Eswatini Daily News
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Business

Corporate/Commercial Law in Eswatini

GENERAL INFORMATION

The Kingdom of Eswatini is a former British protectorate which became independent in 1968. Eswatini is a landlocked country bordered on the north, west and south by South Africa, and on the east by Mozambique.

Area: 17 364 km2

Population: 1.4 million

Capital: Mbabane

Currency: Lilangeni

GDP: USD 6 billion (2010)

Internet domain: .sz

Languages: English, Siswati (official languages)

Working week: Monday – Friday

Exports: Soft drink concentrates; sugar; wood pulp; cotton yarn; citrus and canned fruit; refrigerators

Imports: Motor vehicles; machinery; transport equipment; foodstuffs; petroleum products; chemicals

COMPANY LAW

Business vehicles

There are two forms of companies commonly used by foreign investors:

  • Private limited liability company.
  • Public limited liability company.

Companies must be registered with the Companies Registry. Prior to commencing operations a trading license from the ministry of trade and enterprise is required. Business licenses are required for most activities.

Private and public companies must have a minimum of two shareholders. A Private company has a maximum of 50 shareholders whereas a public company has no maximum.

Registration and formation

The following steps need to be taken in order to incorporate a company:

  • Reservation is required of a unique name at the Companies Registry which entails the submission by the founder of a letter to the Registrar of Companies proposing three company names.
  • Payment need to be made for the name reservation and registration fees at the Eswatini Revenue Authority (ERA).
  • A tax clearance certificate for company directors (each founder must obtain an income tax clearance certificate) must be provided.
  • One will then register the required documents with the Company Registrar, submitting the memorandum and articles of association, which must be prepared by an attorney (however standard forms are available).
  • One will then need to request and obtain a trading license and pay the trading license fee.

It takes approximately 10 working days to incorporate a company in Eswatini. Defensive company name registrations are not possible in Eswatini.

Reporting requirements

Unlike public companies, private companies have no reporting requirements.

Share capital

The minimum capital requirement is approximately USD 9.

Management structure

The minimum number of directors required for a company is two. For appointment of a director, a company resolution, identity document of the incoming director, tax number, physical and postal addresses will be required. This process takes approximately two days.

Local representatives of the company will be required for the directors, company secretary and auditors.

Are local shareholders required?

Local shareholders are not required.

Is it possible to establish a branch and, if so, what is the procedure?

Branches may be established in Eswatini. Notarised copies of the foreign company’s memorandum and articles of association, certificate of incorporation, a list of directors and shareholders (including their addresses) are required.

COMPETITION LAW

Law

  • Competition Act 8 of 2007.
  • Competition Regulations 2010.

The Act is enforced by the Competition Commission, based in Mbabane and the High Court of Eswatini.

Mergers

The Act stipulates that the Competition Commission must be notified of any proposed transaction qualifying as a merger, regardless of the amounts involved and, as such, there are no thresholds for notification.

A merger may not be implemented prior to the necessary approval having been obtained from the Competition Commission

Restrictive Practices

The Act regulates both horizontal and vertical restrictive practices and specifically prohibits certain horizontal agreements, for example, price-fixing; the division of markets; and bid rigging.

Abuse of Dominance

The Act prohibits the abuse of a dominant position.

Sanctions

Where a firm is found to have contravened any provisions relating to merger notifications, restrictive practices or abuse of dominance, the Act provides for the imposition of a fine in an amount not exceeding USD 20 600 and/or imprisonment for a period not exceeding 5 years.

CONSUMER PROTECTION

Currently, Eswatini does not have any promulgated consumer protection laws. However, Eswatini may have some specific statutes which contain provisions that directly or indirectly relate to consumer protection under certain circumstances. An example of such legislation would be Eswatini’s Competition Act which is also aimed at protecting the welfare of consumers.

Eswatini is a member of the Common Market for Eastern and Southern Africa (COMESA) which has been established to primarily regulate competition law amongst the different economies of its member states and to ensure that a fair and effective regional competition law framework exists.

COMESA also has powers regarding consumer protection matters and promotes transparency among economic operators in the region. As such the key aspects of consumer protection dealt with in the COMESA Regulations will also impact consumer protection in Eswatini.

DATA PROTECTION

Eswatini does not currently have any promulgated data protection laws. However, draft data protection legislation is currently being discussed in Eswatini.

The key focus points of the discussions pertaining to Eswatini’s draft data protection act are

  • The establishment of a data protection authority.
  • Regulation of transfer boarder control.
  • The illegitimate and unlawful monitoring of individuals.

At present, it is unclear when this draft data protection act will be finalised and come into operation.

DISPUTE RESOLUTION

Court structure

The highest court in Eswatini is the Supreme Court, which is the final court of appeal and has supervisory and review jurisdiction over all courts of Eswatini. The High Court deals with matters with a constitutional bearing and has full jurisdiction in civil and criminal cases. Special courts, with equal jurisdiction to the High Court, are the Industrial Court and the Industrial Court of Appeal, which deal with labour matters. Magistrate’s Courts form the lower courts.

Costs

The court is empowered by the High Court Rules to make such order as to the costs of the case as the court may deem fit, including an order that the unsuccessful party shall pay to the opposing party a sum fixed by the Judge or court as and for costs.

Security by foreign litigants

Rule 47 of the Eswatini High Court Rules provides for the furnishing of security for costs. A party entitled and desiring to demand security for costs from another shall, as soon as practicable after the commencement of proceedings, deliver a notice setting forth the grounds upon which such security is claimed, and the amount demanded.

When it comes to foreigners, security for costs is not a right which the other party is entitled to as the Court has a discretion whether or not to order security to be lodged in any given case; a discretion which is to be exercised by having regard to all the relevant facts as well as consideration of equity and fairness to both parties.

Legal practitioners

There is a distinction between advocates and attorneys in Eswatini but both are affiliated to the Law Society of Swaziland and are regulated by the Legal Practitioners Act, 1964.

Alternative dispute resolution

Arbitration is a recognised form of dispute resolution in Eswatini and the foremost institute is the Conciliation Mediation and Arbitration Commission (CMAC).

EMPLOYMENT LAW

Governing legislation

  • Industrial Relations Act of 2000.
  • Employment Act of 1980.

Particulars of employment

The employment agreement must be in writing in a prescribed form and should be provided within 6 weeks of commencement. The maximum probationary period permitted is 3 months, unless the employee is engaged in supervisory, technical or confidential work in which case the probation period shall be fixed, in writing, between the employer and the employee at the time of engagement.

Forms of contracts

  • Contracts for an unspecified period.
  • Contracts for a fixed period.
  • Casual work.

Termination of employment / Dismissal

  • During any period of probationary employment, either party may terminate the contract of employment between them without notice.
  • No employer shall terminate the services of an employee unfairly. There are specific instances where termination of an employee’s services are deemed to be unfair as well as instances where it will be fair for an employer to terminate the services of an employee.
  • When the conduct of an employer towards an employee is proved by that employee to have been such that the employee can no longer reasonably be expected to continue in his or her employment and accordingly leaves his or her employment, whether with or without notice, then the services of the employee shall be deemed be unfairly terminated by that of his employer.

Dispute resolution mechanisms and remedies

An Employee who has a dispute should file a complaint with the Labour Commissioner and the Labour Commissioner shall seek to settle the complaint by such means as may appear to be suitable to the circumstances of the case, failing settlement; the Labour Commissioner is required to submit a full report to the Industrial Court.

Important regulations to take note of

The Industrial Relations Act creates the Commission for Conciliation Arbitration and Mediation. However, where one would assume that a party can refer a dispute to the Commission first instead of the Industrial Court, it appears that the parties to a dispute in respect of which the Industrial Court has jurisdiction can consent to arbitration under the auspices of the Commission meaning that the parties are still required to first approach the Industrial Court in the event that Conciliation is not successful instead of approaching the Commission.

EXCHANGE CONTROL

Eswatini participates in the Rand Monetary Area together with Namibia, Lesotho and South Africa.

Within this area, there is no exchange control on the transfer of funds. Transactions outside the Rand Monetary Area are subject to exchange control, which are monitored by the Central Bank of Swaziland in conjunction with the South African Reserve Bank and authorised dealers.

Currency used for the purchase of imports, the repatriation of capital, as well as the payment of dividends, interest, royalties and fees require prior approval from the Central Bank of Eswatini.

TAX LAW

Income tax

Income tax is levied under the Income Tax Order of 1975 on both individuals and companies on all income on a source or deemed source basis.

The taxable income of a non-resident is calculated in the same manner as that of a resident. Non-residents are subject to withholding taxes at source on certain forms of income.

Types of taxable income

Eswatini has the following types of taxes:

  • Income tax.
  • Withholding taxes on interest royalties and fees.
  • Companies are exempt from paying dividends tax. There is no capital gains tax in Eswatini.

Tax rates

The tax rate for domestic companies and foreign companies is 27.5%.

A company issued with a development approval order (up to 10 years) is taxed at 10%. Withholding taxes on royalties, interest and fees for both resident and non-resident companies are taxed as ordinary income.

Double taxation treaties

Eswatini currently has double taxation agreements with Mauritius, South Africa, and the United Kingdom.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances. Article by Adams & Adams

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