The Private Limited Company is a darling for many would be business owners. This is clear from the huge number of Private Limited Companies that are registered every year in Zimbabwe. On average the PLC is more popular than the PBC on a scale of 10:1. So what are the advantages of a PLC and should you choose this form of incorporation or the PBC? This article seeks to help you with that information.
Zimbabwean law has two provisions for the registration of a business or company. The first and more common form of business incorporation is the Private Limited Company (PLC). The second and lesser known (but rising in popularity) form of company registration is the Private Business Corporation.
A Private Limited Company has certain advantages and disadvantages. Depending on your particular situation or circumstances, these may not be advantages/disadvantages at all.
To view a summary comparison of the two forms of company incorporation available in Zimbabwe please check the link below:
Advantages of a Private Limited Company (PLC)
- A Private Limited Company allows another company or organisation to own shares in the business.
- The Private Limited Company is the most popular form of business incorporation in Zimbabwe.
- A Private Limited Company makes it easy to separate between members/ owners or shareholders and directors/ employees.
- The members/ owners or shareholders have limited liability.
- Transfer of ownership is easy.
- A Private Limited Company can employ an unlimited number of employees.
- A Private Limited Company is not limited in terms of how much revenue it can make.
Disadvantages of a Private Limited Company (PLC)
- A Private Limited Company can be de-registered by the Registrar of Companies if it does not submit annual returns for more than 2 years.
- Has slightly more legal requirements than a PBC.
- A Private Limited Company pays annual returns at the Registrar of Companies. PBCs now pay this also under the new Act.
- A Private Limited Company is slightly more expensive to register and run.
Key Features of Private Limited Companies
- A Private Limited Company (PLC) is a legal entity.
- Audited financial statements are required for Private Limited Companies.
- Meetings are compulsory and are held as general or extraordinary general meetings.
- Private Limited Companies (PLCs) can become shareholders in other companies.
- The shareholders or owners of a Private Limited Company are called members.
- The members/ owners or shareholders of a PLC are not personally liable for the debts of a Private Limited Company.
Types of Private Limited Companies
The Companies and Other Business Entities Act (Chapter 24:31) allows for the registration of 5 different types of companies namely:
- Private companies (the most common type).
- Public companies (those listed on the Zimbabwe Stock exchange).
- Companies limited by guarantee (mostly used for Non-Profit companies, this form of company does not have shares).
- Co-operative companies (formed with the purpose of providing service to its members).
- Foreign companies (mostly used for a company registered outside Zimbabwe that wants to trade in Zimbabwe)
A PLC can be converted to a Private Business Corporation.
Possible scenarios where this might be desirable could be:
- A Private Limited Company may desire the simple regulatory requirements of a PBC
- A Private Limited Company may no longer want to pay annual returns.
- A Private Limited Company may now want to trade as a sole trader.
Members of a Private Limited Company (PLC)
- The members of a Private Limited Company (PLC) are the registered owners or shareholders of the company and are listed in the Memorandum and Articles of Association.
- Any changes in respect of the members of the Private Limited Company (PLC) must be notified to the Department of Companies & Intellectual Property (DCIP).
- Non Zimbabweans may be members of a Private Limited Company (PLC), provided that they have at least one director who is resident in Zimbabwe.
- A Private Limited Company can have a minimum of one (1) member and a maximum of fifty (50) members. However there are no limitations in respect of the number of employees in a Private Limited Company.
- If a member of a Private Limited Company (PLC) is under 18, the registration document must be signed by a parent or guardian on their behalf.
Directors of a Private Limited Company (PLC)
- The directors of a Private Limited Company (PLC) are different from the members/ owners or shareholders of the company and are listed on the CR6 (formerlly called CR14).
- The minimum required number of directors for a Private Limited Company is two (2).