Company Formation and Operation in Zambia - Training Content for Investment Clubs in Zambia

Company Law

The principal statute dealing with company law is the Companies Act. The Companies Act sets out provisions dealing

with all aspects of company law including the incorporation of companies generally, share capital provisions, shareholders

rights, offers to the public, the management and administration of companies, accounts, directors duties, consequences of

winding up and the regulation of foreign companies based in Zambia. A company incorporated outside Zambia which has

established a place of business in Zambia must apply to be registered as a foreign company pursuant to the Companies Act. 

A foreign investor can set up a place of business in Zambia by setting up a branch or the incorporation of a company. For

purposes of corporate taxation, a company is deemed to be a resident in Zambia if the company is incorporated in Zambia;

or the central management and control of the company during a particular fiscal year was conducted in Zambia.

Further, where a non-resident company has a permanent establishment in Zambia (e.g. a branch or a project office) it will

be taxed on the same rate as resident companies. Therefore, corporate income tax is at a rate of 35% generally, for both

resident and non-resident companies. It is however worth noting that companies involved in agriculture, manufacture of

chemical fertiliser and non-traditional exports pay tax at a rate of 10%. Mining companies are taxed at a rate of 35% while

banks with profits of over ZMW 250, 000, 000.00 (US$ 48,126) are taxed at a rate of 40%.

Incorporating a Company

The alternative to setting up a branch in Zambia is to set up an independent company or a subsidiary which unlike a branch

will be a separate legal entity from its holding company. Generally speaking, both private and public companies are required

to satisfy minimum capital requirements. Private companies are required to have a minimum of ZMW 5,000 as their capital

and this requirement is deemed to have been met upon a director of the company lodging a signed declaration to the

Registrar of Companies (that this statutory requirement had been met). In the case of public companies, the nominal value

of the company’s allotted share capital is required to be not less than the authorised minimum that is ZMW 50,000. A

company can increase or reduce its share capital if authorised by its articles.

Sourcing of Capital for a Limited Liability Company

A company can source for capital either through issuing shares or through debt financing. Share capital is obtained by the

company through issuing shares and receiving payment for those shares. The Companies Act (Amendment) Act, Cap. 388

in section 208 stipulates residential requirements for directors; the Act provides that half of the directors should be resident

in Zambia including a managing director and an executive director (if the company has one).

Protection of Minority Shareholders

Zambian company law has in place mechanisms to protect minority shareholders from being defrauded or oppressed

by the majority/controlling shareholders. While the day to day management of a company is generally delegated to the

board of directors of a company, conduct of the members (shareholders) relationship inter se is governed by provisions of

the Companies Act and more particularly the articles of association of a company. Both case law and statutory provisions

reinforce the rights of minority shareholders.

General Business and Investment Environment

Business Regulatory Act, No. 3 of 2014

The Business Regulatory Act was passed to compliment laws that generally regulate business. Its purpose is to introduce

a licensing system and licensing principles that all regulatory regimes must adhere to. It is further supposed to introduce

regulatory service centres at which all regulators are to have a presence or an affiliation with, for all applications for licences,

permits, certificates and authorisations to be processed. Most importantly, regulators are required to only put in place

regulatory regimes that fulfill legitimate regulatory purposes.

Investment Guide 2015 - Zambia

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Licensing Regime

A company is required to register with the Zambia Revenue Authority (ZRA) for income tax purposes and obtain a TPIN.

Upon a TPIN being generated by ZRA, it is presented for collection as a certificate. Various categories of businesses are

required to register for TPIN; these include companies, partnerships, individuals (sole proprietorships), non-governmental

organisations, clubs, associations and other similar organisations registered with the registrar of societies.

Taxpayer Personal Identification Number (TPIN) Certificate

A company is required to register with the Zambia Revenue Authority (ZRA) for income tax purposes and obtain a TPIN.

Upon TPIN being generated by ZRA, it is presented for collection as a certificate. Various categories of businesses are

required to register for TPIN; these include companies, partnerships, individuals (Sole Proprietorships), non-governmental

organisations, clubs, associations and other similar organisations registered with the registrar of societies.

VAT Registration

Limited companies are required to apply for VAT registration if they deal in taxable goods and services and their taxable

turnover exceeds the registration threshold of ZMW 800,000 per annum. This application can only be done following

the TPIN registration. The application is done through the filling in of VAT Form 1 which should be accompanied by the

TPIN, a sketch map of location, the latest bank statement, a copy of the business plan, a certified copy of the certificate

of registration or incorporation and evidence of records such as the cashbook, purchases daybook, sales daybook, invoice

books etc. VAT registration like any other under ZRA is free. A VAT number can be allocated within 7 working days.

Trading and Manufacturing Licences

Environmental Impact Assessments

A company undertaking any trade or manufacturing is required to obtain a licence under the Trades Licensing Act. Section

18 A of the Trades Licensing Act requires that licence holders under the Act should submit to the Licencing Authority details

such as the physical address of the place where the licence holder conducts his business or trade. The information obtained

by the Licensing Authority is forwarded to the Commissioner General of the Zambia Revenue Authority at the time when

the licence expires or is renewed.

Generally speaking, environmental issues are governed by the Environmental Management Act, No. 12 of 2011. This

Act provides for various matters including the granting of licences for the discharge of effluent, emissions and for the

operation of waste disposal sites/plants. Furthermore, the Environmental Impact Assessment Regulations pursuant to this Act impose an obligation on any person intending to implement any project, to prepare and submit a Project Brief to the Zambia Environment Management Agency (ZEMA) for approval. ZEMA may on receipt of a Project Brief direct that an Environmental Impact Statement should be prepared by the developer if ZEMA determines that the project is likely to have an adverse impact on the environment. Such a statement would be required, even if the developer is undertaking any project as part of a previously approved project.

Other Licences

Depending on the particular commercial activity a company is engaged in, there may be other industry-specific licences, approvals or permits that the company would be required to obtain. For instance, in sectors such as telecommunications and energy.

Currency and Exchange Rate

Zambia operates a floating exchange rate against foreign currencies. Therefore, the exchange rate between the ZMW and other countries is determined by market forces, subject of course to interventions from time to time by the Bank of Zambia (BOZ). BOZ and commercial banks usually publish on a daily basis the selling and buying prices for various leading currencies.

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