Introduction
It is common for a foreign based head office or parent of a local company to seek legal opinions from a local law firm or notary public for different purposes. Some of the purposes may include:
- To support a year- end financial audit.
- As due diligence for raising finance, listing on a foreign stock exchange or for mergers and acquisitions.
Contents of foreign or overseas legal opinion
A typical legal opinion may include the following:
- Recipient of the legal opinion
- The local company being reported on.
- Reporting period.
- Methodology used by the law firm or notary public.
- Corporate information of the local company.
- Required licences or permits.
- Assets of the company.
- Risk and insurance on assets.
- Operations of the company.
- Compliance with local laws on for example operations, exchange control, taxation, employment.
- Material contracts
- Pending legal matters.
- Contingent liabilities.
- The legal opinion
- Sign off by the law firm or notary public.
Recipient of the audit opinion
The report is usually addressed to the foreign based head office or shareholders who would have requested the legal opinion.
Local company being reported on
The local company’s full legal name, trading name, ought to be correctly stated.
Reporting period
The reporting period ought to be stated clearly, for example whether it is one financial year or longer as such legal opinions may be done from time to time.
Methodology
The methodology followed by the legal practitioner or law firm has to be stated for the recipient or user of the legal opinion to understand the nature and scope of work done and the evidence gathered for purposes of the legal opinion.
Corporate information of the local company
This includes information about the local company such as full legal name, trading name, date of incorporation, registration number, legal nature of the entity, registered office, type of business, current operations, share capital and shareholding, directors of the company, secretary, senior executive, public officer, legal practitioners, etc.
Required licences and permits
This depends with the nature of the entity and its business. I have done some legal opinions for some mining companies. Some of the licences required include the following:
- Company certificate of incorporation for the company.
- Zimbabwe Investment Development (ZIDA) licence(s).
- Visas for expatriates, issued by Immigration
- Product export permits
- Tax registration and tax clearances.
- Health and safety
- Environmental Management Agency (EMA) certificates such as Environmental Impact Assessment certificates.
- For mines, permits for explosives and hazardous chemicals, water rights, affluent disposals, etc.
- Siting of works, etc.
- Annual inspection certificates for claims.
Assets of the company
These may include the following:
- Property, plant and equipment (PPE).
- Mining rights / assets.
On mining assets / rights what is usually reported on include the following:
- Special Grants, mining claims, registered owner of claims, date of last inspection certificate and when next inspection will be done.
- Any mining leases, etc.
Operations of the company
The legal practitioner usually reports on the operations of the company, particularly the main business of the company and any material changes or developments during the period under review.
Compliance with local laws
This is a key part of the audit opinion. The legal practitioner usually reports on:
- Compliance with operational licences, permits, standards, including industry standards and National Social Security Authority (NSSA) regulations. Any accidents including fatalities, any penalties by regulatory authorities.
- As regards movement of funds, compliance with local laws such as exchange control, anti- money laundering.
- Compliance with tax laws, existence of tax clearance certificates, any penalties by the tax authority.
- As regards employment, whether the company was compliant with labour laws.
Material contracts
The legal practitioner may also report on material contracts with suppliers and customers as these usually have a material bearing on the company.
Pending Court cases
This may involve reviewing and reporting on pending court cases as reported by management or the legal practitioner may independently verify with Courts.
Contingent liabilities
These are reported in case they materialise. They may also be reported by external auditors of financial statements of the company.
The legal opinion
A typical legal opinion usually states the following:
- If the company complies with local laws.
- Whether any legal issues are likely to have material adverse effects on the company.
Sign office
The legal opinion is normally signed off by the law firm or a notary public.
Conclusion
Legal opinions are usually requested by foreign based head offices of companies. They give reasonable assurance to the users. They also present opportunities for legal practitioners.
Disclaimer
This simplified article is for general information purposes only and does not constitute the writer’s professional advice.
Godknows (GK) Hofisi, LLB(UNISA), B.Acc(UZ), Hons B.Compt (UNISA), CA(Z), ACCA (Business Valuations) MBA(EBS, Heriot- Watt, UK) is the Managing Partner of Hofisi & Partners Commercial Attorneys, chartered accountant, insolvency practitioner, commercial arbitrator, registered tax accountant and advises on deals and transactions. He has extensive experience from industry and commerce and is a former World Bank staffer in the Resource Management Unit. He was recently appointed to sit on the Council of Estate Administrators in Zimbabwe. He writes in his personal capacity. He can be contacted on +263 772 246 900 or ghofisi@hofisilaw.com or gohofisi@gmail.com. Visit www//:hofisilaw.com for more articles.
