An exposition of the fate of distressed companies in Zambia: is liquidation the only way out?

Abstract

There is nothing in the character of our current commercial and business world more striking and challenging to the legal framework than the rate at which the practices of commerce are moving. These drifting changes in the world of commerce demand an up to date legislation to police the carrying out of business while at the same time encourage business. The question that forms the basis of this paper is whether when a company registered and carrying out business in Zambia is in financial distress, liquidation is the only way out.The paper sets off by giving an overview of the life cycle of a company from incorporation to winding up.In addition, this paper also discusses and analyses the salient provisions of the Companies Act including the history and development of company law in Zambia traces its roots in the English Company Law. Furthermore, the paper considers the law and consequences of a company registered under company the Company Act of Zambia. In this regard, particular attention is drawn to the legislative safeguard provided in the companies Act of Zambia to avoid liquidating a company prematurely. An analysis of the effect of amendment number 12 of 2008 which repealed sections 15 and 18 of the companies Act requiring a company to have minimal capital for it to start operating established that the repeal has made it very fluid for start-up companies to go in to insolvency.The amendment overlooked the purpose which the requirement for minimal capital saved namely to ensure that for a company to start operating it must have a certain minimum capital.