Gwampa Mining (Private) Limited v DGL Investments Number Five (Pvt) Ltd and Others

Gwampa Mining (Private) Limited (the applicant) was the controlling shareholder in DGL Investments Number Five (Pvt) Ltd (the 1st respondent), a mining company incorporated on 14 December 2009. On 11 April 2017, the applicant entered into a Memorandum of Investment Agreement with the 2nd, 3rd, and 4th respondents to jointly mine claims belonging to the 1st respondent. The agreement required parties to contribute capital and fulfill specific conditions precedent before shares could be issued and allotted, including: execution of a shareholders' agreement, payment of US$4.3 million to Imviga creditors, payment under a loan agreement, and injection of capital into mining operations. Despite these conditions not being fulfilled, shares were issued and allotted to the 2nd, 3rd, 4th and 5th respondents. The 3rd respondent was allotted 900 shares (45% equity), the 2nd respondent 500 shares (25%), and shares were also improperly allotted to the 5th respondent (Wang Ke) who was not even a party to the agreement. The applicant alleged that the 3rd respondent only paid US$3,629,694.34 towards its obligations instead of the required US$4.3 million, no shareholders' agreement was executed, and no royalties were paid. The applicant sought rectification of the share register under section 162 of the Companies and Other Business Entities Act [Chapter 24:31].

• Whether the applicant had locus standi to bring the application for rectification under section 162 of the Companies and Other Business Entities Act
• Whether the 3rd respondent's opposition was properly authorized by board resolution
• Whether there was a material dispute of fact requiring oral evidence
• Whether the claim had prescribed
• Whether the 3rd, 4th and 5th respondents were entered into the register of shareholders of the 1st respondent without sufficient cause
• Whether the conditions precedent in the Memorandum of Investment Agreement were fulfilled before shares were allotted
• Whether the 5th respondent could lawfully be allotted shares when not a party to the agreement

The court granted the application for rectification. It ordered: (1) Rectification of the 1st respondent's register of shareholders; (2) The 3rd, 4th and 5th respondents to be deleted from the register; (3) Share certificates in the names of the 3rd respondent (1,000 ordinary shares), and 4th/5th respondent (200 ordinary shares) to be cancelled; (4) The 6th respondent (Chief Registrar of Companies) to delete the names of the 3rd, 4th and 5th respondents from the register; (5) The 3rd, 4th and 5th respondents to pay costs jointly and severally on the legal practitioner and client scale.

The binding legal principles established are: (1) Under section 162 of the Companies and Other Business Entities Act, shares entered into a company's register without sufficient cause may be rectified by the court; (2) Conditions precedent in investment agreements must be strictly fulfilled before shares can be lawfully issued and allotted; (3) The party asserting that it fulfilled its contractual obligations bears the onus of proving such fulfillment with documentary evidence; mere assertions or bare denials are insufficient; (4) Shares cannot be lawfully allotted to a person who was not a party to the investment agreement governing such allotment, particularly where the agreement expressly prohibits assignment or transfer of rights without prior written unanimous consent; (5) A member of a company has standing to seek rectification of the share register under section 162 when aggrieved by unlawful entries; (6) The right to seek rectification of a share register is a statutory right that does not prescribe.

The court made several non-binding observations: (1) The court noted that parties had been negotiating since 2021 to settle the dispute outside court, and criticized the unnecessary back-and-forth regarding the board resolution issue as not serving the interests of litigants; (2) The court observed that parties are expected to argue their cases to persuade the court and not make bald, unsubstantiated averments leaving it to the court to make of them what it can (citing Delta Beverages (Pvt) Ltd v Murandu SC 38/15); (3) The court commented that it should not have to struggle to decipher the meaning of arguments raised by parties; (4) The court noted with apparent disapproval that despite having a royalties agreement in place, there was no indication that the 3rd respondent had made any royalty payments to date as agreed; (5) The court observed that the absence of supporting evidence from a party raises suspicion regarding the veracity of that party's claims.

This case is significant in Zimbabwean company law as it clarifies the application of section 162 of the Companies and Other Business Entities Act [Chapter 24:31] regarding rectification of share registers. It establishes that: (1) Courts will strictly enforce conditions precedent in investment agreements before recognizing share allotments; (2) A member of a company has clear locus standi to seek rectification of the share register when aggrieved; (3) The burden of proof lies on respondents to demonstrate they fulfilled their contractual obligations when challenged; (4) Bare denials without supporting documentary evidence are insufficient to defend against applications for rectification; (5) Shares cannot be lawfully allotted to persons who are not parties to the relevant investment agreement; (6) Statutory rights to seek rectification do not prescribe; (7) Courts can resolve rectification applications on the papers where documentary evidence is clear, without requiring oral evidence. The case reinforces the principle that corporate transactions must comply strictly with contractual conditions and statutory requirements, and that courts will intervene to correct irregularities in share registers where shares have been allotted without sufficient cause.