Sellable Company: Profitability And Transferability

A founder may see steady customer orders and a healthy monthly profit, then receive a potential buyer’s first due-diligence request: share register, tax records, bank reconciliations, major contracts and proof of who can legally transfer ownership. That is when a profitable business discovers it is not yet a sellable company.

Profitability is the ability to earn. Transferability is the ability to pass lawful ownership, trustworthy information, customer relationships and operating capability to a new owner. A credible transaction requires both.

ZIMSTAT’s preliminary Economic Census findings, released in 2025, identified 204,798 operational establishments, of which 76.1% were informal. These figures describe the wider enterprise landscape, not the value of any individual company. A buyer must assess evidence from the specific enterprise, not a founder’s estimate.

What makes a profitable company sellable

Four tests a buyer will perform

A company may trade successfully yet struggle in buyer diligence because the share register is outdated, receivables are not reconciled, key contracts depend personally on the founder, or the company has incomplete statutory records. A prospective buyer needs evidence that the operation can continue after completion.

A practical saleability assessment tests four connected areas:

• Transferable ownership. The company must show who owns the shares, what rights attach to them and whether its articles restrict a transfer.

• Verifiable financial performance. Management accounts, bank statements, reconciliations, customer contracts and an asset register should support the reported profit.

• Compliance evidence. The company should have current company secretarial records, beneficial ownership declarations and tax documentation.

• Buyer eligibility. A resident-to-non-resident unlisted-share transfer requires prior RBZ approval under the March 2026 guidance; reserved-sector restrictions may create further conditions or exclusions.

These gaps affect value and deal certainty. A buyer asked to reconstruct old accounts or resolve ownership disputes may seek additional protections, postpone closing or decline to proceed. Strong records do not guarantee a premium, but they make risk easier to assess.

Step 1: Prove that the profit exists beyond the owner

Begin with financial statements that reconcile to bank movements, invoices, stock records, payroll and tax filings. Section 182 of Zimbabwe’s Companies and Other Business Entities Act requires adequate financial records explaining transactions and giving a true and fair view. Company financial records may generally be destroyed only after eight years from the transactions or operations concerned, subject to other applicable retention laws.

Move company collections and expenditure into clearly documented business channels. Reconcile the ledger, maintain current debtor and creditor ageing, and record owner drawings and related-party balances separately. A buyer needs to distinguish repeatable company earnings from the founder’s personal cash arrangements.

Illustrative example: a profitable distributor with weak evidence

Consider an illustrative Harare distributor with loyal customers and reported profits. It receives some payments into the founder’s personal account, keeps stock counts on paper and has not reconciled major supplier balances. A buyer cannot readily establish whether the reported margin is recurring or whether the liabilities are complete.

The company prepares clean monthly accounts, confirms inventory through counts, reconciles supplier balances and documents the reason for any remaining exceptions. That work does not assure a higher sale price; it removes uncertainty that can delay diligence or trigger difficult contract protections.

A controlled diligence room should hold the period of management accounts the buyer requests, bank reconciliations, tax records, asset registers, key customer and supplier contracts, aged balances and management reporting. A buyer may ask for several years of records; retention and transaction requirements must still be checked separately.

If one owner negotiates every sale, approves purchases and collects debts, a glossy information memorandum is not the priority. Document the operating procedures and transfer customer relationships to accountable managers before inviting offers.

Step 2: Establish clean and transferable ownership

Signing a sale agreement is only one stage of a share transfer. Under Zimbabwe’s Companies and Other Business Entities Act, shares are movable property, and transfers must comply with the Act, the company’s articles and any relevant ownership restrictions.

For certificated shares, check the share certificate or suitable evidence of title, the transfer instrument, and entry in the register of members. Confirm that the rights being sold match the company’s real records and the seller’s authority. A buyer should not rely on family assurances instead of evidence of title.

Check pre-emption rights, restrictions on transfers, shareholder consents and any financing covenants before marketing the company. Resolve material disputes early, including whether an estate has lawfully administered the shares.

Illustrative example: a family business with an incomplete share register

Consider an illustrative Bulawayo engineering company run by two siblings. They believe they own equal shares, but the register still names their deceased parent, and the original certificates cannot be found. The business may be profitable, yet neither sibling can simply promise clean title to a buyer.

The family should obtain estate and company-law advice, trace the administrator’s authority, reconstruct ownership evidence lawfully and correct the corporate register. Keeping records current after each ownership event is far less disruptive than rebuilding the history during a live sale process.

Beneficial ownership is a separate transparency obligation. Section 72 of the Companies and Other Business Entities Act requires companies to maintain and file accurate beneficial-owner information. A material change must be updated with the Registrar within seven days. Form CR16 is used for the prescribed declaration.

The company should identify the people who ultimately own or control the enterprise, even where nominees or layered entities appear in the register. Retain ownership-chain records and review the declaration before a buyer submits regulatory and banking applications.

Step 3: Repair the compliance trail before diligence begins

Buyer diligence tests compliance history because unresolved filings can imply penalties, delays or undisclosed control weaknesses. Start with annual returns, company records, tax filings, licenses and any security registered over assets.

Section 165 of the Companies and Other Business Entities Act requires a company’s annual return within 21 days of its incorporation, registration or re-registration anniversary. The return covers directors, the company secretary where relevant, registered-office details and the share structure. Check the current filing portal and any later amendment before submission.

Assign responsibility for the annual return, beneficial ownership, tax matters, sector licences and records retention. Make the compliance calendar available to directors so that a company does not discover an overdue filing on the eve of sale.

Share and asset sales may involve different Capital Gains Tax, stamp, transfer or other tax consequences. Assemble acquisition and disposal documents, contracts and relevant tax evidence and obtain transaction-specific advice from a qualified tax practitioner before completing a deal.

Legal and tax outcomes depend on the seller, buyer, asset, shareholding structure and transaction date. This article provides a readiness framework, not advice that a particular transfer is tax-free or automatically approvable.

Step 4: Test whether your intended buyer can acquire the business

Zimbabwe’s Reserve Bank Foreign Exchange Transactions Guidelines (March 2026) state that an exchange of securities between a resident and a non-resident requires prior RBZ approval, through an authorised dealer. The requirements matter especially when a foreign buyer proposes to acquire shares in an unlisted company.

Build time into the timetable for registration documents, profiles of the transacting parties and any other approvals requested. The RBZ guidance also governs remittance of foreign-investor disinvestment proceeds after approval. A contract should not assume completion before necessary consents exist.

Restricted-sector rules require a separate check. Statutory Instrument 215 of 2025 established sector-specific conditions for foreign participation. For example, the scheduled retail and wholesale category identifies minimum investment of US$20 million and 200 full-time employees; haulage and logistics identifies US$10 million and 100 employees. Those are regulatory qualification thresholds—not service prices or recommended investment amounts.

Other reserved activities may be subject to stricter conditions or specific exemptions. The Ministry of Industry and Commerce administers applications under the instrument. Obtain current specialist advice before targeting foreign investors, structuring an acquisition or representing that a particular buyer qualifies.

A practical saleability review

Before meeting prospective investors or changing company records, complete a prioritised readiness review:

• Reconcile financial results to bank statements, invoices, payroll and tax records.

• Confirm that the share register, share certificates, articles and director records agree.

• Check annual returns, Form CR16 beneficial ownership declarations and registered-office details.

• Prepare sale documentation and capital gains tax evidence for ZIMRA processing.

• Test foreign exchange approval and reserved-sector restrictions if a non-resident buyer may participate.

• Identify contracts, licences and customer relationships that depend personally on the founder.

Rank findings by whether they threaten ownership title, deal completion, continuing operations or reported earnings. A historical invoice gap is not equivalent to unresolved legal ownership. Resolve the matters that could prevent a transaction first.

Frequently Asked Questions

Can a profitable Zimbabwean company be difficult to sell?

Yes. Profit does not prove transferable ownership, compliance or reliable records. A buyer needs evidence that it can acquire the shares and continue the business without unexpected liabilities.

What documents make a company more sellable?

Core documents include the register of members, share certificates or title evidence, articles, annual returns, Form CR16, financial records, bank reconciliations, contracts, asset registers and tax documentation. The buyer’s sector and transaction structure will determine what else it requests.

When does a share transfer take effect?

The sale agreement sets commercial obligations, but the company must also deal with the transfer under its articles and the Act. For certificated shares, the transfer instrument, title evidence and entry of the buyer in the register of members are key steps.

Can a foreign investor buy a Zimbabwean business?

Foreign acquisition may be possible, but resident-to-non-resident share transfers require prior RBZ approval through an authorised dealer under the March 2026 guidance. The buyer’s activity may also trigger reserved-sector requirements, permitted exemptions or other sector-specific rules.

A genuinely sellable company makes its earnings, ownership, legal compliance and operational continuity easy to verify. Speak with M&J Africa about company-secretarial readiness, governance, financial reporting and preparing a realistic business-sale process.