Legal considerations for entrepreneurs and start-ups in Zimbabwe

By Beatrice Moyo

EMBARKING on the journey of being an entrepreneur and setting up a start-up or “side hustle” venture in Zimbabwe is increasingly becoming a lucrative option for most individuals, due to the inadequacy of the remuneration in the formal employment. Many tend to commence business ventures before legal structures are in place, and start enjoying the profits from the venture, without considering the risks involved in engaging business without the legal structures.

The decision to become an entrepreneur and to set up one’s own company requires careful and thorough planning to ensure compliance with the law and to avoid future problems. This article will present the essential things to consider in setting up a business, and detail both legal terms and agreements to consider beforehand. This is not intended to be an all-encompassing starter pack for entrepreneurs and start-ups as every business venture will vary and include different legal requirements.

The following are a few important things to consider at the inception of the idea:

1. Seek professional advice from the onset and if possible, during the conception stages as opposed to only seeking professional advice when a hurdle presents itself. Seek to identify, appoint and consult at the very least – lawyers and accountants. The accountants may double up as or recommend auditors and tax agents, while the lawyers may also provide company secretarial services.

• Determine the type of entity you want to incorporate or set up. The company laws of Zimbabwe provide various options with varying advantages and disadvantages, ranging from a private limited company, private business corporation, company limited by guarantee, partnerships, syndicates, joint ventures and certain associations of persons all of which may be registered as such at the Companies Registry.

• Identify potential partners and ascertain the shareholding or equity percentages that you and your partners, if any, will hold. The form of shareholding or equity percentages will depend on the type of entity you wish to form and what each shareholder offers to the entity.

• Consider if you require any particular industry licenses or any other relevant business licenses.

• Guarantee that the company has employment contracts in place if you intend on hiring employees or staff and non-disclosure agreements signed before engaging potential partners and shareholders to protect confidential information.

• Have a business plan, vision, mission and goals for the company to assist and crystallise, not only to yourself as the founder, but also to your stakeholders, what services the company offers, what it stands for and where it intends to go. This will simplify the requirements needed when the entity begins operating and websites are needed as well as marketing to potential clients’ commences.

Regards essential legal agreements, it is suggested that where there is more than one shareholder in the business, the shareholders must have a shareholders’ agreement which details the arrangement between the shareholders of a company. It comprises provisions regarding the operation of the company and the relationship between its shareholders.

The shareholders’ agreement is read in conjunction with the memorandum and articles of association which will be prepared and submitted when the company is registered at the company’s registry.

Next, entrepreneurs should ensure that there are employments contracts in place for all employees. It is always advisable that a legal practitioner with commercial expertise prepare the employment contracts to safe guard the company’s interests. Employment contracts should contain duration of employment, salary and any benefits, working hours, leave provisions, confidentiality clauses, and non-compete clauses where the business of the company is highly specialised. Other important agreements that should be prepared and executed include service level agreements, director service agreements, agreements with contractors, suppliers and customers etc., where relevant.

The company is also advised to ensure that internal policies such as corporate governance policy, human resources policy, ICT policy etc. are prepared and kept for reference. Terms and conditions for customers engaging the business for provision of services or goods are also critical and may prevent disputes with clients. Other types of agreement needed will vary from business to business hence the need for professional support at the onset.

The above consist the basic foundations for the legal compliance before commencement of any business operations. It is always advisable to seek independent and professional advice to ensure that all legal and financial risks are taken care of for the purpose of avoiding legal disputes in the future. 

The information and opinions expressed above are for general information only. Specialist advice should be sought about your specific circumstances.  They are not intended to constitute legal or other professional advice. For clarification, assistance or any questions please contact the author Beatrice Moyo, on email at: beatricejoycemoyo@gmail.com.

About the author: Beatrice Moyo is a lawyer and associate partner at Mushoriwa Pasi corporate attorneys. She specialises in commercial advisory and company law. She is the co-author of the Directors’ Handbook in Zimbabwe a comprehensive guide on directors’ duties in Zimbabwe. Contact her on the email above or whatsapp +263737482529.