Formation of a Company in Malawi under the Companies Act, 2013

By Chifundo Ngwira | Partner and  Chairperson of the Practice Management Committee

Introduction

Malawi is open for business. One way of doing business in Malawi is through a company. In Malawi, companies are formed under the Companies Act, 2013 [the Act]. Under this Act a company is defined as a body corporate. A company includes a foreign company or any other body corporate incorporated outside Malawi. According to this Act, there are four different types of companies that may be formed. These are a private limited liability company, a public limited liability company, a company limited by guarantee and a state-owned company. This business guide will outline the different types of companies in Malawi and how they may be formed.

The Types of Companies that may be Formed

Private limited liability company

This is a company which has its membership consisting of a minimum of one member and a maximum of fifty members. The company is further prohibited, by its memorandum of association, from offering any of its securities to the public. Under this type of a company, joint holders of shares are treated as a single member. Private limited liability companies also include single member companies

Public limited Liability company

Unlike the private limited liability company, the public limited liability company’s membership consists of a minimum of three members. There is no maximum number of members who can hold shares in it. The company is allowed to offer its securities to the general public. Its memorandum of association also permits it to transfer its securities.

Company Limited by Guarantee

A company is limited by guarantee if it is formed for the sole purpose of operating as a charity or not for profit organisation. This company is formed on the principle of the liability of its members being limited by its constitution to such amounts as the respective members may respectively undertake to contribute to the assets of the company. The members make such undertaking to contribute to the assets in the unlikely event of the company being wound up. The contribution is not upfront but await the winding up of the company.

State Owned Companies

These are companies which are controlled by the Government. The provisions of the Companies Act applicable to public limited liability companies also apply to state owned companies.  However, the Minister may exempt state owned companies from the provisions of the Companies Act. Such exemption is by notice published in the government gazette.

Who can apply for the formation of the company?

Any person may apply to incorporate a company in Malawi. This includes individuals, other body corporates whether incorporated in Malawi or foreign companies and the government.

What are the requirements for formation of a Company?

Reservation of Name

The first requirement is the reservation and availability of the company name. The registrar will not register a company under a name unless the name is available.   Each applicant must therefore make an application in the prescribed form for the reservation of name. The name to be reserved must not contravene the Companies Act or any other law, must not be identical or almost identical to the name already reserved by the registrar under the Companies Act and lastly, must not be offensive.

After the application is filed the Registrar will inform the applicant in writing if the name has been or has not been reserved. If the name has been reserved, it will be available for a period of two months from the date stated in the notice. However, such reservation of name will not as of right, entitle the proposed company or the foreign company to be registered under that name. The reservation may be revoked by the registrar or it may expire.

The Application
  • The application for the incorporation of a company must be:
  • In a prescribed form;
    • Signed by each applicant;
    • Accompanied by:
  • A document signed by every person named in the application as a director or secretary consenting to be a director or secretary;
  • A declaration that the person is not disqualified to act or holding an office as a director or secretary;
  • In the case of a company having a share capital, a document signed by every person named as a shareholder, containing the shareholder’s consent to being a shareholder. The shareholder must also consent in the document, to taking the class of shares specified in the document while stating the consideration to be provided by the shareholder for the issue of those shares;
  • In the case of a company limited by guarantee, a document signed by each person named as a member consenting to be a member.  The document must also state the amount up to which the member undertakes to contribute to the assets of the company in the event of its being wound up while the person is still a member or one year after the person ceases to be a member of the company. This contribution undertaken by the member is towards the payment of the debts and liabilities of the company contracted before that person ceases to be a member and also of the costs, charges and expenses of the winding up itself;
  • The notice of reserving a name;
  • A document certified by at least one applicant, that the document is the company’s memorandum where the proposed company is to have a memorandum; and
  • Where the document has been signed by an agent, the instrument authorising the agent to sign it.
  • The Application in the prescribed form must state:
  • The name and address of each applicant;
  • The present full name, any former name and the usual residential address of every director and secretary of the proposed company;
  • Particulars of any business occupation, directorship of any public company or subsidiary of a public company held by each director;
  • The full name and residential address of each shareholder of the proposed company, the number of shares to be issued to every shareholder and the amount to be paid or the consideration to be provided by that shareholder for the issue of those same shares;
  • The type of company that is being formed;
  • The registered office of the said company; and
  • In case of a one-person company, the full names, residential address and residential address of a person nominated by the proposed director to be the secretary of the company in the event of the death of the sole shareholder and director.
  • The application must be accompanied by a declaration made by the applicant that the information contained in the application is true and correct.

Incorporation

Where the registrar is satisfied that the application for the incorporation of the company complies with the Act, the Applicant must pay the prescribed fee. Upon the payment of the prescribed fee of MK50, 000.00 [Malawi Kwacha Fifty Thousand], the registrar will:

  • Enter the particulars of the company in the company register kept by the registrar;
  • Assign a unique number to the company as its company number;
  • Issue a certificate of incorporation in a prescribed form.

Conclusion

This guide is the general overview of formation of companies in Malawi. The type of a company any person wishes to operate through will depend on whether the company ought to be a private limited liability company, a public limited liability company, a company limited by guarantee or a state-owned company where a person wants to participate in business with the government as a controlling shareholder.