First: Dormant Does Not Mean Disappeared
If a company is not trading, that does not automatically mean its legal existence has ended. The Companies and Other Business Entities Act, 2019 provides a framework for dealing with defunct business entities, including circumstances in which the Registrar may strike an entity’s name from the register. The law also provides for restoration in certain circumstances.
Option 1: Keep the Company
Keeping a shelf company can make sense when there is a realistic reason to use it later. For example, the owners may be preparing for a new project, investment, tender, acquisition or another business opportunity where the existing corporate structure is useful.
The catch is simple: keeping the company means keeping up with its ongoing statutory obligations. A company should not be treated as ‘on hold’ if its filings and corporate information are being left unattended.
Option 2: Close It Properly
If the company has stopped trading and the owners do not expect to use it again, formally closing it may be more practical than carrying an unused company indefinitely.
Before taking that route, check whether the company has assets, debts, contracts, employees, tax obligations, bank accounts or other matters that must be dealt with first. Closing a company is not simply a matter of stopping business activity.
Option 3: Deregister or Strike It Off
Where the company genuinely has no continuing business purpose, the owners may consider the applicable process for removal from the register. Zimbabwe’s company law contains provisions dealing with striking off defunct business entities. In certain circumstances, a company can also be restored to the register if the statutory requirements for restoration are met.
The Question Most Owners Should Ask
Instead of asking, ‘Can I leave the company dormant?’,
ask: ‘What will this company cost me in compliance, administration and future clean-up if I keep it?’
That question usually makes the decision clearer. A company with a genuine future purpose may be worth maintaining. A company that has no assets, no activity and no realistic future use may need a proper exit strategy.
Before You Decide, Check These 7 Things
- Outstanding annual returns or other company filings.
- The company’s current status on the register.
- Whether the directors, shareholders and registered details are still correct.
- ny outstanding ZIMRA or other statutory obligations.
- Bank accounts, assets, debts and contracts held by the company.
- Whether the company name or corporate history has genuine future value.
- The current cost and procedure for regularising or closing the company.
A Practical Rule of Thumb
If you have a clear business reason for keeping the shelf company, keep it compliant and review it regularly. If you have no realistic plan to use it, do not let years of inactivity turn into a larger compliance problem. Find out its current status, deal with outstanding obligations and consider the appropriate closure or deregistration route.
One Important Warning
Do not assume that simply abandoning a company is the same as legally closing it. The Companies and Other Business Entities Act contains specific rules on defunct entities, striking off and restoration, and the consequences can depend on the company’s circumstances.
Final Thoughts
A dormant company is not automatically a bad asset—and it is not automatically a useful one either. The right choice depends on why the company exists, what obligations remain outstanding and whether there is a credible reason to keep the corporate structure.
For a Zimbabwean company, check the current position with the Companies and Intellectual Property Office of Zimbabwe (CIPZ) or obtain advice from a qualified company secretary, legal practitioner or tax professional before choosing to keep, close or deregister the company. The corporate regulatory framework can change, and current filing requirements should be confirmed before action. CIPZ is the government business regulator responsible for companies and intellectual property.
