COMPANY FORMATION PROCEDURES IN TANZANIA

PROCEDURES OF FORMING A COMPANY IN TANZANIA

Any person wishing to incorporate a company in Tanzania may wish to follow the following procedure stipulated herein below.

A.    CHOICE OF TYPE

The first thing to consider in formation of a company is choice of type. The promoters will first have to make up their minds which of the several types of Registered Company they wish to form, since this may make a difference to the number and types of documents required, and will certainly affect their content.

First, they must choose between a limited and an unlimited company. The disadvantage of the latter is that its members will ultimately be personally liable for its debts and for this reason they are likely to be wary of it if the company intends to trade, see section 3 (2) (c) of Cap 212 R.E 2002.

According to section 10 (1) of Cap. 212, a company having an unlimited liability, the articles must state the number of members with which the company proposes to be registered and, if the company has a share capital, the amount of share capital with which the company proposes to be registered.

Where an unlimited company or a company limited by guarantee has increased the number of its members beyond the registered number, it shall, within fourteen (14) days after the increase was resolved on or took place, give to the Registrar notice of the increase, and the Registrar shall record the increase. If default is made in complying with this subsection, the company and every officer of the company who is in default shall be liable to a default fine. See section 10(3) Cap. 212 R.E. 2002.

v If they decide upon a limited company they must then make up their minds whether it is to be limited by shares or by guarantee. This is to be decided by them by the purpose which the company is to perform. Only if it is to be a non- profit making concern are they likely to form a guarantee company which is especially suited to a body of that type.

A Company limited by Share is a company having the liability of its members limited by the memorandum to the amount, if any, unpaid on the shares re- spectively held by them while a company having the liability of its members limited by the memorandum to such amount as the members may respectively thereby undertake to contribute to the assets of the company in the event of its being wound up a company limited by guarantee, see section 3(1) & (2) of Cap 212.

Overlapping these distinctions, but closely bound up with them, is the further point of whether or not the company is to be limited by share capital. If, as in most probable, the company is to be limited by shares this question does not arise. Likewise if it is to be limited by guarantee. But if the company is unlimited it may or may not have its capital divided by shares. Once more, the decision is dependent on the company’s purpose; if the company is intending to make and distribute profits a share capital will be appropriate.

They will further have to make up their minds whether the company is to be public or private company.  Public and private company fulfil different economic purposes; the former to raise capital from the public to run the corporate enterprise, the latter to confer a separate legal personality on the business of a single trader or a partnership.

Once again, therefore, the choice will in practice be clear-cut and normally it will be to form a private company.

The incorporator may have the ultimate ambition of going public in this regard they must form a public company. The Memorandum must state that it is a public company and special requirements as to its registration will have to be complied with see section 3(3), 4, 15, 114 of Cap. 212 R.E. 2002

As provided under section 114, where a public company having a share capital has issued an offer document inviting the public to subscribe for its shares, the company shall not commence any business or exercise any borrowing powers unless it has complied with the requirements as included from time to time in regulations made by the Minister for the time being re- possible for finance, or the Capital Markets and Securities Authority or such other authority as may be designated for the purpose.

If any public company commences business or exercises borrow-ing powers in contravention of this section, every person who is responsible for the contravention shall, without prejudice to any other liability, be liable to a default fine.

Theoretically therefore, the incorporators will have a choice of five types:

i.                   A public company limited by shares

ii.                 A private company limited by shares

iii.              A private company limited by guarantee and without a share capital

iv.              A private unlimited company having a share capital

v.                 A private unlimited company not having a share capital.

In practice the choice, however is likely to be between (ii) and (iii) and will be determined by them according to whether they want the company to trade for the profit of the members or to perform some charitable or quasi- charitable purpose.

B.   NAME OF A COMPANY

The Second thing, the incorporator must next decide on a suitable name. The Act requires the name to be started in the memorandum of association, on a company seal, on a business letters, negotiatable instruments and order forms and must be affixed outside every office or place of business.

Section 30 of Cap. 212 R.E. 2002, the registrar may, on written application (here application is for name clearance) reserve a name pending registration of a company or a change of name by a company. Any such reservation shall remain in force for a period of thirty days or such longer period not exceeding sixty days, as the registrar may, for special reasons, allow, and during such period no other company shall be entitled to be registered with that name.

NOTE: Currently, BRELA established ONLINE BUSINESS NAMES REGISTRATION SYSTEM including company name clearance and official search. Person wishing to register a company must visit BRELA website and establish OBNRS account. After establish account then provide email address/mobile phone number and your OBRS password to in order to login in into the OBRS system.

The next step is to type the intended name of the company and wait for two hours. You will be notified as to whether you can proceed or not.

Before establishment of Online Business Names Registration System, a person wishing to establish a company was supposed to apply via Form 1 as shown here in below

                                      THE UNITED REPUBLIC OF TANZANIA                Form 1

JAMHURI YA MUUNGANO YA TANZANIA

BUSINESS NAME (REGISTRATION) ACT (Cap.213)

(SHERIA YA KUANDIKISHA MAJINA YA BIHASHARA (Sura 213)

                             Statement of Particulars in case of a Corporation

                                                (Fomu Kama Mmiliki ni Shina/ Kamuni)

NOTE (Angalizo) This statement must be signed by a Director or Secretary of the Corporation (Taarifa hii isaiiniwe na Mkurugenzi au Katibu wa Shirika/Kampuni)

         

1.	Business Name to be registered (Jina la Bihashara linalopendekezwa)
2.	Nature of Business  (Biashara utakayokuwa unafanya)
3.	(a) Postal address     (anwani ya Posta)
	(b) Business address      ( Mahali ilipo biashara)	Number (Namba)		Street(Mtaa)			District(Wilaya)		Region (Mkoa)
	(c) Phone numbers( Namba za simu)
	(d) Email (Barua pepe)
4.	Corporation Name Jina la Kampuni
6.	Situation of the Registered or principal office of the Corporation (Anwani ya mahali ofisi za Shilika/Kampuni zilipo	Number (Namba)	Street( Mtaa)		District(Wilaya)			Region( Mkoa)
7.	Other Business of the Corporation (if any) Shirika/Kampuni linafanya shughuli/kazi gani nyingine?)
8.	Have you ever used this Business name before? (Je jina hili la Biashara limeshaanza kutumkika?)	a.       YES ( state the date that you have started using it) NDIYO (andika tarehe uliyoanza kulitumia)
		b.      NO (write the date that you are applying) HAPANA( andika tarehe ya kuletwa ombi hili)
9	Application date ( Tarehe ya kuleta ombi hili)
10	Signature, Seal/Stamp of the Corporation (Saini na Mhuri wa Shirika/Kampuni)

The use of general terms e.g wholesale and retail must be avoided. Particulars sufficient to identify the type of business carried on must be given (Epuka amtumizi ya maneno ya jumla kama vile “Biashara ya jumla’’

Then, the registry clears establish:-

1.     The availability or non availability of the applied name

2.     Desirability of such name.

As provided by section 9 of the Business Names (Registration) Act Cap. 213 Registrar shall refuse to register any firm, individual or corporation carrying on business under a business name–

1.     which contains any word, which in the opinion of the Registrar, is likely to  mislead the public as to nationality, race or religion of the persons by whom the  business is wholly or mainly owned or controlled;

2.     which includes any of the words "Imperial", "Royal", "Empire",

"Commonwealth", "Government", "Municipal", or any other word, in such a context as, in the opinion of the Registrar, imports or suggests that the business enjoys the patronage of Her Majesty or of any member of the Royal Family or as to import any connection with or recognition by the Government of any part of Her Majesty's dominions or a local authority;

3.     which includes the words "building society" or "co-operative" or their equivalent in any other language or any abbreviation thereof;

4.      which is identical with or is similar to that under which any firm, individual or corporation is registered under this Act, or under the Companies Act or under the Co-operative Societies Act if in the opinion of the Registrar such  registration would be likely to mislead the public.

Note: Private limited company must contain the word limited at the end of its name. Section 32 of Cap. 212 provide an exemption in relation to a company limited by guarantee. The object of it is to promoting commerce, art, science, education, religion, charity or any other useful or social object, and intends to apply its profits, if any, or other income in promoting its objects, and to prohibit the payment of any dividend to its members.

Section 3 of Cap 212, any two or more persons, associated for any lawful purpose may, by subscribing their names to a memorandum of association and otherwise complying with the requirements of this Act in respect of registration, form an incorporated company, with or without limited liability

C.   The MEMARTS

The next step is to prepare the memorandum and articles. The Companies Act provides that a regards each of the various types of companies, these documents shall be in the form specified by regulation.

The present Regulations contain five Tables( A, B, C, D & E) of which table A, prescribing model articles for a company (whether public or private) limited by shares, is the most important and differs in its effect from the others. Such a company does not have to register articles and if does not, Table A becomes its articles. Even if it does register articles, in so far as these do not exclude or modify Table A, its provision will apply. Section 11(2) of Cap.212 provides

In the case of a company limited by shares and registered after the commencement of this Act, if articles are not registered, or, if articles are registered, in so far as the articles do not exclude or modify the regulations contained in Table A, Table A shall, so far as applicable, constitute the articles of the company in the same manner and to the same extent as if articles in the form of Table A had been duly registered

In other hands, it, and any other type of company (which will have to register articles) may, in them, adopt by reference any provisions of Table A, see section 11(1) of Cap.212 R.E 2002.

In contrast, the model article in Table C (relating to a company limited by Guarantee without a share capital), Table D (relating to a company limited by Guarantee and with a share capital) and Table E (relating to an unlimited company having a share capital) are merely models which cannot be adopted by reference and will not apply for fill lacunae in the registered articles.  Tables C and D also include model forms of memorandum for the types of company to which they relate as does Table B (for a public limited company).

Before preparing the memorandum and articles of association, the draftsmen will need to obtain, from the promoters, information on matters such as the followings:

1.     The nature of the business- this will be required in connection with the objects clauses of the memorandum unless the promoters are content to adopt the general purpose formula in section 7

2.     The amount of nominal capital and the denomination of the shares into which it is to be divided

3.     Any other special requirements which deviate from the normal as exemplified by the appropriate Tables.

How to Adopt Table A

The main question for consideration is the extent to which Table A is to be adopted. The option of not registering any articles, which is permissible when the company is limited by shares, is rarely chosen because most such companies on initial registration will be private ones and the incorporators will wish to include the sort of restrictions on freedom to transfer shares which were a pre- condition for qualifying as a private company.

The restrictions in Table A are limited to giving the directors a right to refuse to register a transfer when 1. The shares are partly paid or 2. The company has lien upon them. See Table A art.22 provides

“The director may refuse to register the transfer of a share which is not fully paid to a person of whom they do not approve and they may refuse to register the transfer of a share on which the company has a lien’’.

When the incorporation is a partnership or family business what will be wanted is an absolute discretion to reject transfers and probably, provisions requiring the shares to be offered to the existing shareholders if a member wishes to sell. A common practice is to register articles which substitute alternative provisions for certain Table A provisions but adopt the rest. This reduces the length of the documents and the printing costs, see section 9 of Cap. 212 R.E 2002.

D.   LODGMENT OF DOCUMENTS

The final step is to lodge certain documents at the companies’ Registry. The First of these documents- the Memorandum and articles- must each have been signed by each subscriber in the presence of at least one attesting witness, See section 5(1) Cap.212 R.E 2002.

 If the company as share capital each subscriber to the memorandum must write opposite his name the number of shares he takes and must not take less than one. On lodging the memorandum and articles of association they must be accompanied by two documents in the forms prescribed i.e. Statement of Particulars of the Directors and Secretary and Situation of Registered office and the Declaration of Compliance. The first of these is required by section 14 of Cap 212 R.E 2002. The relevant form is Form. 14 a.

The Second of the two documents, the Declaration of Compliance, is required by section 14 and consist of a statutory declaration by an advocate of the High Court engaged in the formation of the company, or by a person named in the articles as a director or secretary of the company, of compliance with all or any of the said requirements shall be produced to the registrar, and the registrar may accept such a declaration as sufficient evidence of compliance. The relevant form is Form. 14b

Normally these will be the only documents required and all that will be needed in addition is payment of the registration fees. All payments are payable to the Registrar of Companies against which receipts are issued. Applicants are advised to desist from making payments for which no receipts are issued. Any demands or request by any officer in the Registry for money which is not within the payment schedule stated, should forthwith be reported to phone no. 2180113, 2181344, and 2180141 for necessary action.

Currently the fees are as shown below

SNO	FEE DESCRIPTION	FEE AMOUNT
1	Company whose nominal share capital is:
	- More than Tshs. 20,000/= but not more than Tshs. 1,000,000/=	TSHS 95,000 /=
	- More than Tshs. 1,000,000/= but not more than Tshs. 5,000,000/=	TSHS 175,000 /=
	- More than Tshs. 5,000,000/= but not more than Tshs. 20,000,000/=	TSHS 260,000 /=
	- More than Tshs. 20,000,000/= but not more than Tshs. 50,000,000/=	TSHS 290,000 /=
	- More than Tshs. 50,000,000/=	TSHS 440,000 /=
2	For registration of a company not having a share capital where the number of members as stated in the Articles of Association:	TSHS 300,000 /=
3	Filling fee for the application, meaning shs. 22,000/= for each document i.e Memorandum and Articles of Association, Forms no. 14a and 14b.	TSHS 66,000 /=
4	Each Stamp duty for each copy of the Memorandum and Articles of Association is charged	TSHS 5,000 /=
5	Stamp duty for Form no. 14b is charged	TSHS 1,200 /=
6	For reservation of a company name	TSHS 50,000 /=
7	For company name change	TSHS 22,000 /=
8	For the receipt and/or registration by Registrar of any document which under the Act is to be delivered to him	TSHS 22,000 /=
9	For the late filing/registration fee to be paid to the Registrar of any document delivered to him (per month or part thereof)	TSHS 2,500 /=
10	For filing of Annual Returns	TSHS 22,000 /=
11	For certification of any document, per page	TSHS 3,000 /=
12	For making search in any file/perusal	TSHS 3,000 /=
13	For obtaining a written search report per file	TSHS 22,000 /=
14	Fees payable by a company to which Part XII of the Act applies
	- For the registration of certified copy of a charter, statute or memorandum and articles of the company, or other instrument constituting or defining the constitution of the company	USD 750 /=
	- For registration of filling any document required to be delivered to the Registrar under Part XII of the Act/other than the balance sheet	USD 220 /=
	- For filling of Balance Sheet	USD 220 /=
	- For late filing/registration fee to be paid to the Registrar of any document delivered to him out of time (per month or part thereof)	USD 25 /=
15	For obtaining a copy of Certificate of Incorporation	TSHS 4,000 /=

However, as we have seen, a second declaration may be needed if the company is a guarantee company which wishes to dispense with “Limited”, See section 32(1) & (2) Cap. 212 R.E 2002

Purchase of a Shelf- Company

          If the incorporators have no immediate special requirements regarding the company’s constitution or name, but want their business to be incorporated as rapidly as possible as a private company limited by shares, an alternative to registering a new company is to buy one off-the- shelf from one of the agencies which provide this service. This alternative is increasingly being adopted, somewhat to the horror of traditional company Lawyers.

Its great advantage is spread because all the incorporators have to do is to pay the agency and to take transfers of the subscribers’ shares and custody of the company’s registers. They will, of course, then have to send to the Registrar notices of changes of the directors and secretary (with the required consent) and of the situation of the registered office.

Any other change such as alteration of articles or change of name can be affected at leisure. The main disadvantage is that until they make changes, company’s name is unlikely to bear any relationship to them or to the business being carried on.

Registration and Certificate of Incorporation

If the registrar is satisfied that the requirements for registration are met and that the purpose for which incorporators are associated is lawful he issue a certificate of incorporation signed by him or authenticated under his official seal.

Section 15 of Cap 212 R.E 2002 states that on the registration of the memorandum of a company the Registrar shall certify under his hand that the company is incorporated and, in the case of a limited company, that the company is limited, and, in the case of a public company, that the company is a public company

Section 16 of Cap 212 declares that the certificate is conclusive evidence

a.     that all the requirements of this Act in respect of registration and of matters precedent and incidental thereto have been complied with and

b.      that the association is a company authorised to be registered and duly registered under the Act.

The functions of the Registrar in deciding whether or not to register the company are administrative, rather than judicial, but refusal to register can be challenge by judicial review, although with slight hope of success. However, normally, the registration of a company cannot be challenged because of the conclusive effect of the certificate.

However this immunity is not complete. In R. V. Registrar of Companies, ex p. H.M.’S Attorney- General (1991) BCLC 476, a prostitute had succeeded in incorporating her business under the name of  Lindi St Claire (Personal Service) Ltd” (the Registrar having rejected her first preference of Prostitutes Ltd or Hookers Ltd”  and shown no enthusiasm for Lindi St Claire (French Lessons ) Ltd”) and, with scrupulous frankness, she specified its primary object in the memorandum as “ to carry on the business of prostitution”. The court on judicial review at the instance of the Attorney -General quashed the registration on the ground that the stated business was unlawful as contrary to public policy.

Commencement of Business

From the date of registration mentioned in the certificate of incorporation, the company, if it is a private company, becomes capable forthwith of exercising all the functions of an incorporated company. But when it is registered as a public company this is subject ... to section 114 (additional certificate as the amount of allotted share capital).

The company shall not commence any business or exercise any borrowing powers until the Registrar has issued it with a certificate (commonly known as a Certificate of Commencement or Trading Certificate). If any public company commences business or exercises borrowing powers in contravention of this section, every person who is responsible for the contravention shall, without prejudice to any other liability, be liable to a default fine.

One condition for incorporating these type of companies is the issuance of aoffer document which prior to its registration must be approved by the capital Markets and Securities Authority. A an offer document is in essence an invitation to the general public to subscribe for shares

In the word of section 44 of Cap. 212,  an offer document issued by or on behalf of a company or in relation to an intended company shall be dated, and that date shall, unless the contrary is proved, be taken as the date of publication of the offer document. As to what should be contained in the offer document section 47 (1) of Cap. 212 is clear as every offer document issued by or on behalf of a company, or by or on behalf of any person who is or has been engaged or interested in the formation of the company, must state the matters specified and contain the reports required to be included from time to time in regulations made by the Minister for the time being responsible for finance, or by the Capital Markets and Securities Authority or such other authority as may be designated by that Minister for the purpose.

Contractual Effects of Memorandum and Articles of Association

Section 18 of Cap 212 provides that the memorandum and articles shall, when registered, bind the company and the members thereof to the same extent as if they respectively had been signed and sealed by each member, and contained covenants on the part of each member to observe all the provisions of the memorandum and of the articles

From that provision, the following principles can be determined:

a.     The memorandum and articles of association constitute a contract between the company and each member. But it is a contract with various special characteristics. Section 18 it provides that it is Subject to the provisions of this Act (companies Act). Those provisions include section which permits of alteration of memorandum and articles of association by means of special resolution. Thus a member inter into a contract on terms which are alterable by other party

b.     The contract is enforceable among the members inter se. The principle occasions on which this question is likely to be important arise when the articles confer on a member’s a right of pre-emption or first refusal when another member wishes to sell his shares or mere rarely, impose a duty on the remaining members or the directors to buy the shares of a retiring member.

c.      The section is important in relation to the rights of members to restrain corporate irregularities and to the so called rule in Foss v. Harbottle. (principle of proper plaintiff).

RE- REGISTRATION OF AN EXISTING COMPANY

A company may wish, at some stage, to convert itself into a company of a different type. This, in most cases, it may do without the expense of affecting a complete re-organisation of the type referred above and without having to form a brand new company.

1.     Private Company becoming public

Under Cap 212 there are two situations in which a private company can become a public company.

-         By choice

-         By Default

a.     By choice.

Under section 8(b) of Cap 212 a private company can become re-registered as a public company by passing a special resolution that it should be so re-registered and applying to the Registrar in the prescribed form (Form. 29) signed by a director or the secretary, accompanying the application by a number of documents designed to enable the Registrar to satisfy himself that the minimum capital requirements for a public company are complied with.

The special resolution must alter the memorandum of association to state that the company is to be a public company and must make such further alterations as are necessary to comply with the provisions of the Act in relation to public companies (including the change of the suffix to its name from LTD to PLC) and must also make any needed alterations to its articles of association.

Then, it shall send notification to the Registrar in the prescribed form within a period of fourteen (14) days as provided under section 29(1) of Cap 212 R.E 2002.

The documents that must accompany the application are copies of:

a.     The altered memorandum and articles

b.     Balance sheet dated not more than seven months before the application and the auditors’ report theron,which must be unqualified

c.      A written statement by the auditors that the balance sheet showed that at its date the company’s net assets were not less than the aggregate of its called up share capital and undistributable reserves

d.     If, since the balance sheet date, shares have been allotted otherwise than for cash, the valuation report

e.      Special resolution passed by the general meeting

f.       Board of directors resolution  confirming that the special resolution has been passed

If the Registrar is satisfied that the company may be re- registered as a public company, he issues a new certificate of incorporation which is conclusive evidence that the requirements have been meet.

b.    By Default

A private company is required to:

1.     restricts the right to transfer its shares; and

2.      limits the number of its members to fifty, not including persons who are in the employment of the company and persons who, having been formerly in the employment of the company, were while in that employment, and have continued after the deter commination of that employment to be, members of the company, and

3.      prohibits any invitation to the public to subscribe for any shares or debentures of the company.

If fails, then, the company shall cease to be entitled to any privilege or exemption conferred on private companies under any of the provisions of the Act, and thereupon the provisions of the Act shall apply to the company as if it were a public company, see section 28 Cap 212 R.E 2002.

It is the High court of Tanzania, on being satisfied that the failure to comply with the conditions was accidental or due to inadvertence or to some other sufficient cause, or that on other grounds it is just and equitable to grant relief, may on the application of the company or any other person interested and on such terms and conditions as seem to the court just and expedient, order that the company be relieved from such consequences as aforesaid.

The application to the court must be by way of chamber summons supported by affidavity of the company.

2.     Public company becoming private

Public company seeking to become a private company alters the company's memorandum including by way of the deletion of a statement that the company is to be a public company.

The procedures are as follows:

a.     Convene Board meeting, in which the proposed intention of going to private will be discussed by the Board of Directors. When they agree together they will come up with a resolution

b.     Issue the notice for summoning the General meeting of the company where the resolution passed by the Board of Directors will be presented and discussed and hence special resolution will be passed

-          Advertise special resolution passed to change the company to private. This is to be published in the news paper which circulates within the areas where the company operates like Tanzania Mainland.

c.     Delisting the process of removing shares in the stock exchange has to be made. The company has to apply for removal of its security/ shares from the stock exchange. This will be governed by rules of that particular stock exchange

d.     Obtain the necessary approval from the Registrar of Companies for registration process; this is done by application where the company has to give reasons for change.

Documents Required

-         Notice of changing the company

-         Resolution passed by the Board of Directors

-         Resolution passed by the General Meeting

-         Certified copies of the extract of the special resolution

-         Copies of advertisement made to the public

-         Affidavit by the directors of the company that the company is no longer listed in the stock exchange

-         Financial Annual return of the three consecutive years

If the Registrar is satisfied that the company may be re- registered as a private company, he issues a new certificate of incorporation which is conclusive evidence that the requirements have been meet.

3.     Unlimited company becoming limited

A company registered as unlimited may register as limited, but the registration of an unlimited company as a limited company shall not affect the rights or liabilities of the company in respect of any debt or obligation incurred, or any contract entered into, by, to, with, or on behalf of the company before the registration. But it is subject to the provisions of the Companies Act.

On registration in pursuance of this section, the Registrar shall close the former registration of the company, and may dispense with the delivery to him of copies of any documents with copies of which he was furnished on the occasion of the original registration of the company, but save as above, the registration shall take place in the same manner and shall have effect as if it were the first registration of the company

The procedures are;

a.     Passing of  a special resolution

b.     Making necessary alteration to its memorandum and articles ( a copy of these must be forwarded to the registrar

c.      An application must be made in a prescribed form, signed by a directors or the secretary.

Ø In case of anything call me/0764 530 882/0626 402 722        etj.prof@gmail.com

Thank you.

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