Company law in Zambia-its impact on members creditors and workers
Lisimba, Munalula V
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The title of this dissertation is Company Law in Zambia : Its Impact on Members, Creditors and Workers. The dissertation is concerned mainly with company law in Zambia and attempts to examine the nature of this law especially as it affects the members, creditors and workers. It seeks to show that company law is archaic and has maintained its colonial character and form since its adoption from England in 1921. There has been many changes in Zambia affecting social and economic life of people, for example, take-over of key mining and industrial concerns, the adoption of Humanism as a national philosophy and as a basis for social engineering, and the introduction of industrial democracy as a policy in industrial relations. Company Law, however, has not been responsive to these changes and in fact lags behind them. As a result it has become an inappropriate regulatory instrument of corporate rights and obligations of members, creditors and workers as envisaged by the new economic and social order. Further this paper will show that the present company law is capitalist and protects only the rights of members and creditors and not those of workers. This is in direct conflict with the Philosophy of Humanism as typified in the policy of industrial democracy. Apart from having no provision to protect workers those provisions relating to members and creditors are out of date and need complete revision. They have been outlived by time and are not in keeping with modern business management techniques. The subject of this inquiry therefore is to highlight the salient aspects of company law which affect members and creditors and to propose changes that will be necessary in order to up-date the law by extending its application to the workers. In pursuing this inquiry this paper has been divided into three main parts. The first part deals with company law and economic change. An initial attempt is made here to try and examine the nature of company law from its historical background. Zambia Company Law is based on English Company (Consolidation) Act of 1908 which was principally a capitalist legislation. Under that Act ownership and control were vested in those who owned shares in the company and not workers. The present English Company Law has not changed significantly in this respect and share¬holders still reserve the right to hire and fire management with minimum recourse to the workers. This is the law which was inherited and is still in force in Zambia. The only difference however is that whereas English Company Law has through time been constantly changed according to the needs of the English Society, the Zambian Company Law has-not. Thus one finds that despite the Party and Government Policy of involving workers in all the affairs of their companies the applicable law stands in_direct contradiction to this policy. Further the success of the Economic Revolution initiated in 1967 involving the take-overs of key mining and industrial concerns largely depends on the regulatory law that will put it into effect. Law is the instrument through which state objectives may be realised. If it is archaic it will defeat those objectives. Part One therefore exposes the unsuitability of the present company law and suggests that the Economic Revolution will only succeed if the Company Law rules are revised so that provision is made for regulating the economic activities in accordance with the state objectives of acquiring ownership and control. It is further suggested that the corporate base of ownership and control should be changed from a purely capitalist to a socialist one which will recognize the need for workers' participation. In other words whereas there is a need to vest the power of control in the state from the metropolitan capital owners, there is also a growing demand for workers to participate in management and ownership of the State-controlled companies. This does not mean that workers' participation should be restricted to the state-controlled companies but that the state companies should pave the way for the private companies. Workers being part of the public have a stake in state companies and their position in relation to these companies will be enhanced even more if they were allowed full involvement. The idea of workers' participation will entail substantial variation of the present rules relating to protection of members and creditors' rights. This aspect is amply brought out in Part Two °^ the paper. The line of thought is that the source of protection is membership in the corporation. It is only membership that confers the rights of attendance at meetings, voting and dividends. Because workers are not members they are not entitled to these rights. Any scheme intended to give rights to workers should therefore start by conferring on them the right to membership of the company. Hence company law should be changed to provide for membership based on both capital and labour. When this is done and upon satisfying certain criteria as to length of service, good conduct et cetera workers should be entitled to become members. Apart from membership rights Part Two further stresses that workers should be entitled to those rights which are generally conferred on or reserved for the creditors. Workers should have the right, for example, to object to the passing of a resolution to reduce share capital of the company if such a move will be prejudicial to their interest. They should also be entitled to petition for winding-up if the company fails to pay its debts or if the substratum and all the objects of the company have failed. One may admit that it is going too far to confer these rights on the workers but a counter view is that workers are in an inherently weak position which needs special protection. This is only possible is they are given wider powers than the general shareholders. Protection of workers' rights will also be enhanced if they have the right to disclosure of information which is presently restricted to membas and creditors. This category should include disclosure of company accounts and the right of access to directors'and auditors'reports. The problem at the moment is that most of the rules relating to these matters are very old and scanty and in order to give effective protection to the workers they require to be revised so as to ensure full, accurate and detailed disclosure of corporate information. Directors occupy strategic and influential positions in the company which they can abuse to their own advantage by using inside information. To avoid or at least minimise such abuse it has been argued under Part Two that directors should be compelled to disclose insider interests. Presently there is nothing in the Companies Act to govern this aspect. The Leadership Code Regulations which require leaders to declare their assets and liabilities should be extended and strengthened and should include disclosure of the Leaders' beneficial interests. Such a provision should necessitate the amendment of the Companies Act so as to facilitate disclosure of trusts and beneficial interests which are prohibited. Assuming it is accepted that company law rules should be revised, then Part Three outlines in greater detail proposals for parti¬cipation of workers in company law. It is true that under the present law some progress has been made in the area of participation but unfortunately this is restricted to decision making through the Works Councils. The nature of participation is also purely consultative for Works Council members do not participate directly in making decisions. Again workers unlike shareholders have no legal representation on the board of directors. Hence the effectiveness of the Works Council is greatly minimised. In the absence of workers' representation on the board which is the directing and policy-making organ of the company it is difficult to conceive how meaningful participation is possible. Another submission is made under Part Three that workers should participate in equity by owning shares in the company. This should give them the rights to attend shareholder meetings and to vote. In line with this submission three modes of participation have been suggested catering for companies with large amount of retained profits and for small companies. Once you have managed to involve workers in decision-making and in equity through appropriate amendments to the Companies Act and related Laws then you will have gone a long way in changing company law form a capitalist to socialist one and thereby sharing the power of control between the shareholders and creditors on the one hand and workers on the other.
- Law