Business Legal Entities in Zambia- Guide for Investment Clubs in Zambia

Sole Proprietorships

A sole proprietorship is advantageous in Zambia due to a number of reasons including the fact that from a tax point of view, a sole proprietorship does not pay corporate tax but rather the sole proprietor pays income tax.

Partnerships

The Zambian law which governs partnerships is the English Partnership Act of 1890 which is applicable to Zambia by virtue of the English Law (Extent of Application) Act, Cap. 11. The statutory law contained in the Partnerships Act has been supplemented and interpreted by judicial decisions and general principles of common law. The Companies Act of Zambia prohibits the formation of an association or partnership consisting of 20 or more persons where such association or partnership is not a body corporate. This provision however does not apply to a partnership formed for the purpose of carrying on a prescribed profession or calling.

Companies

Companies in Zambia are regulated under the Companies Act, Cap. 388. There are various types of companies that can be formed in Zambia; this includes a company limited by shares, a company limited by guarantee and an unlimited company.

In practice, however, unlimited companies are rarely formed in Zambia. Furthermore, a company in Zambia can be classified either as a private company or a public company. A “private company” means a private company limited by shares, a company limited by guarantee or an unlimited company. On the other hand, a “public company” means a company incorporated as such, being a company satisfying Section 14 of the Companies Act.

In terms of company incorporation, any two or more persons associated for any purpose may form an incorporated company by subscribing their names on an application for incorporation that satisfies provisions of the Companies Act and lodging it with the Registrar of the Patents and Companies Registration Agency, together with the following documents:

• any proposed articles of the company

• a statutory declaration

• a signed consent from each person named in the application as a director or secretary of the company

• a declaration of guarantee by each subscriber, if the company is to be limited guarantee

Cooperative Societies

A cooperative society is a form of business association which is usually undertaken by communities trying to achieve social, economic and cultural needs while members maintain democratic control. The Cooperative Societies Act, Cap. 397 is the primary legislation governing cooperative societies in Zambia. The Act does not set out what type of cooperative society can be registered under it. The Act however, gives the impression that only one type of cooperative could be formed under the Act, namely; a private cooperative limited. The cooperatives may be limited by shares. A cooperative limited by shares is one which the liability of the members (shareholders) is limited to the amount unpaid for the shares.

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