Tanzania: Proposed Amendments To The Companies Act (Act No.12) 2002

In this month's corporate updater, we review the Written Laws (Miscellaneous Amendments) (No.3) Bill, 2019 (the Bill) which includes proposed amendments to the Companies Act (Act No.12) 2002 (the Act). Following assent by the President, the bill will be passed into law and become the Written Laws (Miscellaneous Amendments) (No.3) Act, 2019 (the New Act).

Highlights of the Bill

The Bill proposes several amendments and additions to the Act. A few of the key amendments can be summarised as follows:

Sections 2: Definition of "Company"

The Act currently defines the term "company" as a company that has been formed and registered under the Act or an existing company.

The Bill proposes to extend this definition to a company formed and registered under the Principal Act or an existing company "carrying out investment, trade or commercial activities and any other activity prescribed by the Minister for Trade."

Investment, trade and commercial activities are defined in the Bill as:

  • "commercial activities" means all activities of industry and trade, including, but not limited to, the buying or selling of commodities and activities conducted for the purpose of facilitating such buying and selling;
  • "investment activities" means transactions involving sale or purchase of equipment plants, properties, securities, capital, stocks, debentures or other assets generally not held for immediate re-sale and any other activity as the Minister may, by notice published in the Gazette, prescribe; and
  • "trade" means the transfer of goods or services from one person or entity to another.

Section 3(3), Section 3A and Section 14: Companies Limited by Guarantee

Section 3(3) of the Act is amended to state that a company which is limited by guarantee which fulfils the criteria in the new definition at section 2 will be permitted to be incorporated or registered under the New Act.

The bill proposes to add Section 3A which will state that a company limited by guarantee incorporated under the New Act must comply with the New Act within two months of it coming into force. However, the proposed Section 3A(2) states that a company limited by guarantee which does not have share capital, and has obtained a certificate of compliance under section 11 of the Non-Governmental Organizations Act, shall, within two months of coming into force of the New Act, be deemed to have been registered under the Non-Governmental Organizations Act and struck off from the register.

Section 14 is also amended so that the Registrar shall not register or maintain in the register a company limited by guarantee which has not been duly registered under the Act as stated in the new Section 3(3).

The combination of the amended definition of a company, the addition of Section 3A(2) and amendments to Section 3(3) and Section 14 mean that if the New Act gives effect to the intentions of the Bill, companies limited by guarantee that: (a) do not fall within the new definition; (b) do not have share capital and (c) hold a certificate of compliance under section 11 of the Non-Governmental Organizations Act, will no longer be governed by the Companies Act and will instead be registered under the Non-Governmental Organizations Act.

Section 32: Naming of a private company

The Bill proposes to delete and substitute section 32(1) of the Act which as it is currently drafted, allows a private company to operate without the words ''Limited'' in its name under defined circumstances.

The amendment will only apply to associations aimed and promoting commerce and not art, science, education, religion, charity or other useful social objects.

Section 400A: Striking Companies off the Register

Section 400 of the Act currently provides that the Registrar may strike redundant companies off the register of companies when he has reasonable cause to believe that the company is not carrying on business or not in operation. The Bill proposes to add section 400A which will provide more reasons upon which the registrar may strike off a company. These include:

  • Where a company has been fraudulently registered;
  • Where a company is engaged in criminal activities such as money laundering, human and drug trafficking, terrorist financing or any other offence punishable by law;
  • Where at the time of incorporation the company committed an act of misrepresentation or fraud;
  • By operation of law, where all shareholders or directors have been prohibited from entering the country; and
  • Where it is operating contrary to its objectives contained in the memorandum and articles of association.

In the above circumstances, the Registrar can issue a 30 days' written notice of his intention to strike off the company. In this period, the company can respond with their reasoning to prevent the company being struck off. If a response or the reasons provided are not satisfactory or received within 30 days the registrar can proceed to publish in the Gazette the name of the company which has been struck off and notify the company accordingly. While a company's name may be struck off it will not be used by any other company until the expiration of 5 years. The company, member or creditor has 5 years to apply to the Court to have the company restored to the register.

The Minister for Trade may make Regulations to provide for the implementation of the provisions of section 400A.

As highlighted above, it will be at the registrar's reasonable discretion to determine if the company has been engaged in any offence punishable by law. As the proposed drafting has the potential to lend to a wide interpretation of what may constitute an offence punishable by law, this is an amendment to pay close attention to when the New Act is passed.

We hope this information has been useful.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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