A board meeting can go wrong before anyone votes. A director may have an interest in the proposed supplier, a founder may assume a shareholders’ agreement overrides the articles, or an estate may discover that no one agreed what happens to shares after death.

The duties of directors under Zimbabwe’s Companies and Other Business Entities Act, commonly called the COBE Act, set the standard for each of those moments. For owners and company directors, the practical issue is not simply avoiding a dispute. It is putting governance, share transfers and succession decisions into documents that work when pressure arrives.

We set out the core requirements below. Statutory and tax treatment should be reviewed for the specific transaction before completion, particularly where land-holding entities, non-resident parties or an estate are involved.

Start with the statutory duties, not the shareholders’ agreement

The COBE Act duties apply to every company director and officer. Since 13 February 2020, a director must act in good faith, in the company’s best interests, and with the care, skill and attention that a diligent businessperson would exercise.

That standard affects ordinary decisions. It applies when the board approves a loan, selects a supplier, accepts an investor, sells assets or decides whether to enforce a contract. A directorship of a company carries personal responsibilities, even where one shareholder controls most of the voting power.

Exercise independent judgment

A director must act within the company’s powers and independently exercise judgment. The director must promote the company’s success for shareholders as a whole, while considering employees, suppliers, customers, the community, the environment, long-term consequences and fairness between shareholders.

A founder can take commercial advice from an investor or parent company. The founder cannot simply carry out that party’s instruction without applying independent judgment. Core responsibility cannot be delegated, which is why a board minute should record the decision, the information considered and the reasons for it.

The COBE Act also provides business-judgment protection where a director has no personal interest, has adequate information and honestly believes the decision serves the company. This protection rewards a properly informed process. It does not protect a director who never asked for the relevant figures or ignored an obvious conflict.

Treat conflicts as a meeting procedure

A director who has a personal financial interest in a matter, or whose associate has one, must disclose the interest, leave the meeting and not vote. The director should not sign the resolution after disclosure either.

This is the step businesses most often mishandle. Disclosure alone does not cure the conflict. The minutes should identify the interest, record the director’s departure, record that the director did not vote, and show the basis on which the remaining directors decided.

Breach can carry a level 14 fine, imprisonment for up to two years, or both, together with a category 1 civil penalty. The legal risk is serious because the Act also prohibits misuse of company property, information or position, improper competition with the company, and taking an opportunity that belongs to the company.

Check whether the board itself complies

Before appointment of directors in company law becomes urgent, check the company’s shareholder count and board composition. A private company with 2 to 9 shareholders needs at least 2 directors. A private company with 10 or more shareholders needs at least 3 directors.

A public company needs 7 to 15 directors. At least one director must ordinarily reside in Zimbabwe, and a chief executive officer cannot chair the board. These rules matter in cross-border groups because an offshore parent cannot treat a local entity as a board-less administrative vehicle.

Build a shareholders’ agreement that supports the company’s rules

A shareholders’ agreement is not compulsory under the COBE Act. Yet the Act recognises rules that bind through a shareholders’ agreement as part of a company’s internal rules.

That recognition makes a shareholder agreement a governance tool, not a substitute for the memorandum and articles or for the legal duties of a director. If the documents conflict, the parties create uncertainty at the point where they need certainty most, often during an exit or a dispute.

The agreement should identify reserved matters. These are decisions shareholders agree should not rest with a simple board or shareholder majority, such as issuing new shares, borrowing above an agreed amount, changing the business, selling a material asset or approving a related-party transaction.

Use thresholds that reflect the enterprise. A family trading company and a venture with outside investors should not use the same list. If annual turnover sits below the level at which external equity is realistic, do not build a 30-page investor consent regime that prevents routine trading decisions.

The agreement should also address funding obligations, board appointment rights, information rights and dividend policy where those issues matter. Each provision needs a practical route for enforcement. A clause that says shareholders will “cooperate” during a funding round gives little guidance when one shareholder refuses to sign.

Plan for deadlock, death and exit

Private company articles must restrict share transfers. A shareholders’ agreement should therefore align with those restrictions and state how the parties value shares, who may buy them and what occurs if a shareholder dies, becomes incapacitated or wishes to exit.

What happens to shares when someone dies requires more than a sentence saying that family members inherit. Shares can pass through transmission by operation of law, but the articles and shareholder agreement should deal with the estate, valuation and buy-out funding. Without that planning, surviving owners can find themselves in business with an estate that needs cash while the company needs stability.

Take an illustrative Harare engineering business with three founder-shareholders and a US$250,000 annual turnover. The founders signed a short shareholder agreement when the business began, but it said nothing about death or valuation. When one founder died, the estate sought an immediate sale while the other two wanted to retain control, and the company had no agreed funding mechanism for a buy-out.

They would have been better served by a valuation formula, a clear option for the surviving shareholders and funded succession planning. The business might budget US$4,000 for legal, tax and valuation advice when putting those documents in place. That is an illustrative planning cost, not a statutory fee, and the right budget depends on the company’s structure.

Follow the correct process when shares or directors change

Share sales and changes of directors details are not housekeeping. They affect ownership evidence, tax exposure and the company’s statutory records.

Use an instrument of transfer for an existing share sale

For a private company share transfer, the seller and buyer need a proper instrument of transfer delivered to the company. The company must notify both parties of a refusal within two months.

A common error is using CR11 as a share transfer form for a private limited company. CR11 is a return of allotment. It records newly allotted shares, not the sale of existing shares from one shareholder to another.

The company should update its register of members after a valid transfer. The buyer, seller and board should also check the articles and shareholders’ agreement before signing, because pre-emption rights or consent provisions may apply.

Take an illustrative Bulawayo distribution company with four shareholders. One shareholder agreed to sell a 20% stake for US$60,000 and filed CR11, believing it would record the transaction. The other shareholders then objected that they had not received the first right to buy required by the articles, and the parties had to pause completion while they reconstructed the intended process.

The better sequence would have been to review the articles, issue any required transfer notice, use the instrument of transfer, obtain board approval where required and update the register of members. The US$60,000 price does not determine whether the process is valid. The company’s internal rules and statutory records do.

Address capital gains tax before completion

ZIMRA identifies shares as marketable securities for capital gains tax purposes. Its published rate for sale of an unlisted marketable security is 10%, while listed shares attract 1% CGT withholding.

Do not treat those published rates as the full transaction analysis. Confirm the current assessment and stamp duty shares treatment with ZIMRA before completion, because the facts of the seller, the asset and the transaction can affect the outcome.

Finance Act 2025, enacted on 29 December 2025, inserted section 30C into the Capital Gains Tax Act from 1 January 2026. It creates special CGT compliance for transfers of shares or interests in specified land-holding entities, including a tax-clearance-certificate requirement in litigation over title.

This point deserves early attention. If the company owns or derives value from land, obtain tax advice before the parties fix a completion date. A signed sale agreement cannot remove a compliance requirement that applies to the transaction.

Record director appointments and resignations correctly

CR6 is the prescribed list of directors and secretaries used for appointments, resignations and changed particulars. Keep the company’s internal resolutions, statutory filings and registers consistent.

For an incoming director, the board should confirm eligibility, residency requirements where relevant, consent to act and the scope of authority. For an outgoing director, obtain a written resignation, update bank mandates and access rights, and ensure the company does not continue presenting that person as authorised to third parties.

A practical governance sequence for owners and boards

Good governance does not require a large legal department. It requires the board to follow a repeatable sequence before a significant decision.

1. Identify the decision and authority

Ask whether the matter belongs to the board, shareholders or both. Read the memorandum and articles, then read the shareholders’ agreement. This prevents a board from approving a matter that requires shareholder consent.

2. Check conflicts before papers circulate

Ask each director whether they or an associate has a personal financial interest. Do this before the meeting, because late disclosure can disrupt the quorum and delay a transaction.

3. Put adequate information before the decision-makers

For a share sale, this may include the offer, valuation, tax position, transfer restrictions and funding evidence. For a related-party contract, it may include alternative quotations and the commercial reason for selecting the proposed supplier.

4. Minute the judgement, not only the outcome

A useful minute records what the board considered, who disclosed an interest, who left, and why the remaining directors believed the decision served the company. That record supports the business-judgment protection where the statutory conditions are met.

5. Complete the filings and registers

After approval, execute the correct documents. For how to sell company shares, that normally means the instrument of transfer and the register of members, rather than CR11. For a director change, use CR6 and align the company records.

Frequently Asked Questions

Under the COBE Act, directors and officers must act in good faith, in the company’s best interests, and with the care, skill and attention of a diligent businessperson. They must also act within company powers, exercise independent judgment and avoid misuse of position or company opportunities.

Does a shareholders’ agreement override the COBE Act?

No. A shareholders’ agreement can form part of the company’s internal rules, but it cannot displace statutory director duties. It should also align with the memorandum and articles, especially on share transfers, reserved matters and exit rights.

Can an interested director vote after disclosing a conflict?

No. A director with a relevant personal financial interest, or whose associate has one, must disclose the interest, leave the meeting and not vote. The board should minute each of those steps.

Which form records a sale of existing private company shares?

Use a proper instrument of transfer delivered to the company and update the register of members after the required approvals. CR11 is a return of allotment, so it does not evidence an existing shareholder’s sale of shares.

Governance documents work best before a disagreement, an exit or an estate forces the issue. Speak With Our Team about reviewing your directors’ duties framework, shareholders’ agreement and proposed share transfer.