from differences due to their being in different classes or series.

(3) Where an unlimited company is wound-up, a member shall be liable to contribute, in accordance with Part XIII, without limitation of liability.

Division 2.3-General provisions

21. Subject to this Act, the incorporation of a company shall have the same effect as a contract under seal between the company and its members from time to time and between those members themselves, in which they agree to form a company whose business will be conducted in accordance with the application for incorporation, the certificate of share capital from time to time, the articles of the company from time to time, and this Act.Contractual effect of incorporation

22. (1) A company shall have, subject to this Act and to such limitations as are inherent in its corporate nature, the capacity, rights, powers and privileges of an individual.Capacity and powers of a company

(2) A company shall have the capacity to carry on its business and exercise its powers in any jurisdiction outside Zambia to the extent that the laws of Zambia and of that jurisdiction permit.

(3) A company shall not carry on any business or exercise any power that it is restricted by its articles from carrying on or exercising, nor exercise any of its powers in a manner contrary to its articles.

23. No act of a company, including any transfer of property to or by a company, shall be invalid by reason only that the act or transfer is contrary to its articles or this Act.Validity of acts

24. No person dealing with a company shall be affected by, or presumed to have notice or knowledge of, the contents of a document concerning the company by reason only that the document has been lodged with the Registrar or is held by the company available for inspection.Notice not presumed

25. A company or a guarantor of an obligation of the company may not assert against a person dealing with the company or with any person who has acquired rights from the company that-

(a) any of the articles of the company has not been complied with;

(b) a shareholder agreement has not been complied with;

(c) the persons named in the most recent annual return or notice under section two hundred and twenty-six are not the directors of the company;

(d) the registered office of the company is not an office of the company;

(e) a person held out by a company as a director, an officer or an agent of the company has no authority to exercise the powers and perform the duties that are customary in the business of the company or usual for such a director, officer or agent;No disclaimer allowed

(f) a document issued by any director, officer or agent of the company with actual or usual authority to issue the document is not valid or genuine; or

(g) the financial assistance referred to in section eighty-three or the sale or disposal of property referred to in section two hundred and sixteen was not authorised; except where that person has, or ought to have had by virtue of his position with or relationship to the company, knowledge of the fact asserted.

26. (1) If at any time the number of members of a company is reduced below two and it carries on business for more than six months without at least two members, a member or director of the company who was aware that the business was being carried on with fewer than two members shall be severally liable for the payment of all the debts and liabilities of the company incurred after the end of that period of six months.Companies ceasing to have at least two members

(2) The court, in any proceeding against the member or director or on application being made to it by any person interested, may relieve the member or director either wholly or partly from liability undersubsection(1) on such terms as it thinks fit, if it is satisfied that the member or director had made reasonable efforts to prevent the business from being continued, or that it is otherwise just and reasonable to do so.

(3) The liability imposed under subsection (1) shall be in addition to any liability of the company.

27. A member of a company shall be bound by an alteration made in the articles on a date (in this section called the "alteration date") after the date on which he became a member only to the extent that the alteration does not require him-

(a) to take or subscribe for more shares than the number held by him on the alteration date;

(b) in any way to increase his liability as at the alteration date; or

(c) to contribute to the share capital of the company or otherwise to pay money to it; unless he agrees in writing, either before or after the alteration date, to be bound thereby.No increase in a member's liability or contribution without consent

28. (1) If a person purports to enter into a contract not evidenced in writing in the name of or on behalf of a company before it comes into existence, the person shall be bound by the contract and entitled to the benefits thereof.Pre-incorporation contracts

(2) If a person purports to enter into a contract evidenced in writing in the name of or on behalf of a company before it comes into existence, the person shall be bound by the contract (in this section called "the relevant contract") and entitled to the benefits thereof except as provided in this section.

(3) The company may, not later than fifteen months after its incorporation, adopt the contract by an ordinary resolution, and upon the adoption, subject to subsection (4)-

(a) the company shall for all purposes be bound by the contract and entitled to the benefits thereof as if the company had been in existence at the date of the contract and had been a party thereto; and

(b) the person who purported to act in the name of or on behalf of the company shall cease to be bound by or entitled to the benefits of the contract.y to the contract may apply to the court for an order fixing obligations under the contract as joint or joint and several, or apportioning liability be

(4) Subject to subsection (5), whether or not the relevant contract is adopted by the company, the other parttween or among the company and the person who purported to act in the name of or on behalf of the company, and upon such application the court may make any order it thinks just and equitable.

(5) Subsection (4) does not apply if the relevant contract expressly provides that the person who purported to act in the name of or on behalf of the company before it came into existence shall not in any event be bound by the contract nor entitled to the benefits thereof.

29. (1) A company shall supply to any member on request copies of-Copies of certificate of incorporation, certificate of share capital and articles to be given to members

(a) the certificate of incorporation;

(b) the certificate of share capital, in the case of a company with share capital; and

(c) The articles of the company; within seven days after receiving payment of the sum of one monetary unit, or such lesser sum as may be prescribed by the company, for each set of copies.

(2) A company limited by guarantee shall supply to any member on request a list of the members with the amounts guaranteed by each in the declaration of guarantee.

(3) A copy of the articles supplied under subsection (1) shall have endorsed on it the registered address, the postal address and the address of the registered records office of the company.

(4) If a company fails to comply with this section, the company, and each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding three monetary units for each day that the failure continues.

Division 2.4-Conversion of a company from one type to another

30. (1) A private company limited by shares may be converted into a company limited by guarantee if-Conversion of a private company limited by shares to company limited by guarantee

(a) there is no unpaid liability on any of its shares;

(b) all its members agree in writing to such a conversion;

(c) a special resolution amending the articles to satisfy section nineteen is passed, if the articles do not satisfy that section; and

(d) each member makes a declaration of guarantee.

31. A private company limited by shares may be converted into an unlimited company if all its members agree in writing to its conversion.Conversion of private company limited by shares to unlimited company

32. A company limited by guarantee may be converted into a company limited by shares or an unlimited company if-

(a) all the members agree in writing-Conversion of company limited by guarantee to company limited by shares or unlimited company

(i) to convert the company into such a company; and

(ii) to a share capital for the company and the division thereof into shares of fixed amounts; and

(b) each member agrees in writing to take up a specified number of shares.

33. (1) An unlimited company may be converted into a private company limited by shares or a company limited by guarantee if-Conversion of unlimited company to private limited company

(a) all its members agree in writing to its conversion;

(b) a special resolution amending the articles to satisfy section seventeen or nineteen, as appropriate, is passed, if the articles do not satisfy section seventeen and nineteen, as appropriate; and

(c) each member makes a declaration of guarantee, in the case of conversion to a company limited by guarantee.

(2) In the case of a conversion to company limited by shares, the special resolution may-

(a) increase the nominal amount of the company's share capital by increasing the nominal amount of each of its shares, subject to the condition that no part of the increased capital shall be capable of being called up except in the event and for the purposes of the company's being wound-up; or

(b) provide that a specified portion of its uncalled share capital shall not be capable of being called up except in the event and for the purpose of the company's being wound-up.

34. A public company may be converted into a private company limited by shares if a special resolution is passed that-

(a) approves the conversion; and

(b) amends the articles to satisfy sections sixteen and seventeen, if the company's articles do not satisfy those sections.Conversion of public company to private company limited by shares

35. (1) A private company limited by shares may be converted into a public company if a special resolution is passed that-Conversion of private company limited by shares to public company

(a) approves the conversion; and

(b) amends the articles to satisfy section fourteen, if the company's articles do not satisfy that section.

36. (1) If the requirements of section thirty, thirty-one, thirty-two, thirty-three, thirty-four or thirty-five (in this section called "the conversion section") are satisfied with respect to a company, the company shall, within twenty-one days after the conversion section's becoming satisfied, lodge with the Registrar an application in the prescribed form for conversion of the company in accordance with the resolution or agreement, together with the documents referred to in subsection (4).Method of conversion

(2) On receiving the application the Registrar shall-

(a) issue a replacement certificate of incorporation in the prescribed form worded to meet the circumstances of the case and stating the date of conversion of the company; and

(b) make such entries in such registers as he considers appropriate.

(3) On and from the date stated in the certificate as the date of conversion.

(a) the company shall be converted into a company of the status sought;

(b) if the company is being converted from a company with share capital to a company limited by guarantee, the shares therein shall be validly surrendered and cancelled notwithstanding section seventy-six;

(c) the articles of the company shall be amended in accordance with the documents lodged with the application; and

(d) where this Act requires different words to be the last words of the name of a company of the new status, the name of the company shall be changed accordingly.

(4) The documents to be delivered to the Registrar are the following:

(a) the company's certificate of incorporation;

(b) a copy of each paragraph in the articles affected by any amendment, in its amended form;

(c) a copy of the special resolution or written agreement by the members referred to in the conversion section;

(d) the declarations of guarantee by each member, if the company is being converted to a company limited by guarantee;

(e) a statutory declaration by a director and the secretary of the company stating-

(i) that the conditions of the conversion section have been complied with; and

(ii) that in their opinion the company is solvent;

(f) a certificate by the auditors of the company, made not more than three months before the date of the application, that they have investigated the affairs of the company and that the company is solvent at the date of the certificate;

(g) certified copies, certified by a director and the secretary of the company, of every balance sheet, profit and loss account, group accounts, directors' report and auditors' report sent to the members of the company in the preceding twelve months, if the company is being converted from a public company to a private company and has been incorporated as a public company for more than fifteen months.

(5) The conversion of the company under this section shall not alter the identity of the company, nor affect any rights or obligations of the company except as mentioned in this section, nor render defective any legal proceedings by or against the company.

(6) Where an unlimited company is converted to a limited company and is wound-up within three years after the conversion, a member of the company who was a member immediately before the conversion shall not be entitled to a limitation of liability under section two hundred and sixty-six.

(7) If the company fails to comply with subsection (1), the company, and each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding three monetary units for each day that the failure continues.

(8) If a director, secretary or auditor of a company makes a declaration or certificate for the purposes of subsection (4) that in his opinion the company is solvent, without having reasonable grounds for the opinion, he shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding five hundred monetary units.

Division 2.5-The name of a company

37. (1) A public company shall have a name the last word of which is "PLC".Name of company

(2) Subject to this Division, a private company limited by shares or a company limited by guarantee shall have a name the last word of which is "Limited".

(3) The Registrar shall not register as the name of a company a name which in his opinion is likely to cause confusion with the name of another company or is otherwise undesirable.

(4) The Registrar shall not, without the written consent of the Minister, register as the name of a company a name which in the Registrar's opinion suggests that the company enjoys the patronage of the President.

(5) The Registrar may, at the request of persons who intend to form an incorporated company, give an opinion on the acceptability of a proposed name.

38. (1) A person or persons who propose to form a company may, subject to this section, reserve a name for the company by lodging with the Registrar an application in the prescribed form specifying the name proposed to be reserved (in this section called "the reserved name").Reservation of name

(2) If the reserved named is acceptable to the Registrar and the Registrar is satisfied that-

(a) the reserved name is a registered business name of the person or persons;

(b) the reserved name is the name of an unincorporated association consisting of or represented by the person or persons;

(c) the reserved name is a name under which the person or persons are trading or conducting business, or is such a name with minor modifications or additions; or

(d) the person is a body corporate other than a company and the reserved name is the name of the body corporate or that name with minor modifications or additions; the Registrar shall register the name as reserved by the person or persons for a period of three months.

(3) While the name is so registered-

(a) subject to this Act, the person or persons shall be entitled to incorporate a company under the name; and

(b) the Registrar shall treat the proposed name as the name of a company incorporated by the person or persons for the purposes of determining the acceptability of any other name as the name of a company.

39. (1) The Registrar may, on the application of a company limited by guarantee, grant the company written permission to omit the word "Limited" from its name for the purposes of this Act apart from this Part.Registrar may allow company to dispense with "Limited" in its name

(2) The Registrar may grant the permission on such conditions as he thinks fit, and those conditions shall be binding on the company and shall, if the Registrar so directs, be inserted in the articles of the company.

(3) The Registrar may revoke the permission at any time, after giving written notice to the company of his intention to do so and considering any objections of the company.

40. (1) A company may pass a special resolution to change its name.Change of name

(2) Within twenty-one days after the date of the resolution, the company shall notify the Registrar in the prescribed form that the company intends to change its name to the name specified in the resolution (in this section called the "new name").

(3) The Registrar, after considering the new name, shall notify the company that-

(a) the new name is acceptable; or

(b) in the opinion of the Registrar, the new name of a company would be likely to cause confusion with the name of another company or is otherwise undesirable, and that the Registrar will not register the new name.

(4) If the new name is acceptable, the company shall, within twenty-one days after receiving the notice of the fact, lodge with the Registrar-

(a) the company's certificate of incorporation; and

(b) a copy of the resolution.

(5) On receiving the documents referred to in subsection (4), the Registrar shall enter the new name on the Register in place of the former name, and shall issue a replacement certificate of incorporation worded to meet the circumstances of the case.

(6) A certificate under this section shall be conclusive evidence of the alteration to which it relates.

(7) A change of name by a company shall not affect any rights or obligations of the company nor render defective any legal proceedings that could have been continued or commenced against it by its former name, and any such legal proceedings may be continued or commenced against it by its new name.

41. (1) If, in the opinion of the Registrar, the name of a company is likely to cause confusion with the name of another company or is otherwise undesirable, the Registrar may direct that the company shall change its name in accordance with this Division.Registrar may require change of name

(2) If the company does not change its name within fifty days, or such longer period as the Registrar may allow in writing, after receiving a direction under subsection (1), the Registrar shall register the designating number of the company, together with the word "Limited" or "PLC" if required by section thirty-seven, as the name of the company, and shall issue a new certificate of incorporation for the company worded to meet the circumstances of the case.

(3) A change of name under subsection (2) shall not affect any rights or obligations of the company nor render defective any legal proceedings that could have been continued or commenced against it by its former name, and any such legal proceedings may be continued or commenced against it by its new name.

Division 2.6-Miscellaneous

42. (1) For the purposes of this Act, the "financial year" of a company is the period, whether or not a period of twelve months, that begins on one accounting date of the company and ends on the day before the next.Financial year of a company

(2) The first "accounting date" of a company is the date of its incorporation.

(3) Subject to this section, the subsequent accounting dates of a company are-

(a) the date specified in the application for its incorporation as the date on which the second financial year of the company will begin, and anniversaries of that date, if the application for incorporation specified such a date; or

(b) the anniversaries of the date of its incorporation, if the application for incorporation did not specify such a date.

(4) A company may change an accounting date by lodging a notice of the change in the prescribed form with the Registrar, provided that-

(a) the notice is lodged with the Registrar and notice of the change is given to each registered member and to the auditors (if any) of the company not later than the accounting date previous to the one to be changed; and

(b) the change does not result in a financial year's being longer than fifteen months.

(5) Where a company changes an accounting date under this section, the subsequent accounting dates of the company are, unless changed under this section, the anniversaries of that changed date.

43. (1) For the purposes of this section, "company" means a body corporate, whether or not a company for other purposes of this Act and whether or not incorporated in Zambia.Holding companies, subsidiaries and related companies

(2) For the purposes of this Act, a company is a "holding company" of another company if the other company is a subsidiary of it under subsection (3).

(3) For the purposes of this Act, the "subsidiaries" of a company (in this subsection called "the holding company") are the following companies:

(a) any company in which the holding company holds-

(i) more than half in nominal value of the equity share capital, if the company is incorporated in a jurisdiction that has nominal value of share capital; or

(ii) more than half in value of the equity share capital, if the company is incorporated in a jurisdiction that does not have nominal value of share capital;

(b) any company of which the holding company is a member and the composition of whose board of directors is controlled by the holding company;

(c) any subsidiary under paragraph (a) or (b) of a company which is itself a subsidiary of the holding company under paragraph (a) or (b) or by the repeated application of this paragraph.

(4) For the purposes of this Act, the "wholly owned subsidiaries" of a holding company are the following companies:

(a) any company with no members other than the holding company and its nominees;

(b) any company with no members other than-

(i) the holding company;

(ii) nominees of the holding company;

(iii) companies which are themselves wholly owned subsidiaries of the holding company under paragraph (a) or the repeated application of this paragraph;

(iv) nominees of companies referred to in subparagraph (iii).

(5) For the purposes of this Act, a company is "related" to a second company if-

(i) the first company is a subsidiary of the second;

(ii) the first company is a holding company of the second; or

(iii) both companies are subsidiaries of a third company.

(6) For the purposes of this section, the composition of a company's board of directors is controlled by another company if, and only if, in relation to each of more than half of the directorships-

(a) the other company is able, without the consent or concurrence of any other person, to appoint or remove the holder of the directorship; or

(b) a person's appointment to the directorship follows necessarily from his appointment as director of the other company.

(7) In determining whether the composition of a company's board of directors is controlled by another company-

(a) subject to this subsection, any shares held or power exercisable by a person who is the effective nominee of the other company shall be deemed to be held or exercisable by the other company;

(b) any shares held or power exercisable in a fiduciary capacity shall be disregarded;

(c) any shares held or power exercisable by any persons by virtue of the provisions of any debentures of the company or of a trust deed for securing any issue of such debentures shall be disregarded; and

(d) any shares held or power exercisable by a person only by way of security for the purposes of a transaction entered into in the ordinary course of business shall be disregarded if the ordinary business of the person includes the lending of money.

(8) For the purposes of this section, a member of a company is the effective nominee of another company if he is-

(a) a nominee of the other company;

(b) a subsidiary of the other company;

(c) a person who is the effective nominee under paragraph (a) or (b) of a person who is himself an effective nominee of the other company under paragraph (a) or (b) or by the repeated application of this paragraph.

44. (1) A company shall, within one month after another body corporate has become related to it, lodge with the Registrar a notice of that fact together with particulars identifying the body corporate.Registration of related bodies corporate

(2) If a company fails to comply with this section, the company, and each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding three monetary units for each day that the failure continues.

PART III MEMBERSHIP AND REGISTERS

45. (1) The members of a company with a share capital shall be the shareholders and stockholders of the company.Membership of company

(2) On the incorporation of a company with share capital and until the first allotment of shares by the company, the members shall be those subscribers to the application for incorporation who have not given the company written notice of their ceasing to be members.

(3) The members of a company limited by gurantee shall be the persons who are members in accordance with section nineteen.

46. (1) Except as provided in this section, a company shall not be a member of itself or of a body corporate which is its holding company.Membership by company of itself or of holding company

(2) A company may, in the capacity of personal representative or trustee, be a member of itself or a body corporate which is its holding company unless it or the holding company or a subsidiary of either of them has a beneficial interest in the membership.

(3) A company may be a member of itself or a body corporate which is its holding company by way of security for the purposes of a transaction entered into in the ordinary course of a business which includes the lending of money, but in that case shall have no right to vote at meetings of the holding company or of any class of members thereof.

(4) This section shall not prevent a subsidiary which was a member of a body corporate before it became a subsidiary of the body corporate from continuing to be a member.

(5) This section shall not prevent a subsidiary which was, immediately before the commencement of this Act, a member of its holding company from continuing to be a member.

(6) A subsidiary that continues to be a member of its holding company under subsection (4) or (5)-

(a) shall have no right to vote at meetings of the holding company or any class of members thereof;

(b) shall not acquire further shares in the holding company except upon a general issue of fully-paid bonus shares, if the holding company is a company with share capital; and

(c) shall not, as a member, increase any interest in, or liability in relation to, the holding company, if the holding company is a company limited by guarantee.

(7) For the purposes of this section, a company is deemed to be a member of a body corporate if a nominee of the company is a member.

47. If a private company fails to comply with the provisions of its articles on the number of its members, the company, and each officer and member in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding five hundred monetary units.Offence if membership of private company exceeds number specified in articles

48. (1) A company shall maintain a register of its members and enter therein the following particulars:Register of members

(a) the full name and address of each member of which it has received notice;

(b) the occupation of the member, if the member is an individual;

(c) the fact that the member is a body corporate or an unincorporated association, as the case may be, if the member is not an individual;

(d) the date on which the company received the notice;

(e) if the company has share capital-

(i) the shares held by each member with the share numbers (if any); and

(ii) the amount paid or agreed to be considered as paid on the shares of each member;

(f) the amount that each member has guaranteed in his declaration of guarantee, if the company is limited by guarantee;

(g) the date on which the company received notice of any person's ceasing to be a member.

(2) If the company has more than fifty members, the register shall contain an index of the names of the members in a form that enables the account of each member to be found readily.

(3) If the company fails to comply with this section, the company, and each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding ten monetary units for each day that the failure continues.

(4) If the company fails to comply with this section because of the default of an agent charged with maintaining the register, the agent shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding ten monetary units for each day that the failure continues.

49. (1) Subject to this Part, the register and index of the names of the members of the company shall be available for inspection by any member of the company or other person in accordance with section one hundred and ninety-three.Inspection of register

(2) A company may, on giving notice by advertisement in a newspaper circulating generally throughout Zambia, close for any time or times not exceeding in total thirty days in each year the register of members of the company or the part thereof relating to members holding shares of any class.

50. (1) If-Power of court to rectify register

(a) a company fails to correct an error in its register of members; or

(b) an error in the register causes a loss to a person; the person aggrieved or any member of the company may apply to the court for an order that the register be rectified and the person aggrieved may apply for an order that the company pay compensation for the loss.

(2) If an application is made under this section, the court may make such orders as it thinks fit.

(3) On an application under this section, the court may decide any question relating to the title of any person who is a party to the application to have his name entered in or removed from the register, whether the question arises between members or alleged members, or between members or alleged members on the one hand and the company on the other hand, and generally may decide any question necessary or convenient to be decided for rectification of the register.

(4) If an order is made under this section, the company shall, within twenty-one days after the making of the order, lodge a certified copy of the order with the Registrar.

(5) If the company fails to comply with subsection (4), the company, and each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding three monetary units for each day that the failure continues.

51. (1) A company with share capital may, subject to its articles, keep a part of its register of members (in this Act called a "branch register"), being the part relating to members resident in a specified foreign country or countries, at a place in the foreign country, or one of the foreign countries.Company may keep branch register

(2) The shares registered in a branch register shall be distinguished from the other shares of the company while they are held by members resident in a country to which the branch register applies.

(3) The company shall arrange for the information as to any entry in a branch register to be transmitted to its registered records office as quickly as practicable, and shall maintain there, as part of its register of members, a duplicate of the branch register.

(4) The company shall lodge with the Registrar notice of the physical address of the office where any branch register is kept, and of any change in that address and, if it is discontinued, of its discontinuance, and any such notice shall be given within twenty-one days after the initial keeping of the register in that office or of the change or discontinuance, as the case may be.

(5) A branch register shall be maintained and shall be open for inspection in the manner required in sections forty-eight and forty-nine, or as nearly as is practicable, except that the advertisement before closing the register shall be inserted in some newspaper circulating generally in the country where the branch register is kept.

(6) If a company fails to comply with subsection (3), (4) or (5), the company, and each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding ten monetary units for each day that the failure continues.

52. An instrument of transfer of any share registered in a branch register shall be deemed to transfer property situated outside Zambia, and, unless executed in any part of Zambia, shall be exempt from any duty chargeable in Zambia. Duties in case of securities registered in branch register

53. The regulations may provide that sections forty-eight and forty-nine shall, subject to any modifications and adaptations specified in the regulation, apply to a register of members kept in Zambia by a specified body corporate, or class of bodies corporate, incorporated under the law of a foreign country or countries.Branch registers of foreign companies kept in Zambia

54. (1) Subject to section seventy, no notice of any trust, express, implied or constructive, need be entered on the register of members of a company, or be received by the company or the Registrar.No notice of trust

(2) A company shall not be bound to see to the execution of any trust, whether express, implied or constructive in respect of any of its shares.

(3) A receipt given by a member in whose name a share stands in the register of members shall be a valid and binding discharge of the company for any dividend or other money payable in respect of such share, whether or not notice of any trust relating to the share has been given to or received by the company.

55. The register of members shall be prima facie evidence of any matter by this Act directed or authorised to be inserted therein.Register to be evidence

PART IV SHARES AND SHARE CAPITAL

Division 4.1-Interpretation

56. In this Part, unless the context otherwise requires, "company" means a company with share capital.

Division 4.2-Issue and transfer of shares Interpretation

57. (1) The shares or other interest of a member in a company shall be personal estate and movable property, transferable by a written transfer in a manner provided by the articles of the company or by this Act.Nature and transferability of shares

(2) If an instrument of transfer of fully paid shares in a company is in the prescribed form, executed by both the transferor and the transferee, or by persons duly authorised on behalf of the transferor or the transferee, the company shall not refuse registration of the transfer on the ground of form.

(3) Subsection (2) shall not affect-

(a) the validity of any instrument which would be effective to transfer shares apart from that subsection;

(b) any powers of the directors to accept in their discretion an instrument in any other form which may seem to them sufficient; or

(c) any right of the directors to refuse to register a person as the holder of shares on any ground other than the form in which those shares purport to be transferred to him.

58. (1) Subject to this section, each issued share in a company shall be assigned a distinguished number.Numbering of shares

(2) If at any time all the issued shares in a company, or all the issued shares therein of a particular class, are fully paid up, none of those shares need thereafter have a distinguishing number so long as the shares, or the shares in that class, remain fully paid up.

59. (1) The articles of a company may provide for the issue of shares which are to be redeemed, or are liable to be redeemed at the option of-Redeemable shares

(a) the company;

(b) the share-holder, or

(c) either the company or the shareholder.

(2) No redeemable shares may be issued at a time when there are no issued shares of the company which are not redeemable.

(3) Redeemable shares shall not be redeemed unless they are fully paid.

(4) The terms of redemption shall provide for payment on redemption.

(5) Redeemable shares may be redeemed only out of distributable profits of the company or out of the proceeds of a fresh issue of shares made for the purposes of the redemption.

(6) Any premium payable on redemption shall be paid either-

(a) out of distributable profits of the company; or

(b) out of the company's share premium account (including any sum transferred to that account in respect of premiums on a fresh issue made for the purposes of the redemption).

(7) The manner and terms of the redemption shall be as provided by the articles.

(8) Where shares are redeemed

(a) the shares shall be deemed to be cancelled on redemption;

(b) the amount of the company's issued share capital shall be diminished by the nominal value of the shares redeemed; and

(c) the amount of the company's authorised share capital shall not be affected.

(9) Without prejudice to subsection (8), where a company is about to redeem any shares under this section, it may issue shares up to the nominal amount of the shares to be redeemed as if those shares had never been issued.

(10) Subject to subsection (11), for the purposes of this Act, shares issued by a company-

(a) up to the nominal amount of any shares which the company has redeemed under this section; or

(b) in pursuance of subsection (9), before the redemption of shares which the company is about to redeem under this section; shall be regarded as issued in place of the shares redeemed, or about to be redeemed, under this section.

(11) Shares issued under subsection (9) shall not be regarded as issued in place of the shares about to be redeemed unless those shares are redeemed within one month after the issue of the new shares.

(12) If a company redeems any redeemable shares, it shall, within fourteen days after doing so, lodge a notice of the redemption in the prescribed form with the Registrar.

(13) If a company fails to comply with subsection (12), the company, and each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding three monetary units for each day that the failure continues.

60. (1) Where under section fifty-nine any shares of a company are redeemed wholly out of the profits of the company, the amount by which the company's issued share capital is diminished in accordance with subsection (8) of that section on cancellation of the shares redeemed or purchased shall be transferred to a reserve, to be called "the capital redemption reserve".Capital redemption reserve

(2) Where any shares of a company are redeemed wholly or partly out of the proceeds of a fresh issue of shares and the aggregate nominal value of the shares redeemed or purchased is greater than that of the shares issued, the amount of the difference shall be transferred to the capital redemption reserve.

(3) The provisions of this Act relating to the reduction of the share capital of a company shall apply to a reduction in the capital redemption reserve as if that reserve were paid up share capital of the company, except that the reserve may be applied by the company in paying up unissued shares of the company to be allotted to members of the company as fully paid bonus shares.

61. (1) Where a company issues shares at a premium, whether for cash or otherwise, a sum equal to the aggregate amount of value of the premiums on these shares shall be transferred to an account, to be called "the share premium account", and the provisions of this Act relating to the reduction of share capital of a company shall, except as provided in this section, apply as if the share premium account were paid up share capital of the company.Share premium account

(2) The share premium account may be applied by the company-

(a) in paying up unissued shares of the company to be issued to members of the company as fully paid bonus shares;

(b) in writing off-

(i) the preliminary expenses of the company; or

(ii) the expenses of, the commission paid or the discount allowed on any issue of shares or debentures of the company; or

(c) in providing for the premium payable on redemption of any redeemable preference shares or of any debenture of the company.

62. (1) For the purposes of this section-Variation of class rights

(a) the abrogation of any rights attached to a class of shares; and

(b) any resolution of a company, other than a resolution for the creation or issue of further shares, the implementation of which would have the effect of-

(i) diminishing the proportion of the total votes exercisable at a general meeting of the company by the holders of the existing shares of a class; or

(ii) reducing the proportion of the dividends or other distributions payable at any time to the holders of the existing shares of a class; shall be deemed to be a variation of the rights of that class.

(2) If at any time the shares of a company are divided into different classes, the rights attached to any class may not be varied except to the extent and in the manner provided by the section.

(3) If the articles expressly forbid any variation of the rights of a class, or contain provision for such a variation and expressly forbid any alteration of the provision, the rights or the provision for variation may not be varied except in accordance with the provision, or with the written consent of all the members of that class, or with the sanction of the court under a scheme of arrangement in accordance with section two hundred and thirty-four.

(4) If subsection (3) does not apply, the rights attached to any class of shares may be varied with the written consent of the holders of three fourths of the issued shares of that class, or with the sanction of a special resolution passed at a separate general meeting of the holders of shares of that class.

(5) An application for the resolution to be cancelled may be made to the court within twenty-one days after the date of the resolution by the holders of not less in the aggregate than fifteen per centum of the issued shares of that class, and on such an application the court may confirm or cancel the resolution.

(6) An application under subsection (5) may be made on behalf of the persons referred to in that subsection or by such of their number as they may appoint in writing for the purpose.

(7) If no application is made under subsection (5) the company shall, within fourteen days after the end of the period for making such an application, lodge with the Registrar a copy of each paragraph of the articles affected by the variation, in its amended form.

(8) If an application is made under subsection (5) and the court makes an order, the company shall, within fourteen days after the date of the order, lodge with the Registrar-

(a) a copy of the order; and

(b) a copy of each paragraph of the articles affected by the variation, in its amended form, if the order confirms the resolution.

(9) The articles shall have effect as amended on and from the date of their lodgement.

(10) If a company fails to comply with subsection (7) or (8), the company, and each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding ten monetary units for each day that the failure continues.

(11) Nothing in this section shall affect or derogate from the powers of the court under sections two hundred and thirty-four and two hundred and thirty-nine.

63. (1) Whenever a company makes an allotment of its shares, the company shall within one month thereafter lodge with the Registrar-Return as to allotment of shares

(a) a return of the allotments in the prescribed form, stating the number and the nominal amount of the shares comprised in the allotment, the names and addresses of each allottee, whether each allottee is an individual, a body corporate or an unincorporated association, and the amount (if any) paid or due and payable on each share; and

(b) subject to subsection (3), in the case of shares allotted as fully or partly paid up otherwise than in cash-

(i) any contract constituting the tile of the allottee to the allotment;

(ii) any contract of sale, or for services or other consideration in respect of which that allotment was made; and

(iii) a return stating the number and nominal amount of shares so allotted, the extent to which they are to be treated as paid-up and the consideration for which they have been allotted.

(2) Where a contract referred to in subsection (1) is not in writing, the company shall lodge with the Registrar particulars of the contract.

(3) If a company fails to comply with subsection (1), the company, and each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding ten monetary units for each day that the failure continues.

64. (1) Subject to section sixty-nine, a company shall not register a transfer of shares unless-Transfer of shares

(a) a proper instrument of transfer has been delivered to the company; or

(b) the right to the shares has been transmitted by operation of law.

(2) Transfers may be lodged with the company by either the transfer or transferee.

(3) If a company refuses to register a transfer, the company shall, within two months after the date on which the transfer was lodged with the company, send to the transferee and transferor notice in writing of the refusal, together with a statement of the facts which are considered to justify refusal.

(4) If a company fails to comply with subsection (1), the company, and each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding two hundred and fifty monetary units.

(5) If a company fails to comply with subsection (3)-

(a) the company, and each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding three monetary units for each day that the failure continues; and

(b) the transfer shall be deemed to have been registered on the day on which the transfer was lodged with the company.

65. (1) Save as expressly provided in a company's articles and in this Act, shares shall be transferable without restriction by a written transfer in accordance with section fifty-seven.Restrictions on transferability

(2) The articles of a private company shall not impose any restriction on the transferability of shares after they have been issued unless all the shareholders have agreed in writing.

(3) A company may refuse to register a transfer of shares to any person who-

(a) is under eighteen years of age; or

(b) is of unsound mind and has been declared to be so by the court or a court of competent jurisdiction of another country.

66. (1) A company shall, within two months after the allotment of any of its shares or after the registration of the transfer of any shares, deliver to the registered holder thereof a certificate under the common seal of the company stating-Issue of share certificates

(a) the number and classes of shares held by him, and the distinguishing numbers thereof (if any);

(b) the amount paid on such shares and the amount (if any) remaining unpaid; and

(c) the full name and address of the registered holder and whether the holder is an individual, a body corporate or an unincorporated association.

(2) If a share certificate is defaced, lost or destroyed, the company, at the request of the registered holder of the shares, shall renew the same on payment of a fee not exceeding one monetary unit and on such terms as to evidence and indemnity and the payment of the company's expenses of investigation evidence as the company may reasonably require.

(3) If a company fails to comply with this section, the company, and each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding three monetary units for each day that the failure continues.

67. (1) If the holder of any shares wishes to transfer to any person part only of the shares represented by one or more certificates, the instrument of transfer together with the relevant certificates may be delivered to the company with a request to endorse the instrument of transfer.Endorsement of transfer

(2) If a company endorses on an instrument of transfer the words "certificate lodged", or words to the like effect, this shall be a representation to anyone acting on the faith of the endorsement that there has been produced to and retained by the company such certificates as show a prima facie title to the shares in the transferor named in the instrument of transfer, but not a representation that the certificates are genuine or that the transferor has any title to the shares.

(3) If a person acts on the faith of a false representation made by the company under subsection (2), the company shall be liable to compensate the person for any loss suffered as a result of so acting.

(4) For the purposes of this section, an endorsement under this section shall be deemed to be made by a company if it is made or signed by the secretary or any other person apparently authorised to endorse instruments of transfer on the company's behalf.

68. A share certificate shall be prima facie evidence of the title to the shares of the person named therein as the registered holder and of the amounts paid and payable thereon.Share certificates as evidence

69. (1) A company may, with respect to any fully paid-up shares (or stock) issue a warrant (in this Act called a "share warrant") stating that the bearer of the warrant is entitled to the shares therein specified, and may provide by coupons or otherwise for the payment of the future dividends on the shares included in the warrant.Share warrants to bearer

(2) A share warrant shall entitle the bearer to the shares therein specified, and the shares may be transferred by the delivery of the share warrant.

(3) The bearer of a share warrant shall be entitled, on surrendering it for cancellation, to have his name entered as a member in the register of members, and the company shall be responsible for any loss incurred by any person by reason of the company entering in its register the name of a bearer of a share warrant in respect of the shares therein specified without the share warrant being surrendered and cancelled.

(4) The articles of the company may provide that the bearer of a share warrant shall have any or all of the rights of a registered member of the company for the purposes of this Act (other than the right to receive notices).

(5) The company shall record the issue of a share warrant in its register of members as if the shareholder had ceased to hold those shares together with-

(a) the fact of the issue of the warrant;

(b) a statement of the shares included in the warrant, distinguishing the shares by their share numbers (if any); and

(c) the date of the issue of the warrant.

(6) Until the warrant is surrendered, the particulars referred to in subsection (5) shall be deemed to be the particulars required by this Act to be entered in the register of members in relation to the shares.

(7) On the surrender of the share warrant, the date of the surrender shall be entered as if it were the date on which the company received notice of the transfer of the shares to the bearer.

70. (1) In the case of the death of a shareholder of a company, the survivor or survivors where the deceased was a joint holder, and the legal personal or representative of the deceased where he was a sole holder or last survivor of joint holders, shall be the only persons recognised by the company as shareholders.Transmission of shares by operation of law.

(2) A person (in this section called "the representative") upon whom the ownership of a share devolves by reason of his being the legal personal representative, receiver, or trustee in bankruptcy of the holder, or by operation of law may, upon such evidence being produced as the company may reasonably require-

(a) be registered himself as the holder of the share; or

(b) transfer the share to some other person without first registering himself as the holder of the share.

(3) A company shall have the same right, if any, to decline registration of a transfer by the representative as it would have had in the case of a transfer by the registered holder, but shall have no right to refuse registration of the representative himself.

(4) The representative shall, prior to registration of himself or a transferee, be entitled to the same dividends and other advantages as if he were the registered holder and to the same rights and remedies as if he were a member of the company, except that he shall not, subject to any order by the court under section one hundred and forty-four, before being registered as a member in respect of the share, be entitled to vote at any meeting of the company.

(5) The company may at any time give notice requiring the representative to elect either to be registered himself or to transfer the share, and, if the notice is not complied with within three months, the company may thereafter suspend payment of all dividends or other moneys payable in respect of the share until the notice has been complied with.

71. The production to a company of any document which is by law sufficient evidence that the ownership of a share has been transmitted by the operation of law shall be accepted by the company as sufficient evidence of the transmission of ownership.Evidence of transmission of shares by operation of law

72. A company shall not have or claim a lien on shares on which there is no unpaid liability, nor shall any such lien extend to any sums due from the shareholder except in respect of the unpaid liability on the shares.Company's lien on shares

73. (1) Subject to this section and to its articles, a company may create and issue, whether in connection with the issue of any of its shares or otherwise, rights or options in favour of any directors, officers or employees of the company or of any subsidiary of the company, being rights or options that entitle the holders to acquire from the company, upon such consideration, terms and conditions as may be fixed by the board of directors, shares of any class.Rights and options to subscribe for share issue to directors, officers and employees

(2) The terms and conditions of such rights or options, including the time or times at or within which and the price or prices at which they may be exercised and any limitations on transferability, shall be set forth or incorporated by reference in the instrument or instruments evidencing the rights or options.

(3) Where a company proposes to issue such rights or options to one or more of the persons referred to in subsection (1) as an incentive to service or continued service with the company or any related company, or where it proposes to issue such rights or options to a trustee on behalf of such persons, the issue shall be authorised at a general meeting by special resolution, or shall be authorised by and be consistent with a scheme adopted at a general meeting by special resolution.

(4) If there are any pre-emptive rights in any of the shares proposed under subsection (3) to be subject to rights or options, the issue or scheme, as the case may be, shall also be approved by the vote or written consent of the holders of a majority of the shares entitled to exercise pre-emptive rights with respect to such shares, and the vote or written consent shall release the pre-emptive rights.

(5) The special resolution authorising the issue such rights or options, or the scheme adopted by special resolution, shall include-

(a) the material terms and conditions upon which the rights or options are to be issued, including any restrictions on the number of shares that eligible individuals may have the right or option to acquire;

(b) the method of administering the scheme, in the case of a scheme;

(c) the terms and conditions of payment for shares in full or by instalments;

(d) any limitations on the transferability of the shares; and

(e) the voting and dividend rights to which the holders of the shares may be entitled.

(6) The terms and conditions shall not provide for any share certificate to be delivered to a shareholder, or confer any right to vote in respect of such shares, prior to full payment therefor.

(7) In the absence of fraud in the transaction, the decision of the directors (or, where the directors or a sufficient quorum thereof are not themselves disinterested in the issue or scheme, the decision of the general meeting) shall be conclusive as to the adequacy of the consideration, tangible or intangible, received or to be received by the company for the issue of rights or options and for the acquisition pursuant thereto of shares in the company.

(8) This section shall not apply to the right of holders of convertible debentures to acquire shares upon the exercise of a conversion option.

Division 4.3-Alteration of share capital

74. (1) A company may, unless its articles provide otherwise, by special resolution alter its share capital as stated in the certificate of share capital by doing any of the following:Alteration of share capital

(a) increasing its share capital by new shares of such an amount as it thinks expedient;

(b) consolidating and dividing all or any of its share capital into shares of a larger amount than its existing shares;

(c) converting all or any of its paid up shares into stock, and re-converting that stock into paid up shares of any denomination;

(d) subdividing its shares, or any of them, into shares of smaller amounts than is stated in the certificate of share capital;

(e) cancelling shares which, at the date of the passing of the resolution, have not been allotted to any person, and diminishing the amount of its share capital by the amount of the shares so cancelled.

(2) Where shares are subdivided under this section, the proportion between the amount paid and the amount, if any, unpaid on each reduced share shall be the same as it was in the case of the share from which the reduced share is derived.

(3) A cancellation of un-allotted shares under this section shall be deemed not to be a reduction of share capital for the purposes of this Act.

(4) Where a company has made any alteration referred to in subsection (1), it shall within one month after so doing lodge with the Registrar-

(a) a notice in the prescribed form specifying, as the case may be, the shares increased, consolidated, divided, subdivided, converted, redeemed or cancelled or the stock reconverted; and

(b) a copy of the resolution authorising the alteration.

(5) Where an alteration under this section alters a particular stated in the company's certificate of share capital, the Registrar shall issue a replacement certificate of share capital worded to meet the circumstances of the case.

(6) If a company fails to comply with subsection (4), the company, and each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding ten monetary units for each day that the failure continues.

75. (1) If a company has accumulated a sum of undivided profits, which with the approval of the shareholders may be distributed among the shareholders in the form of a dividend or bonus, the company may, by special resolution, return the same, or any part thereof, to the shareholders in reduction of the paid up capital of the company, the unpaid capital being thereby increased by a similar amount.Power to return accumulated profits in reduction of paid up share capital

(2) Within twenty-one days after making a special resolution under subsection (1), the company shall lodge with the Registrar a return in the prescribed form giving the details required in the case of a special resolution reducing share capital.

(3) The resolution shall take effect as from the date of lodgement.

(4) The provisions of this Act with respect to reduction of share capital shall not apply to a reduction of paid up share capital under this section, except as provided in subsection (2).

76. (1) Subject to confirmation by the court, a company may, if so authorised by its articles, by special resolution reduce its share capital in any way, and in particular, without prejudice to the generality of the foregoing power, may-Special resolution for reduction of share capital

(a) extinguish or reduce the liability on any of its shares;

(b) either with or without extinguishing or reducing liability on any of its shares, cancel any paid-up share capital which is in excess of the wants of the company; or

(c) either with or without extinguishing or reducing liability on any of its shares, pay off any paid-up share capital which is in excess of the wants of the company; and may, if and so far as is necessary, reduce the amount of its shares accordingly.

(2) A special resolution under this section is in this Act referred to as "a resolution for reducing share capital".

77. (1) If a company has passed a resolution for reducing share capital, it shall, within twenty-one days after the making of the resolution, apply to the court for an order confirming the reduction.Creditors may object to reduction in capital

(2) If the proposed reduction of share capital involves either diminution of liability in respect of unpaid share capital or the payment to any shareholder of any paid-up share capital, subsections (5) and (6) shall apply to the reduction unless the court directs otherwise.

(3) In giving a direction under subsection (2), the court may direct that subsections (5) and (6) shall not apply to a specified class or classes of creditors.

(4) If subsection (2) does not apply, subsections (5) and (6) shall not apply unless the court directs that they shall apply.

(5) Every creditor of the company who at the date fixed by the court is entitled to any debt or claim which, if that date were the commencement of the winding-up of the company, would entitle the creditor to benefit from the distribution under the winding-up, shall be entitled to object to the reduction.

(6) The court shall settle a list of creditors so entitled to object, and for that purpose shall ascertain, as far as possible without requiring an application from any creditor, the names of those creditors and the nature and amount of their debts or claims, and may publish notices fixing a day or days after which creditors not yet entered on the list will lose their right to object if they have not presented a claim to be entered on the list.

(7) If a creditor entered on the list whose debt or claim is not discharged or has not been determined does not consent to the reduction, the court may, if it thinks fit, dispense with the consent of that creditor, on the company's securing payment of his debt or claim by appropriating-

(a) the full amount of the debt or claim, if the company admits the full amount of the debt, or claim, or, though not admitting it, is willing to provide for it; or

(b) an amount fixed by the court after the like inquiry and adjudication as if the company were being wound-up by the court, if the company does not admit and is not willing to provide for the full amount of the debt or claim, or if the amount is contingent or not ascertained.

78. (1) The court, if satisfied with respect to every creditor of the company who is entitled to object to the reduction, that-Order confirming reduction and powers of court in making such order

(a) his consent to the reduction has been obtained;

(b) his debt or claim has been discharged or determined; or

(c) his debt or claim has been secured; may make an order confirming the reduction on such terms and conditions as it thinks fit.

(2) The order may require the publication of a notice of the reduction in capital on the issue of the replacement certificate of share capital under section seventy-nine.

(3) Where the court makes any such order it may, if for any special reason it thinks it proper so to do, make an order-

(a) directing that the company shall, during a period specified in the order, add to its name as the last words thereof the words "and reduced"; or

(b) requiring the company to publish as the court directs the reasons for the reduction or such other information in regard thereto as the court may think expedient with a view to giving proper information to the public.

(4) Where a company is ordered to add to its name the words "and reduced", those words shall, until the expiration of the period specified in the order, be deemed to be part of the name of the company.

79. (1) The Registrar, on the lodgement of an order of the court confirming the reduction of the share capital of a company and of a minute approved by the court showing, with respect to the share capital of the company as altered by the order-Lodgement of order and issue of replacement certificate of share capital

(a) the amount of the share capital;

(b) the number of shares into which it is to be divided;

(c) the amount of each share; and

(d) the amount, if any, at the date of lodgement deemed to be paid up on each share; shall issue a replacement certificate of share capital of the company, worded to meet the circumstances of the case.

(2) On the issue of the certificate, the resolution for reducing share capital as confirmed by the order shall take effect.

(3) The issue of the certificate of share reduction shall be conclusive evidence that all the requirements of this Act with respect to reduction of share capital have been complied with, and that the share capital of the company is as stated in the certificate.

80. (1) Subject to this section, where the share capital of a company is reduced, a member of the company, past or present, shall not be liable in respect of any share to any call or contribution exceeding in amount the difference, if any, between the amount of the share fixed by the reduction and the amount paid, or the reduced amount, if any, which is to be deemed to have been paid, on the share, as the case may be.Liability of members in respect of reduced shares

(2) If any creditor, entitled in respect of any debt or claim to object to the reduction of share capital, is, by reason of his ignorance of the proceedings for reduction, or of their nature and effect with respect to his claim, not entered on the list of creditors, and, after the reduction, the company is unable within the meaning of the provisions of this Act with respect to the winding-up by the court to pay the amount of his debt or claim, then-

(a) every person who was a member of the company at the date of issue of the replacement certificate of share capital shall be liable to contribute as if the company had commenced to be wound-up on that date; and

(b) if the company is wound-up, the court, on the application of any such creditor and proof of his ignorance, may if it thinks fit settle accordingly a list of persons so liable to contribute, and make and enforce calls and orders on the persons on the list as if they were ordinary contributories in a winding-up.

(3) Nothing in this section shall affect the rights of the members amongs themselves.

81. (1) Where a company has passed a resolution for reducing share capital, an officer of a company who-Offence of concealing name of creditor

(a) wilfully conceals the name of any creditor entitled to object to the reduction;

(b) wilfully misrepresents the nature or amount of the debt or claim of any creditor; or

(c) aids, abets or is privy to any such concealment or misrepresentation; shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding five hundred monetary units.

(2) An officer referred to in subsection (1) shall be personally liable to pay to the creditor the amount of his debt or claim to the extent that it is not paid by the company, whether or not he has been convicted of an offence under subsection (1).

Division 4.4-Restrictions on financial assistance

82. (1) Subject to this Part, where a person is acquiring or is proposing to acquire any shares in a company, the company or any of its subsidiaries shall not give financial assistance directly for the purpose of that acquisition. Restrictions on financial assistance in acquisition of shares

(2) Subject to this Part, where a person has acquired any shares in a company and any liability has been incurred (by that or any other person) for the purpose of that acquisition, the company and its subsidiaries shall not give any financial assistance directly or indirectly for the purpose of reducing or discharging the liability so incurred.

(3) This section shall not prohibit a company from giving any financial assistance for the purpose of any acquisition of shares in the company or its holding company if-

(a) the giving of the assistance is an incidental part of some larger purpose of the company, and the principal purpose of the company in giving that assistance is not to reduce or discharge any liability incurred by a person for the purpose of any such acquisition; and

(b) the assistance is given in good faith in the interest of the company.

(4) This section shall not prohibit-

(a) any distribution of a company's assets by way of dividend lawfully made or any distribution made in the course of winding-up of the company;

(b) the allotment of any bonus shares;

(c) anything done in pursuance of an order of the court made under this Act;

(d) anything done under an arrangement made in pursuance of section two hundred and thirty-four;

(e) anything done under an arrangement made between a company and its creditors which is binding on the creditors under section three hundred and twenty-five;

(f) any reduction of capital confirmed by order of the court under this Part; or

(g) a redemption of any share in accordance with this Part.

(5) This section shall not prohibit-

(a) the lending of money by the company in the ordinary course of its business, if the lending of money is part of the ordinary business of the company;

(b) the provision by a company, in accordance with an employee's share scheme, of money for acquisition of fully paid shares in the company to be held by or for the benefit of employees of the company (including any director holding a salaried position in the company); or

(c) the making by a company of loans to persons, other than directors, employed in good faith by the company, with a view to enabling those persons to acquire fully paid shares otherwise than as nominees of the company.

(6) In giving financial assistance to any person under subsection (5), a public company shall not reduce its net assets, other than distributable profits.

(7) A reference in this section to a person incurring any liability includes a reference to his changing his financial position by making any agreement or arrangement (whether enforceable or unenforceable and whether made on his own account or with any other person) or by any other means.

(8) If a company fails to comply with subsection (1) or (2), the company, and each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding two thousand monetary units or to imprisonment for a period not exceeding two years, or to both.

(9) In this section-

"financial assistance" means:

(a) financial assistance given by way of gift;

(b) financial assistance given by way of guarantee, security or indemnity, other than an indemnity in respect of the indemnifier's own neglect or default, or by way of release or waiver;

(c) financial assistance given by way of-

(i) a loan;

(ii) any other agreement under which any of the obligations of any other party to the agreement remains unfulfilled; or

(iii) inovation of, or the assignment of, any rights arising under any such loan or agreement; or

(d) any other financial assistance given by a company which has no net assets, or whereby the net assets of the company are reduced to a material extent; "net assets", in relation to the giving of financial assistance by a company, means the amount by which the aggregate amount of the company's assets exceeds the aggregate amount of its liabilities taking the amount of both assets and liabilities to be stated in the company's accounting records immediately before the financial assistance is given;

"liabilities" includes any amount retained as reasonably necessary for the purpose of providing for any liability or loss which is either likely to be incurred, or certain to be incurred but uncertain as to amount or as to the date on which it will arise.

83. (1) A private company may give financial assistance for the acquisition of shares in itself in accordance with this section.Relaxation of restrictions for private companies

(2) A private company may give financial assistance for the acquisition of shares in a private company that is its holding company in accordance with this section unless it is the subsidiary of-

(a) a body corporate not incorporated in Zambia; or

(b) a public company; that is also a subsidiary of the holding company concerned.

(3) Financial assistance shall not be given under this section unless-

(a) the company proposing to give the financial assistance is a wholly owned subsidiary; or

(b) the giving of the assistance is approved by special resolution of the company.

(4) Where the financial assistance to be given by a company is for the acquisition of shares in its holding company, financial assistance shall not be given unless approved by special resolutions of-

(a) that holding company; and

(b) any other company which is both the company's holding company and a subsidiary of that holding company, other than a wholly owned subsidiary.

(5) The directors of the company proposing to give the financial assistance and, where the shares to be acquired are shares in its holding company, the directors of the companies referred to in paragraphs (a) and (b) of subsection (4), shall, not more than seven days before the special resolution is put to a meeting, make a statutory declaration in the prescribed form complying with subsection (6) and make it available, together with the auditors' report annexed thereto, for inspection by members of the company at the meeting at which the resolution is to be voted on.

(6) A statutory declaration for the purposes of subsection (5) shall-

(a) contain such particulars of the assistance to be given and of the business of the company of which they are directors as may be prescribed;

(b) identify the person to whom the assistance is to be given;

(c) state that, to the best of the directors' knowledge and belief, the company will be able to pay its debts-

(i) in full within twelve months of the commencement of the winding-up of the company, if it is intended to commence the winding-up of the company within twelve months of the date of the declaration; or

(ii) as they fall due during the year immediately following that date, in any other case.

(7) In forming their views for the purposes of the statutory declaration, the directors shall take into account any liabilities of the company which the court would be required by section two hundred and seventy-two to take into account in determining for the purposes of that section whether the company was unable to pay its debts.

(8) The statutory declaration shall have annexed to it a report by the auditors of the company, addressed to the directors who made the declaration, stating that the auditors have enquired into the state of affairs of that company and are not aware of any thing to indicate that the opinion expressed by the directors in the declaration is unreasonable in all the circumstances.

(9) Where a special resolution is required under this section to be passed approving the giving of financial assistance, financial assistance shall not be given less than one month after the date on which-

(a) the special resolution is passed; or

(b) the last of the resolutions is passed, where more than one such resolution is passed; unless each member of the company who was entitled to vote on the resolution, or any of the resolutions, voted in favour of the resolution concerned.

(10) Where an application for the cancellation of any such resolution is made under this section, financial assistance shall not be given before the final determination of the application unless the court otherwise orders.

(11) Financial assistance shall not be given under this section more than two months after-

(a) the date on which the directors of the company proposing to give the financial assistance made the statutory declaration under subsection (5); or

(b) the date on which the earliest of the declarations under subsection (5) is made, where the company is a subsidiary and both its directors and the directors of any of its holding companies made such a declaration; unless the court, on an application for the cancellation of any of the resolutions, otherwise orders.

(12) Where a special resolution under this section is passed by a company, an application may be made to the court for the cancellation of that resolution by not fewer than one fifth of the members, being persons who did not consent to or vote in favour of the resolution, within twenty-one days after the making of the resolution.

(13) Within twenty-one days after-

(a) the passing of a special resolution under this section, if there was no application under subsection (12); or

(b) the decision by the court, if there was an application made under subsection (12) but the court rejected the application; the company shall lodge with the Registrar-

(i) the statutory declaration together with any auditors' report annexed thereto; and

(ii) a copy of the special resolution.

(14) If a company fails to comply with subsection (13), the company, and each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding ten monetary units for each day that the failure continues.

(15) A director of a company who makes a statutory declaration for the purposes of this section without having reasonable grounds for the opinion expressed in that declaration shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding five hundred monetary units or to imprisonment for a period not exceeding six months, or to both.

(16) In this section, "financial assistance" and "net assets" have the same meaning as in section eighty-two.

Division 4.5-Miscellaneous

84. No dividend shall be payable to the shareholders of a company except out of the profits arising or accumulated from the business of the company.Dividends may be paid only out of profits

85. Company shares that are listed on any stock exchange in Zambia shall be exempt from the provisions of the Property Transfer Tax Act, 1984.Exemption from Property Transfer Tax Act

PART V DEBENTURES AND CHARGES

Division 5.1-Debentures

86. (1) A company may raise loans by the issue of a debenture or of a series of debentures.Issue of debentures

(2) Debentures may either be secured by a charge over property of the company or be unsecured by any charge.

(3) All debentures which by their terms, or by the terms of any resolution authorising their creation, or by the terms of any trust deed, are declared to be of the same series shall rank equally in all respects notwithstanding that they may be issued on different dates.

(4) Any debenture stock shall be created-

(a) by deed under the common seal of the company in favour of trustees for the debenture stockholders; and

(b) as stock of a specified total amount, parts of which, represented by debenture stock certificates, are issued to separate holders.

(5) A contract with a company to take up and pay for any debenture of the company may be enforced by an order for specific performance.

(6) A condition contained in a debenture or in a trust deed for securing a debenture shall not be invalid by reason only of the fact that the debenture is hereby made irredeemable or redeemable only on the happening of a contingency, however remote, or on the expiration of a period, however long.

87. (1) A company shall, within two months after the allotment of any of its debentures or after the registration of the transfer of any debentures, deliver to the registered holder thereof the debentures or a certificate of the debenture stock under the common seal of the company.Documents of title to debentures

(2) Sections sixty-four and sixty-six to seventy-one shall apply, with the necessary modifications, in relation to debentures and debenture holders.

(3) If any restriction is imposed on the right to transfer any debentures, notice of the restriction shall be endorsed on the face of the debenture or debenture stock certificate and, in the absence of such endorsement, the restriction shall be ineffective as regards any transferee for value whether or not he has notice of the restriction.

(4) If a company fails to comply with subsection (1), the company, and each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding three monetary units for each day that the failure continues.

88. (1) A company shall not-Trustees for debenture holders

(a) idemnify a person who is a trustee for debenture holders of the company or a related company against any liability which under law would otherwise attach to him in respect of any breach of trust or failure to show the degree of care and diligence required of him as trustee having regard to the powers, authorities or discretion conferred on him by the trust deed; or

(b) compensate such a person for the cost of meeting any such liability.

(2) A provision of a contract between the company and such a trustee shall be void if it purports to indemnify or compensate him in contravention of subsection (1).

(3) A release in respect of anything done or omitted to be done by a trustee may be made by a special resolution of the debenture holders.

(4) The court may remove a trustee for the holders of any debentures and appoint another in his place if, on the application of any debenture holder, it is satisfied that the trustee has interests which conflict or may conflict with those of the debenture holders or that for any other reason it is undesirable that the trustee should continue to act.

(5) Upon such an application the court may order the applicant to give security for the payment of the costs of the trustee.

89. (1) The following persons shall not be eligible for appointment or competent to act as trustee for the holders of debentures of a company:

Eligibility for appointment as trustee for debenture holders

(a) an individual under the age of eighteen years;

(b) a person under any legal disability;

(c) a person prohibited or disqualified from so acting by order of a court of competent jurisdiction;

(d) an undischarged bankrupt;

(e) a person who is an officer or auditor of the company or a related company or who has been such an officer or auditor within the preceding two years, save with the leave of the court;

(f) a person who has been convicted within the preceding five years of an offence involving fraud or dishonesty;

(g) a person who has been removed within the preceding five years from an offence of trust by order of a court of competent jurisdiction.

(2) A person who, in contravention of this section, acts or continues to act as a trustee for debenture holders shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding ten monetary units for each day that the contravention continues.

90. (1) A copy of any trust deed for securing an issue of debentures shall be provided to a holder of those debentures at his request and on payment of the sum of one monetary unit, or such lesser sum as may be required by the company, within seven days after the receipt of the request.Right to copies of trust deed

(2) If the company fails to comply with this section, the company, and each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding three monetary units for each day that the failure continues.

91. (1) No unsecured debenture or debenture stock certificate, or prospectus relating to unsecured debentures, shall be issued by a company unless the term "debenture", or such other term as is used to denote the debenture, is qualified by the word " unsecured".Unsecured debentures to be so described

(2) If the company fails to comply with this section, the company, and each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding five hundred monetary units.

92. (1) A company which issues or has issued debentures shall maintain a register of debenture holders.Register of debenture holders

(2) Sections forty-eight to fifty-five shall apply, with the necessary modifications, in relation to the register.

(3) A company shall, on the demand of any trustee for its debenture holders, within seven days furnish to him the names, addresses and other registered particulars of the debenture holders for which he is a trustee.

(4) If the company fails to comply with this section, the company, and each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding ten monetary units for each day for which the failure continues.

93. (1) Subject to this section, sections one hundred and thirty-nine to one hundred and fifty-five shall apply, with the necessary modifications, in relation to the holders of debentures of a company that are secured by a trust deed. Meetings of holders of debentures secured by a trust deed

(2) Unless the trust deed provides otherwise, the registered debenture holders shall have votes in proportion to the value of the debentures they hold.

94. (1) The terms of any debentures not secured by a trust deed may provide for the convening of general meetings of the debenture holders or of classes of debenture holders, and for the passing at such meetings of resolutions binding on all the debenture holders or on all the debenture holders of those classes.Meetings of other debenture holders

(2) Whether or not provision for meetings is made under the debentures, the court may at any time direct a meeting of the debenture holders of any class to be held and conducted in such manner as it thinks fit to consider such matters as it may direct, and may give such ancillary or consequential directions as it thinks fit.

(3) Subject to subsection (4) and unless the debentures provide otherwise, sections one hundred and forty-six to one hundred and fifty-two shall apply, with the necessary modifications, to a meeting held in accordance with this section.

(4) Unless the terms of the debentures provide otherwise, the registered debenture holders shall have votes in proportion to the value of the debentures they hold.

95. (1) A company shall not re-issue any debenture which has been redeemed.Re-issue of redeemed debentures

(2) A company shall not issue a new debenture in place of a redeemed debenture on terms that the new debenture shall have the same priorities as the redeemed debenture.

(3) The issue of a new debenture in place of a redeemed debenture shall not be treated as the issue of a new debenture for the purposes of any provision limiting the amount or number of debentures which may be issued.

(4) A purported issue or re-issue of debentures that contravenes this section shall be void.

Division 5.2-Charges

96. Where a charge is expressed to be made to secure an indeterminate amount, or a fluctuating amount advanced on current account by, or due and owing to, the person entitled to the charge, the charge shall not be considered to be redeemed by reason only that the current account ceases to be in debit or by reason only that no amount is due or owing, as the case may be.Charge to secure fluctuating amount

97. (1) This section applies to any charge on property of the company, whether or not it is required to be registered under section ninety-eight.Company's register of charges

(2) A company which has any property subject to a charge shall open and maintain a register of charges over its property in which it shall, on the creation of a charge over property of the company, or on the acquisition of property subject to a charge, enter the following particulars of each charge:

(a) the date of creation of the charge or the date of acquisition of the property, as the case may be;

(b) a short description of the liability (whether present or prospective) secured by the charge;

(c) a short description of the property charged;

(d) the name of the trustee, if the charge secures debentures under a trust deed;

(e) if the charge does not secure debentures under a trust deed-

(i) the name of the chargee; and

(ii) the name of the person whom the company believes to be the holder of the charge.

(3) The register shall be open for inspection-

(a) by any member or creditor of the company or by the Registrar or his agent, without charge; and

(b) by any other person on payment of an amount required by the company, not exceeding ten monetary units or such higher amount as may be prescribed.

(4) If the company fails to comply with this section, the company, and each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding five hundred monetary units.

98. (1) The Registrar shall maintain a register containing, with respect to each company, the particulars of the charges of the company that are lodged in accordance with this Part.Registrar's register of charges

(2) The register shall include, with respect to each company, a chronological index of the charges of the company.

99. (1) This section applies to the following charges over the property or undertaking of a company:Registration of charges by companies

(a) a charge for the purpose of securing any issue of a series of debentures;

(b) a charge on uncalled share capital of the company;

(c) a charge to which the Trade Charges Act applies;

(d) a floating charge on the whole or part of the undertaking or property of the company;

(e) a charge on land, wherever situated, or any interest therein;

(f) a charge on any present or future book debts of a company;

(g) a charge on calls made but not paid;

(h) a charge on a ship or aircraft or any share in a ship or aircraft;

(i) charge on goodwill, on a patent or a licence under a patent, on a trade mark, or on a copyright or a licence under a copyright;

(j) a charge overshares in another body corporate, not being-

(i) a charge in favour of a broker who has paid for a share purchased or applied for on behalf of the company; or

(ii) a charge created by or accompanied by delivery of the certificates for such shares.

(2) Subject to this section, if a company-

(a) creates any charge to which this section applies; or

(b) acquires property that is subject to a charge to which this section applies; the company shall, within twenty-one days after the date of the creation of the charge, or after the acquisition of the property, as the case may be, lodge with the Registrar in the prescribed form the particulars referred to in subsection (3) together with-

(i) particulars of the instrument by which the charge is created or evidenced sufficient to identify the instrument, if the charge is created or evidenced by an instrument by which it is already registered under this or any other Act; or

(ii) a certified copy of the instrument, if any, by which the charge is created or evidenced, in any other case.

(3) The particulars required for the purposes of subsection (2) are-

(a) the date of creation of the charge;

(b) the date of acquisition of the property by the company, where the property was subject to the charge when acquired by the company;

(c) the amount secured by the charge;

(d) short particulars of the property charged;

(e) the names of the charges; and

(f) any other prescribed particulars of the charge.

(4) Where the property subject to a charge includes property outside Zambia, this section applies in relation to any instrument creating or evidencing or purporting to create or evidence the charge, notwithstanding that further proceedings may be necessary to make the charge valid or effectual according to the law of the country in which the property is situated.

(5) Where a negotiable instrument has been given to a company to secure the payment of any debts owed to the company, the deposit of the instrument for the purposes of securing an advance to the company shall for the purposes of this section be deemed not to be a charge on those debts owed to the company.

(6) Debentures entitling the holder to a charge on land shall for the purposes of this section be deemed not to be an interest in land.

(7) Where a series of debentures is created by a company and contains, or gives by reference to any other instrument, any charge to the benefit of which the debenture holders of that series are entitled in all respects equally, subsection (3) shall be satisfied by the lodgement of the following particulars:

(a) the total amount secured by the whole series;

(b) the date of the resolution authorising the issue of the series and the date of the document, if any, by which the security is created or defined;

(c) a general description of the property charged; and

(d) the names of the trustees, if any, for the debenture holders, together with a certified copy of the document containing the charge, or, if there is no such document, a certified copy of one of the debentures of the series; together with, where more than one issue is made of debentures in the series, the lodgement, within twenty-one days after any issue, of particulars of the date and amount of the issue.

(8) Where any commission, allowance, or discount has been paid or made either directly or indirectly by a company to any person in consideration of his subscribing or agreeing to subscribe, whether absolutely or conditionally, for any debentures of the company, or procuring or agreeing to procure subscriptions, whether absolute or conditional, for any such debentures, the particulars required to be lodged under this section shall include particulars as to the amount or rate per centum of the commission, discount, or allowance to be paid or made.

(9) The deposit of any debentures as security for any debt of the company shall not for the purposes of this section be regarded as the issue of such debentures at a discount.

(10) Lodgement of documents for the purposes of this section may be effected on the application of any person interested in the charge concerned, and if lodgement is effected by a person other than the company, that person shall be entitled to recover from the company the amount of any fees properly paid by him to the Registrar on the lodgement.

(11) If the particulars and documents relating to a charge that are required by this section to be lodged with the Registrar are not lodged within the time required-

(a) the charge shall be void against the liquidator and any creditor of the company; and

(b) the full debt secured by the charge shall become payable immediately by the company.

(12) Nothing in this section shall affect the provisions of any other written law relating to the registration of charges.

100. If the particulars and documents relating to a charge that are required by this Part to be lodged with the Registrar are lodged within the time required, the Registrar shall issue a certificate of the registration of the charge stating the date of lodgement and, if applicable, the amount thereby secured, and the certificate shall be conclusive evidence that the requirements of this Part as to registration have been complied with.Certificate to be issued by Registrar

101. (1) Subject to any consent (express or implied) given by the person who would otherwise be entitled to priority, charges required by this Part to be registered shall have priority in relation to one another in accordance with the times at which they were lodged.Priorities

(2) Where another written law by its terms accords priority as between successive charges affecting the same property, subsection (1) shall not affect the priorities between those charges set by that written law.

(3) Subject to subsection (2), where a charge (other than a floating charge) gives security over property of such a kind that this Part would require its registration, and also over other property, subsection (1) shall apply in respect of the first-mentioned property, but not in respect of the other property.

102. (1) If there is lodged with the Registrar a statement in the prescribed form, signed on behalf of a company and by the person entitled to charge, to the effect that-Entries of satisfaction and release of property from charge

(a) the debt for which the charge was given has been paid or satisfied in whole or in part; or

(b) part of the property or undertaking charged has been released from the charge or has ceased to form part of the company's property or undertaking; then-

(i) the Registrar shall enter the fact in the register of charges;

(ii) the statement shall, in favour of the liquidator and any creditor of the company, be binding on the person entitled to the charge who signed the statement and on any other person claiming through him.

103. (1) If a variation is made in the terms of a charge registered under this Part, other than a satisfaction or release to which section one hundred and two applies, particulars after the variation in the prescribed form shall be lodged with the Registrar within twenty-one days of the making of the variation.Variation of registered charge

(2) The particulars shall identify the terms of the original charge that have been varied and shall indicate the nature of the variation made in each such term.

(3) Where the effect of the variation is to increase the extent of the security or the amount for which security is available, the increase shall, for the purposes of priorities, be treated as if it were a charge, being a charge for an amount which is the amount of the increase and whose particulars were lodged at the time that the particulars of the variation were lodged.

(4) Where by its terms a registered charge secures a fluctuating amount, or an initial sum together with the words "further advances", the making of a further advance to the company shall not, for the purposes of this section, constitute a variation in the terms of the charge.

(5) Lodgement of documents for the purposes of this section may be effected on the application of any person interested in the charge concerned, and if lodgement is effected by a person other than the company, that person shall be entitled to recover from the company the amount of any fees properly paid by him to the Registrar on the lodgement.

(6) If the particulars and documents relating to a charge that are required by this section to be lodged with the Registrar are not lodged within the time required-

(a) the charge shall be void against the liquidator and any creditor of the company; and

(b) the full debt secured by the charge shall become payable immediately by the company.

104. (1) If a person enters into possession of any of the property of a company as mortgagee under any powers contained in a charge, he shall, within seven days after so doing, lodge a notice to that effect in the prescribed form with the Registrar.Registration of enforcement of security by mortgagee

(2) Where a person who is in possession as mortgagee of property of a company goes out of possession, he shall, within fourteen days thereafter, lodge a notice to that effect in the prescribed form with the Registrar.

(3) A person who fails to comply with this section shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding ten monetary units for each day that the failure continues.

105. (1) Where a company issues a debentures forming one of a series of debentures, or a certificate of debenture stock, and the payment of the debenture is secured by a charge registered under this Part, the company shall endorse on the debenture or certificate of debenture stock a statement that registration has been effected and the date of registration.Endorsement of registration on debentures of a series

(2) If the company fails to comply with subsection (1), the company, and each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding two hundred and fifty monetary units.

(3) A person who-

(a) causes to be endorsed on any debenture or certificate of debenture stock a statement that registration has been effected, which he knows to be false in any particular, or

(b) authorises or permits the delivery of any debenture or certificate of debenture stock bearing an endorsed statement that registration has been effected, which he knows to be false in any particular; shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding two hundred and fifty monetary units or to imprisonment for a period not exceeding three months, or to both.

106. This Division shall bind the State in respect of all charges to which the State is entitled.

Division 5.3-ReceiversCharges in favour of the State

107. This Division shall apply in relation to a receiver of property of a company who is appointed after the commencement of this Act, even if the appointment arose out of a transaction entered into before that commencement. Application of Division

108. (1) When a charge over property of a company has become enforceable, the court may, on the application of the chargee, appoint-Appointment of receiver by court

(a) a receiver who is not also a manager; or

(b) a receiver and manager; of the property.

(2) In the case of floating charge, the court may, whether or not the charge has become enforceable, on the application of the chargee, appoint-

(a) a receiver who is not also a manager; or

(b) a receiver and manager; of the property and undertaking of the company if it is satisfied that events have occurred or are about to occur which render it unjust to the chargee that the company should retain power to dispose of its assets.

(3) A receiver shall not be appointed as a means of enforcing debentures not secured by any charge.

109. (1) A person who obtains an order for the appointment of a receiver of property of a company, or who appoints such a receiver under a power contained in an instrument, shall, within seven days after obtaining the order or making the appointment, lodge a notice with the Registrar of the order or appointment.Notification of appointment of receiver

(2) A person who is appointed as a receiver of property of a company shall, within fourteen days after the appointment, lodge with the Registrar a notice in the prescribed form of the physical address of the person's office, and a postal address.

(3) Where a person who has been appointed receiver of property of a company ceases to act as receiver, he shall, within seven days after so ceasing to act as receiver, lodge with the Registrar a notice that he has ceased to act as receiver.

(4) On lodgement of a notice under subsection (1) or (3), the Registrar shall cause a notice of the appointment of the person as receiver, or that the person has ceased to act as receiver, as the case may be, to be published in the Gazette.

110. (1) Where-Payment of preferential creditors

(a) a receiver is appointed, on behalf of the holder or trustee of any debenture of a company that is secured by a floating charge; or

(b) possession is taken by or on behalf of such a person; of property comprised in or subject to the charge, then, if the company is not at the time in the course of being wound-up, the debts which in every winding-up are, under section three hundred and forty-six (relating to preferential payments), to be paid in priority to all other debts shall be paid out of any assets coming to the hands of the receiver or the person taking possession in priority to any claim for principal or interest in respect of the debentures.

(2) For the purpose of applying section three hundred and forty-six, the date of the appointment of the receiver or of possession being taken, as the case may be, shall be deemed to be the date of commencement of the winding-up.

111. (1) A body corporate shall not be appointed as a receiver of the property or undertaking of a company.Eligibility for appointment as receiver

(2) An individual shall not be appointed, act or continue to act as a receiver of the property or undertaking of a company if he is-

(a) under the age of eighteen years;

(b) under any legal disability;

(c) prohibited or disqualified from so acting by any order of a court of competent jurisdiction;

(d) a mortgagee or chargee of the company;

(e) an undischarged bankrupt;

(f) a person who is, or has been within the previous two years, a director or officer of the company or any related body corporate, save with the leave of the court;

(g) a trustee under any trust deed for the benefit of debenture holders of the company, save with the leave of the court;

(h) a person who has been convicted, within the previous five years, of an offence involving fraud or dishonesty; or

(i) a person who has been removed, within the previous five years, from an office of trust by order of a court of competent jurisdiction.

(3) Where a company is being wound-up, the liquidator may not be appointed receiver.

(4) Any person who in contravention of this section acts or continues to act as a receiver shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding five hundred monetary units or to imprisonment for a period not exceeding six months, or to both.

112. A receiver of any property or undertaking of a company appointed by the court shall be an officer of the court and shall be deemed, in relation to the property or undertaking, not to be an officer of the company, and shall act in accordance with the directions and instructions of the court.Receivers appointed by the court

113. (1) A receiver of any property or undertaking of a company appointed, otherwise than by a court, under a power contained in any instrument shall, subject to section one hundred and fourteen, be deemed in relation to the property or undertaking to be an agent and officer of the company and not an agent of the persons by or on behalf of whom he is appointed, and he shall act in accordance with the instrument under which he is appointed and with any directions of the court made under this section.Receivers appointed otherwise than by the court

(2) The court may, on the application of such a receiver, make any order it thinks fit giving directions in relation to any matter arising in connection with the performance of the receiver's functions or declaring the rights of persons before the court or otherwise.

(3) The court may, on the application of the company or any liquidator of the company, by order fix the amount to be paid by way of remuneration to any such receiver and may from time to time, on application made by the company or liquidator or by the receiver, vary or amend the order.

(4) The power of the court under subsection (3) shall-

(a) extend to fixing the remuneration for any period before the making of the order or the application therefor, if the court is satisfied that there are special circumstances making it proper to do so;

(b) be exercisable notwithstanding that the receiver had died or ceased to act before the making of the order or the application therefor; and

(c) extend to requiring the receiver or his personal representatives to account for any amount that the receiver may have been paid or retained for his remuneration, before the making of the order, that is in excess of the remuneration so fixed for that period.

114. (1) A receiver of any property or undertaking of a company shall be personally liable on any contract entered into by him as receiver except insofar as the contract expressly provides otherwise.Liabilities of receivers on contracts

(2) Where the contract was entered into by the receiver in the proper performance of his functions, he shall have, subject to the rights of any prior encumbrances, an indemnity in respect of liability thereon out of the property in respect of which he has been appointed to act as receiver.

(3) Where the receiver was appointed, otherwise than by a court, under a power contained in any instrument, and the contract was entered into by him with the express or implied authority of those appointing him, he shall also have an indemnity in respect of liability thereon from those appointing him to the extent to which he is unable to recover in accordance with subsection (2).

115. (1) Where a receiver of any property or undertaking of a company has been appointed, every invoice, order or business letter issued by or on behalf of the company, the receiver or the liquidator, being a document on or in which the name of the company appears, shall contain a statement that a receiver has been appointed.Fact that receiver has been appointed to appear on correspondence

(2) If the company fails to comply with this section, the company, and each officer, liquidator and receiver in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding three monetary units in respect of each document not containing the statement.

116. Where a receiver is appointed of the whole or substantially the whole of the undertaking of any company on behalf of the holders of any debentures secured by a floating charge, section two hundred and eighty-eight and three hundred and thirty-eight shall apply as regards the submission of a statement of affairs and of periodical accounts by the receiver as if the company had been ordered to be wound-up under this Act and as if the receiver had been appointed liquidator. Statement of affairs and accounts where receiver of undertaking appointed

117. (1) Except where section one hundred and sixteen applies, a receiver of any property of a company shall-Accounts of receivers

(a) within one month, or such longer period as the Registrar may allow, after the end of the period of twelve months from the date of his appointment and of every subsequent period of twelve months until he ceases to act, lodge with the Registrar an abstract showing the receiver's receipts and payments during that period of twelve months; and

(b) within one month, or such longer period as the Registrar may allow, after he ceases to act as receiver, lodge with the Registrar an abstract showing the receiver's receipts and payments during the period from the end of the twelve months to which the last abstract (if any) related, and the total of those receipts and payments during the whole period of his appointment.

(2) A receiver who fails to comply with this section shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding ten monetary units for each day that the failure continues.

118. (1) If a receiver, in the course of the performance of his duties as receiver of property or undertaking of a company, is satisfied that-Reports by receivers

(a) there has been a contravention of, or failure to comply with, any of the provisions of this Act; and

(b) the circumstances are such that in his opinion the matter has not been or will not be adequately dealt with by bringing the matter to the notice of the directors of the company or, if the company is a subsidiary, of the directors of any holding company of the company; he shall as soon as is practicable report the matter to the Registrar in writing.

(2) The court may, on its own motion or on the application of the Registrar or of any person interested in the appointment of a receiver of the property of a company, require the receiver to submit a report to the Registrar on any matter relating to the company on which the receiver may have information.

PART VI PUBLIC ISSUE OF SHARES, ETC.

Division 6.1-Interpretation

119. (1) In this Part, an "invitation to the public" to acquire shares or debentures of a company means an offer of, or invitation to make an offer for, shares or debentures of a company other than one-Meaning of "invitation to the public"

(a) made to fifteen or fewer persons; or

(b) made-

(i) to fifty or fewer persons; or

(ii) of the company exclusively to its existing shareholders, debenture holders or employees; on the basis that a person who accepts the invitation may not renounce or assign the benefit of any shares or debentures to be obtained thereunder in favour of any other person.

(2) For the purpose of this Part, the issue of any kind of application form for shares or debentures of a company shall be deemed to be an invitation to acquire those shares or debentures.

120. (1) Where a company allots or agrees to allot any of its shares or debentures to a person with a view to the public's being invited to acquire any of those shares or debentures, then, for the purposes of this Act-Offer of sale deemed to be made by the company

(a) an invitation to the public so made shall be deemed to be made by the company as well as by the person who in fact made it; and

(b) a person who acquires any of the shares or debentures in response to the invitation shall be deemed to be an allottee from the company of those shares or debentures.

(2) Where a company allots or agrees to allot any of its shares or debentures to a person and an invitation to the public is made in respect of any of the shares or debentures-

(a) within six months after the allotment or agreement to allot; or

(b) before the company has received the whole of the consideration in respect of the shares or debentures; it shall be presumed that the allotment or agreement to allot was made by the company with a view to an invitation to the public being made in respect of those shares or debentures.

121. (1) The first publication of the prospectus shall be presumed to be on the date of registration thereof.First publication of a prospectus

(2) Where the shares or debentures to which the invitation relates are dealt in on a stock exchange or where the prospectus states that application has been or will be made for permission to deal therein on any stock exchange, and it is necessary to advertise the prospectus in one or more newspapers to comply with the requirements of that stock exchange, the first publication of the prospectus shall be deemed to occur when the prospectus is first so advertised.

Division 6.2-Invitations to the public and prospectuses

122. (1) In this section, "company" includes a company proposed to be formed.Restrictions on invitations to the public to acquire shares and debentures

(2) A person shall not make an invitation to the public to acquire shares in a company unless-

(a) the company is a public company and the invitation complies with this Division; or

(b) the invitation is supervised by the court.

(3) A person shall not make an invitation to the public to acquire debentures in a company unless-

(a) all of the following conditions are satisfied:

(i) the company is a public company;

(ii) the debentures are created by deed under the common seal of the company in favour of trustees for the debenture holders; and

(iii) the invitation complies with this Division; or

(b) the invitation is supervised by the court.

(4) A person shall not make an invitation to the public to acquire equity shares in a company unless all the equity shares in the company already issued and all those to which the invitation relates carry an unrestricted right to vote at general meetings of the company and, on a poll, a constant number of votes which, in proportion to nominal value, is the same in the case of every share.

(5) Subsection (4) shall not prohibit an invitation to acquire equity shares that do not comply with that subsection if-

(a) the rights making them equity shares are expressed by the terms of issue to be conditional upon the exercise by the holder of an option; and

(b) the shares will comply with that subsection if the option is exercised.

(6) Subsection (4) shall not prohibit an invitation to acquire equity shares that do not comply with that subsection if the shares are issued, and the invitation made, in fulfillment of an obligation entered into by the company before the commencement of this Act.

(7) If a person acquires shares or debentures in a company as a result of any invitation to the public in contravention of this section, he shall be entitled to recover compensation for any loss sustained by him from any person making the invitation, and where a person making the invitation was a body corporate, from any officer in default.

(8) If an invitation to the public is made in contravention of this section, each person making the invitation and, where such a person is a body corporate, each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding two thousand monetary units or to imprisonment for a period not exceeding two years, or to both.

123. (1) Subject to this section, a person may invite the public to acquire shares or debentures of a public company or of a public company proposed to be formed only if-Prospectus required for invitations to the public to purchase share or debentures

(a) within six months prior to the making of the invitation there was registered by the Registrar a prospectus relating to the shares or debentures that complies with this Division;

(b) every person to whom the invitation is made is supplied with a true copy of the prospectus at the time when the invitation is first made to him; and

(c) every copy of the prospectus states on its face that it has been registered by the Registrar and the date of registration.

(2) An invitation published in a newspaper or magazine advertisement that summarises the contents of a prospectus shall be deemed to satisfy paragraph (b) of subsection (1) if the advertisement-

(a) does not contain or accompany any kind of application form for shares or debentures;

(b) states with reasonable prominence where copies of the full prospectus may be obtained, the fact that it has been registered and the date of registration; and

(c) is in terms previously approved in writing by the Registrar.

124. (1) A prospectus shall not be lodged with the Registrar unless-Contents of prospectus

(a) it does not contain any untrue or misleading statement;

(b) it contains all information that prospective purchasers of the shares or debentures and their advisors would reasonably expect to be provided in order to make a decision on purchase; and

(c) either-

(i) it deals with the matters and provides the reports specified in the Fourth Schedule; or

(ii) the invitation concerned is an invitation made only to existing members or debenture holders of the company (whether or not an applicant for shares or debentures will have the right to renounce in favour of other persons).

125. (1) This section applies to a prospectus that includes a statement purporting to be made by an expert.Expert's consent

(2) The prospectus shall not be lodged with the Registrar unless it is accompanied by the written consent of the expert to the publication of the prospectus with the inclusion of the statement in the form and context in which it is included.

(3) The prospectus shall include a statement that the expert has given his consent to the inclusion of the statement and has not withdrawn his consent.

(4) If the expert withdraws his consent to the inclusion of the statement, he shall immediately notify the Registrar and the persons responsible for issuing the prospectus.

(5) A person responsible for issuing a prospectus shall cease to issue the prospectus after receiving a notice from an expert under subsection (4).

(6) A person who contravenes subsection (5), and, if that person is a body corporate, each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding five hundred monetary units.

126. (1) The Registrar shall not register a prospectus for shares or debentures in a company or in a company proposed to be formed unless the copy lodged conforms with this section.Registration of prospectuses

(2) The copy shall be signed by-

(a) each individual named therein as a director or proposed director of the company or by his agent authorised in writing; and

(b) each other person making the invitation, or his agent authorised in writing.

(3) For the purpose of paragraph (b) of subsection (2), where the invitation is made by a body corporate or members of a firm, it shall be sufficient if the copy is signed on behalf of the body corporate by not fewer than two directors or on behalf of the firm by not fewer than half the partners, and any such director or partners may sign by his agent authorised in writing.

(4) The copy shall have endorsed thereon or attached thereto-

(a) the consent of any expert required by section one hundred and twenty-five; and

(b) a certified copy or translation of each of the documents required to be available for inspection in accordance with paragraph 49 of the Fourth Schedule.

(5) If a copy or translation referred to in paragraph (b) of subsection (4) has already been lodged with the Registrar by the company, the Registrar may waive the requirement that it be attached or endorsed if he is satisfied that the copy originally delivered is readily identifiable and accessible.

(6) The prospectus shall state at its head that a copy has been registered by the Registrar and also state immediately after that statement that the Registrar assumes no responsibility as to its contents.

(7) The copy shall be accompanied by a statutory declaration by a director and the secretary of the company stating that the prospectus conforms to the requirements of this Division.

(8) On registering the prospectus, the Registrar shall issue a certificate stating that the prospectus has been registered.

127. (1) A company shall not accept or retain subscriptions to a debentures issue in excess of the amount of the issue disclosed in the prospectus unless the prospectus specifies-Over-subscription in debenture issue

(a) that the company expressly reserves the right to accept or retain over-subscriptions; and

(b) a limit, expressed as a specific sum or money, on the amount of over-subscriptions that may be accepted or retained, being an amount not exceeding twenty-five per centum above the amount of the issue as disclosed in the prospectus.

(2) Subject to the Fourth Schedule, where a company specifies in a prospectus relating to a debenture issue that it reserves the right to accept or retain over-subscriptions-

(a) the prospectus shall not contain any statement of, or reference to, the asset backing for the issue, other than a statement or reference to the total tangible assets and the total liabilities of the company and of its guarantor companies; and

(b) the prospectus shall contain a statement or reference as to what the total assets and total liabilities of the company would be if over-subscriptions to the limit specified in the prospectus were accepted or retained.

128. (1) Where a prospectus states or implies that application has been or will be made for permission for the shares or debentures offered in the prospectus to be listed for quotation on the official list of a stock exchange, then, subject to subsection (8), no allotment of shares or debentures shall be made on an application made pursuant to the prospectus except in accordance with this section.Reference to stock exchange listing in prospectus-allotment of shares

(2) An allotment may be made-

(a) if the permission has been applied for in the form required by the stock exchange before the third day on which the stock exchange is open after the date of issue of the prospectus; or

(b) if the permission has been granted before the determination day.

(3) If, on the determination day, the conditions of subsection (2) are not satisfied, the company shall, within fourteen days after the determination day, repay without interest any money received from any applicant in pursuance of the prospectus.

(4) If the company fails to repay money in accordance with subsection (3), the directors shall, in addition to the liability of the company but subject to subsection (5), be jointly and severally liable to repay that money with interest at the ruling bank rate from the end of that period of fourteen days.

(5) A director shall not be liable under subsection (4) if he proves that the default in the repayment of the money was not due to any misconduct or negligence on his part.

(6) The company shall, for so long as the conditions of subsection (2) are not satisfied, keep in a separate bank account all money received in pursuance of a prospectus.

(7) A condition purporting to require or bind an applicant for shares or debentures to waive compliance with any requirement of this section shall be void.

(8) The Registrar may, on the application of the company made before the determination day, by notice in the Gazette provide that this section shall not apply to the allotment of the shares or debentures.

(9) For the purposes of this section, a statement in a prospectus to the effect that the articles comply with, or have been drawn up so as to comply with, a condition imposed by a stock exchange shall, unless the contrary intention appears, be deemed to imply that application has been, or will be, made for permission for the shares or debentures offered by the prospectus to be listed for quotation on the official list of the stock exchange.

(10) For the purposes of this section, where a stock exchange grants the permission subject to a condition, the permission shall be deemed to be granted if and when the directors of the company give to the stock exchange a written undertaking to comply with the condition.

(11) For the purposes of this section, the determination day is, subject to subsection (12), the day forty-two days after the day of issue of the prospectus.

(12) If, before the day referred to in subsection (11), the stock exchange notifies the applicant for the permission that a later day, being a day not more than three months after the day of issue of the prospectus, will be the determination day, the determination day is that later day.

129. (1) Where a prospectus-Civil liability for misstatements or omissions in prospectus

(a) contains a statement which is untrue or, in the context, misleading;

(b) omits any matter which is material; or

(c) omits to state any of the particulars or to set out any of the reports which, under this Act, it is required to state or set out; then, subject to this section, the persons specified in subsection (2) shall be liable to pay compensation to any persons who acquire any shares or debentures on the faith of the prospectus for any loss they may have sustained by reason of the untrue statement or omission.

(2) The persons liable to pay compensation under subsection (1) are the following:

(a) every person making the invitation to which the prospectus relates;

(b) every person who was a director of a body corporate making the invitation at the time when the prospectus was published;

(c) where the invitation was made by the company to whose shares or debentures the invitation relates-

(i) every person who has authorised himself to be named in the prospectus as a director or as having agreed to become a director, either immediately or after an interval of time; and

(ii) every promoter of the company who was a party to the preparation of the prospectus;

(d) the expert, if the untrue statement or omission occurs in a statement by an expert who has consented to the publication of the prospectus in accordance with section one hundred and twenty-five.

(3) A person shall not be liable under this section if he proves-

(a) that as regards any untrue statement, not purporting to be-

(i) a statement or report made by an expert (other than himself);

(ii) a public official document or statement; or

(iii) an extract from a document referred to in paragraph (i) or (ii); he had reasonable ground to believe and did believe up to the time of the publication of the prospectus or, where the waiting period applies, up to the expiration of the waiting period, that the statement was true;

(b) that as regards any untrue statement purporting to be a statement or report by an expert (other than himself) or an extract therefrom-

(i) it was a correct and fair copy of the statement, report or extract; and

(ii) he had reasonable ground to believe and did believe up to the time of the publication of the prospectus that the person making the statement was competent to make it and had given the consent required by section one hundred and twenty-five and had not withdrawn that consent before the date of registration of the prospectus;

(c) that as regards any untrue statement purporting to be a copy of or extract from a public official document or a statement made by an official person, it was a correct and fair copy of or extract from the document or statement;

(d) that as regards any omission, he was not aware of the matter omitted, or that the matter omitted was material, up to the time of the publication of the prospectus or, where the waiting period applies, up to the expiration of the waiting period;

(e) that after the publication of the prospectus but before the expiration of the waiting period he, on becoming aware of any untrue statement therein or omission therefrom, withdrew his consent thereto and gave reasonable public notice of the withdrawal and of the reason therefor; or

(f) that the prospectus was published without his knowledge and that, on becoming aware of its publication, he forthwith gave reasonable public notice that it was published without his knowledge.

(4) A person shall not be liable under this section by reason that subparagraph (c) (i) of subsection (2) applies to him if he proves that, having consented to being named as a director or as having agreed to become a director, he withdrew his consent before the registration of the prospectus and that it was published without his authority or consent.

(5) A person shall not be liable under this section by reason that paragraph (d) of subsection (2) applies to him if he proves-

(a) that as regards any untrue statement made by him, he was competent to make the statement and that he had reasonable ground to believe and did believe, up to the date of publication of the prospectus or, where the waiting period applies, up to the expiration of the waiting period, that the statement was true; or

(b) that, after the lodgement of the prospectus with the Registrar but before publication thereof, or, where the waiting period applies, before the expiration of the waiting period, on his becoming aware of the untrue statement or omission, he withdrew his consent in writing and gave reasonable public notice of the withdrawal and of the reason therefor.

(6) Where-

(a) a person is named in a prospectus as a director of a company or as having agreed to become a director of a company and he has not consented to become a director or has withdrawn his consent before the publication of the prospectus and has not authorised or consented to the publication thereof; or

(b) the consent of a person is required under section one hundred and twenty-five to the publication of the prospectus and he either has not given that consent or has withdrawn it before the publication of the prospectus; every person making the invitation to which the prospectus relates and every person who was a director of any body corporate making the invitation at the time when the prospectus was published (except any person without whose knowledge or consent the prospectus was published) shall be liable to indemnify the person referred to in paragraph (a) or (b) against all damages, costs, and expenses to which he may be made liable by reason of his name having been inserted in the prospectus or of the inclusion therein of a statement purporting to be made by him as an expert, or in defending himself against any legal proceeding brought against him in respect thereof.

130. (1) Where any prospectus, advertisement or circular published in relation to any invitation to the public to acquire shares or debentures of a company contains any untrue statement or omits truthfully to state any of the matters which, under this Act, it is required to state, any person who authorised the publication of the prospectus, advertisement or circular shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding seven thousand monetary units or to imprisonment for a period not exceeding seven years, or to both.Offence of misstatement or omission in prospectus

(2) It is a defence to a charge under subsection (1) that-

(a) the untrue or omitted statement was immaterial; or

(b) the person had reasonable ground to believe and did believe, up to the time of publication of the prospectus, that the statement was true.

(3) For the purposes of this section, a person shall not be regarded as having authorised the publication of a prospectus by reason only of his having given the consent required by section one hundred and twenty-five, and the Registrar shall not be regarded as having authorised the publication of an advertisement or circular by reason of his having given the certificate referred to in section one hundred and twenty-six.

131. (1) Where a prospectus has been registered and it appears to the Registrar that it-Stop trading order

(a) contains a statement, promise, estimate or forecast that is false or misleading, whether or not the statement or other particular was false or misleading at the time the prospectus was lodged;

(b) fails to comply in any material respect with this Division or with the Fourth Schedule; or

(c) conceals or omits to state a material fact so that a statement in the prospectus is rendered misleading in the context in which it appears; the Registrar may apply to the court for an order under subsection (2).

(2) If the court is satisfied that the ground for the application is established, it may make an order-

(a) cancelling the registration of the prospectus and directing the persons making the invitation to the public to which the prospectus relates-

(i) to withdraw the prospectus;

(ii) to cease to accept further subscriptions or purchases of shares or debentures offered in the prospectus; and

(iii) to repay with interest any money received from applicants in pursuance of the prospectus;

(b) declaring any contract for the subscription or purchase of shares or debentures offered in the prospectus to be voidable;

(c) directing the persons making the invitation to the public to which the prospectus relates to reissue forthwith the prospectus amended in such terms as the court directs; or

(d) protecting the rights of persons injuriously affected by the issue of the prospectus, in such terms as it thinks fit.

(3) In exercising its powers under this section, the court may, on the application of the Registrar and on being satisfied of the existence of a prima facie case, make such interim orders as it considers necessary to apply for a period of not more than fourteen days after the date of the order.

132. Where an invitation is made to the public to acquire shares or debentures of a public company or of a public company proposed to be formed, an agreement for the acquisition of the shares or debentures made before the end of the waiting period, other than a bona fide underwriting agreement, shall not be enforceable by the company or the promoters. Waiting period

133. Where an invitation is made to the public in respect of any shares or debentures of a public company, an application for such shares or debentures shall not be revocable during a period of seven days commencing on the expiry of the waiting period unless, before the expiry of that period of seven days, some person responsible for the prospectus has given a notice to the public which has the effect under section one hundred and twenty-nine of excluding or limiting the responsibility of the person giving it for any misstatement or omission in the prospectus.Withdrawal of application after waiting period

134. (1) No allotment of shares offered to the public shall be made unless-Allotment and minimum subscription

(a) the minimum subscription has been subscribed as required by section fifteen; and

(b) the sum payable on application for the shares so subscribed has been received by the company.

(2) Where a cheque is given in payment of a sum under subsection (1), the sum shall not be regarded as having been received by the company until the cheque is paid by the bank on which it is drawn.

(3) The minimum subscription shall be calculated-

(a) on the nominal value of each share, if the shares are not issued at a premium; or

(b) on the nominal value of each share plus the premium payable, if the shares are issued at a premium.

(4) The amount payable on application on each share offered to the public shall not be less than five per centum of the nominal amount of the share.

(5) If the conditions of subsection (1) have not been satisfied after the expiry of four months from the first issue of the prospectus, any money received from applicants for shares shall forthwith be repaid to them without interest.

(6) Subject to subsection (7), if any money received under subsection (5) is not repaid within five months after the issue of the prospectus, the directors of the company shall be jointly and severally liable to repay that money with interest at the ruling bank rate from the expiry of the period of five months.

(7) A director shall not be liable under subsection (6) if he proves that the default in the repayment of the money was not due to any misconduct or negligence on his part.

(8) An allotment made by a company to an applicant in contravention of this section shall, notwithstanding that the company is in the course of being wound-up, be voidable at the option of the applicant by written notice given to the company within one month after the date of the allotment.

(9) A director who wilfully contravenes, or wilfully authorises or permits the contravention of, this section shall be liable to compensate the company and the allottee for any loss, damages or costs which the company or the allottee has sustained or incurred thereby.

(10) Proceedings for the recovery of any compensation under subsection (9) shall not be commenced more than two years after the date of the allotment.

(11) A condition purporting to require or bind an applicant for shares to waive compliance with any requirement of this section shall be void.

(12) A company shall not allot, and an officer or promoter of a company or a proposed company shall not authorise or permit the allotment of, shares or debentures to the public on the basis of a prospectus more than six months after the publication of the prospectus.

(13) An allotment of shares or debentures shall not be voidable or void by reason only that it was made in contravention of subsection (12).

135. (1) A public company that does not issue a prospectus on, or with reference to, its formation shall not allot any of its shares or debentures unless it has, not later than three days before the first allotment of the shares or debentures, lodged with the Registrar a statement in lieu of a prospectus.Statement in lieu of prospectus

(2) The statement in lieu of a prospectus shall-

(a) be signed by every person who is named therein as a director or a proposed director of the company or by his agent authorised in writing; and

(b) be in the form of a prospectus and deal with such matters specified in Part A of the Fourth Schedule as apply to the formation of a company.

136. A condition purporting to require or bind any person to waive compliance with this Part or purporting to attribute to him notice of any contract document or other matter not specifically referred to in any prospectus advertisement or circular, shall be void.Prohibition of waiver and notice clauses

PART VII MEETINGS AND RESOLUTIONS

137. (1) In this Part, unless the context otherwise requires, "meeting" means any of the following meetings of a company:

Interpretation

(a) an annual general meeting;

(b) an extraordinary general meeting; and

(c) a class meeting.

138. (1) Subject to this section, a company shall hold, within three months after the end of each financial year of the company, a meeting to be called the annual general meeting of the company.Annual general meeting

(2) If, after any financial year, no annual general meeting is held in accordance with subsection (1), the Registrar may, on the application of any member of the company, convene, or direct the convening of, an annual general meeting of the company and give such ancillary or consequential directions as the Registrar thinks expedient, including directions modifying or supplementing, in relation to the convening, holding and conducting of the meeting, the operation of the company's articles, or a direction that one member of the company present in person or by proxy shall be deemed to constitute a meeting.

(3) If the company fails to comply with subsection (1), or with any direction of the Registrar under subsection (2), the company, and each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding one thousand monetary units.

(4) If the company is a private company, the annual general meeting in relation to a financial year, other than the first financial year, may be dispensed with if all the members of the company entitled to attend and vote at any annual general meeting so agree in writing before the end of the financial year.

139. (1) An extraordinary general meeting of a company may be convened in accordance with other provisions of this Act, or-Extraordinary general meetings

(a) by the directors whenever they think fit; or

(b) if the articles so provide, by any other person in accordance with those provisions.

140. (1) Unless the articles provide otherwise, a meeting of members of a particular class may be convened-Class meetings

(a) by the directors whenever they think fit; or

(b) by two or more members of that class, holding, at the time that notice of the meeting is sent out, not less than one-twentieth of the total voting rights of all the members having a right to vote at meetings of that class.

141. (1) A member or members of the company may make a requisition for a general meeting to be held under this section if they hold, at the time when the requisition is made, not less than one-twentieth of the total voting rights of all the members having a right to vote at general meetings of the company.Requisition of a general meeting

(2) The requisition shall state the nature of the business to be transacted at the meeting, and shall be signed by the requisitionists and deposited at the registered office of the company or posted to its registered postal address, and may consist of several documents in like form each signed by one or more requisitionists.

(3) Where a requisition is made in accordance with this section, the directors shall proceed duly to convene a general meeting of the company.

(4) If the directors do not proceed duly to convene a meeting to be held within the requisition period, the requisitionists or any of them may themselves convene a meeting, but any meeting so convened shall not be held more than three months after the receipt of the requisition by the company.

(5) A meeting convened under this section by the requisitionists shall be convened in the same manner, as nearly as possible, as that in which meetings are to be convened by directors.

(6) Notwithstanding anything in the articles, the notice period for a meeting convened under this section shall be the period set out in section one hundred and forty-three for the type of meeting concerned.

(7) Any reasonable expenses incurred by the requisitionists by reason of the failure of the directors duly to convene a meeting shall be repaid to the requisitionists by the company, and the sum so repaid shall be retained by the company out of any sums due or to become due from the company by way of fees or other remuneration in respect of their services to such of the directors as wilfully authorised or permitted the failure.

(8) For the purposes of this section, the requisition period is the period of-

(a) twenty-eight days, if the meeting is to be an annual general meeting or a meeting for the passing of a special resolution; or

(b) twenty-one days, in any other case; beginning on the date of receipt by the company of the requisition.

(9) For the purposes of this section, the directors fail duly to convene a meeting if-

(a) they do not convene it within the requisition period; or

(b) they do not give such notice thereof as is required by section one hundred and forty-three for a meeting at which a special resolution is to be proposed, if the requisition states that a resolution is to be proposed as a special resolution at the meeting.

142. (1) Where a meeting of a company is to be convened, any person who is, on the day before the latest day on which notice of the meeting may be given under this Act-Entitlement to receive notice of meetings

(a) a registered member having the right to vote at a meeting of that kind;

(b) a person upon whom the ownership of a share devolves by reason of his being a legal personal representative, receiver or trustee in bankruptcy of such a member and of whom the company has received notice;

(c) a director of the company;

(d) an auditor of the company; or

(e) a person entitled under the articles to receive such notice; shall be entitled to receive notice of the meeting.

(2) The proceedings of a meeting shall not be invalid by reason only of-

(a) the accidental omission to give notice of a meeting to a person entitled to receive notice; or

(b) the non-receipt of notice of a meeting duly sent to such a person.

143. (1) Subject to this section, notice of a meeting of a company shall be given in writing served in accordance with this Act on each person entitled to receive such notice and shall be given not less than-Length of notice for convening a meeting

(a) twenty-one days, in the case of an annual general meeting;

(b) twenty-one days, in the case of a meeting at which a special resolution will be proposed; or

(c) fourteen days, in any other case; and not more than fifty days before the meeting is to be held.

(2) The articles may substitute for the minimum periods of notice provided in subsection (1) longer periods, being periods of not more than thirty days.

(3) Where a meeting of the company is convened with a shorter period of notice than that required under this section, full notice shall be deemed to have been given if it is so agreed-

(a) by all the members entitled to attend and vote at the meeting, in the case of a meeting convened as the annual general meeting;

(b) by a majority in number of the members having a right to attend the meeting and vote on the resolution concerned, being a majority holding not less than ninety-five per centum of the total of such voting rights, in the case of a meeting convened as a meeting at which a special resolution will be moved, and in relation to that resolution; and

(c) by a majority in number of the members having a right to attend and vote at the meeting, being a majority holding not less than ninety-five per centum of the total of such voting rights, in the case of any other meeting.

144. (1) If for any reason it is impracticable to convene or to conduct a meeting of a company in compliance with this Act and the articles, the court may, either of its own motion or on the application of any director of the company or of any member of the company who would be entitled to vote at the meeting, order a meeting of the company to be convened, held and conducted in such a manner as the court thinks fit, and, where any such order is made, may give such ancillary or consequential directions as it thinks expedient, including a direction that one member of the company present in person or by proxy shall be deemed to constitute a meeting.Power of court to order meeting

(2) A meeting convened, held and conducted in accordance with an order under this section shall for all purposes be deemed to be a meeting of the company duly convened, held and conducted.

145. Unless the articles provide otherwise, or all the members entitled to vote at that meeting agree in writing to a meeting at a place outside Zambia, a meeting of a company shall be held in Zambia.Place of meetings

146. The following persons shall be entitled to attend and to speak at a meeting of a company:

(a) each member of the company having the right to vote at the meeting;

(b) each person upon whom the ownership of a share devolves by reason of his being a legal personal representative, receiver or trustee in bankruptcy of such a member;

(c) each director of the company;

(d) the secretary of the company;

(e) each auditor of the company;

(f) each person entitled under the articles to do so;

(g) any other person permitted to do so by the chairman.Attendance at meetings

147. (1) Unless the articles of a company provide otherwise, members shall have votes at any meeting of the company as follows:

Conduct of meetings and voting

(a) a member of a company with share capital shall have one vote for-

(i) each share; and

(ii) each whole unit of stock; that he is registered as holding;

(b) each member of a company limited by guarantee shall have one vote.

(2) The articles may provide that a member shall have rights in respect of shares not registered in respect of the person, but a person who is not a member of the company shall not be entitled to vote at a meeting of the company.

(3) Unless the articles provide otherwise, the quorum for a meeting of the company shall be two members of the company holding not less than one-third of the total voting rights in relation to the meeting.

(4) Unless the articles provide otherwise-

(a) a meeting of the company may elect a chairman; and

(b) on matters not provided for in this Act or in the articles, the meeting may provide for the conduct of its business.

(5) The articles may provide that a member shall not be entitled to attend a meeting of the company unless all sums presently payable by him in respect of shares in the company have been paid.

(6) For the purposes of this section, a "unit of stock" of a company is the amount of stock having the nominal value arrived at by adding together the nominal values of all the shares of the company other than stock, and dividing the sum by the number of those shares.

148. Unless the articles of a company provide otherwise, a statement by the chairman of a meeting of the company that a motion or resolution at a meeting was passed by a specified majority shall be conclusive evidence that it was so passed unless a poll was demanded on the motion or resolution.Chairman's declaration as to result of a vote

149. A poll may be demanded at a meeting of a company on any question other than the election of the chairman of the meeting or the adjournment of the meeting by-

(a) not fewer than three members having the right to vote on the question, representing not less than one-twentieth of the total voting rights of all members having the right to vote on the question, where there are more than eight such members present; or

(b) not fewer than one third of the members present having the right to vote on the question, where there are eight or fewer such members present.Right to demand a poll

150. On a poll taken at a meeting of company or a meeting of any class of members of a company, a member entitled to more than one vote need not, if he votes, use all his votes or cast all the votes he uses in the same way.Voting on a poll

151. (1) A member of a company entitled to attend and vote at a meeting of the company shall be entitled to appoint another person as his proxy to attend and vote instead of him.Proxies

(2) An appointment as proxy shall be in writing under the hand of the appointer or his agent duly authorised in writing or, if the appointer is a body corporate, either under seal or under the hand of an officer or agent duly authorised.

(3) A proxy appointed under this section shall have, subject to any instructions from the member in the instrument of appointment, all the rights and powers of the member in relation to the meeting.

(4) If voting rights attach to shares in a company having share capital, a shareholder may appoint separate proxies to represent respectively such of the shares held by him as may be specified in their instruments of appointment.

(5) An appointment of a director as a proxy shall not authorise the director to vote as proxy on the following business transacted at an annual general meeting:

(a) the declaration of a dividend;

(b) the consideration of the accounts and the directors' and auditors' reports;

(c) the election of directors in place of those retiring;

(d) the fixing of the remuneration of the directors; and

(e) the appointment of the auditors and the fixing of their remuneration.

(6) In every notice convening a meeting of a company there shall appear with reasonable prominence a statement that a member entitled to attend and vote is entitled to appoint one or more proxies to attend and vote instead of him, and, unless the articles provide otherwise, that a proxy need not also be a member.

(7) A company shall not provide a member with a form for the appointment of a proxy unless the form permits the member to direct the proxy as to how to use his vote on different matters.

(8) A company's articles shall not have the effect of requiring the instrument appointing a proxy, or any other document necessary to show the validity of appointment of a proxy, to be received by the company or any other person more than forty-eight hours before a meeting or adjourned meeting in order that the appointment may be effective thereat.

(9) If a company fails to comply with subsection (6) or (7), the company, and each officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding two hundred and fifty monetary units.

(10) If a company, for the purpose of any meeting of the company, issues invitations to appoint as proxy a person specified or listed in the invitation, and issues the invitations to some only of the members entitled to be sent a notice of the meeting and to vote thereat, the company, and every officer in default, shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding two hundred and fifty monetary units.

(11) A company shall not be regarded as issuing an invitation for the purposes of subsection (10) if the name or list is available on request to every member entitled to vote at the meeting, and is not sent to any such member except on request.

152. (1) A body corporate or an unincorporated association may, if it is a member of a company, by resolution of its directors or other governing body, authorise any person as it thinks fit to act as its representative at any meeting of the company.Representation of bodies corporate and unincorporated associations at meetings

(2) A person so authorised may exercise the same powers on behalf of the body corporate or unincorporated association which he represents as it could exercise if it were an individual member of the company.

153. (1) A member of a company entitled to attend and vote at a meeting may, in accordance with this section, require the company to circulate , at the company's expense-Circulation of members' resolutions and supporting circulars

(a) notice of any resolution which may properly be moved and is intend to be moved at the meeting; and

(b) a statement of not more than five hundred words with respect to the matter referred to in the proposed resolution or any other business to be dealt with at the meeting.

(2) A requisition for the purposes of this section shall be in writing and posted to the company's registered postal address or deposited at the company's registered office.

(3) If a meeting of the company is proposed and the company receives a requisition-

(a) not less than seven days before the end of the period during which notice of the meeting is required to be given; or

(b) at a time when it is practicable to include the notice and statement required with the notice of the meeting; the company shall send the notice and statement to each person entitled to receive notice of the meeting before the end of period during which notice of the meeting is required to be given.

(4) If the company receives a requisition and subsection (3) does not apply, the company shall include the notice and statement required with the notice of the next meeting of the company for which it is practicable to do so.

(5) If a requisition is made under this section and the resolution is not passed, a requisition shall not be made in relation to the same resolution, or one substantially to the same effect, to be moved at a meeting within three months after the meeting at which the resolution was moved unless-

(a) the directors otherwise agree; or

(b) the requisition is supported in writing by members of the company representing between them not less than one-twentieth of the total voting rights of all the members having at the date of the request a right to vote on the resolution to which the request relates.

154. (1) A company shall, at the written request of any member entitled to attend and vote at a meeting, circulate to members of the company a statement of not more than one thousand words with respect to any business to be dealt with at that meeting.Circulation of members' circulars

(2) Unless the company otherwise resolves, the circulation of the statement shall be at the expense of that member.

(3) The statement shall be circulated to members of the company in any manner permitted for service of notice of the meeting and at the same time as notice of the meeting or as soon as practicable thereafter.

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