Companies in Zimbabwe are registered in terms of the Companies and Other Business Entities Act [Chapter 24:31] that replaced the Companies Act [Chapter 24:03] and Private Business Corporation Act [Chapter 24:11].
Private Limited Companies (PLC) and Private Business Corporations (PBC) are the two most common forms of business incorporation. Other business entities include Public Limited Companies, Companies Limited by Guarantee, Co-operatives, Trust Companies, Foreign Companies and Partnerships (partnerships are registered voluntarily).
PLCs and PBCs are more or less the same, the most striking distinction is that a PBC is ideal for small entities only whereas a PLC covers all entities from small to large.
Private Business Corporation Features
➢ Minimum of 1 member with a maximum of 20 members
➢ Members have limited liability
➢ Only shareholders can be directors
➢ Can open bank account, get tax clearance certificates and be sued and sue in its own name
❖ Relatively cheap to form
❖ Does not need to file annual returns
❖ Not compelled to have audited financials
❖ Only natural persons can be shareholders
❖ Some Regulators like RBZ and MCAZ do not approve PBC holders for instance if you want to apply for certification to operate as microfinance company, surgery or pharmacy
❖ The “small’’ connotation makes it difficult to access lines of credit
❖ Less chances of winning tenders as compared to PLC
Private Limited Company Features
➢ Minimum of 2 members with a maximum of 50 members
➢ Members have limited Liability- liability is limited to the value of shares held
➢ Regarded as a separate legal entity- can enter into contracts, sue and be sued in its own name
➢ Directors do not need to be necessarily shareholders
❖ Shares can easily be transferred from one member to another
❖ Shareholders can be natural persons or an artificial legal entity
❖ Enjoys better prospects of accessing funds and can participate in tender processes with ease
❖ Many compliance formalities like obligations to audit financials, file annual returns and holding
❖ Relatively expensive to set up as compared to PBC
❖ Minimum number of shareholders is 2 meaning sole-traders cannot start a PLC
Editor’s Note: A Private Limited Company is the most preferred form of business Incorporation in Zimbabwe however; when the budget is limited Private Business Corporation is the way to go and you can as well upgrade from PBC to PLC later.