Marshlands Consortium Limited and Ors v Felicitus Kabwe Chibamba (Appeal No. 154 of 2021) [2024] ZMCA 158 (28 June 2024)

IN THE COURT OF APPEAL OF ZAMBIA HOLDEN AT LUSAKA ( Civil Jurisdiction) Appeal No. 154 of 202 1 BETWEEN: MARSHLANDS CONSORTIUM LIM~I:;.,;T~ - TOBIAS HAANYIMBO MILA~ RICHARD LUBEMBA t'uBLIC OF <A~ cnuRT mAPPt:"'l. e,,, NACHI MUSONDA AND 2 ~ JUN 2024 C!VIL REGISTRY 2 "o · 8ox 50067 . LU5t>-v . FELICITUS KABWE CHIBAMB CHANDA KATOTOBWE JUSTIN PHIR1 KLEIN SY AMPONGO MAYBIN SILA VWE 1st Appellant 2nd Appellant 3rd Appellant 4 th Appellant 1st Respondent 2nd Respondent 3rd Respondent 4 th Respondent 5th Respondent CORAM: Kondolo, Ngulube and Sharpe-Phiri, JJA on 24 August 2023 and 28 June 2024 For the Appel lants: For the l st & 2nd Respondents: For the 2nd Respondent: For the yd to 5th Respondents: Mr. M . Nchito, SC and Mr. C Hamwela Nchito and Nchito Advocates Mr. J. Madaika of J &M Advocates Mr. S. Sikota, SC of Central Chambers Mr. L. M. Chikuta of LM Chikuta JUDGMENT SHARPE-PHIRI, JA, delivered the judgment of the Court Legislation referred to: J. The Companies Act, Chapter 388 of the Laws of Zambia (repealed) 2. The Companies Act, No. JO of 201 7 3. The Insurance (Minimum Paid-Up Share Capital) Regulations, StatutOJy Instrument No. 7Jof2015 Cases referred to: /. Lake Kariba Boating Services Limited v Kariba North Bank Co. Limited (1982) Z. R. 35 J I J. 2. John Paul Mwila Kasengele & Others v ZANA CO (2000) ZR 72 3. Bank of Zamb ia v Chibote Meat Corporation Limited, SCZ Judgment No. 14 of 1999 4. Zambia Revenue Authority v Post Newspapers Limited SCZ Judgment No. 18 o/2016. 5. Macaura v Northern Assurance Co. Limited ( 1925) A. C.6 19 7. Royal British v Turquand (1 856) 6 E & B 32. 8. Cavmonl Merchant Bank Limited v Amaka Agricultural Development Limited (2001) ZR 73 9. Konkol a Copper Mines Pie V Jacobus Keune Appeal No. 29 of 2005 Other authorities: 1. Halsbury 's laws of England, Butterworths, 4'" Edition, Volume 7(1) 2. John Hatchard and Muna Ndulo (2013), 'The law of Evidence in Zambia: Cases and Materials '. 1.0 INTRODUCTION 1.1 This judgment pertains to an appeal against the decision rendered by Justice Chenda of the Commercial Division of the High Court on 9 April 2021. The delay in delivering this judgment is sincerely regretted and is attributed to the substantial workload of the Court and the extensive documentation involved in this appeal. 2.0 BACKGROUND 2.1 The dispute between the parties concerns a disagreement regarding the ownership and control of a corporate entity known as Ultimate Insurance Company Limited ("Ultimate Insurance"). 2.2 The background facts leading to the action in the Court below, as inferred from the pleadings, indicate that an amended writ of summons was fi led in the High Cou11 on 23 August 2019 by Felicitus Kabwe Chibamba (Chibamba) and Chanda Katotobvve (Katotobwe), named as the !51 and 2nd Plaintiffs, respectively. J2 2.3 Marshlands Consortium Limited (Marshlands) was the pt Defendant, Tobias Haanyimbo Milambo (M ilambo) was the 2nd Defendant, Richard Lubemba (Lubemba) was the 3rd Defendant, Nachi Musonda (Musonda) was the 4 th Defendant, Justine Phiri (Phiri) was the Yh Defendant, Klein Syampongo (Syampongo) was the 6th Defendant, and Maybin Silavwe (Si lavwe) was the 7th Defendant respectively. 2.4 Due to the numerous parties and their different designations in the lower Court and in this Court, the parties will be referred to by their last names throughout the first part of the judgment. They wil l be grouped and refen-ed to by their designations in this appeal in the later part of the judgment. 2.5 The pleadings in the lower Court allege that in November 2017, Milambo, Lubemba, and Musonda approached Katotobwe w ith a proposal to purchase the shareho lding of Ultimate Insurance, a company experiencing financial difficulties and whose insurance license had been revoked by the Pensions and Insurance Authority (PIA). They informed Katotobwe that the Insurance company was listed for sale at K 1,500,000. Milambo, Lubemba, and Musonda represented themselves as experts in the insurance industry with extensive experience at top managerial levels. They requested Katotobwe to retain their services in the potential acquisition of Ultimate Insurance on the pretext that they would enhance the business ' s value. 2.6 Chibamba and Katotobwe, a couple seeking investment opportunities in the financial services sector, found the proposal of Milambo, Lubemba, and Musonda attractive. The three individuals emphasized the need for Chibamba and Katotobwe to invest in an existing company to secure J3 immediate employment opportunities for them, as their contracts with Meanwood Insurance were approaching termination. They assured Chibamba and Katotobwe that they would utilize their business connections, experience, and expertise in the insurance industry to ensure the success of Chibamba and Katotobwe 's investment. 2.7 Milambo, Lubemba and Musonda requested that Chibamba and Katotobwe guarantee them the right to purchase shares in Ultimate Insurance once it was acquired. They sought this assurance to avoid the mistreatment they had experienced from prev ious employers and to ensure they would not be easily replaced once the company became successful. 2.8 The pa11ies tentatively agreed that Milambo, Lubemba, and Musonda would become shareholders in U ltimate Insurance, holding a 65% shares, while Chibamba and Katotobwe would hold a 35% shares. This agreement was contingent upon Milambo, Lubemba, and Musonda making a 65% monetary contribution towards the purchase price of Kl ,500,000 payable to Phiri, Syampongo, and Silavwe for the shares in the company. 2.9 Chibamba and Katotobwe alleged that Milambo and Lubemba failed to raise the required 65% of the purchase price for shares, leaving Chibamba and Katotobvve to make the entire payment of Kl ,500,000. Consequently, thi s altered the initial plan, requiring Milambo, Lubemba, and Musonda to acquire the 65% shareholding in U ltimate Insurance at a later stage once they had aiTanged their finances. This arrangement resulted in Chibamba and Katotobwe retaining 100% of the sharehold ing in the interim. J4 2.10 Due to the shift in the transaction 's dynamics and the original plan for Milambo, Lubemba, and Musonda to become majority shareholders, the trio had assumed the lead role in the transaction, leveraging their claimed expetiise in the insurance sector and meeting with Phiri, Syampongo, and Silavwe, while Chibamba and Katotobwe took a more pass ive role. 2.11 Upon realizing their inability to contribute the required capital, Milambo, Lubemba, and Musonda approached Chibamba and Katotobwe w ith a renewed proposal. Despite Chibamba and Katotobwe having paid 100% of the purchase price for the shares, Milambo, Lubemba, and Musonda requested a guarantee of their 65% shareholding and assurances that they would not be removed from the company while they arranged the funds to reimburse Chibamba and Katotobwe for these shares. 2.12 To persuade Chibamba and Katotobwe to accept their proposal, Milambo, Lubemba, and Musonda made the following representations, which Chibamba and Katotobwe accepted as the basis fo r the allocation of shares, in the manner they are currently held in the company: (i) After Chibamba and Katotobwe acquired the company for the purchase price of Kl ,500,000, the 100% shareholding would be transferred to them, with the intention of subsequently transferring 65% to Milambo, Lubemba, and Musonda upon fulfillment of the additional terms outlined below. (ii) Milambo, Lubemba and Musonda proposed that their shares be held by Marshlands, a privately held company established under the Companies Act, No. 7 of 2017, in which Milambo serves as a JS Director and Board Chairperson, while Lubemba and Musonda hold positions as Director and Company Secretary, respectively. (iii) Chibamba and Katotobwe would allot 65% of the shareholding to Marshlands in exchange fo r Milambo, Lubemba, and Musonda making a payment of K3 ,500,000 fo r the purchase of the 65% shareholding in the Company (through their nominee, Marshlands). The payment would be made in two installments: an initial payment of KS00,000 within 30 days from date of Chibamba and Katotobwe making full and final payment of the purchase price of K 1,500,000 to Phiri, Syampongo, and Silavwe, and a subsequent payment of K3,000,000 within 90 days thereafter. (iv) A Board of Directors compnsmg seven members would be established, with Chibamba and Katotobwe having the permanent right to appoint four Board Members, including the Board Chairperson while. Marshlands would appoint the remaining three Board Members. (v) Chibamba and Katotobwe, wou ld receive 40% of the dividends as an inducement for their proposed arrangement. (vi) The position of Managing Director was to be advertised, with the administration committee, a subcommittee of the Board of Directors, responsible for the appointment of the Managing Director. J6 (vii) Marshlands would contribute real estate titles valued at a minimum of K6,500,000 to meet the Pensions and Insurance Authority's requirements, with Chibamba and Katotobwe covering the remaining amount. The total security required by Pens ions and Insurance Authority was Kl 0,000,000, and the paiiies agreed to provide the security in propo11ion to their shareholding. 2. 13 Chibamba and Katotobwe further asserted that following their agreement to the terms, the transaction between them and Phiri, Syampongo, and Silavwe progressed. They requested Phiri, Syampongo, and Silavwe to permit Milambo and Lubemba to operate from the company premises to facilitate the handover and transition of manage ment and shareholders. 2.14 During the transition phase, Phiri, Syampongo, and Silavwe proposed to Chibamba and Katotobwe that they should prov ide alternative security amounting to K 10,000,000, as required by the Pensions and Insurance Authority (PIA). However, Chibamba and Katotobwe later discovered that Milambo, Lubemba, and Musonda had made further agreements after Chibamba and Katotobwe purchased the insurance company, without their consent or knowledge. 2.15 The Appellants collaborated with or misled Phiri, Syampongo, and Silavvve into s igning the sale and purchase agreement and subsequent shareholders' agreement among themselves. These agreements were prepared w ithout any authority from Chibamba and Katotobwe w ho were not informed about the agreements. J7 2.16 Chibamba and Katotobwe fm1her asse11ed that they raised their portion of the security by transferring the titles to some of their flats to Milambo, Lubemba, and Musonda. The latter then engaged a valuer, prepared a valuation report, and submitted it to the Pensions and Insurance Authority. 2.17 The parties did not finalize any written agreement on the aforementioned terms due to their conflicting work schedules. However, they agreed that these terms would be binding to meet the timelines set by the Pension and Insurance Authority. It was necessary to get the company operational, and the parties agreed to convene later to finalize a written share sale agreement and shareholders agreement. Chibamba and Katotobwe confirmed that they possessed evidence of pai1ial fulfilment of the te1ms, which they eventually relied on at trial. 2.18 Relying on the representations made by Milambo, Lubemba, and Musonda, Chibamba and Katotobwe proceeded to pay the full purchase price of K 1,500,000 for the shares in Ultimate Insurance from the previous shareholders. This payment was facilitated by Milambo, Lubemba, and Musonda, who assumed a leading role due to their extensive business experience. 2.19 Upon receiving the purchase price, Phiri, Syampongo, and Silavwe transferred 3 5% of the shareholding to Chibamba and mistakenly transferred 65% to Marshlands instead of Chibamba and Katotobwe, the financiers of the acquisition. It was alleged that Marshlands acquired the shares in Ultimate Insurance through false misrepresentation, rendering the contract void. J8 2.20 Chibamba and Katotobwe contended that the pai1iculars of false misrepresentation where as follows: a) That Milambo, Lubemba and Musonda held themselves out as persons that would competently manage the affairs of an insurance company as shareholders to give value to Chibamba and Katotobwe 's need for expertise when the said Appellants knew very well or ought to have known that a shareholder or any person beneficially interested in the insurance business are restricted by the Pensions and insurance Authority from taking part in the day-to-day ,nanagement of the insurance business in which they have interest. Corporate governance also proscribes such arrangements. b) Milambo, Lubemba and Musonda concealed their identity by incorporating Marshlands Consortium Limited for purposes of deceiving the regulator and Chibamba and Katotobwe that ;r was permissible for them to run the day-to-day business of the company when in fact the same was not the case. c) The Appellants have since refused to make/or complete the cash payment in the sum of KJ,500,000 which was the condition precedent for shares given to Marshlands Consortium Limited, albeit in error. d) The sum of K400,000 paid to Chibamba towards the KJ,500,000 was made by the company and not from any of the Appellants and for no consideration at all in breach of the requirement of law to that effect. e) The Appellants have since denied the existence of a separate agreement that gave r;se to issuance of shares in Marshlands Consortium Liniited's favour despite them purporting to pay the sum of K400,000 in partial fulfilment of the said agreement. The term 'purport ' ;s used here because the funds did not come from the Appellants but from the revenue generated by Ultimate insurance Limited. Essentially the said Appellants were paying Chibamba and Katotobwe with the Respondents ' own money. j) Instead of giving property with minimum value of K6,500,000, it has since come to the attention that the Appellants overstated the value of properties submitted to the Pensions and Insurance Authority as security when the actual value of the stated properties mentioned in the inter preceding paragraph of the statement of claim as assessed by the Zambia Revenue Authority (ZRA) for property transfer tax was much lower than declared to Pensions and Insurance Authority; g) The Appellants deceitfully abandoned the earlier interim agreement on the signing arrangement betvveen the shareholders for payments of funds from the company that was intended to assure transparency in management of company fimds (whereby for any payment of money from the company to be made, two panels representing the two shareholders each were created, pending appointment of the Board and subsequently the Managing Director of the company as aforesaid), by creating a situation where any payment could pass with only representatives of Marshlands Consortium Limited as shareholder signing for both panels. JI 0 2.21 After agreeing to purchase the Company fro m Phiri, Syampongo and Silavwe, Chibamba and Katotobwe requested the sellers to allow Milambo, Lubemba and Musonda to be present at the company premises for the transition period until the Board of Directors and later the Managing Director were appointed. During this period, Milambo, Lubemba, and Musonda assumed control of the day-to-day operations of the company without proper authorization. 2.22 Milambo, Lubemba, and Musonda further persuaded Chibamba and Katotobwe to expedite operations, claiming that they had numerous clients that they could bring to the company. They emphasized the need to maximize the issuance of insurance policies during the second quarter of the year. 2.23 Chibamba began working as General Manager Finance and Administration during the transition period but worked for less than a month as she later fell ill. 2.24 The signing arrangements fo r the existing bank accounts of the company were amended, with the agreed pattern being Lubemba and Musonda as representatives of Marshlands in Panel A and Mr. John M. Mponda as representative of Chibamba in Panel B. The agreement stipulated that one signatory from each panel was required to authorize all transactions to be honoured by the banks. 2 .25 During Chibamba' s extended absence from work in June 2018 due to a surgical operation, the Appellants removed Mr. Maybin Silavwe as Finance Manager without the consent of Chibamba and Katotobwe. This J II action was contrary to the understanding and terms of agreement for the transition period, which was pending the appointment of the Board of Directors, which had not yet been constituted. Without the knowledge of Chibamba and Katotobwe and without any board resolution by a duly constituted Board of Directors, the Appellants also created a bank account. 2.26 It was additionally asserted that Milambo, Lubemba, and Musonda have assumed control of the company' s operations, conducting business in an unprofessional manner without the involvement of Chibamba and Katotobwe, thus directly violating the agreements verbally reached by the parties pending the formal execution of written agreements. The Appellants have also declined to formalize these verbal agreements into written contracts, as the current circumstances significantly benefits them. 2.27 For instance, Chibamba and Katotobwe highlighted the dismissal of Patricia Shikwe, a recently appointed Finance Manager, in 2019 without a formal handover process. This resulted in company funds being handed over to Milambo without proper accounting records. As the Finance Manager was the sole accountant in the company, her termination led to non-accountants overseeing the company' s financial accounts. It was argued that this dismissal led to financial mismanagement in the company, thereby jeopardizing innocent policyholders and potentially exposing the company to legal actions. 2.28 It was also argued that the Appellants have consistently denied the 1st and 2nd Respondents access to financial documents and any correspondence necessary for ensuring good governance during the transition. This situation, initially temporary, has now been enforced as permanent. J 12 Additionally, the Appellants have included Milambo on Panel B, which is designated for Chibamba and/or her agent's representatives, effectively marginalizing the other signatories, including Chibamba and John Musonda, and undermining their signing authority with the banks. 2.29 Furthermore, it ,,vas averred that the inclusion of Milambo on Panel B of the signing mandate has enabled Milambo, Lubemba, and Musonda to deceitfully seize complete control of the company purchased by Chibamba and Katotobwe's, to the detriment of the said purchasers. Milambo, Lubemba, and Musonda have also proceeded to appoint a Board of Directors without the agreement or input of Chibamba and Katotobwe as shareholders. 2.30 It was also alleged that in April and May 2019, Lubemba and Musonda withdrew money totaling K636,220.68 from the company's bank account held at Stanbic Bank Manda Hill Branch without adhering to the agreed terms and without involving Chibamba and Katotobwe, mirroring the appointment of the Board of Directors without their input. Additionally, Milambo has reportedly resorted to pressuring the accounts officers to cease depositing cash collection funds into the bank and instead hand over the money to Musonda for subsequent unaccounted appropriation. 2.31 It was further alleged that Milambo, Lubemba, and Musonda have declined to execute the shareholder's agreement, which was meant to substantiate their shareholding in the company, despite making irregular payments totaling about K400,000 from the company to Chibamba in paitial fulfillment of the agreement to pay K3,500,000 within 90 days from date Jl3 of the agreement. Chibamba and Katotobwe detailed the irregular payments as follows: a) The Appellants utilized company funds to make a payment of K400,000 to Chibamba as a partial payment for their shares. However, this payment should have been made from the trio's personal or other funds. The use of company funds for purchasing its own shares is known as "financial assistance" and is prohibited under the Companies Act No. 7 of 2017. 2.32 Chibamba and Katotobwe also claimed that Milambo, Lubemba, and Musonda refused to sign the shareholders agreement between them, which outlined the terms for transferring shares to the Appellants. Chibamba and Katotobwe argue that this refusal constitutes repudiation of the agreement, despite Chibamba's efforts to schedule a shareholder meeting to execute the agreement through several letters. 2.33 Despite effo1ts to resolve the erroneous transfer of shares to Marshlands, Milambo, Lubemba, and Musonda, through a reply signed by Milambo, stated that there was already a shareholders' agreement executed among them. Chibamba and Katotobwe neither sanctioned nor authorized this agreement and were unaware of its existence. 2.34 It was also contended that Milambo, Lubemba, and Musonda' s takeover of 65% of the shares implies that they accepted the Respondents' terms by conduct. It was fu1ther argued that the te1ms could not be altered after the fact by the Appellants, as this would amount to a rejection of the terms, which would vitiate the agreement and transaction. J 14 2.35 It was also indicated that under no circumstances would the 1st and 2nd Respondents have consented to selling shares in the company to Marshlands. This stance was based on the insurance regulator' s policy, which discourages shareholders from actively managing or invo lving themselves in the day-to-day operations of an insurance business. Fu11hermore, the 1st and 2nd Respondents claimed that the planned sale of shares to M ilambo, Lubemba, and Musonda through Marshlands was the result of their misunderstand ing, influenced by Milambo, Lubemba, and Musonda's concealment, misrepresentation, and outright deception. 2.36 Chibamba and Katotobwe also stated in the lower court's pleadings that they were prepared and capable of providing the necessary security as demanded by the insurance regulator, had it not been for their planned sale of shares to Marshlands. They expressed regret that the fundamenta l condition for the share transfer to Marshlands has collapsed entirely, rendering the agreement between the two Respond ents and M il ambo, Lubemba, and Musonda null and vo id. 2.37 Ch ibamba and Katotobwe reiterated that Milambo, Lubemba, and Musonda ' s actions completely invalidated the contract and made the transacti on imposs ible to fulfill. They, as primary purchasers of the shares, have been totally disregarded and mistreated, and they no longer w ish to maintain any further relationship w ith Mi lambo, Lubemba, and Musonda due to the trio 's misrepresentation, concealment, irregular conduct, and impunity. JIS 2.38 Chibamba and Katotobwe also asserted their right as purchasers of Ultimate Insurance to determine how to manage their shareholding. They argued that they could not be compelled to accept the terms imposed by Milambo, Lubemba, and Musonda, who exploited the mistaken transfer of shares to Marshlands. This exploitation meant there was no genuine agreement between the parties to validate the transfer of shares. 2.39 Chibamba and Katotobwe emphasized that Milambo, Lubemba, and Musonda's refusal to accept their terms constituted a rejection of their offer. They argued that as a result, the pa11ies should be returned to their original positions when Chibamba and Katotobwe purchased the shares from Phiri, Syampongo, and Silavwe. They further contended that Milambo, Lubemba, and Musonda' s continued control of the company constituted unjust enrichment from the business of Ultimate Insurance. 2.40 Therefore, Chibamba and Katotobwe sought vanous reliefs against Marshlands, Milambo, Lubemba, and Musonda and Phiri, Syampongo, and Silavwe, including the follow ing: i) A declaration that the Plaintiffs are the 100% owners of UJC having been the parties that paid the full purchase price of ZMKJ,500,000=00. ii) An Order directing that the 1st • 211d, 3rd and 4th Defendants having not furnished any consideration were not entitled to have received any shareholding in UIC directly from the S ", 6th , and ?" Defendants. J 16 W) An order that the transfer by the sr'1, 6t11, and 7th Defendants of shares to the Js ' Defendant was done wrongly, by mistake of fact and on a tnisapprehension of the true facts, which said error, mistake and misapprehension was perpetrated by the 211d , 3rd and 4th Defendants. iv) An order directing/or the reversal of transaction transferring 65% shares between the Defendants whereby the l5' Defendant was made beneficiary of shares to which it had not furnished any consideration and that the status quo be restored by means of the initial owners, the 5'11, 6'11, and 7th Defendants getting back the 65% shares in VIC from the Js ' Defendant/or purposes of properly concluding the share sale agreement between the proper parties to the agreement, who are the Plaintiffs and the 5th , 6'11, and 7th Defendants. v) An order directing that the contracts, agreements and/or undertakings agreed bet,,veen the Plaintiffs and the Js ', 2'1 d, 3rd and 4th Defendants have been discharged on account of breaches committed by the Defendants. vi) Ancillary to (v) above, a further order declaring null and void the transfer of shares into the l5'Defendant on account of mistake of fact on the part of the 5th , 6th , and ?" Defendants and for failure of consideration. vii) An order for restitution in integrum bet,,veen the Plaintiffs and the Js1 , 2nd , 3rd and 4th Defendants. viii) An order directing for the reversal or rescission of the transaction envisaged between the Plaintiffs and the J51, 211 d, 3rd and 4'11 Defendants by which the JS1 Defendant retained the 65 % shares erroneously transferred to it by the 5'11, 6'11, and 7th Defendants. J 17 ix) An order directing that the Plaintiffs are not bound to conclude the transaction with the 1st , 2nd , 3rd and 4th Defendants despite any purported part-pe,formance undertaken by any party. x) An order directing that the initial transaction between the Plaintiffs and 5th , 6th , and ?" Defendants be properly concluded by filing the proper share transfer documents and other statutory requirements for the remaining 65% shares in UIC to be transferred to the Plaintiffs by the 5th , 6th , and 7th Defendants after same are retrieved from the 1st Defendant. xi) An order compelling the si'1 , 6th , and 7th Defendants to execute all necessary documents and provide all necessary legal and other assistance to ensure that the Plaintiffs obtain the 100% shareholding in UJC that they paid for. xii) Accompanying the ultimate transfer of shares to the Plaintiffs, an order for the Plaintiffs, as 100% shareholders, to have sole and full control of the affairs of UJC to i,nmediately appoint a Board of Directors to oversee such matters as meeting the statutory obligations to the Pensions and Insurance Authority (PIA), bank accounts, appoint competent employees, etc. xiii) An order for the ]st , 2nd , 3rd and 4th Defendants ' contributions, in UJC, whether in monetary form or by contribution of real property as security to the Pensions and insurance Authority (PIA), be assessed by the Court and paid out to the si'1 , 6th , and ? h Defendants after a fit!! audit of the company has been concluded and a proper account rendered by the J51 , 2nd , 3rd and 4th Defendants. J 18 xiv) An order for the cancellation of the shares allotted to the ]st Defendant and that the said shares be transferred to 5'11, 61h, and 7th Defendants for the onward transfer to the Plaintiffs. xv) An order that the register of members as held at the Patents and Companies Registration Agency (PA CRA) be ultimately rectified to reflect the Plaintiffs as owners of the entire shares of UIC. xvi) An order for the appointment of auditors by the Plaintiffs to carry out a forensic audit of UIC and present a report to the Court for purposes of ascertaining the state of affairs of the company. xvii) An order for the Jst , 2nd , 3rd and 4th Defendants to render an account for all monies received by the UJC at all material times and that any waste, pillage, misuse, misapplication, abuse, theft or unexplained loss of revenue and /or assets be made good jointly by the JS', 2'1d, 3rd and 4'" Defendants. xviii) A permanent injunction restraining the Defendants from inte,jering with the operations and management of UIC or in any way representing themselves to the public as shareholders or owners of the said company. xix) In addition to all the above, an order for the 1st , 2nd , 3rd and 4'11 Defendants to pay damages for breach of contract including aggravated damages for their malicious conduct. xx) Any other relief that the Court may deem fit. xxi) Interest on all sums found due and payable to the Plaintiffs,· and xxii) Costs. J 19 3.0 THE DEFENCE IN THE LOWER COURT 3 .1 The defence in the court below was a blunt denial of the claim that Katotobwe financed the entire purchase of the shareholding in Ultimate Insurance. They argued that it was Chibamba who purchased 1,650,000 shares from Phiri, Syampongo, and Silavwe with the purchase price paid directly to these Respondents. They asse11ed that the shares sold by Phiri, Syampongo and Silavwe to Chibamba were only the shares that they owned. They also argued that the remaining 1,850,000 shares owned by Chibamba were acquired through subscription. 3.2 It was argued that Milambo, Lubemba, and Musonda only became aware of the investment opportunity in Ultimate Insurance around 28 January 2018. They purportedly signed a non-disclosure agreement on 9 February 2018 to enable due diligence before deciding to invest in the company. The Appellants further claimed that Milambo, Lubemba, and Musonda only met Chibamba and Katotobwe after all the agreements had been made among Marshlands, Ultimate Insurance, Phiri, Syampongo, and Silavwe. Milambo, Lubemba, and Musonda insisted that Chibamba and Katotobwe never purchased Ultimate Insurance. 3 .3 It was further contended that Marshlands became a shareholder in Ultimate Insurance through a subscription agreement, where it subscribed to shares that were created through an increase in share capital. The shareholders' agreement between Marshlands and Phiri, Syampongo, and Silavwe allegedly indicated that Chibamba and Katotobwe were not involved in Marshland 's acquisition of shares in Ultimate Insurance. J20 3 .4 Marshlands, Milambo, Lubemba, and Musonda asserted that the shares currently held by Marshlands were never owned by Phiri, Syampongo, and Silavwe. Therefore, these shares could not have been part of the share purchase agreement between Chibamba and Phiri, Syampongo, and Silavwe for 1,650,000 shares. Milambo, Lubemba, and Musonda also denied acting as agents of Chibamba and Katotobwe in the transaction, asserting that Marshlands acquired the shares it holds on to its own behalf. 3.5 Marshlands, Milambo, Lubemba, and Musonda refuted any arrangements with Chibamba and Katotobwe, asserting that the shares held by Marshlands were acquired from Ultimate Insurance for valuable consideration and not from Phiri, Syampongo, and Silavwe. They emphasized their intent to establish the following facts at trial: a) By special resolution passed on or about 24 November 201 7 signed by Chabuka Jerome Kawesha and the 6111 and 7 ih Defendants who were the principal persons in Ultimate Insurance at the time before the ]51 to 41h Defendants became involved with Ultimate Insurance resolved to increase its share capital to I 0, 000, 000 fully paid shares and the new shares amounting to 8,350,000 shares would be issued to potential partners upon them bringing in assets or cash. b) Having increased the share capital of Ultimate Insurance Company Limited, the 5th , 6111 and 7111 Defendants wrote to the then Board Chairperson of Ultimate Insurance, Mr. Chabuka Jerome Kawesha informing him that Ultimate Insurance was now fully capitalized and they had found new partners in the name of Marshlands Consortium Liniited and Ms. Felicitas Kabwe Chibamba who had contributed J2 I the required capital by converting personal properties into Ultimate Insurance Company Limited. By the said letter, the Sil, 6th and l1" Defendants had confirmed that the ]st Defendant had contributed towards capitalizing Ultimate Insurance. c) The 1st Defendant acquired the shares from Ultimate Insurance by subscription as the same were never owned by 5th to ? 11 Defendants. d) The shareholding structure between the ]st Defendant and the 5'11, 6th and 7th Defendants was reduced into writing before the Plaintiff became shareholder by way of a shareholders agreement dated 23 February 2018 and signed by the 1st Defendant the 5'11, 6th and 7th Defendants. The said agreement broke down the shareholding of Ultimate Insurance as indicated below: i) ii) Marshlands Consortium Limited 83.5% shares Justin Phiri 6. 6% shares iii) Klein Siampongo 6.6% shares iv) Maybin Silavwe 3.3 shares. e) The total shareholding of the 5 th, 6th and 7th Defendants as at the date of the shareholders agreement was only 16.5% whichfor a company with a share capital of 10,000,000 shares, the minimum share capital for an insurance company translates into 1,650,000 shares which is what Chibamba bought and could buy from the 5 th , 6th and 7th Defendants. J22 j) Three days after the shareholders agreement on 23 February 2018, Phiri, Syampongo and Silavwe passed a special resolution of Ultimate Insurance which all three of them signed whereby they resolved that after increasing the share capital of Ultimate Insurance Company Limited to l 0, 000, 000 shares, the additional new shares of 8,350,000 be issued (not sold) to new shareholders as follows: i) ii) Marshlands Consortium Limited - 6,500, 000 shares. Felicitas Chibam.ba Kabwe - 1,850,000 shares. This meant that the 5'", 6'" and 7'11 Defendants continued to own 1, 650,000 shares in Ultimate Insurance Company Limited. g) The }51 Plaintiff then made a transaction with the 5th , 6th and ?111 Defendants to purchase their 1,650,000 total shareholdings for the sum of Kl,000,000. The acknowledgement of receipt was signed by the S111 , 6'11 and 7'11 Defendants, and it clearly shows that the ZMWJ,000,000=00 being received by the Y1, 6'" and 7rh Defendants was for 1,650,000 shares which is aff the 5'11 , 6'11 and 7th Defendants could sell to the }51 Plaintiff as these are the only shares, they owned. 3 .6 Marshlands, Milambo, Lubemba and Musonda also denied the ex istence of any agreement to pay Chibamba and Katotobwe the sum ofK3 ,500,000, stating that the K400,000 paid was not intended as a payment for shares. J23 3. 7 Marshlands, Milambo, Lubemba and Musonda maintained that the bank signing arrangements were not determined by shareholding but by the management roles of the signatories. They stated that when the company was issued with a Trading License, Chibamba along with Milambo, Lubemba and Musonda assumed management roles as General Manager Finance, General Manager Technical and General Manager Corporate, respectively. They futiher noted that despite Chibamba's ill health, she continued to serve as General Manager Finance up to early 2019. 3.8 Marshlands, Milambo, Lubemba and Musonda also asserted that Mr. John Maponda who served as the Finance and Accounting Consultant at the time, was designated as an alternative to Chibamba due to her health issues. They argued that since Chibamba was no longer an employee of Ultimate Insurance, she could not be involved in the company's day-to-day management. 3.9 Marshlands, Milambo, Lubemba and Musonda fu11her clarified that the termination of the Finance Manager' s contract was appropriately documented. They also stated that the addition to Panel B of the signing mandate was made during a properly constituted Board Meeting, which Chibamba, as a director, refused to attend. The addition was prompted by Chibamba' s ongoing refusal to approve payments, including statutory payments. 3 .10 The Defence fu11her stated that Chibamba participated in the appointment of the company's Board. It was argued that Milambo, Lubemba, and Musonda adhered to company guidelines and did not withdraw any funds J24 improperly. It was also argued that the K400,000 payment was made under Chibamba's oversight as General Manager Finance. 3.11 The claim that they were obligated to sign the shareholders agreement with Chibamba was also contested in the defence, noting that they did not decline attendance at any shareholders meetings. Additionally, they stated that the draft shareholders agreement, which Chibamba wanted them to sign, did not address the issue of wrongly transferred shares which issue is central to the current case. They clarified that the focus of the draft agreement was on dividend sharing, not on matters such as Board Member appointments or consultancy service payments. 3 .12 Marshlands, Milambo, Lubemba, and Musonda also refuted the asse11ion that they had reached any agreement with Chibamba and Katotobwe regarding Marshlands' shareholding in Ultimate Insurance. They contested the claim that Milambo, Lubemba, and Musonda were not shareholders in Ultimate Insurance, argu ing that there are no regulations prohibiting shareholders from assuming management roles in a company. Furthermore, they denied any purchase or agreement to purchase shares from the two Respondents, as alleged by Chibamba and Katotobwe. 3 .1 3 Marshlands, Milambo, Lubemba, and Musonda also denied the claim that the Pensions and Insurance Authority requested security in the form of property. Additionally, they accused Chibamba of mistreating Milambo, Lubemba, and Musonda by initiating private criminal prosecutions on matters similar to those in the current coui1 case. J25 3.14 Marshlands, Milambo, Lubemba, and Musonda also disputed that only Chibamba had called for a shareholders ' meeting to discuss a shareholder' s agreement that she had unilaterally prepared. They denied that Chibamba and Katotobwe purchased Ultimate Insurance, asse11ing that there was no agreement to rescind. They claimed that the action in the lower court had no genuine chance of success. 4.0 DECISION OF THE LOWER COURT 4.1 After consideration of the relevant evidence, Judge Chenda determined in the lower Court's judgment, that Katotobwe financed Chibamba to acquire the entire issued share capital in Ultimate Insurance. This was accomplished through Katotobwe's payment of K 1,500,000 to Phiri, Syampongo, and Silavwe based on the verbal agreement reached by all the Respondents regarding the purchase price of the entire issued share capital of Ultimate Insurance. 4.2 The trial Judge accepted Phiri's testimony, the sole witness for Phiri, Syampongo, and Silavwe, stating that the 1,650,000 shares represented the sole working capital for Ultimate Insurance. Thus, whoever purchased these shares from Phiri, Syampongo, and Silavwe effectively bought the entire company, as the remaining 8,350,000 shares were unissued at the time the paid up issued share capital was sold to Chibamba and Katotobwe. 4.3 The lower cou11 noted that the initial offer to purchase Ultimate Insurance was made to the Appellants by Phiri, Syampongo, and Silavwe. However, they failed to pay the purchase price. Subsequently, Musonda informed Phiri, Syampongo, and Silavwe that a new buyer had been found who J26 turned out to be Katotobwe. This led to a meeting between the said parties at East Park Mall on 21 February 2018. During this meeting, the purchase price for the issued share capital was negotiated and agreed upon at Kl ,500,000. The Court further noted that Katotobwe paid an initial deposit of K300,000 to Phiri, Syampongo, and Silavwe on 22 February 2018, with the final instalment paid on 19 April 2018. 4.4 The trial Judge found that at the material time, Ultimate Insurance had 1,650,000 issued shares, which Chibamba purchased with financing from Katotobwe, plus 8,350,000 unissued shares. Citing the Supreme Court decision in Lake Kariba Boating Services Limited v Kariba North Bank Company Limited 1 the Judge held that 'acquisition of the entire issued share capital of a company was effectively an acquisition of a company and its assets with conferment of a beneficial interest in the acquiring party'. 4.5 On pages J6 l to 162, which correspond to pages 74 to 75 of the Record of Appeal, the trial Judge acknowledged Chibamba and Katotobwe's version of events, suggesting that Milambo, Lubemba and Musonda abused their positions as agents to collude with or mislead Phiri, Syampongo, and Silavwe into facilitating Marshland 's acquisition of shares in Ultimate Insurance. The trial Court also accepted the evidence that it was impossible for anyone to obtain shares in Ultimate Insurance, whether through subscription or otherwise, without the authorization of Phiri, Syampongo, and Silavwe. 4.6 The trial Court, as documented on page J64, which corresponds to page 77 of the Record of Appeal, found that Milambo's testimony lacked J27 credibility. Consequently, the Cou11 was not persuaded by the Appellants ' argument that Marshland' s acquisition of shares was separate from the transaction between Chibamba, Katotobwe, Phiri, Syampongo, and Silavwe. Instead, the trial Court believed Phiri, Syampongo, and Silavwe's assertion that they faci litated Marshlands' acquisition based on representations by Milambo, Lubemba, and Musonda, whom they believed to be agents of Chibamba and Katotobwe. The trial Cou11 concluded that Marshlands acquired its shareholding based on the prior acquisition of Ultimate Insurance by Chibamba and Katotobwe. 4.7 On the legality of Marshlands Conso11ium L imited 's share subscription of 6,500,000 (and Chibamba' s 1,850,000 shares), the tria l Court fo und that there was no shareholders resoluti on authorizing the Directors of Ultimate Insurance Company Limited to accept payment in kind for these shares. This was deemed to be a departure from a shareholder's resolution of 28 February 2018, which stipulated that the shares should be issued for cash consideration. 4. 8 The trial Court cited a Supreme Court case of John Paul Mwila Kasengele & Others v ZANACO and BOZ v Chibote2 to support its decision. In those cases, the apex Court affirmed that a shareholders' decision should take precedence over those of directors in case of a conflict. Consequently, in the present case, the trial Judge concluded that the share subscription in question was null and void ab initio due to the lack of authorization as required under Section 216(1) of the repealed Chapter 388 of the Laws of Zambia. J28 4.9 The trial Court also examined whether the Board of Ultimate Insurance was lawfully constituted and if Milambo, Lubemba and Musonda were rightfully in charge of the company. The Judge determined that this should be evaluated under the Companies Act of 2017, as the events surrounding the purported appointment of the Board occurred after the Act came into effect on 15 June 2018. 4.10 The trial Court further determined that the Board of Ultimate Insurance, as represented to the Pensions and Insurance Authority, was not properly constituted according to Section 85(1) of the Companies Act 2017, rendering it void from the onset. The Judge highlighted that Section 85 grants the authority to appoint directors to the members through an ordinary resolution documented in the minutes of a general meeting. However, the resolution to remove and appoint directors was signed by Phiri, Syampongo, and Silavwe, allegedly as shareholders of Ultimate Insurance, a position they had explicitly relinquished as of 19 April 2018, following the receipt of the final payment for the share purchase from Chibamba and Katotobwe. Moreover, the Judge found that Marshlands had no basis to participate in the appointment of the Board of Directors, given the prior determination that its share subscription was void ab initio. 5.0 THE APPEAL 5.1 Being dissatisfied with the judgment of the High Court Commercial Division rendered on 9 April 2021, Marshlands, Milambo, Lubemba, and Musonda, the Appellants filed a Notice and Memorandum of Appeal on 12 April 2021 advancing eight grounds of appeal as follows: J29 i. The Court below erred in law and fact when it held that the pt Respondent had purchased Ultimate Insurance Company Limited ("Ultimate Insurance'') in its entirety and not merely a percentage of the shareholding contrary to established company law principles and contrary to documentary evidence showing that the pt Appellant had acquired 65% of the shares in Ultimate Insurance Company Limited. ii. The Court below erred in Law and in fact by relying 011 contradictory acknowledgment receipts as proof that the pt Respondent had purchased Ultimate Insurance in its entirety when evidence 011 record showed that the pt Respondent and the 3rd , 4th and 5th Respondents in an agreement signed by themselves acknowledged that the pt Appellant held 65% shareholding in Ultimate Insurance Company Limited. iii. The Court below erred in law and in fact when it found that the transfer of shares, from the 3rd , 4th and 5th Respondent to the pt Appellant had occurred prior to the share subscription agreement contrary to the share purchase agreement between the said parties, the actual date of the transfer of shares and other documentary evidence on the record. 1v. The Court below erred in law and in fact when having held that the pt Appellant had subscribed to the shares in Ultimate Insurance Company Limited, it then held that the pt Appellant did not Lawfully acquire 65% shareholding in Ultimate Insurance Company on account of an unpleaded alleged breach of an internal process by the J30 former shareholders - a holding which conflicts with the Rule in Royal British v Turquand (1856) 6 E & B 32. v. The Court below erred in law and in fact when it held that the J51 Appellant's subscription for 65 % of the shares in Ultimate Insurance was null and void, despite the fact that the Appellants provided adequate and sufficient consideration for the said shares. vi. In the alternative, the Court below erred in law and in fact when it omitted to consider that the actions of the directors to accept an in kind consideration for the share subscription had been ratified by the shareholders of Ultimate Insurance who were also directors at the relevant time. vii. The Court below erred in fact when it found that the shareholders' resolution for the appointment of the board of directors was invalid as the same was executed by the 3n1 to 5th Respondents who were still shareholders in Ultimate Insurance as the transfer of their shares to the l51 Respondent had not yet occurred and consequently, they had not exited the company. viii. The Court below erred in law by placing a large reliance 011 the intention of the Respondents as opposed to the law and evidence that was brought before it. J3 l 6.0 ARGUMENTS OF THE PARTIES 6.1 The parties filed their heads of arguments on 14 July 2021, 20 August 2021 and 7 September 2021, respectively. The arguments will not be replicated herein but will be cited as needed in our determinative section. 7.0 HEARING OF THE APPEAL 7.1 The appeal was heard on 24 August 2023 , with the parties being represented as indicated above. The respective Counsels relied on the arguments and submissions in support of their positions, which have been duly considered but not reproduced here. 8. DECISION OF THE COURT 8.1 We have carefully reviewed the impugned judgment, the record of appeal, and the respective arguments of the parties. Before addressing the grounds of appeal, it is necessary to understand the background that led to the matter being brought before the High Court. 8.2 The dispute revolves around a company, Ultimate Insurance, incorporated in accordance with the Companies Act of Zambia. It originated fo llowing the enactment of Statutory Instrument No. 71 of 2015, The Insurance (Minimum Paid-Up Share Capital) Regulations, 2015. Regulation 3 of this instrument stipulated that ' a re-insurer, insurer or broker shall maintain the minimum paid-up share capital prescribed in the schedule.' J32 8.3 Clause 2 of the schedule prescribed that an insurer in General Insurance must maintain a minimum paid-up share capital equal to or more than ten million Kwacha [Kl 0,000,000]. Regulation 5 required insurance companies to comply with these regulations within two years from the commencement date or any longer period specified by the Authority. Initially gazetted on 2 October 2015, this regulation mandated that insurance companies comply with the minimum share capital requirements and maintain a minimum share capital ofKl0,000,000 by 2 October 20 17. The regulatory authority later extended this deadline to 30 October 2017. 8.4 Although, there was no official printout on the Record of Appeal from the Companies Registry showing the shareholding structure of Ultimate Insurance as of October 2017, it can be inferred from the other documents on record that at the time of the enactment of Statutory Instrument number 71 of 2015, Ultimate Insurance had a paid-up share capital of Kl ,650,000 consisting of 1,650,000 shares of KI each. 8.5 This company structure is also confirmed by a Special Resolution passed on 24 November 2017 and the Notice of Alteration of Capital filed on the same date, both submitted for registration with the Companies Registration Agency on 26 December 2017 (refer to pages 1151 to 1153 of volume Ill of the Record of Appeal). 8.6 As per the Special Resolution mentioned, signed by Kawesha as Board Chairman, Silavwe as Board Secretary and Syampongo as board member, the members of Ultimate Insurance agreed to increase Ultimate Insurance' s share capital from Kl ,650,000 to Kl0,000,000. This consisted of I 0,000,000 authorized ordinary shares, of which 1,650,000 were fully paid -,-, .).) J up, issued ordinary shares and 8,350,000 were unissued ordinary shares, each was valued at Kl. 8.7 Following the resolution to increase the share capital, Ultimate Insurance effectively had two sets of shares: the fu lly paid-up issued share capital consisting of 1,650,000 shares, and the 8,350,000 unallotted shares. The distinction between the category of shares will be discussed in the later part of this judgment. 8.8 Endeavoring to implement this Regulation and following the increase of share capital, Ultimate Insurance sought investors to comply with the requirements thereunder. The company entered into comm1ss1on agreements with agents to find buyers for the additional 8,350,000 shares. Evidence of these agreements can be found at page 1147 to 1150 of volume JJJ of the Record of Appeal, which includes agreements with Mr. Manyando Situmba on 3 October 20 17 and with Tusini Trading Limited on 15 December 2017. 8.9 During this period of transition and, as Ultimate Insurance was seeking investors to recapitalize and take up the 8,350,000 shares to comply with the new regulations, Phiri, Syampongo, and Silavwe who collectively owned the 1,650,000 paid-up shares, also sought to sell their shares in Ultimate Insurance. 8. 10 Meanwhile, Milambo, Lubemba, and Musonda began discussions with Chibamba and Katotobwe to invest in Ultimate Insurance. Following the discussions, Chibamba and Katotobwe engaged with Phiri, Syampongo, and Silavwe, over their 1,650,000 paid up issued shares in Ultimate J34 Insurance Company and they concluded negotiations with Phiri, Syampongo, and Silavwe for the purchase of the only paid-up share capital of 1,650,000 shares in Ultimate Insurance. However, unbeknownst to them, as of 24 November 2017, U ltimate insurance had increased its share capital to K 10,000,000 made up of 10,000,000 shares valued at K 1 each. This was an increase of 8,350,000 shares as earlier stated. 8.11 An agreement between Phiri, Syampongo, and Silavwe (the sellers) and Chibamba and Katotobwe (the buyers) was finalized in the presence of Lubemba during a meeting held about 2 1 February 20 18, in which the sellers agreed to sell their 1,650,000 shares to the buyers for a total consideration of K l ,500,000. An initial sum of K300,000 was paid by Katotobwe to the sellers on 22 February 2018 (see acknowledgment of receipt of payment at page 1297 of volume III of the Record of Appeal). 8. 12 The evidence reveal s that soon after Phiri, Syampongo and Silavwe received the initia l payment for their shares on 22 February 20 18, Ultimate Insurance, w ith members; Phiri, Syampongo and Silavwe, passed another Special Resolution on 26 February 2018 (see pages 233 and 234 of volume I of the Record of Appeal). This resolution acknowledged the increase in share capital as per the resolution of 24 November 20 17 and allotted the add it ional 8,350,000 shares to Marshlands and Chibamba. The relevant pa11 of the resolution read as follows: 'That th e share capital of Ultimate Insurance Co. Ltd was increased from 1,650,000 ordinwy shares to 10,000, 000 fully paid shares with eff ective 26th December 2017. 1. That th e additional 8,350,000 shares be issued to NEW shareholders as follows: J35 o Marshlands Consortium Limited - 6,500,000.00 fully paid Additional Ordinmy sltares of KJ.00 eaclt payable in cash and o Felicitus Chibamba Kabwe - 1,850,000 fully paid Additional Ordinary shares of KJ.00 each payable in cash. 2. Tit at in line with Statuto,y Instrument (SI) 71 of 2015, witlt regard to increasing tlte minimum capital to KIO million of Insurance Companies by 30th October 2017, the Directors have brought 011 board new Partners/Investors to invest into tlte business from outside the company with tlte sole purpose off unding tlte increase of share capita/from the current Kl.65million to KJ0million. Tltis will make us conduct insurance business together under a new Board of Directors. ' 8.13 The Special Resolution of 26 February 2018 acknowledged the earlier increase in share capital and was intended to provide for the allotment of the additional shares to Marshlands and Chibamba. This resolution was followed by a Return of Allotment of Shares for the new shares (refer to page 587 of volume II of the Record of Appeal). 8.14 The documentation shows the members resolution to allot 6,500,000 ordinary shares to Marshlands and 1,850,000 shares to Chibamba. However, this allocation appears to contradict the share allocation embodied in the Share Subscription Agreement between Marshlands Consortium and Ultimate Insurance of 23 February 2018, where all the 8,350,000 additional shares were purportedly agreed to be allotted to Marshlands Consortium for a consideration of K 1 per share. This also conflicts with the earlier transaction with Katotobwe, in which he and Chibamba had begun paying for the 1,650,000 issued shares, consisting of only the issued paid-up share capital at the time. J36 8.15 Subsequently, Milambo, Lubemba, and Musonda allegedly entered into separate agreements regarding the shares of Ultimate Insurance. The agreements appear to be signed by Marshlands, managed by Milambo, Lubemba, and Musonda and Ultimate Insurance. The fi rst agreement, shown at pages 1311 to 13 2 3 of volume 111 of the Record of Appeal, themed as the Sale and Purchase Agreement (SPA) was made on 23 February 20 18 between Phiri, Syampongo, and Silavwe ( collectively referred to as 'the sellers' ) of the one patt, Marshlands (referred to as ' the purchaser') of the second part, and Ultimate Insurance (referred to as 'the company') of the third part. By this agreement, the sellers agreed and committed to sell 16.5% of the shares they held in the company to the purchaser for a sum of Kl ,300,000. 8.16 Among the key terms of clause 2 of this agreement between the sellers and the purchaser were that: 'The Sellers are the beneficial owners of 16.5% of the total issued share capital in the company as at the completion date and that the Purchase Price would be paid as follows: K900,000 011 completion date; and K400,000 within four months of the completion date.' 8.17 Phiri, Syampongo, and Silavwe, who owned 1,650,000 shares entered into a written agreement entitled Sale and Purchase Agreement, shown at page 1311 of Volume Ill Record of Appeal to sell their shares for which they had already orally contracted to sell o Chibamba and had in fact received and acknowledged a partial payment the previous day. J37 ·- " 8.18 A second agreement titled ' Share Subscription Agreement' is on record as having been executed between Marshlands (referred to as ' the Subscriber') and Ultimate Insurance (refe1Ted to as ' the Company') on 23 February 2018 (refer to pages 1301 to 1310 of volume III of the Record of Appeal). It purports to issue the unallotted 8,350,000 additional shares resulting fro m the Special Resolution that raised the share capital to KIO million to Marshlands. 8.1 9 Among some salient terms of this agreement are as produced below: 'The Company has an authorised share capital of KJ0,000,000 divided into 10,000,000 ordina1J1 shares of Kl each. The current shareholding of the Company is as f ollows: i. ii. iii. Klein Sy ampongo: 660,000 shares Justin Phiri: 660,000 shares Maybin Si!avwe: 330,000 s hares The Company wishes to raise capital by the issuance of 8,350, 000 unissued ordinary shares in the Company to the Subscriber (the 'Subscription Shares'). The S ubscriber is desirous of subscribing f or the S ubscription Shares at the Subscription Price, which Subscription Price shall be used by the Company to finan ce its business. "Subscription Price" m eans the amount of Kl in respect of each S ubscription Share, f or a total price of ZMWB,350,000 to be paid.for in cash or in kind. The Subscriber shall discharge its obligations to pay the Subscription Price to the Company within a reasonable time f ollowing the issue of the general insurance licence to the Company by the Pensions and Insurance A uthority. For avoidance of doubt, the Subscriber will not pay the Subscription Price !f the said licence is not issued. ' J38 8.20 This agreement purports to allot the unissued 8,350,000 ordinary shares of Ultimate Insurance, to Marshlands, which were authorised by Special Resolution of 24 November 2017. The price consideration for each subscription share was set at Kl , totalling K8,350,000 for the 8,350,000 ordinary shares. The initial Special Resolution of 24 November 2017 which increased the share capital of Ultimate Insurance as shown at page 1151 of volume Ill of the Record of Appeal gave an in kind or cash consideration options for share subscription to the additional shares and was an exclusive offer to only the original members of Ultimate Insurance who included Phiri, Syampongo and Silavwe. The second Special Resolution of26 February 2018 acknowledged the earlier resolution which increased share capital, but additionally opened the offer for share subscription to non-members of Ultimate Insurance only for cash consideration. The said Special Resolution as shown at page 584 of volume fl of the Record of Appeal under Resolution 2 reads as fo llows: "2. That the additional 8,350,000 shares be issued to NEW shareholders as follows: o Marshlands Consortium Limited - 6,500,000.00 fully paid additional ordinary shares of Kl. 00 each payable in cash and o Felicitas Chibamba Kabwe - 1,850,000.00 fully paid additional ordinary shares of KJ.00 each payable in cash." 8.21 The third agreement, entitled ' Shareholders Agreement' of 23 February 2018 (found at pages 1324 to 1347 of volume Ill of the Record of Appeal) listed Marshlands, Phiri, Syampongo and Silavwe as shareholders on the one part, and Ultimate Insurance on the other part. Although Silavwe was listed as a shareholder, he did not sign the agreement in his individual J39 capacity, but signed together with Phiri and Syampongo as officers of Ultimate Insurance. This can be verified from various documents in the record bearing their respective signatures, such as the acknowledgment receipt on page 1297 of volume Ill of the Record of Appeal. Meanwhile, clause C of the agreement, found on page 1326 of the Record Appeal, contained significant provisions, including that: 'The Shareholders own all th e shares in th e capital of th e Company and now wish to define the terms 011 which the Company will be manged and define th eir respective rights and obligations as slwreholders of the Company and the Company have agreed to enter into this Agreement for the purpose of regulating th eir relationship with each other and certain aspects of the <~[fairs of and th eir dealings with th e Company ... 2.2 Appointment of Directors A shareholder shall from time to have the exclusive right to appoint, remove or replace one (I) Director from the Board.for each whole twenty per cent (20%) of tlte tit en issues sit ares in nominal value wlticlt it tlten owns in any event not ex ceeding the max imum number of Directors as determined in clause 2.1.' 8.22 While Katotobwe and Chibamba were moving forward with their commitment to complete the payi:nent for the 1,650,000 shares of Ultimate Insurance, the other parties, including the company itself, had allegedly entered into the agreements regarding the same shares. 8.23 Chibamba, in fact, made an additional payment of K200,000 on 9 March 2018, with financing from Katotobwe, towards fulfilling the share purchase agreement (see acknowledgment of receipt at page 1377 of volume Ill of the Record of Appeal). J40 -· 8.24 Katotobwe and Chibamba made the final payment of ZMKl ,000,000 to Phiri, Syampango and S ilavwe on 19 April 2018, bringing the total sum paid to the sellers to K 1,500,000 for the 1,650,000 ordinary shares owned by them. The acknowledgment receipt for this payment is found at page 653 of volume JI of the Record of Appeal. ~ACKNOWLEDGMENT OF RECEIPT OF ZMKl,000,000 CASH, BEING FULL PAYMENT FOR SHARE PURCHASE IN ULTIMATE INSURANCE COMPANY LIMITED DATED J9TH APRIL 2018 This is to acknowledge receipt of ZMKl,000,000 from Felicitas Kabwe Cltibamba of NRC 110. 643840/11/1, being payment to Klein Syampongo, Justin Pltiri and Maybin Silavwe as full and final payment for purcltase of 1,650,000 sltares in ULTIMATE INSURANCE COMPANY LIMITED DECLARATION We declare tltat we ltave no furtlter claim from Felicitas Kabwe Cltibamba and ltence-witlt relinquish our shareholdings in Ultimate Insurance Company Ltd and vice versa.' 8.25 A computer printout dated 1 March 2018 from the Patents and Companies Registration Agency Records (exhibited at pages 879 to 881 of volume JI Record of Appeal) indicates Chibamba as registered holder of 1,850,000 ordinary shares, while Marshlands Consortium Limited as the holder of 6,500,000 ordinary shares. Meanwhile, Phiri, Syampango, and Silavwe are still reflected as holders of 660,000, 660,050 and 329,950 shares respectively, totaling 1,650,000 ordinary shares collectively. J4 I 8.26 A subsequent computer printout from the Companies Registry dated 6 May 2019 (pages 654 to 656 of the Record of Appeal) indicates that, as at that date, Ultimate Insurance Company Limited had two shareholders: Chibamba holding 3,500,000 ordinary shares, and Marshlands Consortium Limited holding 6,500,000 ordinary shares. This update occurred nearly a year after Katotobwe and Chibamba completed their final payment for the 1,650,000 ordinary shares. 8.27 Additionally, there is a Deed of Transfer dated 27 February 2018 ( exh ibited at pages 1364 to 1366 of volume 111 of the Record of Appeal) which purports to transfer property, Subdivision A of Lot No. 20081 Chongwe, from Perform Agric Limited to two parties: Marshlands Consortium Limited and Ultimate Insurance Company Limited. However, we have not seen any evidence show ing if and when thi s transaction was registered at Ministry of Lands, and ultimately which transferee is the registered holder of the property. 8.28 Further, page 1375 of volume II of the Record of Appeal includes a lodgment schedule dated 2 March 2018 indicates lodgment for a Deed of Transfer dated 27 February 2018, referencing the transfer of Lot No. 204, Chanyanya between Milambo, Marshlands Consortium Limited and Ultimate Insurance Company Limited. However, there is no further ev idence regarding the transferors and transferees of this transaction and the consideration or valuation of the property in question. 8.29 We now turn to address the first and second grounds of appeal together; the Appellants contend in ground 1 that the lower court en-ed in law and fact by determining that the 1s t Respondent purchased the entirety of J42 Ultimate Insurance and not just a percentage of the shareholding contrary to established company law principles and the documentary evidence demonstrating that the 1st Appellant acquired 65% of the shares in Ultimate Insurance. In ground 2, it has been argued that the lower court e1Ted in law and fact by relying on contradictory acknowledgment receipts as proof that Chibamba had purchased the company, Ultimate Insurance, in its entirety, when evidence on record showed that Chibamba and Phiri, Syampongo, and Silavwe, in an agreement signed by themselves acknowledged that Marshlands held 65% shareholding in Ultimate Insurance Company Limited. 8.30 Another aspect of these two grounds is the contention that, despite the trial Court's finding on page J53 of its judgment that there was no signed agreement explaining the purpose of the K 1,500,000 payment, the Court still concluded that the payment made, was for acquiring the entire issued shareholding in Ultimate Insurance Company. 8.31 Counsel for the Appellants additionally argued that the trial Court disregarded all the written documentation demonstrating that Chibamba and Katotobwe had no objection to or complaint against Marshlands holding 65% of the shareholding in the insurance company. They also highlight that the 1st Respondent acknowledged the I st Appellant's interest in the company. 8.32 Moreover, Counsel contended that the Court relied on extrinsic evidence, which is typically inadmissible, as explained by John Hatchard and Muna Ndulo (2013)3 in "Law of Evidence in Zambia: Cases and Materials" page 319, where they state: J43 'extrinsic evidence is generally not admissible to (a) to p rove th e contents of a document (b) to add, vary or contradict the terms of a document and (c) to prove the meaning intended by the author of th e document ... extrinsic evidence m eans any evidence outside th e document itself and includes oth er documentwy evidence as well as oral evidence. ' 8.33 In response to this ground, on behalf of the 1st and 2nd Respondents, Counsel argued that the Appellants selectively relied on excerpts of the trial Court's judgment that suited their convenience, which go against the guidance provided by the Supreme Court in the case of Zambia Revenue Authority v Post Newspapers Limited.-1 8.34 The 1st and 2nd Respondents argued that contrary to the na1Tative being advanced by the Appellants, the trial Judge actually an-ived at a correct conclusion by considering both documentary evidence and testimonies of witnesses before it. It was submitted that while there was overwhelming evidence including proof of payment of property transfer tax for the shares acquired by the I st and 2nd Respondents, the Appellant's own witness could not prove if there was any valid consideration for the shares acquired by the 1st Appellant. 8.35 It was submitted that the Appellants were not providing a full picture of what actually transpired in the lower Court. They argued that the trial Judge was very categorical in his reliance on the Supreme Court case of Lake Kariba Boating Services Limited v Kariba North Bank Company Limited, which decided that acquisition of the entire issued shares translates to acqu isition of a company and its assets. It was advanced that J44 the Appellants have not countered this position of the law, yet they blame the lower Court for deciding against them in the manner it did. 8.36 Counsel for the 3rd to 5th Respondents argued that the 1st Respondent, acquired the issued share capital in Ultimate Insurance, she effectively acquired the entire company and its assets. This position is in accordance with the Supreme Court's decision in Lake Kariba Boating Services Limited v Kariba North Bank Co. Limited and the case of Macaura v Northern Assurance Co. Limited. 5 They also insisted that the trial judge was on firm ground in making his decision which was based on findings of fact and evidence presented before the court both orally and documentary. 8.37 Given that the dispute herein relates to. the ownership of a company, it is important to understand key company law terminologies relating to the ownership and financing of the company. 8.38 The learned authors of Halsbury's Laws of England 4th Edition, volume 7(1) at paragraph 169 offer pertinent definitions on this matter and articulate that: 'The word 'capital' sometimes means the 'nominal' capital of the company, namely that which is stated in the memorandum of association of any company limited by shares or by guarantee with a share capital, or in the articles of an unlimited company which has a capital divided into shares, and any increase oft/wt nominal capital which has been made in the manner required by statute. This 'nominal' capital does not at the onset, or necessarily at any time, represent money in the possession or ownership of the J45 company, or assets of any kind, but the amount of nominal capital at any given time limits the power of the company to issue shares.' 8.39 The authors elaborate further in paragraph 169 the concepts of issued and unissued capital of a company. They state that: 'The nominal capital stated in the memorandum or articles, as the case may be, or in the resolution of the company for increase, is at first, and may for the most part always be, 'unpaid' capital, but some of it, namely the share subscribed for by the signatories to the memorandum of association, is at once 'issued' capital. Shares registered in any person's name, or in respect of which a share certificate has been issued, are part of the 'issued' capital. Shares, too, which are properly allotted are in the same position. The residue of the 'nominal' capital, or at any rate such of it as has not been agreed to be taken by any person, is 'unissued' capital.' 8.40 The foregoing elucidates that the Share Capital of a company s ignifies the total amount of capital obtained by a company through the issuance of shares. Share Capital can be categorized into two principal types : authorized share capital and issued share capital. Authorized share capital refers to the maximum amount of share capital that a company is permitted to issue as stipulated in its a11icles of association, representing the total number of shares a company can legally issue. Issued share capital, on the other hand, represents the portion of the authorized share capital that has been issued to shareholders, encompassing the shares that are currently in circulation and held by investors. The capital retained by a company after .• 1ssumg its authorized share capital 1s referred to as ' un-issued share capital. ' 8.41 The learned authors of the Halsbury's Laws of England, 4th Edition, paragraph 425 of draws a distinction between issued shares and allotted (unissued) shares in the fo llowing terms: "As regards other shares, when a person who has agreed to take shares is entered on the register as a shareholder, the shares have been issued to him, although he has not obtained the share certificate. However, a resolution to allot shares is not necessarily the issue of them, and the term seems to mean allotment followed by registration or possibly some other act, distinct from allotment, whereby the title of the allottee becomes complete. 8.42 Issued shares therefore are the shares created by a company and then allotted or sold to a party. The issued shares are a po11ion of the authorized share capital of the company that are owned by the members. In this case, the 1,650,000 shares were the issued shares, whereas the unissued shares are those shares that have been authorized but not yet all otted to an investor. In this case, the 8,350,000 shares were unissued. 8.43 To address the contentions presented in the first two grounds of appeal, we will undertake an examination of three key questions that pertain to the issues raised. These inquiries are as fo llows: l . Did the trial Court determine that the 151 Respondent purchased the entire Ultimate Insurance as alleged by the Appellants? J47 ii. Did the evidence before the lower Court reveal that the ]st Appellant properly acquired 65 % of the shares in Ultimate Insurance? And 111. Did the ]st , Jrd, 4th and S111 Respondents validly and legally acknowledged the ]51 Appellant as 65% shareholder in Ultimate Insurance. 8.44 In addressing the first issue under the first ground, concerning the purchase of Ultimate Insurance in its entirety, a review of the record indicates that the trial Judge began his consideration of the evidence, by acknowledging the absence of a signed written agreement between the pa11ies, to clarify the purpose of the K 1,500,000 payment made by the pt and 2 nd Respondents to the 3rd to 5th Respondents. 8.45 The Judge acknowledged that this necessitated a meticulous examination of the evidence presented. Pages 153 to 159 of the judgment, as reflected on pages 66 to 72 of the Record of Appeal, detail the trial Judge' s analysis of the evidence. This analysis included a thorough review of three acknowledgment receipts dated 22 February , 9 March, and 19 Apri l 2018, (as documented on pages 1297, 1377 and 1401 of volume Ill of the Record of Appeal) respectively representing payments from the 2nd respondent to the sellers. 8.46 The Judge also closely reviewed the witness testimonies and ultimately concluded that the evidence before him elucidated the bas is for the funds paid by the 2 nd respondent to the 3rd to 5th Respondents. In its review of the evidence as shown at pages J55 of its judgment, and at page 68 of volume I of the Record of Appeal, the trial Court conceded that the first and second J48 acknowledgment receipts suggest that the payment was made for the purchase of the entire U ltimate Insurance. However, the third acknow ledgment receipt could be construed to mean that the payment was for the purchase of only 1,650,000 shares in Ultimate Insurance. 8.4 7 In his judgment, shown on pages 71 to 72 of volume I of the record of appeal, the trial Judge having recourse to the holding of the Supreme Court in the Lake Kariba Boating Services Limited case referred to above, concluded that: '4.12 Given the mosaic of evidence it is manifestly clear that the payment of Kl,500,000 made by the second Plaintiff [Katotobwej to the fifth to seventh Defendants [Phiri, Syampongo and Silavwej was for the purchase of the entire issued share capital of UIC [Ultimate Insurance/, based 011 the verbal agreement of February 2018 [21 Februa,y 2018]. 4.13 It is also evident from the said mosaic that at the time of agreement between the second Plaintiff [Katotobwej and the said Defendants [Phiri, Syampongo and Silavwej: (i) the shareholding of VIC comprised 1,650,000 issued shares and 8,350,000 unissued shares; and (ii) the first Defendant [Marshlands Consortium/ had not acquired any interest in UIC. 4.14 I therefore find as a fact that the payment of Kl,500,000 made by the second Plaintiff to the fifth to seventh Defendants was for acquisition of the entire issued shareholding of UIC.' J49 8.48 Acknowledging that, Chibamba and Katotobwe acquired 1,650,000 issued shares of Ultimate Insurance Company Limited as of 19 April 2018, with payment commencing on 22 February 2018, it is not disputed that these shares did not constitute the entirety of the share capital of the company. By a resolution dated 24 November 20 17, the members of Ultimate Insurance resolved to increase the share capital to Kl 0 million, consisting of 10 million ordinary shares of K l each. 8.49 It is therefore evident from the foregoing that, regarding the first issue under this ground, the Appellant's argument is unfounded. The trial Court determined that the 1st Respondent acquired all the issued shares of Ultimate Insurance. However, the Cou11 did not find that the acquisition extended to the entire ownership of Ultimate Insurance, rather it specifically related to the complete issued share capital of the company. 8.50 The second issue under the first ground relates to whether the evidence revealed that the 1st Appellant properly acquired the 6,500,000 shares. Following the implementation of the new Regulations, Ultimate Insurance passed a resolution in November 2017 to increase its number of ordinary shares from 1,650,000, held by the 3rd to 5th Respondents, to 10,000,000 ordinary shares, giving a total of 8,350,000 shares which remained unissued. 8.51 This category of shares is under scrutiny to determine whether, following their creation, they were properly allotted to their intended owners and whether they fu lfilled all the conditions for valid ownership of these shares. J50 8.52 We have reviewed the Record of Appeal. The journey of the 6,500,000 shares begun with the Special Resolution of 26 February 2018, see page 584 of volume II of the record of appeal, which allotted the 8,350,000 shares: 1,850,000 to the 1 si respondent and 6,500,00 shares to the 1 si Appellant. This is also outlined in paragraph 8.20 above. Despite this resolution only having been made on 26 February 2018, the I s i Appellant purported to have acquired 8,350,000 shares in Ultimate Insurance by the Share Subscription Agreement on 23 February 2018. 8.53 To evaluate Marsh land's standing in Ultimate Insurance concerning Chibamba' s interests and to establish a definitive position on thi s matter, it is imperative to examine the terms of the Share Subscription Agreement between Marshlands and Ultimate Insurance, dated 23 February 2018 . This agreement was executed one day after Phiri, Syampongo, and Silavwe commenced receiving payment for their shares. 8.54 Clause 4 of the agreement contained the following condition: 'The Subscriber shall discharge its obligations to pay the Subscription Price to the Company within a reasonable time f ollowing the issue of the general insurance licence to the Company by the Pensions and Insurance Authority. For avoidance of doubt, the Subscriber will not pay the Subscription Price if the said licence is not issued. ' 8.55 It is evident from the above that Milambo, Lubemba, and Musonda intended to leverage the financing from Katotobwe and Chibamba to operationalize Ultimate Insurance. They p lanned to utilize the resources from Ultimate Insurance, facilitated through their proxy, Marshlands, to finance the acquisition of the 6,500,000 shares to which they had subscribed, as per the Special Resolution of 26 February 2018. However, J5 l Marshlands had agreed with Ultimate Insurance to subscribe to 8,350,000 shares by the Share Subscription Agreement dated 23 February 2018. 8.56 Furthermore, as of 30 January 20 18, Ultimate Insurance did not possess an operating licence to conduct insurance business. This fact is corroborated by a letter from the Pensions and Insurance Authority,found at page 589, volume II of Record of Appeal, which states in pait: 'We regret to inform you that your application for the 2018 general insurance licence did not meet the licensing renewal requirements. Your company's application was thus unsuccessful on account of failure to meet the revised minimum capital requirements. " 8.57 From the forego ing, it is apparent, that the patties understood that Marshlands would not effect any payment until Ultimate Insurance became fully operational as an insurance company. To this end, Milambo, Lubemba, Musonda, Phiri, Syampongo, and Silawve heavily relied on the financing from Katotobwe and Chibamba facilitated through their acquisition of the 1,650,000 paid-up shares, initially held by Phiri, Syampongo, and Silavwe which were subsequently acquired by Chibamba through financing provided by Katotobwe. 8.58 In addition to the above, we observe the trial Judge' s reliance on the provisions of Section 216 of the repealed Companies Act, which remains applicable in this context, paiticularly Subsections (1) and (5) thereof, which impose limitations on the disposal of company assets and the issuance of new and unissued shares. Subsection (1) will be addressed in this part and Subsection (5) will be addressed under grounds 4 and 5 below. Section 216(1)(b) provides that: "The directors of a company shall not, J52 without the approval in accordance with this section of an ordinary resolution of the company - (a) sell, Lease or otherwise dispose of the whole, or substantially the whole, of the undertaking or of the assets of the company; (b) (c) issue any new or unissued shares in the company; or create or grant any rights or options entitling the holders thereof to acquire shares of any class in the company." 8.59 The foregoing authority is clear and unambiguous. The Directors of a company cannot issue shares in a company without the approval of an ordinary resolution of the company. Therefore, in the present case, we are of the view that the Directors of Ultimate Insurance lacked the authority to iss ue shares amounting to 8,350,000 as of 23 February 2018 as no prior resolutio n of the members authorizing such an allotment had been made in accordance with Section 216(1) of the repealed Companies Act. The resolution referred to is dated 26 February 2018. The implications of non compliance with Section 216(1) in the context envisioned under Section 216(5) of the said Act will be addressed in more detail when we consider ground 4 and 5 below. 8.60 The final issue for consideration under the first two grounds of appeal pertains to the Appellants' contention that the 1st Respondent, as well as the 3rd , 4th and 5th Respondents had themselves signed and acknowledged that the I st Appellant had acquired 65% shareholding in Ultimate Insurance. We examined the subject agreement upon which the Appellant relies fo r this argument. The document dated 5 June 2018, is found at page J53 889 to 900 of volume If of the Record of Appeal. The 'Parties clause ' of this agreement, titled the 'Sale and Purchase Agreement ' lists only the 1st , 3rd , 4th and 5th Respondent together with Ultimate Insurance as pai1ies. This clause also categorizes the Yd, 4th and 5th Respondent as the "Sellers" of the collective of 1,650,000 shares to the 1st Respondent, who is classified as the "Purchaser ". Ultimate Insurance is classified as the "Company". 8.61 In the said agreement, there is a mere acknowledgment in the recitals that the 1st Appellant holds 6,500,000 shares, just as the same recitals acknowledge that the 1st Respondent holds an additional 1,850,000 shares. However, the substantive shares subject to that agreement are the 1,650,000 shares constituting the issued share capital, which we have already addressed in the preceding paragraphs. 8.62 Furthermore, the 1st Appellant is not a party to the said agreement to have the authority to enforce it. In the case of Cavmont Merchant Bank Limited V Amaka Agricultural Development Company Limited, the Supreme Court refused to accept the argument that the Appellant was an agent of the Principal, Ministry of Agriculture Food and Fisheries, by vi11ue only of having been mentioned in the recitals of the Storage Agreement under interpretation therein. Similarly, we do not find anything compelling in the Appellant's argument that the 1st , Yd, 4th and 5th Respondents validly and legally acknowledged the 1st Appellant as 65% shareholder in Ultimate Insurance. Having stated this, we must mention that we will also address in more detail the status and fate of the 8,500,000 shares (6,500,000 of which were purportedly allotted to the !51 Appellant wh ile 1,850,000 were purportedly allotted to the 1st Respondent) when addressing grounds 4 and 5 below. J54 8.63 Hav ing determined as we have above, we find that there is no merit in the fi rst and second grounds of appeal. Consequently, they are dismissed accordingly. 8.64 We tum our attention to the third ground of appeal, which contends that the lower Court erred in law and fact by concluding that the transfer of shares from the 3rd , 4th and 5th Respondents to the 1st Appellant preceded the share subscription agreement contrary to the share purchase agreement between the parties, the actual date of the share transfer, and other documentary evidence on the record. 8.65 In the heads of argument dated 14 July 2021 , the Appellants argued at page 15 in relation to this third ground of appeal, that the lower Court erred at 165 paragraph 4.36 of the judgment when it found that, 'I therefore find as a fact that the first defendant acquired is shareholding on the backbone of the prior acquisition of UJC by the first plaintiff (financed by the second plaintiff). ' Counsel for the appel lants argued that the trial Court misapprehended the facts and as an objective bystander observing the evidence before it, should have concluded that the transfer cou ld not have been before the execution of the share subscription agreement. Our attention was drawn to the cases of Wilson Masauso Zulu v Avondale Housing Project Limited and Konkola Copper Mines Pie V Jacobus Keune on the circumstances when an appellate Cou11 can reverse fin dings of fact. 8.66 We have exam ined this ground of appeal and the arguments advanced by the Appellant under it. In the preceding paragraphs, we have established that the transfer of the 1,650,000 shares from Phiri, Syampongo, and J55 Silavwe to Chibamba, began with the initial payment on 22 February 2018, was finalized only after 19 April 2018 upon full payment of the share purchase price. This payment transaction followed an agreement made on 21 February 2018 between Katotobwe, serving as Chibamba' s financier, and Phiri, Syampongo, and Silavwe, the share sellers w ith facilitation by Lubemba, representing Marshlands Consortium, as elaborated above. 8.67 We have previously detailed the circumstances surrounding the Share Subscription Agreement, which occurred following Katotobwe's initial payment for the purchase of the issued share capital in Ultimate Insurance. As explained above, the Share Subscription Agreement specified that Marshlands would only pay for the subscribed shares once Ultimate Insurance had achieved full regulatory compliance and operational status. Based on the facts of this case, the insurance company expected to begin operations w ith funding from Katotobwe, who had initiated.the acquisition of the issued share capital by making an initial payment to Phiri, Syampongo and Silavwe on 22 February 2018. 8.68 Additionally, Marshlands through its representatives, was cognizant of the stake Katotobwe was acqumng in U ltimate Insurance Company. Consequently, the Appellants are estopped from asserting a superior interest in Ultimate Insurance Company. Therefore, the trial Judge' s recognition of Katotobwe and Chibamba' s prior interest in U ltimate Insurance Company concerning the Share Subscription Agreement, which occurred subsequently cannot be faulted. J56 8.69 Moreover, as previously noted the Share Subscription Agreement under consideration, was executed in contravention of Section 216(1) of the repealed Companies Act and thus holds no legal validity. Ultimate Insurance did not have a reso lution authorizing the execution of such an agreement regarding its shares of 23 February 2018 . Consequently, the third ground of appeal lacks merit for the aforementioned reasons. 8.70 We turn to address ground 4 and 5 together. The two grounds have been addressed together for obvious reasons. Both grounds attempt to justify the propriety of the 1st Appellant's purported acquisition of 65% shareholding in Ultimate Insurance. In the fourth ground of appeal, the Appellants argue that the lower court en-ed in finding that the 1st Appellant had subscribed to the shares in Ultimate Insurance, but then held that the 1st Appellant did not lawfully acquire a 65% shareholding in Ultimate Insurance due to an unpleaded alleged breach of an internal process by the former shareholders. They argue that this holding conflicts with the Rule in Royal British v Turquand (1856) 6 E & B 32. The Appellants in the fifth ground of appeal contend that the lower court erred in declaring the 1st Appellant ' s subscription for 65% of the shares in Ultimate Insurance null and void, despite the Appellants providing adequate and sufficient consideration for these shares. 8.71 The pnmary contention of the Appellants, concerns the trial Court's deci sion regarding the alleged allotment of 65% shareholding to Marshlands. The trial Judge' s holding, found on pages 171 and 172 (Page 84 and 85 of the Record of Appeal) respectively is as follows: J57 "4.47 Quite clearly the directors of VIC had no choice over the matter but to accept only cash as consideration for the issuance of the new shares to the First Defendant (and First Plaintiff). " 8.72 The judgment goes further to state: "4.52 The net result is that the subscription of shares in the manner actually done by the First Defendant (and First Plaintiff) is null and void ab initio for lack of authorisation required under Section 216(1) of Chapter 388, which was the governing law at the time. " 8. 73 In ground 4 of appeal in particular, the Appellants are seeking to rely on the provisions of Section 216(5) of the repealed Companies Act (which was applicable to the transaction in issue) which states: "The validity of a transfer or disposition of property to a p erson dealing with the company in good faith shall not be affected by a failure to comply with this section." 8.74 The Appellants have also invoked the rule established in Royal British v Turquand which posits that third parties dealing with a company are not obligated to investigate the regularity of its internal management but may assume that its formal requirements had been satisfied. They asse11 that Marshlands prudently acquired the 65% shareholding, a contention we have refuted in our analysis of the grounds of appeal above. Our assessment is that the Appellant's conduct and the utilization of Marsh lands in th is J58 transaction are characterized by dishonesty and bad faith. Accordingly, we affirm the trial Judge's decision on this matter. 8. 75 We have also painstakingly searched the record of appeal before us, we have found no evidence of cash consideration provided by Marshlands for these shares, contrary to the requirements under Clause 2 of Statutory Instrument No. 71 of 2015, wh ich stipulates that the minimum share capital must consist of paid-up shares. Additionally, Clause 4 of the Share Subscription Agreement stipulates that consideration w ill only be paid for w ithin a reasonable time, on condition that the insurance Company had been issued a licence by the regulator. This position is further suppo1ted by the reso lution of 26 February 2018, which required the shares to be paid for in cash by the subscribers, including Marshlands. However, there is no evidence on record showing that Marshlands provided the required cash consideration for the subscribed shares of 6,500,000 as per the resolution of 26 February 2018, nor for the 8,350,000 shares as per the Share Subscription Agreement of23 February 2018 (seepages 1301 to 1310 of volume Ill of the Record of Appeal) wh ich would have completed its title to the allotted shares. 8.76 The learned authors of the Halsbury's Laws of England, 4 th Edition, paragraphs 425 state as follows: 'As regards other shares, when a person who has agreed to take shares is entered on the register as a shareholder, the shares have been issued to him, although he has not obtained the share certificate. However, a resolution to allot shares is not necessarily the issue of them, and the term seems to mean allotment followed J59 by registration or possibly some other act, distinct from allotment, whereby the title of the allottee becom es complete'. 8. 77 The evidence on record includes a letter from the regulator, Pensions and Insurance Authority (PIA) dated 30 January 2018, in which the regulator informed Ultimate Insurance that its application for the 20 18 general insurance licence was unsuccessful, due to fai lure to meet the revised minimum cap ita l requirements. This letter is located at page 589 of volume II of the Record of Appeal. There is no evidence on record to suggest that the insurance company has since met the minimum capital requirements and resumed its insurance business. 8. 78 In their arguments, the Appellants are attempting to plead ignorance of internal processes of Ultimate Insurance by attempting to rely on the Royal British case and Section 216(5) of the repealed Companies Act. 8. 79 By advancing the cited authorities, the Appellants aim to demonstrate that they acted in good fa ith throughout the sequence of these transactions. However, we are not inclined to accept his positi on g iven certain findings of the trial Court, which we find no reason to disturb. Throughout these transactions, the 2nd to 4th Appellants crafted the transaction documents as insurance experts, having worked and conducted business in the insurance sector for several years. They cannot therefore be deemed to be ignorant of the provisions of Clause 2 of Statutory Instrument No. 71 of 2015, wh ich stipulates that the minimum share cap ita l must consist of paid-up shares. This fact is also confirmed by the trial Court at page 162, which corresponds with page 75 of the volume I of the Record of Appeal, where it is noted that the 2nd to 4 th Appellants, acting as agents of the 1st Appel lant, J60 crafted the second resolution of 26 February 2018, wh ich required investors to furnish cash consideration for shares. 8.80 Further, an examination of the actual record of proceedings in the Comt below at page 2 352 of volume v of the Record of Appeal, reveals that during cross-examination, the 3rd Respondent conceded that the Resolution of 26 February 2018, which required shares to be subscribed for cash consideration, was actually prepared and crafted by the 2 nd , 3rd and 4 th Appellant. They cannot now assert that the I st Appellant was an innocent subscriber for value. Moreover, there is no compelling evidence of a completed transfer of property or any in-kind consideration from the I st Appellant to U ltimate Insurance for the shares purportedly subscribed to. Considering these reasons, we find no merit in grounds 4 and 5 of the appeal, which are hereby dismissed accordingly. 8.81 Under ground 6, the Appellants contend in the alternative that the Cou1t below erred in law and in fact by fail ing to consider that the actions of the directors to accept an in-kind consideration for the share subscription had been ratified by the shareholders of Ultimate Insurance, who were also Directors at the relevant time. While the doctrine of ratification is a principle of common law under contract law, it does not apply to corporate actions of this nature, wh ich are specifically governed by statute, particularly Section 216(1) of the repealed Companies Act. As previously indicated, this provision required Directors to obtain members approval before making any disposition of shares or assets. The Section, as framed, did not provide for the ratification of Directors ' issuance of shares after the fact. For this reason, this ground also fa ils for lack of merit. J61 8.82 In the seventh ground of appeal, the Appellants contend that the Cou1t below etTed in fact when it found that the shareholders' resolution for the appointment of the board of directors was inval id. The Appellants argue that this reso lution was executed by the 3rd to Yh Respondents, who remained shareholders of Ultimate Insurance as the transfer of their shares to the 1st Respondent had not yet occutTed, and consequently, they had not exited the company. 8.83 We have reviewed the lower Cou11's analysis of all the documentary evidence on record concerning the appointment of directors to the board of Ultimate Insurance, pages 17 3 to 178 of the judgment. The Judge specifically referenced the written circular shareholder's reso lution signed by Marshlands and/ or a series of appointment letters purportedly signed by a representative of Marshlands and Chibamba in their capacity as shareholders ofUltimate Insurance. The Judge made the following findings on pages 175 to 177 of the judgment: 'Whereas section 77(2)(a) of the Companies Act, 201 7 prescribes that the mechanism under section 77(1) is a preserve of th e members of a company, the resolution in issue was signed by the fifth to seventh Defendants purportedly as shareholders of UIC and yet by the memorandum dated 19th April 2018 th ey expressly relinquish ed th eir slrnres following receipt of the final payment from th e Plaintiffs (see pages 258 of fifth to seventh Defendant 's bundle). Further, whereas section 77(5) of the Companies Act, 201 7 precludes a resolution for removal of directors fi-om being passed in a written circular form in lieu of a general meeting, the very first page of the resolution in issue begins with the purported removal of the directors followed by appointment J62 of replacements at page 2 (see pages 285 to 286 of the .fifth to seventh Defendants' bundle). ft follows therefore that the written circular resolution at pages 285 to 286 of the fifth to seventh Defendants bundle is not valid and the business purported to have been transaction thereunder is void ab initio. Turning to the appointment letters, they do not for their part purport to be extracted minutes of an ordinmJ1 resolution passed at a general meeting of the members of U/C (acting pursuant to section 85(1) of the Companies Act 2017) to effect the appointments. In addition,following my earlier.findings that the subscription for the shares was void ab initio, there was no legal basis for the first Defendant to participate in the appointment process of directors. Lastly the first plaintiff did without any real challenge or contradiction testify that she did not sign the appointment letters (at pages 72 to 86 of the first to fourth Defendants' bundle) as she was away recovering from surge1J1 at the material time. Consequently, by whatever measure, there is no basis upon which this court can conclude that the board of U/C was law/ ully reconstituted following the exit of the fifth to seventh Defendants from the affairs of UIC. The end result is that the new board of U/C as per representation to the PIA in the letter of 13th August 2018 (at page 155 of the.first to fourth Defendants' bundle) was not properly constituted as required by section 85(1) of the Companies Act 2017. All rd the appointments of the ,rnmed individuals are accordingly a nullity and void ab initio and by all necessa,y implication so too is the subsequent appointments of the second Defendant as Managing Director<~[ UIC.' J63 8.84 We have reviewed the Judge's analysis above and see no reason to fau lt the Judge on his determination of the validity of the appointments. As we have observed earlier, the Appellants, initially aided by Phiri, Syampongo, Silavwe and Ultimate Insurance itself, committed deliberate and evident acts of manipulation, and sharp practice. This is apparent in the crafting of the three agreements dated 23 February 2018, the subject matter of these agreements, and the underlying motives despite the engagements, agreements, and payments received from Katotobwe and Chibamba. It is our firm stance that the Appellants should not benefit from their own proscribed actions. 8.85 Therefore, we are of the view that the appointments made after 22 February 20 18, which sought to undermine Katotobwe and Chibamba's interests in Ultimate Insurance, cannot be validated and are null and void as determined by the lower Court. This invalidation extends to the appointments to directorship and management made based on account of Marshland's irregular holding of 6,500,000 shares and its membership in Ultimate Insurance, as there is no evidence of cash consideration for the 6,500,000 shares it subscribed to. The same applies to the 1,850,000 shares allotted to Chibamba. Consequently, this ground of appeal also fails. 8.86 In the eighth ground of appeal, the Appellants have advanced an ancillary argument that the Court below erred in law by placing significant reliance on the Respondent's intentions rather than on the law and evidence presented before it. This ground was argued in conjunction with ground 7. We have observed that this ground, as articulated, is predominately descriptive and does not distinctly identify any error of law or fact committed by the lower Court. J64 • 8.87 Order X rule 9 (2) of the Court of Appeal Rules requires the grounds of objection to the judgment appealed against, to specify the points of law or fact vvhich are alleged to have been wrongly decided. This ground clearly contravenes the mandatory provisions of Order X, rule 9(2) of the Court of Appeal Rules, as it fails to specify the points oflaw and fact purportedly misapprehended by the lower Court. Consequently, this eighth ground of appeal is dismissed. 9.0 CONCLUSION 9 .1 The grounds of appeal all having been unsuccessful; we uphold the judgment of Chenda J, of the Commercial Division of the High Court of9 April 2021 and dismiss the appeal accordingly. 9.2 Having affirmed the High Court' s judgment, it is further ordered and directed that the orders and directives issued by the High Court shall remain in full force as issued, effective immediately. J65 9.3 The Appellants shall bear the l51 and 2nd Respondents costs of this appeal, to be taxed in default of agreement. ~ <:::: _:=-> M. M. Kondolo, SC COURT OF APPEAL JUDGE P. C. M Ngulube COURT OF APPEAL JUDGE ~ -A. Sharpe-Phiri COURT OF APPEAL JUDGE ~ ~ - r- J66