Can shareholders be lawfully divested of their rights outside the ambit of the Companies Act, asks Ms. Miriam Mutizwa

Ms. Miriam Mutizwa, a Zimbabwean-born IT professional based in the UK and a corporate literacy enthusiast under the Banking on Africa’s Future (BOAF) initiative to deepen and widen the understanding of the centrality of the rule of law in delivering the promise of an inclusive and prosperous Africa; asks: “Can shareholders be lawfully divested of their rights outside the ambit of the Companies Act.”

Ms. Mutizwa asks this question because the Attorney General of Zimbabwe, Mr. Machaya, a qualified lawyer, did not see anything legally and constitutionally wrong with an Administrator appointed by the Minister of Justice pursuant to the operation of the Reconstruction of State Indebted Insolvent Companies Act (the Act) to substitute the combined role of directors and shareholders in relation to the affairs of a company that is duly incorporated and operating in terms of the prescripts of the law.

“I have chosen to be vocal on issues of the rule of law and constitutionalism because of the relationship between the law and companies.

I have realised that in the animal kingdom, there is life but no wealth because there is no rule of law in the kingdom.

Only human beings are capable of putting limitations on the animalistic and predatory nature of man. This necessarily means that anything that is done without the consent of an affected party, is deemed without any qualification to be illegal and unconstitutional.

This then means that a law that permits a shareholder to be substituted by an extra-judicially appointed Administrator is inherently illegal and should be invalid.” said Ms. Mutizwa.

“Who is this Mr. Machaya? How was he appointed? It makes me angry to know that the drive by President Mnangagwa to make Zimbabwe great is being undermined by people who are paid to protect the rights and freedoms of the people,” said Ms. Mutizwa.

Mr. Prince Machaya, was appointed by former President Mugabe in February 2015 as Attorney-General of Zimbabwe to replace Mr Johannes Tomana who was appointed Prosecutor General in 2014.

It is instructive that the ceremony was presided over by the then Vice President Mnangagwa and Minister of Justice at the time, after the VP had been duly authorised by the President to administer the oaths of loyalty and office to Mr Machaya.

In his preamble, the then VP Mnangagwa said, “…And whereas in terms of Section 114(2) of the Constitution of Zimbabwe, the Attorney-General assumes office upon taking before the President, or a person authorised by the President the oath of loyalty and office.”

It is significant that the reading of this constitutional provision was followed by Mr Machaya taking the oaths of loyalty and office.

In an affidavit below, Mr. Machaya said under oath that: “The effect of reconstruction is akin to the concept of judicial management as it is intended to preserve value for the various stakeholders of the state-indebted company.”

 

 

 

 

 

 

When one looks at s 23 of the Reconstruction Act, it is provided as follows:

 

 

 

 

 

 

 

 

 

 

It is clear from the above that subject to s 25 of the Reconstruction Act, the Administrator shall have unfettered powers to formulate a scheme of reconstruction of a company, that is neither owned and controlled by the government outside the provisions of this Act.

The AG must have known and ought to have known that reconstruction is not akin to any judicial management especially having regard to the provisions of s 23(a) of the Act which gives an Administrator appointed by the Minister and not a Court of law to issue to the state shares in a purportedly reconstructed company in satisfaction to any credit owed to the state by, or payment by the state of any guarantee on behalf of, the targeted company.

“Would I be correct in saying that the government in its capacity as a creditor proceeds to target a company that owes any government controlled entity any funds whether in form of loans, guarantees, and for services rendered can be a victim of this madness clothed as some form of reconstruction when it is really an attempt to expropriate? I am struggling to establish the legal basis on which a bona fide creditor can engage in a blatant self-help exercise without the involvement of the courts and get away with it,” asks Ms. Mutizwa.

What is even more scary is what is contained in s 25 of the Reconstruction Act which reads as follows:

 

 

 

 

 

 

 

 

 

It is clear from the above that once a company has been targeted for takeover, there is no going back. The shareholders and creditors cease to have any role or power over the company leaving the Minister and his cronies to do whatever they may wish to do.

Even the Court has no jurisdiction over such a company.

Ms. Mutizwa was lost after reading the above: “Just to imagine that the consequences of an orchestrated and manipulated purported reconstruction of a private company have predetermined outcomes makes me sick to the core.”

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