Beneficial Ownership Requirements in Zambia
The Companies Act No. 10 of 2017 mandates that all companies (both domestic and foreign) maintain, update, and disclose a beneficial ownership register of their shares and associated voting rights. Companies must also provide a statement of beneficial ownership when applying for incorporation.
The Act grants unrestricted access to the beneficial ownership register for law enforcement agencies and permits public access upon a request demonstrating sufficient interest to the Registrar.
Definition of a beneficial owner
The Companies Amendment Act No. 4 of 2020 expanded the definition of beneficial ownership to align with the Financial Action Task Force (FATF) standards. Under Section 3 of the Companies Act No. 10 of 2017, as amended, a beneficial owner is a natural person who:
- Directly or indirectly owns, controls, or derives substantial economic benefit from a company.
- Exercises ultimate and effective control over a legal entity or arrangement.
- Effectively controls a legal person on whose behalf a transaction is conducted.
The terms “beneficial ownership”, “beneficial owner”, and related expressions are interpreted accordingly.
Thresholds for Substantial Economic Benefit and Control
The Companies (Amendment) Act No. 4 of 2020 clarifies key financial and control thresholds:
- Substantial economic benefit: A natural person legally or equitably receives at least 5% of:
- Dividend distributions.
- Proceeds from transactions involving the company.
- Substantial interest: Defined as at least 5% ownership of a company’s shares by a natural person.
- Control: A person is deemed to control a company if they:
- Hold more than 25% of its issued share capital.
- Control the majority of voting rights at a general meeting.
- Have the power to appoint or veto a majority of the company’s directors.
- Control a holding company where the company in question is a subsidiary.
- Influence the company’s management, policies, or affairs comparably to a majority shareholder.
For Extractive Industries Transparency Initiative (EITI) reporting, the Zambia Extractive Industries Transparency Council (ZEC) has adopted the beneficial ownership definition as outlined in the Companies Act of 2017.
Politically Exposed Persons (PEPs)
Regulatory Requirements for PEPs
The Companies Act No. 10 of 2017 must be read alongside Statutory Instruments No. 14 and 21 of 2019, which require applicants to declare whether a beneficial owner is a Politically Exposed Person (PEP) when:
- Incorporating a company.
- Changing company shareholding structures.
The Financial Intelligence Centre Act No. 46 of 2010, as amended by Act No. 4 of 2016, provides Zambia’s official definition of a PEP, which includes:
- Current or former holders of public office, including:
- Head of State or Government.
- Ministers and Deputy Ministers.
- Politicians and political party officials.
- Judicial officials and senior members of quasi-judicial bodies.
- Military officers.
- Members of state-owned enterprises’ management or supervisory bodies.
- Individuals entrusted with public functions by a government, public body, or international organization.
- Immediate family members of a person in the above categories.
- Close associates of a person in the above categories.
The Financial Intelligence Centre (FIC) issued a revised guidance note in December 2017, outlining reporting obligations and anti-money laundering measures related to PEPs.
Categories of PEPs for EITI Reporting
For EITI reporting purposes, ZEC categorizes PEPs as follows:
- Foreign PEPs: Individuals holding or having held prominent public positions in a foreign country, including:
- Heads of State or Government.
- Senior politicians, government, judicial, or military officials.
- Senior executives of state-owned enterprises.
- High-ranking political party officials.
- Domestic PEPs: Individuals holding or having held prominent public positions within Zambia, including:
- Heads of State or Government.
- Senior politicians, government, judicial, or military officials.
- Senior executives of state-owned enterprises.
- High-ranking political party officials.
- International Organization PEPs: Senior management members of international organizations, including:
- Deputy directors.
- Board members or individuals holding equivalent positions.