Introduction

Transferring shares in Zimbabwe is a regulated process governed by the Companies and Other Business Entities Act (COBE) and overseen by authorities such as the Zimbabwe Revenue Authority (ZIMRA) and the Zimbabwe Stock Exchange (ZSE). Whether you are a business owner, investor, or company secretary, understanding the legal, tax, and procedural requirements is essential for a smooth and compliant share transfer. This article provides a comprehensive guide to the share transfer process under Zimbabwean law, including documentation, tax obligations, and special considerations for foreign investors.

What Is a Share Transfer?

A share transfer is the legal process of moving ownership of shares in a company from one individual or entity to another. Upon completion, the new owner (transferee) gains rights to dividends, voting, and other shareholder privileges. Share transfers can occur for various reasons, including private sales, inheritance, corporate restructuring, or employee share schemes.

The COBE Act [Chapter 24:31] is the primary legislation governing share transfers in Zimbabwe. It outlines the procedures and requirements for both private and public companies. Key elements include:

  • All share transfers must be recorded in the company’s share register.
  • Directors must approve each transfer through a formal board resolution.
  • Transfers involving foreign shareholders may require compliance with Exchange Control Regulations and Reserve Bank of Zimbabwe (RBZ) approval.
  • The process applies to both listed and unlisted companies, with additional rules for companies trading on the ZSE or Victoria Falls Stock Exchange (VFEX).

Key Steps in the Share Transfer Process

Initiation and Agreement The process begins when the current shareholder (transferor) and the incoming shareholder (transferee) agree on the sale or transfer of shares. This agreement is typically formalized in a Share Sale Agreement, detailing the terms, price, and any conditions.

Board Approval and Resolutions The company’s board of directors must formally approve the share transfer. This is done through a board meeting, where a resolution is passed authorizing the transfer. Minutes of the meeting and the resolution itself must be documented and retained.

Preparation of Share Transfer Documents Essential documents include:

  • Share Sale Agreement
  • Share Transfer Form or Certificate
  • Original and updated Share Certificates
  • Company register updates
  • Tax clearance and proof of payment of any applicable taxes

Tax Compliance Before the transfer is finalized, the transferor (seller) must ensure all relevant taxes are paid. The primary tax is Capital Gains Tax (CGT), which varies depending on whether the shares are listed or unlisted. ZIMRA oversees assessment and collection of CGT, as well as any income tax or stamp duty that may apply.

Updating the Share Register Once all approvals and documentation are complete, the company secretary or authorized officer updates the share register to reflect the new ownership. The transferee’s details are entered, and new share certificates are issued.

Notification and Filing For listed companies, the ZSE or VFEX must be notified of the transfer. In some cases, filings with the Registrar of Companies are also required to ensure compliance with COBE.

Tax Implications of Share Transfers

Capital Gains Tax (CGT) CGT is the main tax levied on share transfers in Zimbabwe. The rate depends on the nature of the shares:

  • For listed shares (ZSE/VFEX): CGT is 1% of the transaction value.
  • For unlisted shares (private companies): CGT is 20% of the net capital gain (sale price minus purchase price and allowable costs).

Shares acquired before February 2009 may be taxed at a different rate, and exemptions exist for certain types of transfers, such as intra-group transactions, inheritance, and approved employee share schemes.

Income Tax If the sale of shares is part of a business’s regular trading activity, proceeds may be treated as business income and taxed accordingly.

Stamp Duty Stamp duty is generally not applied to listed share transfers but may be required for private company transactions, especially when share certificates or agreements are notarized.

For more details on share transfer taxes, see M&J Consultants’ Share Transfer Tax in Zimbabwe.

To ensure compliance and avoid disputes, the following documents are typically necessary:

  • Share Sale Agreement
  • Original and updated Share Certificates
  • Share Transfer Form (or certificate)
  • Board resolution and meeting minutes
  • Updated company share register
  • ZIMRA Capital Gains Tax Form (CGT1)
  • Tax clearance certificate
  • Proof of payment of CGT and any applicable taxes

Special Considerations for Foreign Investors

Foreign investors must comply with additional requirements, including:

  • Exchange Control Approval: Mandatory for non-residents acquiring or disposing of shares, as regulated by the RBZ.
  • Adherence to sector-specific foreign ownership limitations, where applicable.
  • Compliance with anti-money laundering and know-your-customer (KYC) regulations.

Transfers involving foreign parties may take longer due to the need for regulatory approvals and additional documentation.

Exemptions and Reliefs

Zimbabwean law provides exemptions or relief from CGT in specific scenarios:

  • Intra-group transfers within wholly owned corporate groups, provided there is no change in beneficial ownership.
  • Transfers through inheritance or donation, particularly where no cash changes hands.
  • Employee Share Ownership Schemes (ESOPs) approved by authorities.
  • Rollover relief when proceeds are reinvested in qualifying Zimbabwean businesses.

Frequently Asked Questions

What types of shares can be transferred? Ordinary shares are most commonly transferred, but preference shares and other classes may also be transferred, subject to company rules.

How long does the share transfer process take? With all documentation in order, transfers can be completed within 24 working hours for private companies. Listed company transfers may take longer due to exchange requirements.

Can I transfer shares if my company was not registered through a specific agent? Yes, share transfer services are available to any Zimbabwean registered company, regardless of the registration agent.

What information is needed for a share transfer? You’ll need the transferee’s name, address, national ID or passport number, and the number of shares being transferred.

Compliance and Professional Support

Given the complexity of Zimbabwean share transfer regulations, companies are strongly advised to seek professional assistance. Company secretaries, legal advisors, and specialized service providers can help prepare the necessary paperwork, ensure compliance with COBE, and manage tax obligations.

Failure to follow the correct process can result in non-compliance, penalties, or disputes over share ownership. Keeping company records current and accurate is essential for legal protection and smooth business operations.

Conclusion

Understanding the share transfer process under Zimbabwean law is vital for anyone involved in company ownership or investment. The process is governed by the Companies and Other Business Entities Act, with oversight from regulatory bodies such as ZIMRA and the ZSE. Proper documentation, board approval, tax compliance, and updates to the company share register are all critical steps. Foreign investors face additional regulatory hurdles but can benefit from exemptions and reliefs in certain circumstances.

By following the correct procedures and seeking expert guidance, companies and investors can ensure that share transfers are completed efficiently, legally, and with minimal risk.