Introduction: Why a Shareholders Agreement Is Crucial in Zimbabwe

In Zimbabwe, many businesses—especially SMEs and family-run companies—operate without formal legal agreements between shareholders. Everything begins with trust, but when that trust breaks down, the absence of a clear Shareholders Agreement can lead to confusion, disputes, legal costs, and even the collapse of the business.

A Shareholders Agreement is a legally binding document that governs the relationship between shareholders, outlines their rights and responsibilities, and provides a framework for decision-making, dispute resolution, and exit strategies.

Whether you’re starting a new company or bringing in new investors, understanding the key elements of a Shareholders Agreement in Zimbabwe is critical to protecting your business and your peace of mind.

What Is a Shareholders Agreement?

A Shareholders Agreement is a private contract between the shareholders of a company. It complements the company’s Memorandum and Articles of Association but goes deeper into the day-to-day governance and the “what if” scenarios that can affect ownership or management.

It is especially important for:

  • Private companies with more than one shareholder
  • Start-ups bringing in investors
  • Family businesses planning for succession
  • Partnerships between individuals with unequal contributions or roles

In Zimbabwe, companies are governed by the Companies and Other Business Entities Act [Chapter 24:31], which provides the foundation for corporate law. However, the Act does not cover the specifics of internal shareholder relations, which is where a Shareholders Agreement comes in.

Although not mandatory by law, courts in Zimbabwe recognise and enforce Shareholders Agreements, provided they do not conflict with the Act or the company’s Articles of Association.

Key Elements of a Shareholders Agreement in Zimbabwe

Here are the most important clauses and elements that should be included in any Shareholders Agreement tailored to Zimbabwean companies:

1. Share Capital and Ownership Structure

Clearly define:

  • The number of shares each shareholder owns
  • The type of shares (ordinary, preference, etc.)
  • The process for issuing new shares

This avoids future confusion and ensures everyone understands their ownership stake.

2. Roles and Responsibilities of Shareholders

Detail the expectations and contributions of each shareholder, especially if some are silent investors and others are involved in operations.

Include:

  • Voting rights
  • Management roles (if any)
  • Participation in strategic decisions

3. Decision-Making and Voting Rights

Not all decisions require unanimous agreement. The Agreement should classify:

  • Decisions that can be made by a simple majority (e.g., budget approval)
  • Decisions that require unanimous consent (e.g., selling the company, amending the agreement)
  • Appointment and removal of directors

This protects minority shareholders and prevents abuse of power by majority holders.

4. Dividend Policy

Disagreements often arise over how profits are shared. Your agreement should state:

  • Whether dividends will be paid (and how often)
  • Who decides on dividend declarations
  • How retained earnings will be used

In Zimbabwe, many disputes arise when one partner reinvests everything while others expect regular cash returns. A clear dividend policy prevents such misunderstandings.

5. Share Transfer Restrictions

To avoid unpleasant surprises, the agreement should outline how shares can be sold or transferred. Include:

  • Right of first refusal (existing shareholders get the first chance to buy)
  • Tag-along rights (if a majority sells, minority shareholders can join the deal)
  • Drag-along rights (majority can force minority to sell in case of a big sale)
  • Restrictions on selling to competitors or outsiders

This prevents unwanted third parties from entering the business.

6. Exit Strategy and Buyout Clauses

Every business relationship must allow for a graceful exit. Address:

  • What happens if a shareholder wants to leave?
  • How is the value of their shares determined?
  • Will the company buy them out or must another shareholder?

This clause protects both the exiting shareholder and the company from disruption.

7. Dispute Resolution Mechanism

When disagreements happen, how will they be resolved?

Options include:

  • Internal negotiation
  • Mediation by a neutral party
  • Arbitration (less formal than court but legally binding)
  • Legal court proceedings as a last resort

Choosing a clear dispute resolution process helps avoid messy, costly court battles.

8. Deadlock Situations

What if there’s a 50/50 split on a major decision? The agreement should include:

  • A deadlock-breaking mechanism (e.g., third-party mediator, rotating chairperson)
  • Option for one party to buy out the other
  • Option to dissolve or sell the business if no agreement is reached

9. Confidentiality and Non-Compete Clauses

To protect the company’s intellectual property and trade secrets, include clauses that:

  • Prohibit shareholders from sharing sensitive information
  • Prevent shareholders from starting or joining a competing business during or after exit (within reasonable time and location limits)

10. Succession Planning

Especially important in Zimbabwean family-run businesses, this clause should address:

  • What happens if a shareholder dies?
  • Do their shares go to family members, or can the company buy them?
  • Can heirs become involved in management?

Succession issues can destroy good businesses—planning early avoids confusion.

11. Capital Injection and Additional Funding

Agree on how future capital needs will be handled:

  • Will all shareholders contribute equally?
  • Can new investors be brought in?
  • Will shares be diluted?

Having clarity on funding responsibilities avoids future tension.

12. Compliance with Zimbabwean Law

Ensure the agreement includes a clause that:

  • Confirms the agreement complies with Zimbabwe’s Companies Act
  • Recognises the company’s incorporation under Zimbabwean jurisdiction

Practical Tips for Drafting a Shareholders Agreement in Zimbabwe

  • Avoid templates: Many online agreements are based on other jurisdictions (e.g., UK, US) and may not suit Zimbabwean law or context.
  • Use a qualified legal professional: Always work with a lawyer or consultant familiar with corporate law in Zimbabwe.
  • Review regularly: As your business grows, revisit and update the agreement to reflect changes in structure, investment, or operations.
  • Get all shareholders to sign: A Shareholders Agreement is only valid if all parties agree to it in writing.

Why You Shouldn’t Delay

Too many Zimbabwean businesses wait until there’s a fallout before realising the value of a Shareholders Agreement. But by then, it’s often too late.

Ask yourself:

  • What happens if one shareholder wants to leave?
  • What if someone dies?
  • What if there’s a tie in voting?
  • Can shares be sold to strangers without your consent?

If you can’t confidently answer these, you need a Shareholders Agreement—now.

Conclusion

A well-drafted Shareholders Agreement is one of the smartest investments you can make in your company’s future. It protects your ownership, clarifies your rights, and helps prevent disputes that can drain your resources.

Whether you’re launching a start-up, growing your SME, or managing a legacy family business, don’t leave things to chance. Put it in writing.