This chapter was prepared in accordance with the Commercial Code approved by Decree-Law No 1/2005 of 27 December 2005 (and changes introduced by Decree-Law No 2/2009 of 24 April 2009 and Decree-Law No 1/2018 of 4 May 2018). A new Commercial Code has been approved by Decree-Law No 1/2022 of 25 May, to be enforced on the coming 25 September.

The principal forms of corporate/business organisations in the Mozambique jurisdiction are:

• a private limited company, an Lda (Sociedade por Quotas); and
• a public limited company, an SA (Sociedade Anónima).

In an Lda, the share capital is divided into “quotas”. There is no separated title for a quota. The quota holding is evidenced by the document of incorporation of the Lda/the contract of transfer of company participation duly signed by parties.

In an SA, the share capital is divided into “shares” and represented by title shares.

We also have the following types of companies:

• a public company; and
• a participated company.

A public company is the entity exclusively owned by the state (Article 36 of Law No 3/2018 of 19 June that establishes the principles and rules applicable to the business sector of the state). The public company is created by Decree of Council of Ministers that approves the articles of association; the public company must adopt a name that reflects the purpose of its activity, followed by the words Empresa Pública or the initials E.P. (Article 37 of Law No 3/2018 of 19 June that establishes the principles and rules applicable to the business sector of the state).

Under the terms of Article 53 of Law No 3/2018 of 19 June, a company incorporated under the terms of the Commercial Code and taking the form of an Lda or an SA is considered a state-participated company, in the following cases:

• exclusively state-participated, when the state is the sole shareholder;
• majority state-participated, when the state owns more than 50% of the share of capital;
• minority state-participated, when the state owns less than 50% of the share of capital.

The principal sources of corporate governance requirements for companies in the Mozambique jurisdiction are:

• the Commercial Code, comprised in Decree Law No 1/2005, dated 27 December 2005 – the changes were introduced by Decree Law No 2/2009, dated 24 April 2009 and Decree Law No 1/2018, dated 4 May 2018; and
• articles of association of the company.

The corporate governance requirements are essentially to seek efficiency and transparency in the management of the company. However, the mandatory corporate governance requirements which exist for companies with shares that are publicly traded (ie, an SA), are as follows.

Right to Information

The right to information is established in paragraph c) of No 1 of Article 104 and in Article 122, both of the Commercial Code. The exercise of the shareholders' rights depends on the accuracy and transparency of the information.

Structure of the Administration and Supervisory Bodies of the Company

The company is managed and represented by a Board of Directors made up of an odd number of members, who may or may not be shareholders of the company, or by a sole director as long as the company's capital does not exceed MZN500,000 (No 1 of Article 418 and Article 419, both of the Commercial Code).

The supervision of the company is the responsibility of the Auditing Board or a single auditor.

The Auditing Board is composed of three effective members, the articles of association can increase the number to five (Nos 1 and 2 of Article 436 of the Commercial Code).

The Various Shareholders' Rights

In addition to the right to information referred to above, shareholders are entitled to share in profits, to participate in General Meetings of Shareholders (No 1 of Article 104, and Article 414, both of the Commercial Code), to elect and dismiss members of the corporate bodies (paragraph d), No 1 of Article 129 of the Commercial Code), to vote (Article 417 of the Commercial Code). However, articles of association of the company may suppress the exercise of voting rights of preferred shares, except with regard to matters concerning the approval of the management report, accounting statements and profit and loss accounts for each financial year (No 1 of Article 354 of the Commercial Code).

Duty of Diligence

The directors of a company shall act with the diligence of a judicious and co-ordinated manager, in the interest of the company, taking into account the interests of shareholders and employees (No 1 of Article 150 of the Commercial Code).

Liability of Directors

Whenever the acts or omissions of the directors do not comply with their legal or statutory duties and consequently cause damage, the directors are liable before the company (Article 160 of the Commercial Code of Mozambique). Furthermore, the directors are also liable before creditors of the company should the social assets become insufficient to satisfy the credits of creditors (Article 164 of the Commercial Code of Mozambique). Lastly, the directors are also liable before shareholder and third parties (Article 165 of the Commercial Code of Mozambique).

Over and above those issues addressed below, other key or topical corporate governance rules and requirements to be drawn out in the Mozambican jurisdiction, are as follows.

Environmental

This refers to the practices of the company or entity aimed at the environment. Here, topics include: reduction of pollutant gases emission (eg, carbon, methane); rational use of water; reforestation; reduction of natural resources consumption; choice of equipment for business operation; change in product packaging, decreasing the use of plastic and using recycled and biodegradable products; and circular economy.

Social

This is related to social responsibility and the impact of companies and entities in favour of the community and society. Primarily, it refers to topics such as: health and safety at work; fair wages; diversity of team members; monitoring of the supply chain; employee engagement and motivation; training, qualification and development programmes for employees; preparation of programmes aimed at workers' physical and mental health; promotion of social actions to support the causes defended by the company; customer satisfaction; social investment; and relationship with the local community.

Governance

This is linked to the policies, processes, strategies and administration guidelines of the companies and entities. It includes, for example: corporate conduct; choice of partners and suppliers that also meet ESG criteria; respect for the rights of consumers, suppliers and investors; data transparency; transparent financial and accounting reports; and risk management. It is closely linked to the other two terms (social and environmental), as it is the one that dictates, guides, supervises and reports sustainable practices (or not).

The key issues and requirements for companies in relation to reporting on ESG issues are as follows.

Environmental

What is an organisation doing to be a guardian of the environment? The environmental umbrella covers:

• how a company is combating climate change;
• what a company is doing to reduce carbon emissions;
• how a company is preserving biodiversity, improving air and water quality, combating deforestation or managing its solid and liquid waste responsibly;
• how a company is using resources responsibly.

Social

What is an organisation doing to improve lives? The social umbrella covers:

• how a company nurtures its people and workplace;
• gender inclusion initiatives;
• data protection and privacy;
• community involvement;
• human rights and labour laws.

Governance

What is an organisation doing to stay ahead of corruption and ensure its investments remain sustainable into the future? The governance umbrella encompasses: 

• a company's internal controls; 
• policies, principles and procedures governing:
1. leadership;
2. composition of the board of directors and its independence;
3. executive remuneration;
4. internal and external audits;
5. shareholder rights;
6. contributions, discrimination, harassment and corruption-reporting policies and programmes;
7. transparency and anti-corruption policies.

The body involved in the governance and management of a company is the Administration Body, which is responsible for managing and representing the company (No 1 of Article 151 of the Commercial Code).

In an Lda, the company may be managed by one or more directors or by a Board of Directors composed of at least three members (No 1 of Article 320 and No 3 of Article 323, both of the Commercial Code).

In an SA, the company can be managed by a sole director, who can be a person outside the company, provided that the share capital does not exceed MZN500,000 (Article 419 of the Commercial Code) or by a Board of Directors composed by an odd number of members, who can be shareholders of the company or not (No 1 of Article 418 of the Commercial Code).

In general terms the administration of companies is responsible for managing and representing the company (No 1 of Article 151 of the Commercial Code).

In an SA, in addition to the above-mentioned competence, the Board of Directors is responsible for managing the activities of the company, binding the company and representing it in and out of court, subject to the resolutions of the shareholders or the interventions of the Auditing Board or single auditor only in those cases where the law or articles of association so establish (No 1 of Article 431 of the Commercial Code).

Under the terms of No 2 of Article 431 of the Commercial Code, it is also incumbent upon the Board of Directors to deliberate on any company management matter, namely:

• choosing its chairman, in cases where the articles of association so stipulate;
• co-optation of directors;
• requesting the convening of General Meetings of Shareholders;
• annual reports and accounts;
• to acquire, dispose of and encumber real estate;
• provision of bonds and personal or real guarantees by the company;
• opening or closing of establishments;
• changes in the organisation of the company;
• extensions or reductions of the activities of the company;
• projects for merger, demerger or transformation of the company;
• establishment or cessation of co-operation with other companies;
• changing the registered office, increasing the capital and issuing bonds, under the terms prescribed in the articles of association;
• any other matter on which a director requests a decision by the Board of Directors.

The articles of association may set out other competences of the Administration Body.

The Administration Body takes decisions through Administration/Board of Directors meetings.

In an Lda, the Board of Directors meets whenever convened by any director and the respective resolutions of any meeting must be drawn up and signed by the directors present in the minute book or on a loose sheet or in separate documents. In the latter case, the signatures of the directors present must be notarised (No 8 of Article 323 of the Commercial Code).

The articles of association may set out other formalities for convening meetings of the Administrative Body.

In an SA, the meetings of the Board of Directors are convened by the chairman of the Board of Directors or by two other directors and must meet at least once every month, unless the articles of association provide otherwise (No 1 of Article 434 of the Commercial Code).

Minutes of each meeting must be drawn up in the respective book, signed by all directors that attended the meeting (No 5 of Article 434 of the Commercial Code).

The articles of association may set out other formalities for convening meetings of the Administrative Body.

In an Lda, the Board of Directors is composed of at least three members (No 3 of Article 323 of the Commercial Code).

In an SA, the Board of Directors is composed of an odd number of members (No 1 of Article 418 of the Commercial Code).

The roles of the members of the Board of Directors of an Lda and an SA are set out in 3.2 Decisions Made by Particular Bodies.

Directors may be natural persons with full legal capacity and legal persons (No 1 of Article 149 of the Commercial Code), and must be morally or technically fit, under the penalty of the shareholders who fraudulently approved the appointment of an unsuitable director for the losses caused to the company and to the other shareholders (paragraph a) of No 3 and No 2 of Article 125 of the Commercial Code).

If a legal person is appointed as director, it must appoint a natural person to exercise the position in its representation; the legal person is jointly and severally liable with the appointed person for the acts of the latter (No 2 of Article 149 of the Commercial Code).

In an SA, persons disqualified from any position in the administration of the company are those disqualified by special law, including those regulating the capital market in charge of the Central Bank, or convicted of a crime of bankruptcy, prevarication, bribery, graft, embezzlement, against the economy and the rights of the consumer, the public faith, property and the environment, or even of a criminal sentence that prohibits, even temporarily, access to public office (Article 421 of the Commercial Code).

The directors of a company are appointed and removed by way of a General Meeting of shareholders (paragraph d) of No 1 of Article 129 of the Commercial Code).

Directors may also be appointed by way of the articles of association (No 3 of Article 149 of the Commercial Code).

Independent directors are non-executive directors of a company who help the company to improve its credibility and governance standards. They have no relationship with the company that could affect their independence of analysis or decision-making.

The Commercial Code does not provide a definition of what constitutes an independent director, nor does it set out rules and requirements regarding director independence. However, a director may not vote, either personally or through a representative, nor represent another director in a vote, whenever, in relation to the matter object of the resolution, such a director finds themself in conflict of interests with the company.

In general terms, the legal duties of directors, with reference to Article 150 of the Commercial Code, are as follows:

• to act with the diligence of a judicious and co-ordinated manager, in the interests of the company, taking into account the interests of the shareholders and employees;
• directors shall not, without the prior express consent of the shareholders, undertake, for their own account or on behalf of a third party, a commercial activity competing with the activity covered by the business purpose of the company, unless they have already undertaken such activity prior to their appointment to the post, and such activity is known to all shareholders.

Directors shall be prohibited from:

• entering into contract with the company, obtaining guarantees from the company and its obligations, receiving payments on account of personal obligations contracted or receiving advances of more than one month's monthly remuneration;
• borrowing or using company resources or assets for their own benefit or for the benefit of third parties, without the prior authorisation of the General Meeting of Shareholders;
• receiving any personal advantage from third parties, in whatever form, due to the exercise of their office;
• performing acts of liberality at the company's expense, unless previously authorised by the General Meeting of Shareholders and this liberality is for the benefit of the company's employees or of the community where the company acts, in view of the company's social responsibilities;
• taking advantages, for themself or for others, at the expense of failing to take advantage of a business opportunity in the company's interest.

In an SA, under of the terms of No 1 of Article 433 of the Commercial Code, in addition to the duties set out above for company directors, the following constitute fiduciary legal duties of the director:

• to keep confidential any information which has not yet been duly confirmed and which, when disclosed to the market, may significantly influence the price of the company's securities, and to ensure that their subordinates do not disclose such information;
• to disclose through the press, on the day immediately following the fact, any resolution of the General Meeting of Shareholders or of the administrative bodies, a relevant fact which has occurred in their business and which may influence, in a ponderable manner, the decisions of investors in the securities market;
• not to use information obtained by virtue of their position to obtain, for themselves or others, advantages through the purchase and sale of securities;
• to establish an ethical relationship with minority shareholders in terms of political rights, namely the right to vote, the right of representation on company bodies and those relating to property rights;
• to ensure the protection of the interests of shareholders, employees and other company participating, within the attributions conferred on it by law and the articles of association, in order to achieve the business purpose of the company and social function;
• to increase the confidence of investors so as to attract more long-term capital;
• to optimise the use of capital by reducing its cost through more stable sources of financing.

The interests that the directors are required to take into account in the exercise of their functions are set out in 4.6 Legal Duties of Directors/Officers.

The directors of a company must act with the diligence of a judicious and co-ordinated manager, in the interest of the company, taking into account the interests of the shareholders and employees (No 1 of Article 150 of the Commercial Code).

The own company, shareholders, creditors of the company, and third parties, can enforce a breach of the legal or statutory duties of the directors.

The consequences of a breach are as follows.

Liability Action Proposed by the Company

The liability action to be proposed by the company depends on a resolution of the shareholders taken by simple majority and must be proposed within three months from the date on which the resolution was taken (No 1 of Article 162 of the Commercial Code).

Liability Action Proposed by Shareholders

A liability action in favour of the company may be proposed by a shareholder or shareholders with unlimited liability or who hold a participation in the capital of not less than 10%, if the company has not already initiated the respective action (No 1 Article 163 of the Commercial Code).

Whenever the company or the shareholders have not done so, the creditors of the company can exercise the right to compensation that the company holds, provided that there is a just fear of relevant reduction of the patrimonial guarantee (No 2 of Article 164 of the Commercial Code).

Dissolution

The company can be dissolved, to the extent that any creditor has legitimacy to request the court to declare the dissolution of the company based on any fact that determines it, even if there has been a resolution of the shareholders not to recognise the dissolution (No 2 of Article 229 of the Commercial Code).

Insolvency

If, due to a breach of legal or statutory duties by the directors, the financial situation of the company is not good, the insolvency of the company may be decreed, and the company itself, the shareholders of the company, and any creditor have legitimacy to request the insolvency of the company (No 1 of Article 93 of the Decree Law No 1/2013 of 04 July approving the legal regime of insolvency and recovery of businesses).

The bases for claims or enforcement against directors are set out in 4.8 Consequences and Enforcement of Breach of Directors’ Duties.

As a rule, directors are not liable with their personal assets for the debts of the company; the assets of the company are liable for the debts of the company (Article 286.2 of the Commercial Code).

The liability of directors may be limited when it is guaranteed or in cases of civil liability insurance

In an SA, the liability of the directors must be guaranteed if the articles of association so determine (No 1 of Article 424 of the Commercial Code).

In general terms, it is the responsibility of the General Meeting of Shareholders, unless otherwise provided for in the articles of association, to establish the remuneration of the corporate bodies, assigning this power to a committee of which the members of the corporate bodies are not members (paragraph a) No 2 of Article 129 of the Commercial Code).

In an Lda, unless otherwise provided for in the articles of association, directors have the right to receive remuneration to be established by resolution of the General Meeting of Shareholders, and any shareholder may request in court, in a judicial investigation process, a reduction of the directors' remuneration when it is disproportionate to the services rendered or to the company's situation (Nos 1 and 2 of Article 325 of the Commercial Code).

Unless the articles of association provide otherwise, the remuneration of directors cannot consist, totally or partially, in share in the company's profits (No 3 of article 325 of the Commercial Code).

In an SA, the articles of association or, in its absence, the General Meeting of Shareholders or a Shareholders' Committee elected by it, is responsible for fixing the remuneration of the directors (No 2 of Article 424 of the Commercial Code).

The company should not make public disclosures in relation to the remuneration payable to directors.

The company has a separate legal personality, and its assets are totally distinct from its shareholders, since the assets of the company belong only to the company and not to the shareholders (No 1 of Article 286 of the Commercial Code). In principle the personal assets of shareholders are not liable for the company's debts (No 3 Article 286 of the Commercial Code). However, pursuant to Article 87 of the Commercial Code, the legal personality of the company will be disregarded, and the shareholders will be held liable when they act intentionally or culpably, in the following cases:

• the company is used as an instrument of fraud and abuse of economic power;
• there is a violation of the essential rights of the consumer and the environment;
• in any case where the legal personality is used to harm the interests of the shareholder, the company's employee, a third party, the state and the community where the company operates; and
• in the event of bankruptcy of the company of the same group of companies when defined in special legislation.

A shareholders has the right to be appointed as a member of the Corporate Body of the company.

As stated in 4.4 Appointment and Removal of Directors/Officers, the appointment of members of company bodies is made exclusively at the General Meeting of Shareholders. At the General Meeting of Shareholders, any shareholder may suggest and propose a name as a member of the Corporate Body. The appointment of the concrete name proposed depends, however, on the vote of the shareholders present at the General Meeting of Shareholders.       

The shareholders whose name has been proposed to be a director cannot vote, either through a representative or by representing another shareholder because they are in a situation of conflict of interest (Article 131 of the Commercial Code).

In general terms, General Meetings of Shareholders are convened by the chairman of the board of the General Meeting of Shareholders, with the exception of the notice for the first General Meeting of Shareholders which is incumbent on the shareholders (No 1 of Article 133 of the Commercial Code).

However, if the chairman of the board of the General Meeting of Shareholders does not call a General Meeting of Shareholders when they should legally do so, the Administration, or the Auditing Board or the single auditor or the shareholders who requested it may call it directly (No 2 of Article 133 of the Commercial Code). The convening of the General Meeting of Shareholders must comply with the formalities legally defined for convening it, as provided in Article 134 of the Commercial Code.

In an Lda, the calling of General Meetings of Shareholders is the responsibility of any of the directors and must be done by means of a letter, sent at least 15 days in advance, unless the law or articles of association require other formalities or establish a greater period of time (No 3 of Article 317 of the Commercial Code).

The resolutions of the General Meetings of Shareholders must be signed by all shareholders that participated in them (No 5 of Article 317 of the Commercial Code).

In an SA, General Meetings of Shareholders are convened in the general terms as mentioned above by the chairman of the board of the General Meeting of Shareholders. If the chairman of the board does not convene a General Meeting of Shareholders, when they should legally do so, the Administration, or the Auditing Board or the single auditor or the shareholders that requested it may convene it directly (No 2 of Article 133 of the Commercial Code).

The convening notice must be published at least 30 days prior to the General Meeting of Shareholders (No 1 of Article 416 of the Commercial Code).

The resolutions of General Meetings of Shareholders must be signed by the Chairman and Secretary of the Board of the General Meeting of Shareholders (paragraph g), No 2 of Article 147 of the Commercial Code).

The articles of association may require other formalities and may permit the substitution of publications by letters addressed to shareholders with the same advance notice, when all of the company's shares are nominative (No 1 of Article 416 of the Commercial Code).

Mozambican law provides for the right of shareholders to challenge the resolutions of general meetings (Article 144 of the Commercial Code).

As mentioned in 4.8 Consequences and Enforcement of Breach of Directors’ Duties, there is the liability action brought by shareholders against directors (No 1 of Article 163 of the Commercial Code).

The shareholder can bring an action against the company for nullity or annulment of corporate resolutions (Article 144 and Article 145, both of the Commercial Code).

The shareholder can bring against the company a precautionary measure to suspend corporate resolutions (Article 146 of the Commercial Code and Article 396 of the Code of Civil Procedure).

There are no disclosure obligations for shareholders. Other obligations for shareholders in publicly traded companies are as follows:

• to subscribe and pay up the share capital (Article 336 of the Commercial Code);
• to enter into the company with assets liable to be pledged (paragraph a) of Article 107 of the Commercial Code);
• to participate in losses (paragraph b) of Article 107 of the Commercial Code) – in accordance with the articles of association, shareholders may be required to make shareholder loans or ancillary payments (Article 119 A and Article 119 D, both of the Commercial Code);
• the shareholders resident or domiciled abroad must communicate to the company the complete identification of the person who will receive, in their name, the company's communications, as well as notices and citations regarding administrative and judicial proceedings, to which, in their capacity as shareholder, they are a party (No 1 of Article 410 of the Commercial Code).

In general terms, according with No 1 of Article 132 of the Commercial Code, the General Meeting of Shareholders must meet ordinarily within the three months immediately following the end of each financial year in order to:

• deliberate on the balance sheet and management report for the financial year;
• deliberate on the application of results;
• elect the directors and the members of the supervisory board or the single auditor for vacancies that occur in these bodies.

In an SA, under the terms of No 1 of Article 415 of the Commercial Code, up to one month before the date of the ordinary General Meeting of Shareholders, the directors must make available to the shareholders the following documents:

• a management report, containing the business and main facts that occurred in the financial year ended;
• a copy of the accounting statements, accompanied by the opinion of independent auditors and of the supervisory board, if applicable.

The shareholders are informed that the documents are available to them at the registered office of the company, through the publication of a notice in a widely read daily newspaper, up to one month prior to the date designated for the holding of the meeting (Article 415.2 of the Commercial Code).

Independently of the shareholders having become aware of the content of the documents, it is essential that they are published in a widely circulated daily newspaper at least ten days prior to the date set for the Ordinary General Meeting of Shareholders (No 3 of Article 415 of the Commercial Code).

In the Mozambican legal system, there are no requirements for companies to disclose their corporate governance arrangements either in these reports or elsewhere.

The filings that a company required to make at the companies registry in Mozambique are as follows:

• to keep under its custody and responsibility the bookkeeping and other documents (books, correspondence, etc) corresponding to the business activity, duly ordered, for ten years from the last entry made in the books (No 1 of Article 52 of the Commercial Code); and
• to keep in good order, for a period of ten years, a file of tax documentation relating to each financial year (No 1 of Article 46 of the Regulations of the Corporate Income Tax Code).

The above-mentioned documents are not available to the public. However, the certificate of the company, the document submitted to the Company Registry Office for the incorporation of the company, as well as the documents that served as the basis for the registration of other facts subject to registration are of public character in accordance with Article 111 of the Code of Registration of Legal Entities (Decree Law No 1/2006 of 3 May).

The Company may appoint an external auditor in relation to its financial statements (No 5 of Article 154 of the Commercial Code), or appoint an Auditing Board, composed of three or five members, the articles of association may determine that they be replaced by a single auditor (No 1 of Article 154 of the Commercial Code).

The main requirements governing the relationship between the company and the auditor are as follows:

• one member of the Auditing Board or the single auditor must be an auditor or a firm of auditors and the other members of the Auditing Board must be natural persons with full legal capacity (Nos 2 and 4 of Article 154 of the Commercial Code);
• the firm of auditors that is part of the Auditing Board must appoint a shareholder or an employee of the firm, in any case an auditor, to exercise the functions entrusted to them in the company;
• under the terms of No 1 of Article 155 of the Commercial Code, the following shall not be members of the Auditing Board or a single auditor:
1. the directors of the company;
2. any employee of the company or any person receiving from the company any remuneration other than for the exercise of duties as a member of the Auditing Board or a single auditor;
3. the spouses, relatives or kin, up to the third degree, inclusive, of the persons mentioned in the foregoing subparagraphs;
• the auditor or auditing firm that is the Auditing Board or single auditor member may not be a shareholder of the company (No 2 of Article 155 of the Commercial Code).

Mozambican legislation does not lay down requirements for directors in relation to risk management and internal controls in the company, however directors must act in accordance with the duties provided for in 4.6 Legal Duties of Directors/Officers, especially in regard to the duty of diligence, insofar as the internal control and risk management systems constitute a sensitive point in the entire management of the company, given that, whilst serving as mechanisms without which it would not be possible to exercise vigilance over the day-to-day running of the company, they are also sine qua non requirements for a reasonable decision-making process.

These systems are therefore of vital importance for the two aspects encompassed by the duty of diligence: the aspect related to the duty to make informed decisions and the aspect related to the general duty of vigilance. The duty of diligence is enshrined in No 1 of Article 150 of the Commercial Code and establishes that the directors of a company must act with the diligence of a judicious and co-ordinated manager, in the interest of the company, taking into account the interests of the shareholders and employees.