Beneficial ownership transparency in Zambia

Legislative and policy review

Companies Act, No. 10 of 2017 and the Companies (Amendment) Act, 2022

	Section	Provision	Gaps, conflicts and inconsistencies with other laws, OO Principles, FATF Rec. 24 and 25 and EITI Requirement 2.5	Regulator challenges	Recommendation
1	3	(a) Defines “beneficial owner”, “control”, “substantial economic benefit” and “substantial interest”. (b) “Substantial economic benefit” is defined to include the benefit realised by a natural person from a corporate body, legally or equitably, of at least 5% of the proceeds of a transaction. (c) “Control” is defined as the control of a company by a person who beneficially owns more than 25% of the issued share capital of the company. (d) Defines BO in the context of a “corporate” and a “legal arrangement”, terms which are also defined. However “control” is defined only in the context of a “company”.	(a) Does not provide a non-exhaustive list of examples/ways in which BO can be held directly or indirectly as required by the “Definition” OO Principle. (b) The term “transaction” and the nature of the proceeds that amount to economic benefit have not been defined. E.g., a lender or bank receiving interest on a loan transaction may also be captured under this definition. (c) There is currently a discrepancy in the threshold for BO of shares. Paragraph (a) of the definition of ‘’control’’ in the 2017 Act sets the threshold for control at 25%, which conflicts with the threshold of 5% set out in the definition of “substantial interest”. This also conflicts with the OO Principles, which stipulate that thresholds should be set low to reduce the risk that someone with the relevant ownership or control remains hidden.	(a) The Companies Forms do not make provisions for capturing BO information relating to substantial economic benefit derived from transactions. (b) The unclear definition of the parameters to take into account when considering economic benefit from transactions have not been prescribed. PACRA is therefore unable to implement this provision.	Definition: (a) The Companies Act should be amended to include a non-exhaustive list of examples/ways in which BO can be held as the case, for example, in Slovakia’s Act on the Register of Public Sector Partners and on Amendments to Certain Laws (Act No. 315/2015). (b) The Companies Regulations should be amended to make provisions for capturing BO information relating to substantial economic benefit derived from transactions and substantial interest. (c) Amend the definition of substantial economic benefit as far as it relates to transactions by defining the term “transaction”. The definition must clarify what parameters should be taken into account when considering economic benefits. (d) Amend the definition of “control” in the Companies Act to make it consistent with the threshold of 5% set out in the definition of “substantial economic benefit” and “substantial interest”. (e) Harmonise the definitions of “body corporate ”, “corporate”, “legal arrangement” and “company” in defining what amounts to BO.
2	12 (3) (e) as read together with Regulations 4 (e), 5 and 11 of the Companies (General) Regulations, SI No. 14 of 2019	Prescribes the particulars to be included, in respect of each beneficial owner, on the statement of BO, as well as the particulars to be included in the Register of Beneficial Owners.	The Regulations expand on the particulars required to be included in a statement of BO at incorporation, over and above what is prescribed in the Companies Act. For example, the Companies Act does not require an applicant to declare their identity number, phone number, number and class of shares owned, etc. This information is required under the Regulations. Applicants have argued that only the provisions of the Companies Act must be adhered to and have challenged the Regulations on account of the seeming inconsistency with the Companies Act.	N/A	Detail: Section 12 of the Companies Act should be amended by deletion of the particulars to be provided in Section 12(3)(e). It should instead provide that the particulars of BO information shall be as prescribed in the Regulations. This will allow for easier amendment when required, as the Regulations do not need to be amended by Parliament but only by the Minister.
3	12 (3) (e) as read together with 372 and 373	Creates a criminal offence for contravening the Companies Act or failing to comply with a request, direction or order of the Registrar of Companies.	There are no specific sanctions for failing to submit BO information. It is unclear which provision between section 272 and 273 would apply for this criminalised breach. This falls short of the “Sanctions and enforcement” OO Principle which requires adequate, effective, proportionate and dissuasive sanctions for noncompliance.	N/A	Sanctions and enforcement: (a) The Companies Act should be revised to provide that sanctions for breach of BO obligations will be provided under the Regulations. (b) The Regulations should be revised to include specific penalties for different types of compliance violations, including failure to submit BO information; late, incomplete, incorrect or false submission; and persistent noncompliance. (c) The Regulations should clearly specify the targeted person on whom the penalty will be imposed, whether it is the beneficial owner, declaring person, legal entity or the company officers. (d) Compliance violations should be penalised through the imposition of administrative fines and other non-financial sanctions, including restrictions on voting rights, board appointments, processing of annual returns and deactivation of a company where noncompliance has persisted for a specified period of time. (e) Criminal sanctions should be reserved for serious BO violations, such as knowingly making false BO declarations, concealing the true beneficial owners of the company, etc. In this regard, section 359 of the Companies Act on furnishing false information should be amended to include BO.
4	21 (2)	Establishes a central and public registry for BO information.	(a) The BO information published on the computer printout does not indicate the nature of beneficial interest in a company or the date when beneficial interest in the company was acquired. (b) BO records are searchable only by entering the name or incorporation number of the company. One cannot conduct a search by entering the name or identity number of a beneficial owner. This is inconsistent with the “Access” OO Principle, as it limits the options for accessing BO information. (c) PACRA requires users to register online in order to access BO information, and this may act as a barrier or restriction to access and/or use.	(a) PACRA has found it difficult to effectively collaborate with other regulators and public bodies, as they do not have fully developed online systems that can integrate with the PACRA database which hosts the BO register. (b) The Companies Forms used to obtain BO information do not allow for the capture of BO information for complex legal arrangements and group company structures. (c) The Companies Forms are not user friendly. (d) PACRA has faced resistance to the declaration of BO information from some applicants and stakeholders on the grounds of data privacy and protection.	Access: (a) The criteria by which one can conduct a search on the public registry should be expanded to, include the name of beneficial owner, identity number of beneficial owner (national identity number or passport number) and taxpayer identification number of beneficial owner. (b) The BO declaration forms should be revised to allow data on the first layer of the ownership chain of a company to be collected for ease and consistency in data collection. The data should be collected in a structured format for interoperability. (c) The requirement to register an account with PACRA in order to access BO information should be removed. BO information should be made searchable by non-PACRA account holders. (d) The nature of BO should be included on the PACRA printout. (e) The Companies Act should be amended to include a broad legal basis for the publication of BO information, such as transparency and accountability, in order to meet requirements of the Data Protection Act No. 3 of 2021 (which provides that restrictions on data privacy can be exempted if done for legitimate and lawful purposes) and to mitigate against challenges for submission of BO information.
5	(a)	a) Establishes a public registry that is only open to inspection by the public upon payment of prescribed fees. (b) Regulation 11 (e) particularly allows the Registrar to restrict specific BO information from being made public.	(a) A fee of ZMW 90.00 (approximately USD 5.30) per company is payable to access information of companies. This is a barrier to open access to open data. (b) At present, only law enforcement officers have unrestricted access to BO information on request. Members of the public are required to pay to access information from PACRA. (c) The Registrar has the discretion to exempt specific BO information from being made public under the Regulations, but no provision is given for criteria or guidelines for such exemptions.	N/A	Access: The regulations should be amended to clearly define and justify the grounds upon which publication of BO information may be exempted.
6	21 (3) as read together with 372 and 373	A company is required to notify the Registrar of any changes in BO within 14 days of the change.	There are no sanctions specific to breach of these BO obligations. The general sanctions for breach under sections 372 or 373 would apply. However, it is unclear which of the two is applicable. Both sections criminalise the breach. This is a gap in relation to the requirements of the “Sanctions and enforcement” OO Principle on effective and proportionate sanctions.	PACRA has a very limited role in sanctions and enforcement, as BO offences attract criminal liability as opposed to administrative penalties.	Sanctions and enforcement: Kindly refer to the recommendations on sanctions and enforcement under row 3 above.
7	124	Registrar must ensure that the BO information of shares is known, ascertained and verified before the shares can be registered.	In practice, PACRA has no capacity to verify BO information provided by companies. Reliance is placed on the honesty of those submitting the BO information.	PACRA is unable to verify the BO information submitted by applicants. Some level of verification for BO would be possible if the PACRA system used the Integrated National Registration Information System (INRIS), hosted by the Ministry of Home Affairs, to verify BO information submitted in relation to Zambians and foreign nationals with Zambian permits.	Verification: (a) Amend the Companies Act to require PACRA to implement measures to ensure the adequacy and accuracy of BO information, including an express provision that information declared to the Registrar shall be legally binding. (b) Invest in an automated IT system to automatically red-flag BO information that is inconsistent with information held on other government databases or information that has previously been declared. (c) Interlink the PACRA system with public registries and other data platforms hosted by government agencies to enhance verification processes. PACRA and other data platforms can rely on the INRIS to verify BO information relating to Zambian nationals or of foreign nationals present in Zambia. (d) Adopt verification measures, such as requiring BO disclosures to be notarised before submission.
8	270 (3)	Requires a company to lodge an annual return with PACRA within 90 days after the end of each financial year.	The provision states that an annual return, in the case of a public limited company, should include updated BO information. This appears to place the requirement for lodging updated BO information only on public companies and implies that other types of companies, such as private companies and state-owned enterprises, are excluded from this obligation. This falls short of the “Up-to-date and historical records” OO Principle, as these types of companies could use this as a basis to not provide updated BO information.	N/A	Up-to-date and auditable data: (a) Section 270(3) of the Act should be amended to make it clear that all companies must confirm, update or provide BO information when filing annual returns. (b) The annual returns indicating change in BO information should be accompanied by the Notice of Change of BO form, which will contain details on the nature and dates of such changes. (c) Section 272 of the Act should be amended to provide that companies should expressly declare that BO information is the same and has not changed when filing a no change annual return. The section should also clearly state that a declaration of BO should be made where there has been a change. (d) The PACRA system should not allow filing of annual returns where a company has not previously disclosed BO information.

Registration of Business Names Act, No. 16 of 2011

Section	Provision	Gaps, conflicts and inconsistencies with other laws, OO Principles, FATF Rec. 24 and 25 and EITI Requirement 2.5	Regulator challenges	Recommendation
8	Provides for registration of a business as a nominee, trustee or agent of another person or corporation.	Does not provide for BO declaration for trustees and agents.	There is no requirement in the Act or the application forms to disclose the BO of a business registered by trustees or agents.	(a) Amend the Act by including an obligation for disclosure of BO information of businesses by incorporating requirements of the Companies Act. (b) Amend the BN Form BIII (Application for Registration of Business Name) to include a requirement for disclosure of BO.

Mines and Minerals Development Act, No. 11 of 2015

Section	Provision	Gaps, conflicts and inconsistencies with other laws, OO Principles, FATF Rec. 24 and 25 and EITI Requirement 2.5	Regulator challenges	Recommendation
67(4)	Provides for what amounts to control and sets a threshold of 50% of the equity or ability to appoint at least half of the board of directors.	Does not provide for BO declaration requirements.	N/A	(a) Include obligation in legislation for mining and exploration licence holders to declare BO information to PACRA. The legislation should also include a requirement for licence holders to provide evidence of compliance with BO declaration from PACRA. (b) Define BO by cross- referencing to the Companies Act. (c) Requirements for BO declaration should be included at licence application stage, renewal stage, transfer stage and at any point where BO changes. (d) Reduce the threshold for what amounts to “control” from 50% of the equity to align with the threshold of control in the Companies Act. (e) The Mining Cadastre system should be linked to the PACRA system in a way that allows Mining Cadastre staff to extract BO information and verify against what has been provided by licence holders and applicants.

Mines and Minerals Development (General) Regulations, Statutory Instrument No. 7 of 2016

Section	Provision	Gaps, conflicts and inconsistencies with other laws, OO Principles, FATF Rec. 24 and 25 and EITI Requirement 2.5	Regulator challenges	Recommendation
Application Form I	Information to be provided by applicant for licence.	Does not provide for disclosure of BO information.	N/A	(a) Include provision for submission of BO in the forms, for which the Mining Cadastre can verify against the BO register maintained by PACRA.
Notice of change in particular, Form XI	Change in particulars of licence holder.	Does not provide for disclosure change in BO information.	N/A
Application for renewal, Form XIII	Renewal of licence.	Does not provide for disclosure of BO information of applicant.	N/A

National Mineral Resources Development Policy 2022

Section	Provision	Gaps, conflicts and inconsistencies with other laws, OO Principles, FATF Rec. 24 and 25 and EITI Requirement 2.5	Regulator challenges	Recommendation
2.2	Encourages the use of Information and Communication Technology (ICT) and various online platforms as well as entrenchment of transparency and accountability in the Mining Cadastre System.	N/A	Inadequate/proper ICT infrastructure.	The promotion of ICTs and transparency is a basis for linking the Mining Cadastre System to the PACRA register, which hosts BO information on companies.

The Lands and Perpetual Succession Act, Chapter 186 of the Laws of Zambia and the Land (Perpetual Succession) (Amendment) Act, No. 11 of 2020

Section	Provision	Gaps, conflicts and inconsistencies with other laws, OO Principles, FATF Rec. 24 and 25 and EITI Requirement 2.5	Regulator challenges	Recommendation
4(2) (h) and (i)	The provisions require a person applying for a certificate of incorporation of a trust as a corporate body to submit a statement of BO and declare that such information has been submitted with the knowledge of the beneficiaries.	(a) There is no requirement for the Registrar to verify the accuracy of the information declared in the statement of BO. (b) There is no definition of what amounts to BO in the context of trusts.	(a) There are currently no BO declaration forms. Applicants are therefore required to design their own BO declaration forms, resulting in insufficient information being submitted. (b) There is no BO registry. This makes searching for BO information a challenge.	(a) Amend the Act to provide for verification of information submitted by applicants. (b) The Ministry of Lands system should be linked to the PACRA system in a way that allows their staff to extract BO information and verify against what has been provided by applicants. (c) Develop a standard BO declaration form. (d) Amend the Act to specifically provide a definition of what amounts to BO in the context of trusts, as their corporate structure is fundamentally different from companies and, as such, the reference to trusts in Section 21(2)(c) contained in the Companies Act is insufficient to help a disclosing person determine who a beneficial owner of a trust is.

Lands and Deeds Registry Act, Chapter 185 of the Laws of Zambia

Section	Provision	Gaps, conflicts and inconsistencies with other laws, OO Principles, FATF Rec. 24 and 25 and EITI Requirement 2.5	Regulator challenges	Recommendation
N/A	N/A	Does not provide for disclosure of BO information.	N/A	(a) Include a provision that companies that wish to own, purchase, transfer or otherwise convey land must declare their BO to PACRA. (b) Provide a definition of BO which cross-references the Companies Act. (c) The Ministry of Lands system should be linked to the PACRA system to enhance BO verification procedures.

Financial Intelligence Centre Act, No. 46 of 2010

Section	Provision	Gaps, conflicts and inconsistencies with other laws, OO Principles, FATF Rec. 24 and 25 and EITI Requirement 2.5	Regulator challenges	Recommendation
2	Defines “beneficial owner” in terms of an individual exercising effective control or on whose behalf a transaction is conducted.	Effective control is defined to include receiving a large percentage of declared dividends. This definition does not provide a definite threshold for what amounts to control and is uncertain.	Reporting entities do not have the capacity or infrastructure to verify BO information provided by customers.	Amend legislation to include a specific threshold of a share in dividends that amounts to control from an anti-money laundering (AML) perspective.

Banking and Financial Services Act No. 7 of 2017

Section	Provision	Gaps, conflicts and inconsistencies with other laws, OO Principles, FATF Rec. 24 and 25 and EITI Requirement 2.5	Regulator challenges	Recommendation
2	Definition of BO, control and significant shareholding.	(a) One of the qualifications to be considered as having control under the Banking and Financial Services Act is to hold 50% of the issued share capital of a company. This conflicts with the OO Principles, which stipulate that thresholds should be low to reduce the risk that someone with relevant ownership or control remains hidden. (b) Further, the definition of “significant shareholding” means a person who has direct or indirect shareholding or a beneficial interest of 10% or more of the share capital of a financial service provider.	The regulated entities do not follow these reporting requirements.	The threshold under the definition of “control” in relation to issued share capital of a financial service provider should be lowered and harmonised with international or regional standards where applicable.
25	Approval of the Bank of Zambia when you acquire a beneficial interest or the ability to control 25% of the voting rights under any arrangement in a financial service provider.	Beneficial interest is defined under “significant shareholding”, which means a direct or indirect shareholding or beneficial interest of 10% or more of the share capital of a financial service provider.	N/A	For consistency, the definition of BO, control and significant shareholding should be aligned with that in the Companies Act. We recommend a threshold of 5% on the basis that financial service providers are important industries that require stringent and robust disclosure requirements.

Securities Act, No. 41 of 2016

Section	Provision	Gaps, conflicts and inconsistencies with other laws, OO Principles, FATF Rec. 24 and 25 and EITI Requirement 2.5	Regulator challenges	Recommendation
2	Definition of BO, control, insider, nominee, substantial shareholder and take-over.	One of the qualifications to be considered as having control under the Securities Act is 50% of the issued share capital of a company. This is inconsistent with the threshold contained in the Companies Act and the standard requirements for low thresholds. Further, the definition of “significant shareholding” is a person who has direct or indirect shareholding or beneficial interest of 15% or more of the share capital of a financial service provider.	N/A	The threshold under the definition of control in relation to the issued share capital of a company should be lowered to be consistent with the Companies Act.

Insurance Act, No. 38 of 2021

Section	Provision	Gaps, conflicts and inconsistencies with other laws, OO Principles, FATF Rec. 24 and 25 and EITI Requirement 2.5	Regulator challenges	Recommendation
2	Defines BO as provided in the Companies Act.	Mirrors deficiencies of the Companies Act. See part 2.1.	N/A	N/A

Public Procurement Regulations, Statutory Instrument No. 30 of 2022

Section	Provision	Gaps, conflicts and inconsistencies with other laws, OO Principles, FATF Rec. 24 and 25 and EITI Requirement 2.5	Regulator challenges	Recommendation
2	Defines BO as provided in the Companies Act.	Mirrors deficiencies of the Companies Act. See part 2.1.	The electronic government procurement system is not integrated or linked with the PACRA system which hosts the BO information, affecting verification capabilities for procuring entities.	(a) Procuring entities and the regulator, the Zambia Public Procurement Authority, should have access to the BO register maintained by PACRA. (b) Amend the Regulations to provide that beneficial owners are also liable to sanctions and not only directors, shareholders and other principal officers of erring suppliers, as is currently the case.

Income Tax Act, Chapter 323 of the Laws of Zambia

Section	Provision	Gaps, conflicts and inconsistencies with other laws, OO Principles, FATF Rec. 24 and 25 and EITI Requirement 2.5	Regulator challenges	Recommendation
2	Defines BO as provided in the Companies Act.	Mirrors deficiencies of the Companies Act. See part 2.1.	N/A	Zambia Revenue Authority should have access to the BO register maintained by PACRA on companies, the Ministry of Lands on Trusts and the INRIS for verification purposes.

Next page: Synopsis of recommendations