About Private Limited Companies
What is a Private Limited Company?
A Private Limited Company is a legal business structure that is registered with the Companies Registry – the Registrar of Companies in Zimbabwe – through the process of incorporation. When a Private Limited Company is registered through the Companies Registry, it becomes an individual in the eyes of the law. As such, a Private Limited Company is a completely separate individual from its owners, because it is responsible for its own actions, finances and liabilities. This is the most common company structure in Zimbabwe for any type of business that wishes to make a profit for its owners.
Why would you want a Private Limited Company
Private Limited Companies allow the business owners, that is the shareholders to benefit from company’s profits without being personally liable. The financial liability of the shareholders is limited to the value of their shares or financial guarantees, which means they are only required to cover business debts up to the amount they invest or agree to pay if the company runs into financial difficulty. This type of protection is known as limited liability.
One of the most important obligations of a Private Limited Company is the disclosure of corporate and financial information. This is achieved by adhering to a number of annual filing requirements and event-driven obligations, including: the submission of annual returns, filing tax returns and annual accounts and reporting any significant changes in the business such as change of company addresses, change of company directors, transfer of shares, company name changes, amendment of memorandum and articles of association, increase in share capital, vary share capital, allotment of shares, company de-registration and company conversions
Any type and size of business can operate as a Private Limited Company, and there are many financial and professional benefits to be gained – limited personal liability, tax-saving opportunities, enhanced professional status and investment opportunities are the main advantages of registering your company as a Private Limited Company.
Who owns a Private Limited Company?
A Private Limited Company is owned by one or more ‘shareholders’. A minimum of two directors must be appointed to manage the company on behalf of the shareholders; however, it is also possible for one person to be the sole shareholder and one of the directors of a Private Limited Company.
Private Limited Companies are required to issue portions of the business as ‘shares’. Each shareholder must agree to buy one or more of these issued shares. This determines how much of the company each shareholder owns and the amount of money they are legally required to invest. If the company accrues debts that it cannot afford to pay, the shareholders must contribute the value of their unpaid shares toward the financial liabilities of the business; therefore, the number and value of each shareholder’s shares determines the limit of their personal financial liability.
Key features and benefits of a Private Limited Company
- Can be owned by one individual or more.
- Both companies and individuals can be shareholders.
- Minimum number of directors is 2 the maximum being 50.
- Personal liability of shareholders is limited to the value of their shares.
- Company enjoys limited status which is more appealing to clients, investors and lenders.
- Company can sell shares to raise capital.
- A tax-efficient way to run a profit-making business.
- Shareholders can keep all company profits for their personal use.
The legal requirements
- Must be incorporated with the Zimbabwe Companies Registry.
- Minimum of one shareholder
- Minimum of two directors above the legal age of 16.
- Registered office must be situated Zimbabwe.
- Company details can be viewed by anyone at the registry, including directors’, shareholders’ information.
- Articles of association must be adopted to outline the company’s operational rules and regulations.
- Director is responsible for delivering a number of statutory reports to the Companies Registry and ZIMRA every year and notifying the Companies Registry when any company details change.
- Surplus income can only be taken out of the company as a director’s salary, shareholders’ dividends, a director’s loan or reimbursement of expenses.