Precious Chisebuka and 2 Ors v Kaleya Smallholders Company Ltd and 4 Ors (2024/HPC/0855) [2025] ZMHC 53 (23 July 2025)

IN THE HIGH COURT FOR ZAMBIA AT THE COMMERCIAL REGISTRY HOLDEN AT LUSAKA (Commercial Jurisdiction) 2024/HPC/0855 IN THE MATTER OF: IN THE MATTER OF: SECTION 331 OF THE COMPANIES ACT NO. 10 OF 2017. SECTION 66 OF THE CORPORATE INSOLVENCY ACT NO. 9 OF 2017. BETWEEN: PRECIOUS CHISEBU GREY NG'ANDU KALEYA SMALLHOL AND ---- ...... N JUL 2Ut5 '- -FA~\ ~~ :'.-~ ~- -- s;/ I - Jx soo 1ST APPLICANT 2ND APPLICANT 3RD APPLICANT KALEYA SMALLHOLDERS COMPANY LTD DEVELOPMENT BANK OF ZAMBIA MAZABUKA SUGAR CANE GROWERS TRUST GROWERS INVESTMENTS HOLDINGS LTD VIEW POINT INVESTMENTS LTD }ST RESPONDENT 2ND RESPONDENT 3RD RESPONDENT 4TH RESPONDENT 5TH RESPONDENT Delivered in Chambers before the Honourable Mrs. Justice Mwenda-Zimba on the 23rd day of July, 2025. For the Applicants For the 1st & 3 rd Respondents : For the 2 nd Respondents For the 4th & 5th Respondents : Mr. C. Sianondo of Malambo & Company Mr. Z. Sampa, Mr. A. Sakala & Mr. M. Lungu of Simeza Sangwa & Associates No Appearance No Appearance RULING Cases referred to: l. Emmanuel Mwamba {Su1.nq 1.n his capacity as d1.rector and s hareholder of Rephidim Mining Supplies and Technical Services Limited} v. Cosmas Tembo and 2 Others Appeal No 43 of 2023. 2 . Crispin Daka and Another v . Elliot International Limited and Another, Appeal No.153 of202l. 3. Konkola Copper Mines and Another v. Milingo Lunqu and Others, Appeal No. 128 of2021. 4. Sinkamba and Another v. Credit Afnca Bank, Appeal No. 94 of 2002. 5. Rural Development Corporation Ltd v. Bank of Credit and Commerce (Zambia) Ltd (19871 Z. R. 35. 6. Chimanqa Changa Limited v. Export Trading Limited, Appeal No. 3 of 20ZZ, 7. Vedanta Resources Holdings Limited and Another v. Milinqo Lungu (Sued as Provisional Liquidator of Konkola Copper Mines PlcJ and Another, Appeal No. 70 of 2023. 8. Chikuta v. Chipata Rural Council (1973} ZR 241. 9, New Pig.st Industries v. Commissioner of Lands and Another (20011 ZR 51. 10. Aaron Chungu v, Peter Chanda and Others. Appeal No. 12 of 2023. 11. Foss v. Harbottle (1843} 67 ER 189. 12. ZCCM Investment Holdings PLC v. First Quantum Minerals and 6 others, Appeal No. 92 of 2020. 13. Sharpe v. San Paulo Railway Company (1873} 8 Ch. App. 597. 14. Joseph Hayim Hayim and George Isaac Hayim v. Citibank NA and Hong Kong Bank Trustee Limited (1987} UKPC 11. 15. Access Financial Seroi.ces Limited and Access Leasing Limited v. Bank of Zambia. Appeal No. 88 of 2003. 16. Hickman v. Kent Romney Maresh Sheep Breeders Association Ltd (1915} 1 Ch 881. 17. Grace Wanff.ru Munyinyi and Others v. Gedion Waweru Gi.thunguri - Civil, Appeal No. 202 of 2005. 18. National Pensions Scheme Authority v. Phillip Stuart Wood 12018/ 3 ZR 102. Legislation referred to: 1. The Constitution ofZambia. Chapter 1 of the Laws ofZambia, Article 118 (2JfeJ. 2. The High Court Rules. Chapter 27 of the Laws of Zambia. Order 6 Rule 1 . 3. Land (Perpetual Succession} Act No. 186 of the Laws of Zambia. 4. The Corporate Insolvency Act, No. 9 of 2017, Section 66. 5. The Companies Act No. 10 of 2017. Sections 3. 197 llJ and 331. 6. The Rules of the Supreme Court of England, 1965, 1999. Order 5 Rule 5, Order 15 Rule 12A and Order 53 Rule 3 . 7. The Banking and Financial Services /Amendment} Act No. 7 of 2020, Section 73. Other works referred to: l. Clive M . Schmitthoffand James H. Thompson Palmers on Company Law. 21•t Edition. 2. Minority Shareholders: Law, Practice and Procedure by Joffe (Butterworths, 2000}. 1.0. INTRODUCTION AND BACKGROUND 1.1. On 15th November, 2024, the applicants filed what was termed as an 'Originating Notice of Application' seeking leave to commence a derivative action against the respondents. R2 1.2. The 1st and 3 rd respondents opposed the application alleging that that this court has no jurisdiction to grant the application as the applicants have employed a wrong mode of commencement. Further, they argued that the parties are not the correct parties to commence these proceedings. 1.3. This Ruling, therefore, deals with whether the court has jurisdiction to hear this application and whether the applicant is entitled to an order for leave to commence a derivative action and leave to commence legal proceedings against the respondents. 2.0. THE APPLICANT'S CASE 2.1. In the affidavit of 15th November, 2024, deposed by Precious Chisebuka, the 1st applicant in this matter, she stated that the 3 rd applicant is a shareholder in the 1st respondent company as shown in exhibit marked "PC 1". She gave a history of 1st respondent company to which she and the 2 nd applicant belonged and relied on an Investor Agreement of 1980, marked as exhibit "PC 2" by which the I st respondent was loaned money. That in 1997, the I st respondent adopted the Articles of Association marked as exhibit "PC 3". 2.2. She swore that in 2012, some Articles of Association were adopted and registered at the Patents and Companies R3 Registration Agency (PACRA) borne out of a board that was appointed irregularly, which Articles she produced as exhibit marked "PC 4''. 2.3. She placed reliance on Clause 7 of the Articles of Association of 1997 to depose that as at 24th and 30th September, 1999, the amount owed to Common Development Corporation and Zambia Sugar had been paid in full. This entitled the farmers, amongst them the applicants and their successor, acquisition of shares in the company. 2.4. She stated that the 1st respondent also acquired facilities from the 4th and 5th respondents which were to be paid by the farmers and small holders by deduction of their dividends as shown by the letter of commitment marked as exhibit "PCS". 2.5. That in a shareholder's agreement dated 24th March, 2005, marked as exhibit "PC6", various parties, amongst them Kaleya Small Holders Farmers Association, purported to enter into an agreement for the purchase of shares held by Barclays Bank Plc. That this agreement was null and void as the parties did not have the capacity to enter into the said agreement. 2.6. Contrary to Clause 7 of the Articles of Association adopted in 1997, which limited the number of shares a person could hold to not more than 3,500, the 2nd and 3rd respondents hold R4 250,000 and 305,000 shares, respectively. That this action has high prospects of success as shown in the statement of claim marked as exhibit "PC7". 2 . 7 . She swore that as advised by counsel, the 3rd applicant being a shareholder of the respondent, may only commence an action of this nature with leave of the court. Further, that the 2 nd respondent is in liquidation and in possession by the Bank of Zambia as shown by the Press Statement marked as exhibit "PCS" and thus, it is necessary to make this application for leave to commence an action against the 2nd respondent. 2 .8 . In the skeleton arguments of even date, Mr. Sianondo argued that the 3rd applicant, as shareholder, has sufficient interest to commence a derivative action against the directors of the 1st respondent who have abrogated the clauses of the Articles of Association and thus committed wrongs against the 1st respondent. In support of this position, counsel relied on the following authorities to support his position- 1. Section 331 of the Companies Act No.10 of 2017: 2 . Emmanuel Mwamba (Suing in his capacity as director and shareholder of Rephidim Mining Supplies and Technical Services Limited) v. Cosmas Tembo and 2 Others:<1 > and 3. Crispin Daka and Another v. Elliot International Limited and Another. 121 RS 2. 9. That in this case, the majority shareholders and directors of the 1st respondent illegally constituted the board of directors who amended the company's Articles of Association and illegally sold shares of the company to the 3rd, 4th and 5th respondents. That since the 3 rd applicant is a minority shareholder, there is need to commence a derivative action. In support, he placed reliance on the case of Konkola Copper Mines and Another v. Milingo Lungu and Others.(31 2.10. He referred to Section 66 of the Corporate Insolvency Act, No. 9 of 2017, and the case of Sinkamba and Another v. Credit Africa Bank, < 4l to point out that it is mandatory to apply for leave to commence an action against a company in liquidation. He argued that it is necessary for the 2°d respondent to be party to these proceedings as it is the applicant's assertion that it holds shares contrary to the Articles of Association of the 1st respondent. 3 .0. THE 18T AND 3RD RESPONDENT'S CASE 3.1. On 3rd February, 2025, the 1st and 3rd respondents filed their affidavit in opposition with supporting skeleton arguments. 3.2. The affiant, Paul Mundia, a manager and company secretary of the 1st respondent company, deposed that the proposed statement of claim shows that the applicant seeks to challenge the acquisition of shares held by 3rd parties in the 1st R6 respondent company and to challenge the amendment of the Articles of Association by the Board of Directors which paved the way for the transfer of the said shares. 3.3. Additionally, that the applicants are seeking an order to transfer the shares held by the 2nd respondent to the applicants and other farmers which orders and declaratory reliefs are for their own benefit. 3.4. In the skeleton arguments of even date, Mr. Sampa, Mr. Sakala and Ms. Lungu argued that there is no provision in the Companies Act or Corporate Insolvency Act or any Rule of Court made under the said Acts which provides that proceedings under Section 331 of the Companies Actor Section 66 of the Corporate Insolvency Act ought to be commenced by Originating Notice of Motion. He relied on Order 5 Rule 5 of the Rules of the Supreme Court of England to argue that since Section 331 of the Companies Act or Section 66 of the Corporate Insolvency Act do not provide for commencement of proceedings by way of Originating Notice of Motion, the motion here has no legal basis as proceedings can only be commenced by Originating Notice of Motion, where a specific provision in the Act or Rules of Court says so. 3 .5. Further, counsel submitted that an action for leave to commence a derivative action or to commence an action against R7 a company in liquidation ought to have been commenced by Originating Summons. He relied on the following authorities to support this position: 1. Order 6 Rule 1 (3) of the High Court Rules: 2. Rural Development Corporation Ltd v. Bank of Credit and Commerce (Zambia) Ltd;(S) 3. Chimanga Changa Limited v. Export Trading Limited;(5J and 4. Vedanta Resources Holdings limited and Others v. Milingo Lungu (Sued as Provisional Liquidator of Konkola Copper Mines Pie) and Another.(7) 3 .6 . In regard to the consequences of commencing an action using a wrong mode, he relied on the cases of Chikuta v. Chlpata Rural Council,(8! New Plast Industries v. Commissioner of Lands and Another<9 > and Aaron Chungu v. Peter Chanda and Others(10 > to submit that the Court has no jurisdiction to hear the matter. 3. 7. On whether the proposed action is a derivative action, counsel argued that the intended action by the applicants does not pass for a derivative action. According to counsel, none of the claims sought in the writ and statement of claim are being sought on behalf of and for the benefit of the company, the 1st respondent herein. He specifically cited paragraph 44 of the statement of claim as an example. That the statement of claim exhibited clearly shows that the cause of action is not vested in the 1st respondent but the applicants as shareholders in the 1st RS respondent. In support of this position, counsel relied on the following authorities: 1. Foss v. Harbottle:<11 > 2. Section 331 of the Companies Act: 3. Clive M. Schmitthoff and James H. Thompson Palmers on Company Law, 21 st Edition; and 4. Order 15 Rule 12A of the Rules of the Supreme Court of England. 3.8. Counsel added that it is clear that the applicants are aggrieved by the manner the 2nd to 5th respondents acquired shares in the 1st respondent which they wish to challenge and are within their rights do so -but that they should do so in an ordinary action. That a shareholder does not need to bring a derivative action in order to express his or her grievance. That the applicant's claim for an order or declaration that the shares held by the 2 nd respondent in the 1st respondent can only be transmitted by them is not an action vested in the company. 4.0. THE 2nd RESPONDENT'S CASE 4.1. On 11th February, 2025, the 2nd respondent filed its affidavit in opposition to the originating notice of motion. It was deposed by Nchimunya Kuwunda Mweemba, a manager in the 2 nd respondent. 4 .2 . He deposed that in August, 1980, by way of an Investors Agreement marked as exhibit "PC2" the 2 nd respondent R9 acquired 250,000 ordinary shares in the 1st respondent company as a result of an equity investment. That the applicant's assertions that the amended Articles of Association, the resolution of 29th August, 1997 and the deposition that the amount from Common Development Corporation and Zambia Sugar entitled the farmers to shares in the company are not supported by any evidence. 4.3. That the applicant's position that the 2nd and 3rd respondent's hold 250,000 shares whilst the 4th respondent holds 305,000 shares as a result of the Articles of Association adopted in 1997 are misconceived as the 2nd respondent's right to hold shares in the 1st respondent was anchored in the capital structure in the Investors Agreement of 1980. 4.4. He deposed that the Articles of Association of the 1st respondent adopted in 1997 did not have a retrospective effect on the rights vested to the 2nd respondent which rights were conferred by the Investors Agreement of 1980. That Clause 7 of the Articles of Association adopted in 1997 neither affected the equity interests held by existing investors nor did they oblige the 2 nd respondent to transfer its equity interest to a 3rd party. RlO 4.5. He added that the 2nd respondent is in possession of a duly issued Share Certificate by the 1st respondent as shown by exhibit marked "NKM 1". 4.6. He pointed out that the 2 nd respondent has not yet been placed in liquidation but is still under possession by the Bank of Zambia as shown by the Press Statement marked as exhibit "PCS". 4. 7. He deposed that the applicant's intended action has no real prospects of success against the 2 nd respondent as the claim in the statement of claim marked as exhibit "PC7" is for a declaration that the shares held by the 2nd respondent in the 1st respondent can only be transmitted to the applicants and other farmers, which claim has no legal basis. That the claims being made in the statement of claim do not seek to redress wrongs perpetuated against the 1st respondent but to vindicate alleged wrongs against some beneficial owners of the 1st respondent in their individual capacity. 4.8. In the skeleton arguments of even date, it was argued that the 1st and 2nd applicants have not demonstrated that they in fact answer the description of being either directors in the 1st respondent or entitled persons in terms of Section 3 of the Companies Act No. 10 of 2017. In support of this position, Counsel Rll relied on Section 331 of the Companies Act No. 10 of 2017 and the case of ZCCM Investment Holdings PLC v. First Quantum Minerals and 6 Others. (12) 4.9. Counsel argued that the 3rd applicant is a member and trustee in the 1st respondent. Counsel submitted that the 1st and 2nd applicants have no cause of action against the 3rd party as they have not demonstrated that they are trustees of the 3rd applicant or failure by the trustees of the 1st respondent to protect their interests as beneficiaries in the 3 rd applicant. 4.10. That the applicants have not demonstrated what wrong has been inflicted on the 1st respondent which warrants redress. That what the applicants seek by their contemplated action is to vindicate the wrongs purportedly inflicted on them in their capacity as beneficial owners of the 1st respondent. Counsel relied on the cases of Sharpe v. San Paulo Railway Company'13 > and Joseph Hayim Hayim and George Isaac Hayim v. Citibank NA and Hong Kong Bank Trustee Limited1141 to support the submissions. 4. 11. Counsel submitted on what the Court should have regard to when determining whether to grant leave to commence a derivative action or not. He placed reliance on the case of ZCCM Investment Holdings PLC v. First Quantum Minerals and 6 Others.1121 4.12. He submitted that the applicant's position or assertion that the 2nd respondent holds 250,000 shares contrary to the Articles of R12 Association adopted in 1997 is misguided as the 2nd respondent financed the 1s t respondent or its predecessor by way of equity and loan financing resulting in it having the right to hold 250,000 ordinary shares. He relied on the Investors Agreement marked as exhibit "PC2" to support his position. 4.13. He re-iterated the 2nd respondent's position that the applicant's belief that the amended Articles of Association adopted by special resolution of 13th December, 2012 as shown by exhibit marked "PC4" were borne from a Board of Directors which flowed from the irregular appointment of directors is unsupported. 4 . 14. He submitted that whilst Clause 7 of the 1st respondent's Articles of Association marked as exhibit "PC3" restricts the issuance of ordinary shares to farmers or trustees of farmers, it did not strictly apply to the issue of transfer and transmission of shares under Clause 14(27) (1) of the Articles of Association of 1997. That the 2nd respondent's entitlement to hold 250,000 shares in the 1st respondent cannot be assailed as it is in possession of a duly issued Share Certificate. In support, he relied on Section 197 (1) of the Companies Act No. 1 O of 2017. 4.15. He submitted that the applicants have not established a prima f aci.e case of wrongdoing perpetrated or inflicted on the 1st R13 respondent to warrant the grant of leave to commence a derivative action. 4.16. In regard to the applicant's application for leave to commence legal proceedings against a company in liquidation, counsel submitted that the 2nd respondent is not under liquidation but is under possession by the Bank of Zambia as shown by exhibit marked "PCS". He relied on Section 73 of the Banking and Financial Services (Amendment) Act No. 7 of 2020 and the case of Access Financial Services Limited and Access Leasing Limited v. Bank of Zambia<15>to discuss what must happen before a company can be placed in liquidation and that none of the actions contemplated in the above authorities have been taken by the Bank of Zambia. 5.0. THE APPLICANT'S AFFIDAVIT IN REPLY TO THE 2ND RESPONDENT'S AFFIDAVIT IN OPPOSITION 5.1. On 18th February, 2025 1 the applicants filed a reply to the 2nd respondent's affidavit in opposition. It was deposed by Precious Chisebuka, the 1st applicant in this matter. She deposed that the other respondents could not change the Articles of Association as the shares were irregularly acquired. 5 . 2. She averred that the 2nd respondent cannot do anything without the Bank of Zambia and hence the need to seek leave of court. R14 5.3. She added that she had been advised by counsel that when the shares are taken from the subsisting shareholder, they will have to go to the 1st respondent and hence the need for a derivative action. 5.4. In the skeleton arguments of even date, counsel relied on the case of Hickman v. Kent Romney Maresh Sheep Breeders Association Ltd<151 to argue that the Articles being a contract, raises rights of the parties which need to be enforced especially that the Articles were made after the Agreement. That there being a loan between the 1st and 2nd respondents, examination ought to be heard at trial as to what extent the loan has been repaid. 5.5. Counsel also argued that since the 2nd respondent has suggested that it is not in receivership and there is no need to seek leave, there is thus no need to oppose the application. 5.6. In reply to the 1st respondent, he referred to the learned author of Minority Shareholders: Law, Practice and Procedure by Joffe (Butterworths, 2000), the case of Foss v. Harbottle,(11 ) Grace Wanjiru Munylnyi and Others v. Gedion Waweru Githunguri - Civil,(17) to submit that the 3rd applicant has every right to file a derivative action for a minority shareholder as the majority were in control of the company. RlS 5. 7. Counsel argued that the case of Vedanta Resources Holdings limited and Others v. Milingo Lungu (Sued as Provisional Liquidator of Konkola Copper Mines Pie) and Another<n relied on is not binding on this court as it is a High Court decision. 5.8. He referred to the case of New Plast Industries v. Commissioner of lands and Attorney-General(0lto argue that the law in this country allows a party to move the court according to the mode provided by statute. That Section 331 (5) of the Companies Act No. 10 of 2017 provides for the procedure of Notice of Application to approach the Court. That this procedure is not an alien way of approaching the Court as it is also a procedure used for Judicial Review under Order 53 Rule 3 ofthe Rules of the Supreme Court, 1999 Edition. He argued that the authority of using the High Court Rules as a way of commencing an action by way of Originating Summons when the Act provides other ways is unattainable. He relied on the case of National Pensions Scheme Authorjty v. Phillip Stuart Wood<1e, to submit that the High Court Rules cannot override what Section 331 (5) of the Companies Act demands. 6 .0. AT THE HEARING 6 . 1. At the hearing of this matter, counsel for all parties present relied on their respective affidavits and skeleton arguments on record. Mr. Sianondo added that a minority shareholder or R16 affected person can challenge in its own name the decision of majority shareholders. He clarified that there has been no action commenced. 7.0. CONSIDERATIONS, FINDINGS AND CONCLUSION 7 .1. I have considered the "Originating Notice of Application" the parties' affidavits, skeleton arguments as well as the oral submissions at the hearing of this matter. 7.2. For convenience, I will first deal with the issue of jurisdiction raised by the 1st and 3rd respondents in their arguments. 7 .3. It is trite law that jurisdiction goes to the root of commencing any action and the commencement of an action by a wrong mode divests the court of its jurisdiction. In the case of Chikuta v. Chipata Rural Counci1<9 > relied on by the respondents, the Court held that- "Where any matter is brought to the High Court by means of an originating summons when it should have been commenced by writ, the court has no jurisdiction to make any declarations." 7.4. This was the same position in the case of New Plast Industries v. The Commissioner of Lands and The Attorney GeneraJ(9l where the Court held that- "Where any matter under the Lands and Deeds Registry Act, is brought to the High Court by means of Judicial Review when it should have been brought by the way of an appeal, the court has no jurisdiction to grant the remedies sought" R17 7 .5. Therefore, where the mode of commencement employed is wrong, the Court has no jurisdiction to deal with the matter. 7 .6. In the present case, the applicants took out this application by what is termed as "Originating Notice of the Application." Counsel for the applicant argued that this is premised on Section 331 (5) of the Companies Act No. 10 of 2017. Section 331 (5) of the Companies Act is in the following terms: " (5) A notice of the application, made in accordance with subsection (2), shall be served on the company or subsidiary. (6) A company or its subsidiary- (a) may appear and be heard; and (b) shall inform the Court, whether or not it intends to bring, continue, defend, or discontinue the proceedings, as the case may be." [Underlining for emphasis only] 7. 7. Section 331 (5) does not state the mode of applying for leave to commence a derivative action. It simply guides that a notice of the application shall be served on the company or subsidiary. 7.8. The Rule on commencement of actions in the High Court is contained in Order 6, Rule 1 of the High Court Rules, which reads- "Except as otherwise provided by any written law or the Rules, an action in the High Court shall be commenced, in writing or electronically by writ of summons endorsed and accompanied by; a) Statement of claim R18 b) List and description of documents to be relied on at trial; c) List of witnesses to be called by plaintiff at trial; d) Letter of demand ... " 7. 9. Further, Order 6 Rule 1 (3) of the High Court Rules provides that- (3) A matter which, under any written law or these Rules may be disposed of in chambers shall be commenced by an originating summons accompanied by an affidavit in support." 7.10. This position was upheld in the Chikuta v. Chipata Rural Council,181 case cited above, when the Supreme Court opined that- " ... The Zambian Rules are much more rigid. Under Order 6, rule 1, every action in the court must be commenced by writ, except as otherwise provided by any written law or the High Court Rules. Order 6, rule 2, states that any matter which under any written law or the Rules may be disposed of in chambers shall be commenced by an originating summons. Rule 3 provides for matters which may be commenced by an originating notice of motion. It is clear, therefore, that there is no case where there is a choice between commencing an action by a writ of summons or by an originating summons. The procedure by way of an originating summons only applies to those matters referred to in Order 6, rule 2, and to those matters which may be disposed of in chambers. Chamber matters are set out in Order 30 of the High Court Rules." [Underlining for emphasis only] 7 .11. The above notwithstanding, I note that the present application is not a commencement process of the action. However, it is the commencement process for leave. R19 7 .12. Whilst the Act provides that the notice of the application for leave to commence a derivative action must be served on the company or its subsidiary, it does not provide for the mode of commencement of the said application. As an application such as this one is one that can be disposed of in chambers, it follows that the correct mode of approaching the Court is by way of Originating Summons. Therefore, where the Act does not specify as is the case in this matter and the matter is suitable for disposal 1n chambers, the law on the mode of commencement defaults to Order 6 Rule 1 (3) of the High Court Rules as guided by the Chikuta(8l case cited above. 7.13. I am, therefore, of the view that the correct mode of commencement was by way of originating summons. Section 331 of the Companies Act states that the notice of the application ought to be served on the company or its subsidiary and not that the application ought to be by "Notice of the Application." 7.14. Despite the above, even if I dealt with the application on its merit, I am of the view that it ought to fail. The starting point is, Section 331 of the Companies Act No. 1 O of 2017, which is in the following manner: "331. (1) Except as provided in this section, a director or an entitled person shall not bring or intervene in any R20 proceedings in the name of, or on behalf of, a company or its subsidiary. (2) Subject to subsection (4), the Court may, on the application of a director or an entitled person, grant leave to- (a) bring proceedings in the name and on behalf of the company or any subsidiary; or (b) intervene in proceedings to which the company or any related company is a party for the purpose of continuing, defending, or discontinuing the proceedings on behalf of the company or subsidiary, as the case may be. (3) Despite the generality of subsection (2) , the Court shall, in determining whether to grant leave in accordance with that subsection, have regard to the (a) likelihood of the proceedings succeeding; (b) costs of the proceedings in relation to the relief likely to be obtained; (c) action already taken, If any, by the company or its subsidiary to obtain relief; or (d) interests of the company or its subsidiary in the proceedings being commenced, continued, defended, or discontinued, as the case may be. (4) The Court may grant leave, in accordance with subsection (2), if satisfied that- (a) the company or Its subsidiary does not Intend to bring, diligently continue or defend, or discontinue the proceedings, as the case may be; or R21 (b) it is in the interests of the company or subsidiary that the conduct of the proceedings should not be left to the directors or to the determination of the members as a whole." 7.15. According to the afore cited Section, a director or an entitled person may be granted leave to commence a matter on behalf of a company. 7.16. The Court of Appeal in Zambia discussed the above cited Section in the case of Konkola Copper Mines & Another v. Lungu & Others,131 and held that- "9 .11 In our view, on a proper construction of section 331 of the Companies Act supra, it is evident, that a director or an entitled person shall not bring or intervene in any proceedings in the name of, or on behalf of, a company or its subsidiary, withoutthe leave of the court." 7 .17. The Section further gives direction on what to consider when granting leave to a director or an entitled person. It guides that when considering whether to grant leave a court must have due regard to the likelihood of the proceedings succeeding, the costs of the proceedings in relation to the relief likely to be obtained, whether any other action has been taken by the company or its subsidiary in relation to the reliefs sought and finally the interests of the company or its subsidiary. R22 7.18. In the present case, the applicants ought to show that the action sought to be commenced is in the interest of the company. 7 .19. One of the applicant's contentions is that the loan owed to the 2 nd respondent by the 1st respondent was repaid. However, there is no evidence that has been adduced to suggest that the loan was repaid. Even if the loan was repaid, there is no evidence in the Investors Agreement or the Articles of Association that stipulated that the 2nd respondent ought to have returned the shares it was allotted once the loan was repaid and that once returned, these shares ought to have been transferred to the members of the 1st respondent company. 7.20. The applicants have also not demonstrated how the allotment of, and continued ownership of the shares by the 2nd respondent has been contrary to the interests of the 1st respondent company therefore, warranting the grant of leave for commencement of a derivative action. 7 .21. Further, the deposition that the Articles of Association of 2012 were borne out of an illegality is not supported by evidence. The same applies to the assertion that Clause 7 of the Articles of Association of 1997 applied to shares acquired prior to its adoption. There is no evidence to suggest that the limit in the R23 number of shares a person could hold applies to the shares in dispute. In any case, there is evidence in the Investors Agreement suggesting that the shares that were allotted to the 2 n d respondent were what are referred to as 'founders shares' which also appear in the Articles of Association of 1997 under Clause 6. This clause does not restrict the number of founders shares to 3 ,500. 7.22. It should be noted that as the persons that moved the Court, the applicants have to show a prima facie case in support. This position was affirmed in the case of Emmanuel Mwamba (Suing in his capacity as director and shareholder of Rephidim Mining Supplies and Technical Services Limited) v. Cosmas Tembo and 2 Others in which the Court of Appeal stated that- "It is trite, that in our jurisdiction and based on section 331 of the Companies Act, for the appellant to bring a derivative action, it was required to apply for leave to proceed with the derivative action. It was incumbent on the appellant to show to the court below that it is possessed of sufficient evidence to warrant and consequently proceed with the derivative claim.,. 7.23. From the evidence adduced, this has not been shown. It follows that the applicants have not met the threshold for the grant of leave to commence a derivative action. They have also not shown that the action they sought to bring is for the benefit of the company. R24 7.24. On the argument that the applicants require leave to commence an action against the 2nd respondent, it was alleged that the 2nd respondent is in liquidation and possession by the Bank of Zambia. This position was disputed by the 2nd respondent which insisted that the 2nd respondent is not in liquidation but is in possession by the Bank of Zambia. This position was conceded by the applicant's counsel at the hearing of this matter. A review of the Press Statement marked as exhibit "PCS" reveals that the 2nd respondent is in possession by the Bank of Zambia. As this issue was conceded, I shall not belabour the point. 7 .25. All in all, I dismiss the application with costs. Dated at Lusaka this 23rd day of July, 2025. ~ ,___Q ...... ~ .••.••••............•• K. E. Mwenda-Zimba HIGH COURT JUDGE R25