Introduction
In Zimbabwe, many businesses start with a handshake between friends, family members, or former colleagues. Everyone is excited, trust is high, and no one wants to think about conflict.
Until conflict shows up.
From disagreements over money and management to exits and ownership disputes, business disputes between shareholders are common—and they’re often expensive, emotional, and destructive. What makes the difference between a business that survives and one that collapses? In many cases, the answer is simple: a well-drafted Shareholders Agreement.
This article explains how Shareholders Agreements work, why they matter, and how they help prevent or resolve disputes before they ruin the business.
What Is a Shareholders Agreement?
A Shareholders Agreement is a legally binding contract between a company’s shareholders. It outlines:
- Each shareholder’s rights and obligations
- How decisions are made
- What happens if someone wants to leave
- How profits are shared
- How disputes are resolved
Unlike the Memorandum and Articles of Association, which are filed publicly with the Companies Registry, a Shareholders Agreement is private and tailored to the specific needs of the shareholders.
In Zimbabwe, the agreement complements the Companies and Other Business Entities Act [Chapter 24:31], which governs how companies are run.
Why Shareholders Agreements Matter in Zimbabwe
In practice, many Zimbabwean businesses fail to put formal agreements in place. This opens the door to serious problems such as:
- Power struggles between directors or shareholders
- One partner trying to sell their shares without consent
- Disagreements over profit-sharing or salaries
- Conflicts about how to grow or exit the business
- Family members inheriting shares and interfering with management
Without a written agreement, resolving these issues can become a legal battle—or worse, lead to the collapse of the business.
Common Business Disputes Among Shareholders
Here are typical examples of shareholder disputes in Zimbabwe:
1. Unequal Contribution, Equal Profit Disputes
One partner invests capital, while another brings in clients. Later, the investor wants more returns, and the “sweat partner” refuses.
2. Silent Partner vs. Active Manager Conflicts
A silent investor feels sidelined by the day-to-day manager and questions how funds are being used.
3. Selling Shares Without Consent
A shareholder attempts to sell their shares to a third party—sometimes a competitor—without informing the others.
4. Death or Exit of a Shareholder
A shareholder passes away, and the spouse or children claim control without understanding the business.
5. Deadlocks in Decision-Making
In a 50-50 shareholding structure, partners can’t agree on key decisions. The business becomes stuck.
These scenarios are very common in Zimbabwe, especially among startups, family-owned businesses, and informal partnerships that eventually formalise without legal structures.
How a Shareholders Agreement Prevents Disputes
A properly drafted Shareholders Agreement provides clear, agreed-upon rules. Here’s how it helps:
1. Defines Roles and Responsibilities
Clarifies what each shareholder is expected to contribute—money, time, skills—and how performance is measured.
2. Outlines Decision-Making Processes
Specifies which decisions need unanimous approval, which need a majority, and who can break a deadlock.
3. Provides Exit and Buyout Options
Explains how a shareholder can leave, how shares are valued, and who gets first right of refusal.
4. Restricts Unwanted Share Transfers
Prevents a shareholder from selling their stake to outsiders without giving others a chance to buy first.
5. Covers Dispute Resolution Mechanisms
Includes processes like internal negotiation, mediation, arbitration, or court only as a last resort.
6. Handles Inheritance and Succession
Outlines what happens if a shareholder dies or becomes incapacitated—protecting the business from family interference.
Key Clauses That Prevent Disputes
When drafting a Shareholders Agreement in Zimbabwe, be sure to include:
- Ownership and shareholding structure
- Decision-making thresholds
- Voting rights
- Dividend policy
- Conflict of interest rules
- Share transfer restrictions
- Tag-along and drag-along rights
- Dispute resolution method
- Exit strategy and valuation formula
- Death or incapacity provisions
These clauses must align with the Zimbabwean Companies Act and the company’s Articles of Association.
Real-Life Scenario: What Happens Without an Agreement
Case Study:
Three business partners in Harare form a tech start-up. One provides funding, the second handles marketing, and the third writes software. No Shareholders Agreement is signed—only verbal promises.
After two years, the business grows rapidly. The software developer wants to leave and sell his shares to a competitor. The others are shocked and object.
Without a Shareholders Agreement:
- They have no legal way to stop the sale
- They can’t agree on how much the shares are worth
- Trust breaks down
- The business ends up in court
This could have been avoided with a simple agreement.
What If a Dispute Still Arises?
Even with a Shareholders Agreement, disputes may still happen. The agreement should offer a clear, structured process, such as:
- Internal Meeting – A formal meeting to address and resolve the issue.
- Mediation – Use a neutral third party to help negotiate a resolution.
- Arbitration – A legal process that is faster and more private than court.
- Court Litigation – A last resort, often expensive and time-consuming.
The agreement can state which steps to follow and whether the decision is final or appealable.
Tips for New and Growing Businesses
- Start early – Don’t wait until there’s a conflict to draft an agreement.
- Use a local expert – Work with a lawyer or consultant familiar with Zimbabwean law.
- Review regularly – Update your agreement as the business grows or shareholders change.
- Educate all partners – Make sure all shareholders understand what they’re signing.
- Put everything in writing – Verbal agreements often lead to misunderstandings.
Conclusion
In Zimbabwe’s fast-growing business environment, many SMEs collapse not because of poor products—but because of poor governance. A Shareholders Agreement is not just a legal formality; it’s a business survival tool.
It protects the business.
It protects the people behind it.
And it prepares everyone for success—even when disagreements come.
