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Corpus Legal Practitioners
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Piyiza Office Park, Stand No 2374, Thabo Mbeki Rd, Mass Media, Lusaka Zambia
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Schemes of Arrangements and Business Rescue Proceedings in Zambia


The unprecedented impact of the Covid-19 pandemic has been far reaching. From governments to small and medium scale enterprises, the effect of a global pandemic has left the world wondering what an economic recovery looks like. World and business leaders are navigating a complex range of seamless issues that include keeping their employees and customers safe, hedging cash and liquidity, reviewing operations and navigating an entirely new economic landscape.

To help our clients navigate the economic impact of Covid-19 on their businesses, this article considers in brief, some options companies can consider to stay afloat under the Corporate Insolvency Act, No. 9 of 2017. .

Schemes of Arrangements

What is a scheme of arrangement under Zambian law?

This is a procedure which can be used by a financially distressed company to reach a binding agreement with its creditors with respect to payment of all, or part of, its debts over an agreed period.

What is the procedure for effecting a scheme of arrangement?

A scheme of arrangement can be initiated either by the:

  • company;
  • creditors; or
  • members.

Any one of the above can apply to the High Court for Zambia (the “Court”) asking:

  • for one or more scheme creditors’ meetings to be summoned; and
  • for the scheme to be sanctioned.

Following such application, the Court makes an initial Order allowing one or more meetings of creditors to be summoned and setting out the guidelines for convening and holding the meeting or meetings. At a meeting of creditors, the voting power is assigned to the creditors in proportion to the amount of the debt outstanding from the company to each creditor.

The threshold for approval of the scheme is 75% of the votes of the creditors entitled to vote in person or by proxy. Once the voting threshold is attained at the meeting of creditors, the scheme then becomes binding on all the creditors.

The company or any creditor thereafter petitions the Court to approve the scheme. After the scheme has been sanctioned by the Court, the Order sanctioning the scheme must be filed with the Registrar (the “Registrar”) of the Patents and Companies Registration Agency (“PACRA”) following which the scheme becomes effective and also binding on the company.

A scheme of arrangement terminates after it has been implemented and its implementation has been reported to the Court.

Business Rescue Proceedings

What are business rescue proceedings under Zambian law?

Business rescue proceedings are proceedings aimed to facilitate the rehabilitation of a company that is financially distressed by providing for:

  • the temporary supervision of the company, and the management of its affairs, business and property, by a business rescue practitioner;
  • a temporary moratorium (stay) on the rights of claimants against the company or in respect of property in its possession; and
  • the development and implementation, if approved, of a business rescue plan to rescue the company by restructuring its business, property, debt, affairs, other liabilities and equity in a manner that maximises the likelihood of the company continuing in existence on a solvent basis, if it is not possible for the company to so continue in existence, results in a better return for the company’s creditors or shareholders than would result if the company was to be liquidated.

What is the purpose of business rescue proceedings?

The aim of business rescue proceedings is to restructure the affairs of a company to maximise the likelihood of the company to continue as a going concern or results in a better return for the creditors of the company than would result from a liquidation of the company.

When can business rescue proceedings be initiated?

When a company is financially distressed and there appears to be a reasonable prospect of rescuing the company. To be financially distressed means that a company is likely to be insolvent within the immediately ensuing six months.

What is the procedure for effecting business rescue proceedings?

Business rescue proceedings can be commenced either by the members or by an affected person. If initiated by the members, they are required to pass a special resolution to begin the process. The resolution becomes effective after it has been filed with the Registrar.

If commenced by an affected person, such person is required to apply to the Court for an Order to place the company under supervision and begin business rescue proceedings. An affected person is defined to include:

  • a regulator;
  • a shareholder;
  • a member;
  • a director;
  • a creditor;
  • an employee;
  • a former employee;
  • a registered trade union representing employees of the company; and
  • the Registrar.

The Court may thereafter make an Order placing the company under supervision and begin business rescue proceedings. Once business rescue proceedings have commenced, this generally acts as a stay on legal proceedings against the company.

Following filing of the special resolution at PACRA or granting of a Court Order to place the company under supervision and begin business rescue proceeding, a business rescue administrator is appointed by the members or an affected person as the case may be.

One of the main duties of a business rescue administrator is to create a business rescue plan in consultation with the creditors, the management of the company, and where applicable, shareholders. A proposed business rescue plan shall be approved, at a meeting convened on a preliminary basis, if:

  • it is supported by the holders of more than 75% of the affected persons’ voting interests; and
  • the votes in support of the proposed plan include at least 50% of the independent creditors’ voting interests, if any.

A business rescue plan that has been adopted binds the company, every creditor, affected person and holder of the company’s securities, whether or not that person was present at the meeting; or voted in favour of adoption of the plan; or had proven their claims against the company.

Business rescue proceedings can terminate when:

  • the court sets aside the resolution or order that began the proceedings;
  • the court converts the proceedings to liquidation proceedings;
  • a business rescue administrator files with the Registrar and the official receiver a notice of the termination of the business rescue proceedings; or
  • a business rescue plan is proposed and rejected, and no affected person applies to revise the plan.

Article by Jackie Jhala, partner at Corpus Legal Practitioners and head of the Corporate Advisory Department


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