The thought of starting their own business took centre stage in most of their discussions but were held back by fear of the unknown and even the known and yet their other friends who despite such fears started and seem to be flourishing in their own fields. One day Hamu, Gamu and Chamu decided to register an engineering company since they were all engineers.
The question of capital was not a big issue as they have been for some time saving towards starting something. As the world has just become one global village, procuring their lathe machines and others from China was not a big issue, they just paid online using their Visa card and got them delivered.
Work started and each contributed equally in terms of capital, expertise and even connections and the business took off well. No one even thought anything bad could befall the organization. They had employed up to 30 people in the company and their senior management could be afforded the latest cars in the market.
The years 2018-2019 took them by surprise. Business started to take a nosedive. They started laying off staff until they were eventually left with a skeletal staff just to keep the name of the company up and servicing a few loyal clients.
One of the directors, Chamu, was not patient enough to wait for another economic up-turn. He heard engineers were needed in the UK and he processed his papers and left. The two soldiered on until the fortunes of the company and the economy started picking up all over again, the company had a drastic rebound. This time around employees numbered up to 100 with clients all over the country. The business network grew and it got listed on the New York stock exchange.
One morning Chamu got wind of the new developments through an old friend who didn’t know he left the company two years back. This friend wanted to congratulate him for the company’s growth but he told him he was no longer part of the team.
Chamu got some interest into the company wanting to know how far it had gone in growth terms, googled it and even went to its website and indeed the company had made it in a big way. As he shared his story with his UK friend, he was asked when he resigned as a director from the company. That’s when the evil thoughts started. Chamu told his friend that he just told the other two that he’s no longer interested in becoming part of the company and they paid him off from the little they had, but no document with regards to resignation was done. The friend quickly told him that he was still part of the company legally.
The reason why Chamu entertained that thought was that the UK had also turned bad on him as his salary was cut by half the company he was working for had its own share of misfortunes and looking back home their company was all over the press on performance.
Chamu flew back into the country, visited the company and successfully claimed his 33.33% shareholding in the company as no document was processed with regard to his resignation. The other two were pained and learnt a life lesson for efforts to block him failed as the documents with the registrar of companies spoke in favour of Chamu and he was still a bona fide director of the company.
How could they have avoided that?
When director and or shareholder resigns, there should be convened an extraordinary general meeting where the issue is tabled and a resolution be arrived at to resign this shareholder and have the then CR6 which was popularly known as CR14 amended.
The process goes on again to have the CR11 done, which is the share allocation which then results in new share certificates being issued out. This is what the team should have done to safeguard its interest in the company.
This issue is also arising as a result of lack of information on the company secretariat as to what is expected once a company is registered. Every private limited company incorporated under the Zimbabwean law is expected to file an annual return with the registrar.
The annual return provides the Companies Registry with up-to-date information on a company’s registered office address, the address at which the register of members is kept, the number of shares in the company, the number of issued shares, directors and secretary(s) in office and auditors.
If this was done, then the other shareholder would have been struck off the register. You will find out that there are important things people take for granted but which will then be costly to the company if one chooses to use that weakness to manipulate the company.
You need to safeguard your hard earned investment in your business by making sure that you file every statutory return on time. Once a director or shareholder resigns, get the company documents amended to avoid losing your wealth.