A creditor’s demand letter changes the character of every board discussion. A warehouse transfer that made commercial sense six months earlier can look very different once suppliers remain unpaid, cash has tightened, or liquidation has become a real possibility.

Asset protection planning works only when directors treat it as disciplined risk management, not as a last-minute way to place value beyond creditors’ reach. In Zimbabwe, timing, solvency, fair value and documentary evidence determine whether a structure can withstand scrutiny.

As of October 2026, the relevant boundaries sit across the Companies and Other Business Entities Act, insolvency rules and, for offshore structures, the Reserve Bank of Zimbabwe’s Foreign Exchange Transactions Guidelines Version 2.0 issued on 2 March 2026. We help boards bring these questions into corporate governance discussions before pressure makes every option narrower.

The purpose of asset protection planning should be clear: separate operating risk from long-term assets, manage contractual exposure, preserve continuity and support orderly investment. It cannot serve as a device to defeat an existing creditor, conceal value or strip a company that cannot meet its obligations.

Directors must act in good faith, in the company’s best interests, and with due care, skill and attention under the Companies and Other Business Entities Act provisions effective from 1 December 2020. This matters because a structure that benefits one shareholder but damages the company or its creditors creates a directors’ duties problem, even where the documents appear orderly.

A disposal has a wider meaning than many boards expect. Zimbabwe’s insolvency rules can capture a sale, donation, mortgage, pledge, payment, grant of security, release or suretyship. The form of the transaction does not determine the outcome. Its timing, value and commercial purpose do.

The first judgement call: act while solvent

If the company has missed material obligations, received a formal demand, or cannot pay debts as they fall due, do not begin moving core assets without specialist legal and insolvency advice. A rushed transfer at that point can deepen the directors’ exposure and give a liquidator grounds to challenge the transaction.

If the company remains solvent, has a documented risk reason for the structure and can pay its debts after the transaction, a properly valued and authorised arrangement may be appropriate. Solvency evidence matters because it shows the board considered creditors, not only the asset owner’s interests.

Step 1: Map the Assets and the Risks They Carry

Start with a board-level asset register. Identify property, plant, vehicles, intellectual property, receivables, cash, shares, guarantees and insurance rights, then record which operating activity exposes each item to risk.

A manufacturing warehouse and a trading company’s stock do not carry the same risk profile. The warehouse may support a long-term property strategy, while stock must remain available for the daily business. Separating both simply because they have value is not a sufficient commercial reason.

Ask four practical questions for each asset:

•  Which entity legally owns it today?

•  Which entity uses it, and on what written terms?

•  Does it secure borrowing, support a guarantee or face a pending claim?

•  What independent evidence supports its current market value?

This exercise often identifies the step boards skip: checking existing security interests and guarantees before approving a transfer. A company cannot deliver a clean asset position if a lender already holds rights over the asset.

Worked example: a Harare manufacturer

Consider a solvent Harare manufacturer that owns a valuable warehouse while its trading operations carry product-liability and customer-credit risks. Before any default, creditor demand or financial distress, the board considers transferring the warehouse to a separately governed local property company at an independently supported market value, with a written commercial leaseback arrangement.

The board documents the commercial rationale, confirms that the manufacturer can still meet its obligations, checks existing lender security and obtains legal, tax and accounting advice before signing. Formal approvals and an accurate record of the sale and leaseback make the transaction easier to explain to auditors, funders and other stakeholders.

The independent valuation matters because it establishes a fair-value basis rather than an artificial discount or undisclosed distribution. A transaction completed after a creditor demand, or one that moves assets to a connected party for significantly less than their value, can raise serious insolvency and directors’ duties concerns. A genuine transaction must also be supported by real payment, viable lease terms and continued solvency.

Step 2: Test Solvency Before You Approve Anything

A board should document both balance-sheet and cash-flow considerations before transferring material assets. In practical terms, directors need evidence that liabilities do not exceed assets and that the company can continue meeting debts when due after the transaction.

Use management accounts, aged creditor reports, borrowing schedules, projected cash flow and contingent-liability records. Include pending litigation, tax assessments, guarantees and supplier disputes. A favourable bank balance on one day does not answer the solvency question if substantial obligations fall due the following week.

Consider a distributor that appears well capitalised on its management accounts but has also guaranteed borrowing for a related company. Unrecorded contingent liabilities and overdue supplier balances may materially change its actual financial position. The board should assess these exposures before assuming a proposed fleet transfer leaves sufficient resources to meet creditor claims.

The board should not transfer its delivery fleet to an associated company until it has assessed those obligations and recorded the result. The cost of pausing a proposed transfer may be a delayed restructuring. The cost of proceeding without the analysis can include litigation, reversal of the disposal and personal scrutiny of directors’ conduct.

Step 3: Use Fair Value and Real Commercial Terms

Asset protection planning does not permit a company to give assets away. A sale to a related company, trust, shareholder or family member needs a defensible market value, a written agreement and payment terms that make commercial sense.

An independent valuation provides evidence that the board did not use an artificial price. It also gives directors a basis for explaining the transaction to auditors, lenders, a liquidator or a court if questions arise later.

Where the structure uses a leaseback, document the rent, duration, maintenance responsibilities, insurance and termination rights. A property company that owns a factory but cannot show why the trading company occupies it, or what it pays, leaves an avoidable gap in the record.

Do not assume that a family trust or sister company sits outside the analysis. Under Zimbabwe’s insolvency rules, an associate includes spouses, close relatives, business partners, trusts, controlled companies and entities under common control. That broad definition matters because related-party transactions receive closer scrutiny precisely where control and information overlap.

Step 4: Understand the Six- and Twelve-Month Challenge Periods

Zimbabwe’s insolvency rules allow a court to set aside a creditor preference where liabilities exceeded assets and the transaction occurred within six months before liquidation. The period extends to 12 months where the recipient is an associate, unless that recipient proves the parties dealt in the ordinary course of business and without an intention to prefer.

The six-month period reflects the heightened concern around transactions made shortly before liquidation. The 12-month period recognises that related parties may have knowledge or influence that an independent counterparty does not.

These periods do not create a safe harbour outside six or 12 months. They identify specific circumstances in which a court may scrutinise a preference. Directors should therefore not treat a calendar calculation as a substitute for a genuine commercial rationale and a proper solvency assessment.

Worked example: a Bulawayo family enterprise

Consider a Bulawayo engineering business whose directors are siblings and whose family trust controls a separate property company. After suppliers begin demanding payment on overdue invoices, the operating company proposes to transfer valuable machinery to the property company. The timing and common ownership create immediate questions about solvency, creditor interests and the genuine purpose of the transfer.

An independently supported valuation is necessary, but it cannot on its own resolve a potential preference or an otherwise challengeable disposition. The board must evaluate the company’s financial position, any existing lender rights, the transferee’s relationship to the company and the wider circumstances of the proposed transaction.

The better course is to stop, preserve records and obtain insolvency, legal and tax advisory advice before the board takes action. If the business had completed a value-supported restructuring while solvent and before the creditor pressure emerged, it would have had a stronger factual foundation.

Step 5: Keep the Board Record Complete

A sound transaction file should tell the commercial story without relying on memory. Include the board paper, resolution, solvency analysis, independent valuation, written agreement, payment records, updated asset register, accounting treatment and relevant tax review.

Record alternatives considered by the board. For example, the minutes should explain why a leaseback, rather than a direct sale to a shareholder, better served the company’s risk and continuity objectives. This is useful evidence of due care and attention.

The form itself matters less than the substance, but poor documentation creates unnecessary doubt. The common mistake we see in planning discussions is a board approving the broad idea of a group structure without approving the value, counterparty, funding method and continuing obligations that make it real.

Corporate governance should also align with company registration records and beneficial ownership information where the restructuring changes control or ownership. A group chart that differs from signed agreements and statutory records invites questions that a careful board can avoid.

Step 6: Obtain RBZ Approval Before Building an Offshore Layer

An offshore holding company that owns Zimbabwean local assets requires prior Reserve Bank of Zimbabwe approval through an Authorised Dealer bank. The RBZ’s Foreign Exchange Transactions Guidelines Version 2.0, issued on 2 March 2026, expressly address this requirement.

The Capital Flows Administration process requires ownership details, commercial rationale, capital-raising method, five years of audited financial statements where applicable, a board resolution and relevant sector approvals. These documents allow the RBZ to assess the purpose, ownership and funding of the proposed structure.

Zimbabwean residents also require prior RBZ approval for cross-border investments, offshore branches, holding companies and subsidiaries. The application can require a business plan or due diligence, source-of-funds evidence, a three-year operating or export history, five-year cash-flow projections and financial statements.

Do not set up the offshore company first and seek approval later. The prior-approval requirement exists because exchange-control compliance attaches to the transaction and capital movement, not merely to the company’s eventual ownership chart.

False or misleading exchange-control documentation can expose the company and responsible persons to substantial regulatory consequences. The applicable sanction depends on the transaction, the legal provision engaged and the current RBZ framework. Avoid stating a fixed exposure without checking the current Guidelines and obtaining transaction-specific advice.

Where Asset Protection Ends and Creditor Evasion Begins

Asset protection planning remains legitimate when directors act while the company is solvent, use real value, obtain proper authority and preserve the company’s ability to meet obligations. It becomes dangerous when a board donates assets, backdates documents, hides ownership, creates artificial debts or transfers value after distress has begun.

Tax, exchange-control, insolvency and directors’ duties can apply at the same time. A transaction that appears acceptable from one perspective may still fail another test, which is why a board should coordinate legal review, tax advisory work, accounting treatment and corporate governance before execution.

For a modest business with a straightforward ownership structure, limited fixed assets and no significant guarantees, a complex holding structure may add expense and administration without addressing the main risk. Start with the asset map, suitable insurance, contract reviews, documented authority and strong governance. Establish separate entities only where a defensible commercial purpose justifies their establishment and ongoing compliance.

The Business Value of Early Asset Protection Planning

Protecting business assets is not about escaping valid obligations. It is about making risks visible before they threaten the operation. A structured review can identify where guarantees, weak contractual terms or concentrated ownership leave valuable assets unnecessarily exposed.

Early planning also improves investment readiness. Directors can explain who owns each asset, which entity uses it, what obligations attach to it and how the business will continue operating. Clear ownership records, independent valuations and reliable management accounts build confidence with lenders, potential investors and business partners.

The strongest outcome is a board-approved plan that balances continuity, creditor protection and commercial flexibility. M&J Consultants can help coordinate the governance, company secretarial, tax and specialist legal work needed to assess the available options. The appropriate structure and professional scope should be determined from the business’s circumstances, with a tailored quotation supplied on enquiry.

Frequently Asked Questions

Yes, but the company should use independently supported fair value, a written agreement, board approval and a documented solvency assessment. Related companies, trusts and close relatives can fall within the broad associate definition under Zimbabwe’s insolvency rules, so the transaction may receive closer scrutiny.

How long before liquidation can a transaction face challenge?

A court may set aside a creditor preference made within six months before liquidation where liabilities exceeded assets. The period can extend to 12 months where the recipient is an associate, subject to the recipient proving ordinary-course dealing and no intention to prefer.

Does a family trust protect business assets automatically?

No. A family trust can count as an associate under the applicable insolvency rules. The board must still show legitimate timing, value, authority, solvency and commercial purpose.

Does an offshore holding company require RBZ approval?

Yes, prior RBZ approval through an Authorised Dealer is required where an offshore holding company will own Zimbabwean local assets. The March 2026 RBZ Guidelines also require prior approval for specified cross-border investments and offshore restructurings by Zimbabwean residents.

Asset protection is strongest when the board acts early, records a genuine commercial purpose and protects the company’s ability to meet its obligations. Speak With Our Team at M&J Consultants about asset protection planning, business restructuring, corporate governance and tax advisory. We can review your circumstances and prepare a tailored scope of work and quotation before a crisis limits your options.