“There are many provisions that have nothing to do with private companies,” Moyo told executives at last week’s Mandel Economic Outlook Symposium. “Under Section 73 of the Companies Act, you can’t leverage the assets of a target company in order to ensure an acquisition.
“I have not heard of any representation made by the business community to ensure removal of the restriction.”
Section 73 of the Companies Act Chapter 24:03, provides for financial assistance in the purchase of shares in the holding company by its subsidiary.But Moyo said the provision
was “unfortunate”, especially when efforts by policy-makers to indigenise an economy besieged by a liquidity crunch were taken into account.He said the law prevented lawyers and investment bankers from structuring deals for entrepreneurs who have ideas but do not have the cash.
The veteran lawyer said there were many indigenous people who did not have cash but were able to mobilise resources from various sources abroad.“For instance, in the case of mining claims, people want to leverage those to raise capital as well as to structure some of the empowerment deals when dealing with buyers who have no cash,” Moyo said.
He pointed out that although the restriction was imposed in order to protect creditors, English law later abandoned this aspect, as it appears to have an unsecured creditor in mind.
Many investment bankers would welcome an opportunity, in a market facing a liquidity crunch, of being able to leverage the assets of the target company, especially in mergers and acquisitions.
