Governance Law Legislation M&A Zimbabwe

Zimbabwe competition law and merger notification update

The Minister of Trade and Commerce has recently revised all fees in terms of the Competition Act [Chapter 14:20] (“Competition Act”). The regulations, which were passed on 5 June 2020, provide new financial thresholds for merger notification in Zimbabwe, new filing fees, advisory fees, and penalties.

The Minister in consultation with the Competition and Tariffs Commission (the “CTC”) effectively sought to increase all statutory fees in terms of the Competition Act due to the rapidly decreasing rate of the Zimbabwean Dollar against the United States Dollar. In addition, the passing of the Companies and Other Business Entities Act [Chapter 24:31] (“COBE”), which came into force on 14 February 2020, has seen the introduction of an additional merger notification process for mergers that consist of at least one public company and one private company.

1. Merger Notification Fees

Since the introduction of the United States Dollar as legal tender in Zimbabwe in 2011, the CTC has denominated all its fees associated with merger notification in Zimbabwe, in the United States Dollars. However, in mid-2019, the United States Dollar was banned as legal tender for domestic transactions in Zimbabwe and upon the passing of Presidential Powers (Temporary Measures) (Amendment of Reserve Bank of Zimbabwe Act and Issue of Real Time Gross Settlement Electronic Dollars (RTGS Dollars)) Regulations, 2019 (Statutory Instrument 33 of 2019), every enactment in which an amount was expressed United States Dollars was required to be paid in Zimbabwean Dollars.

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Due to the rapid depreciation of the Zimbabwean Dollar and decrease in value against the United States Dollar, payment of fees in Zimbabwean Dollars caused a significant reduction in the punitive effect of penalties in terms of the Competition Act and grossly reduced the cash flow of the CTC. Due to these changes, the penalty fee of US$50 000 (fifty thousand United States Dollars) became a fee of ZWL$ 50 000 (fifty thousand Zimbabwean Dollars) which, when converted into United States Dollars on 1 June 2020, was equivalent to US$2 000 (two thousand United States Dollars) creating a shortfall of US$48 000 (forty eight thousand United States Dollars).

A. Filing Fees and Penalties:

Competition (Notification of Mergers) Regulations, 2020, Statutory Instrument 126 of 2020 (“Merger Fee Regulations”) repeals Competition (Merger Notification Thresholds) (Amendment) Regulations, 2011 (No. 2) and Competition (Notification of Mergers) (Amendment) Regulations, 2011 (No. 5).

In terms of the Merger Fee Regulations, all merger notifications are to be accompanied by a fee of 0.5% of the combined annual turnover or the combined value of assets in Zimbabwe of the merger parties, with a minimum fee of ZWL$ 100 000 (one hundred thousand Zimbabwean Dollars) and a maximum fee of ZWL$ 800 000 (eight hundred thousand Zimbabwean Dollars) respectively. Previously, the range sat between ZWL$ 10 000 (ten thousand Zimbabwean Dollars) and ZWL$ 50 000 (fifty thousand Zimbabwean Dollars).

In terms of the Merger Fee Regulations, a merger may be notifiable if the parties to the transaction hold a combined annual turnover in or from Zimbabwe that is equivalent to or more than ZWL$ 10 000 000 (ten million Zimbabwean Dollars) OR if the combined assets in Zimbabwe of the merging parties are valued at an amount equivalent to or more than ZWL$ 10 000 000 (ten million Zimbabwean Dollars). This financial threshold for a notifiable merger has been revised upwards from ZWL$ 1 200 000 (one million two hundred thousand Zimbabwean Dollars).

B. Advisory Opinion Fees:

Competition (Advisory Opinion) Regulations, 2020 (“Advisory Regulations”) repeals Competition (Advisory Opinion) Regulations, 2011 in which the cost of an Advisory Opinion was formally prescribed to be ZWL$ 250 (two hundred and fifty Zimbabwean Dollars). In terms of the Advisory Regulations, the fee will now sit at ZWL$ 10 000 (ten thousand Zimbabwean Dollars).

2. Merger Notification in terms of COBE

In terms of COBE, a merger is defined as: “an amalgamation or consolidation of two or more companies.” Section 228 of COBE provides a merger notification procedure for the merger of at least one public company and at least one private company in Zimbabwe.

The Act requires merging parties to enter into a contract of merger in terms of certain requirements laid out in section 229 of COBE. After approval by the shareholders of the merging parties, the contract is to be filed with the Registrar of Companies. The Act also requires the publication of the merger transaction as a notice in the Gazette and a daily newspaper.

These provisions do not require the merging parties to obtain any type of approval for transactions from the Registrar of Companies and functions only to notify the Registrar and the public of a merger transaction. In terms of the Act, companies will continue to be authorized to undertake and complete a merger at any time as provided by the Competition Act.

In conclusion, the changes imposed by the new regulations issued on 5 June 2020, have resulted in an increase in the cost of merger notification for merging parties and a rise in the penalty fee for non-compliance concerning merger filing in Zimbabwe, seeing the CTC move towards a more punitive approach regarding non-compliance of Competition Laws in Zimbabwe. As a result we are likely to see a increase in merger notifications by merging parties in order to avoid penalty fees.

Source: Manokore Attorneys LinkedIn article

Author: Lisa Dutiro

Manokore’s Official Website

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