1. “Financing via the Issuance of Securities” The Securities Commission S e c of Zimbabwe

2. 1. SEC Vision 2. Key objectives of the Commission 3. The Capital Markets in Zimbabwe 4. Types of Securities in Zimbabwe 5. Methods of Raising Capital on the ZSE 6. The Role of Lawyers in Raising Capital 7. Conclusion 8. Discussion

3.  SEC Vision  Creating a sound and safe investment environment in the securities and capital markets of Zimbabwe and beyond.  Mission  The Securities Commission commits itself to the impartial application of the law in ensuring a sound and safe investment environment.  Core Values  SECZ is a transparent organization that is guided by the following values in discharging its duties:  Professionalism  Transparency  Fairness  Integrity and  Ethical Conduct

4.  Key Objectives of the Commission The key objectives of the commission are derived from the Securities Act and these are: I.Providing high levels of investor protection. II.Reducing systemic risk in the capital markets. III.Promoting market integrity and investor confidence. IV.Preventing market manipulation, fraud and financial crime. V.Ensuring transparency in capital and securities markets. VI.Promoting investor education. 

5.  What are capital markets? Definition: “Capital markets are markets where money (capital) can be raised for investment in a business. The money can be raised in the form of DEBT or EQUITY from publicly organised exchanges or through private placements”  The Securities Commission of Zimbabwe overseas the trading of securities in PUBLIC markets in Zimbabwe. The Zimbabwe Stock Exchange is the only current public market for the trade of securities in Zimbabwe. For purposes of this discussion, the raising of capital will refer exclusively to raising capital (via the issuance of securities) on the Zimbabwe Stock Exchange and the role of lawyers in the processes….

6. Since dollarisation of the Zimbabwean economy in 2009, the types of securities that can be issued (sold) by publicly-listed companies to raise capital are limited to the following:  Ordinary shares- units of ownership in public companies where owners are typically entitled to vote on the selection of directors and other important matters as well as to receive dividends on their holdings  Preference shares- shares that pay dividends at a specified rate and that have preference over ordinary shares in the payment of dividends and the liquidation of assets  Debentures- general debt obligations backed only by the integrity of the borrower and the borrower’s commitment to repay the obligations from anticipated future profits

7. There are THREE main methods for companies to raise capital on the ZSE and these are:  Private placement- the direct sale/placement of a new issue of shares or debentures to a selected institution or a group of selected institutions  Initial Public Offering- a company’s first offering of shares to the public through the sale on a stock exchange. This is also a way to launch the company on the stock exchange  Rights Issue- a method of raising additional capital by issuing more shares to existing shareholders in proportion to their shareholding

8. Corporate Lawyers, be they internal company counsel or external legal counsel, play a significant role in the capital raising exercises of publicly-listed companies. In order for these lawyers to be effective in advising on such transactions they need to be well acquainted with the legislative framework and rules governing such exercises. The Companies’ Act (Chapter 24:03) has certain sections that deal with the raising of capital namely under Part III titled “Share Capital and Debentures”. The following Sub-sections under Part III are particularly relevant:  Section 53 - Section 71  Section 74 – Section 111 (“Issue of Shares, preference shares, increase/decrease of share capital, provisions of debentures etc” The Zimbabwe Stock Exchange Listing Rules and Requirements must also be considered in all capital raising issues by corporate lawyers as these need to be fulfilled to the letter by all ZSE listed entities Or those entities seeking to raise capital through a listing

9. The relevant section in the ZSE Listing Rules and Requirement dealing with the Raising of capital is Section 5 titled “ Methods and Procedures of Bringing Securities to Listing” Other sections which corporate lawyers must be familiar with are Sections 9,10 and 11 of the ZSE Listing Rules and Requirements SPECIFIC FUNCTIONS OF LAWYERS IN CAPITAL RAISING EXERCISES  The lawyer to an issuer of securities must examine the issuer’s Memorandum and Articles of Association and certify the authenticity, adequacy and compliance or otherwise with the Companies Act and ensure, where necessary, consequential amendments to them. For instance, it must have been converted to a public company if it is a private company. Also the articles must not place restrictions on the transfer of shares  The lawyer must make sure that there is a Resolution for the increase of share capital, if existing capital is not adequate

10.  resolution of which must be passed at a properly convened Annual or Extra- Ordinary General Meeting. Thereafter the lawyer should file the resolutions with the Registrar of Companies and the Zimbabwe Stock Exchange. Where there are subdivisions of shares such as preferential, ordinary etc the lawyer must also ensure that the subdivisions are duly registered  The lawyer to the offer shall also request from the company all substantial contracts and determine material contracts for disclosure. He is to critically examine the general circumstances of each contract involving the issuer in order to ascertain which of the contracts may be regarded as material  The lawyer must also ensure that a Power of Attorney and/or consent document is executed by the Chairman and all other directors. This document should carry the date of the completion Board Meeting as evidence of “consent” by the chairman and directors. The names must be mentioned in the prospectus and as regards their joint acceptance of joint and several responsibilities with regard to the contents of the prospectus

11.  The lawyer to the company working in conjunction with the company secretary must verify all historical and present facts about the company. This includes ensuring that decisions and minutes of the board meeting and AGM/EGM for the various corporate decisions and approvals are in place and that all material facts in the prospectus are verified. Facts such as the date of incorporation, the share capital, registered office, the directors, company secretary, borrowing powers, encumbrances of charges etc must be confirmed by the lawyer to the offer  The lawyer must disclose any ongoing or threatened litigation or claim, the outcome of which could adversely affect the fortunes fo the company. He must give a professional summation of the total adverse claims and express professional judgement as to the possible outcome of ongoing or threatened litigation or claim (this has direct bearing on any capital raising exercise)  The lawyer of the company must participate in due diligence especially in areas concerning examination of title documents over land properties, plant machinery and equipment and intellectual property rights and proffer opinion on the existing state of affairs with consequential recommendations

12.  The lawyer must examine the extent of directors’ shareholdings whilst compiling the share capital history of the company for purposes of the prospectus GENERAL DUTIES OF THE LAWYER  The general duties of the lawyer to the company includes the fact the he must act as the “watch dog” of the company’s interests throughout the public issue exercise, particularly in the preparation of the prospectus connected with the same. He must familiarise himself thoroughly with all aspects of the transaction, ie the issue exercise and attend every All Parties Meeting a the instance of the issuing company. He must also ensure that all internal conditions precedent required to be met for a successful public offer are put in place and supplied to the issuing company  The lawyer must avoid contravention or breaches of the practices and procedures of the Securities Commission of Zimbabwe and the Zimbabwe Stock Exchange (especially their listing requirements)

13.  Lastly the lawyer advising in a public capital raising transaction must conduct all the necessary legal and institutional searches and ensure that the company and the issue conform with any mandatory periods or time frames prescribed by any statute or regulations to avoid penalties, forfeitures or rejection of documents Lawyers play a significant and essential role in the raising of capital in all capital markets and their input is vital for the successful conclusion of all capital raising exercises in public capital markets.

14.  DISCUSSION