Saturday, September 26, 2020

Francistown business people welcome new Companies Act

Local entrepreneurs have welcomed the new company act saying that it will facilitate better trade and enable small medium and micro enterprises to access business opportunities in Botswana.

The company act dates back to a 1959 proclamation, and the last major review of the act was in 1999, leading to the company act of 2003.

The new act comes into effect on July 3, 2007.

Addressing the business community in Francistown recently, an official from the Registrar of Companies, Lesetedi Keothepile, said that the new companies act was aimed primarily at improving services and encouraging liberalization in the registration of companies.

In the past, many companies were faced with the problem of a long process in company registration. The Botswana government found that this detracted foreign direct investment. In an earlier interview with The Sunday Standard, former BOCCIM President, Iqbal Ibrahim, said that Botswana’s policies were not liberal enough to attract and retain foreign investors in the country after their initial fact finding visits.

”We have failed to attract sizeable business investors because we are essentially not prepared for industrial development,” he said.

Ibrahim said that though Botswana has been repeatedly clamoring for FDI, the country has not been very welcoming to foreigners when they visit the country.

He said that government bureaucracy and poor service delivery, especially in the civil service, have on more than one occasion driven potential investors away. According to Ibrahim, stringent company registration rules and other factors in the public service maze should be relaxed to ensure proper and efficient service delivery to potential investors.

When presenting the new companies act, Keothepile said that one of the major features of the new act is aimed at reducing the long time it takes to register companies so that potential investors could be easily attracted and retained, and also to assist small micro and medium enterprises who have on more than one occasion been derailed from entering the business world because of the cumbersome registration process and the high registration costs.

” The main objective is simplification and liberalization of the registration process,” she said.

The new features of the act also include simplified procedures for incorporation.

The memorandum and articles of association which were considered by many in the business world to be a headache have now been replaced by provision of a constitution. Though companies have the choice to decide if they want to present a constitution in their applications, they are not bound to do so because the actual companies act can represent the company’s constitution. But where the company does decide to present a constitution, there arises some restrictions of objectives if such objectives are stated in the constitution.

The new companies act has also done away with the doctrine of ultra vires and constructive notice. In the old act, the memorandum and articles of association stipulated the line of business that the company was due to pursue. But abolition of the memorandum and articles of association effectively mean that companies are now not restricted to any scope of business but can now pursue any business that they wish to.

”Subject to this act , any other enactment and the general law a company has both within and outside Botswana full capacity to carry out or undertake any business or activity …” states section 25(1) of the act.

The new companies act also introduces a new concept called a close company, which is specifically designed to meet the needs of SMMEs. In the past, a minimum of two directors were needed to form a company. Investigations have revealed that some people were forced to include others as minority shareholders while they did not necessarily want to do business with them.

“This led to conflicts when the company did not do well because the minority shareholder was most of the time not informed of the transactions that the company was going into,” said Keothepile.

In the new act 1-5 people may form a close company and private companies can also apply for conversion to a close company. However, a close company cannot go into the business of banking or insurance but may otherwise carry out any lawful form of business.

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Sunday Standard September 27 – 3 October

Digital copy of Sunday Standard issue of September 27 - 3 October, 2020.