You are on page 1of 150

ENTREPRENEURSHIP

2017

5 December, 2017 Faustine J.M

LECTURE ONE: UNDERSTANDING
ENTREPRENEURSHIP
1.1 Definition of entrepreneurship

5 December, 2017 Faustine J.M

1.1 Definition of Entrepreneurship
• Before defining the term entrepreneurship it is
important to define a key word forming part of
this terminology. This term is an “entrepreneur”.
The word entrepreneur derives from the French
words, entre, meaning "between"' and
prendrem, meaning to "to take". The word was
originally used to describe people who take on
the risk"' between buyers and sellers or who
"undertake" a task such as starting a new
venture.

5 December, 2017 Faustine J.M

1 Definition of Entrepreneurship • Entrepreneur is a therefore defined as the person who tries to do something new. visualizes a business opportunity. organizes the necessary resources for setting up the business and bears the risk involved. an organizer and a risk bearer. 5 December. an entrepreneur may be termed as an innovator. 2017 Faustine J.1.M . Thus.

start enterprises based on those ideas.1. 2017 Faustine J. now let us define the term entrepreneurship. 5 December. and provide added value to society based on their independent initiative.1 Definition of Entrepreneurship • The term entrepreneur may be properly applied to those who incubate new ideas. • After understanding who is an entrepreneur.M .

1 Definition of Entrepreneurship • Entrepreneurship is the process where individuals or a group of individuals risk time and money in pursuit of opportunities to create value and grow through innovation regardless of the resources they currently control. 5 December. 2017 Faustine J. The term ‘entrepreneurship’ can also refers to the functions performed by an entrepreneur.1.M .

M .1. 2017 Faustine J. 5 December. assuming the accompanying financial. and social risks. and receiving the resulting rewards of monetary and personal satisfaction and independence. entrepreneurship can be defined as the process of creating something new with value by devoting the necessary time and effort.1 Definition of Entrepreneurship • In not quite different perspective. psychic.

These give a rough picture of how entrepreneurs look like. risk and resources to mention few. 2017 Faustine J.M . we met common and re-occuring terms such as value. 1. 5 December. initiative. the following are the characteristics that many people who are known as entrepreneur shares. To be very specific.2 Characteristics of Entrepreneurs • In the definitions of who is entrepreneur and what is entrepreneurship. independence.

M . 1. 2017 Faustine J. 5 December.2 Characteristics of Entrepreneurs i. and initiate action. the ability of an entrepreneur to take initiative is the key to the success of the venture to a great extent. If he/she does not initiate action at the right time the opportunity may be lost. Hence.an entrepreneur must have an innovative aptitude. Initiative. pick the right opportunity.

an entrepreneur should have wide knowledge of the economic and non-economic environment of business like the market. etc. the decisions taken by him may be poor and will not contribute to the profitability of his business in the long run. 1.M . 5 December. Wide Knowledge.2 Characteristics of Entrepreneurs ii. consumer attitudes. technology. 2017 Faustine J. In the absence of such adequate knowledge.

entering any venture is full of risks and uncertainties. the entrepreneur should have willingness and necessary foresightedness to assume risks. Willingness to assume risk. 1. 5 December. In order to deal with various kinds of risks and uncertainties efficiently.2 Characteristics of Entrepreneurs iii. 2017 Faustine J. The quantity and quality of risk taking would determine the quality of business decisions.M .

5 December. Open mind and optimistic outlook.2 Characteristics of Entrepreneurs iv.an entrepreneur should have an open mind. 2017 Faustine J.M . He/she must possess a dynamic and optimistic outlook so as to predict changes in the business environment and respond effectively without delay. 1. Being optimistic enable the entrepreneur to take initiative in relation to his business idea.

the entrepreneur must be prepared to adapt to the changes taking place in the system. shall lead to losing the opportunity of taking advantage thereof. Self-confidence.M . one should have confidence in himself/ herself. A person who lacks confidence can neither do any work himself/herself nor inspire others to work. 1.2 Characteristics of Entrepreneurs v. 5 December. vi. Adaptability/flexibility. Any resistance to change and delay in responding thereto.for achieving success in life. 2017 Faustine J.

Leadership Qualities. 2017 Faustine J. sense of justice. 5 December.M . honor and dignity and above all. a high moral character.an entrepreneur should possess the qualities of a good leader. presence of mind. 1. He/she should have the traits of self- discipline.2 Characteristics of Entrepreneurs vii.

The businessmen has to be vigilant about these and find solutions thereof as early as possible. This requires hard work on the part of the entrepreneur. one problem or the other may occur.2 Characteristics of Entrepreneurs viii. He has to put in extra efforts to ensure success of the enterprise started by him.M . 5 December. Orientation towards hard work-while running a business. 1. 2017 Faustine J.

Promotion: It is felt that generally an entrepreneur undertakes the risk of setting up 5 December. i. 2017 Faustine J. 1.M . and give them a concrete shape. Conception of an idea: An entrepreneur is the person with a creative mind who can identify business opportunities and take steps for the conversion of ideas into successful business ventures. ii.3 Functions of Entrepreneur The functions of an entrepreneur can be summarized as follows.

decide to the form of organization. As a promoter. now- a-days many entrepreneurs have assumed the role of promoters of large companies. small or large expansion of an existing business or for combining two or more business firms.3 Functions of Entrepreneur a small enterprise as a sole proprietor. 5 December. In fact. promotion may be undertaken for setting up a new business. the entrepreneur has to conduct feasibility studies.M . 2017 Faustine J. 1. But.

2017 Faustine J. The entrepreneur uses his creative abilities to do new things and exploit opportunities in the market. and give a concrete shape to the business proposition.3 Functions of Entrepreneur assemble the required funds and people. 5 December. iii.M . 1. Innovation: An entrepreneur is also seen as an innovator who tries to develop new technology. products and markets.

it is the entrepreneur who assumes risks and is prepared for the losses that may arise because of unforeseen situations in future.M . 5 December. In fact. 1. To start with. it is his willingness to take risks that helps him to take initiatives in doing new things or trying new methods of production.3 Functions of Entrepreneur iv. Bearer of risks and uncertainty: You know that starting of a new business venture involves good amount of risk and uncertainty. 2017 Faustine J.

M .3 Functions of Entrepreneur v. 1. 5 December. It is he/she. himself/herself who has to provide the initial capital (otherwise known as ‘risk capital’ or ‘seed capital’) for starting the ventures. 2017 Faustine J. Arranging necessary capital: Arranging funds is one of the biggest hurdles in setting up a new entrepreneur.

1.4 Role of Entrepreneurship in the Economy • It is beyond reasonable doubt that entrepreneurship is essential for economic development in a country like Tanzania and anywhere in the world.M . 5 December. Entrepreneurs are regarded as the prime movers of innovations and act as key figures in economic development of a country. Specifically entrepreneurship serve the following roles in the economy. 2017 Faustine J.

ii. 1. Provides large-scale employment opportunities and increases the purchasing power of the people. iv.4 Role of Entrepreneurship in the Economy i. Helps the formation of capital by bringing together the savings and investments of people. 2017 Faustine J.M . Helps in reducing concentration of economic power (power to own the factor of production in a few hands). 5 December. Promotes balanced regional development in the country. iii.

Helps availability of new products and services at higher quality. vi.4 Role of Entrepreneurship in the Economy v. Promotes country's export trade- Entrepreneurs produce goods and services in large scale for the purpose of earning huge amount of foreign exchange from export.by adopting latest innovations in the production of wide variety of goods and services in large scale that too are at lower cost. 2017 Faustine J. Helps introduction of new technology. vii. Improvement in the standard of living. viii.M . 5 December. 1.

The total effects of various roles of entrepreneurship is overall economic development of a country. 1. Facilitates overall development.4 Role of Entrepreneurship in the Economy ix.M . 2017 Faustine J. x. Induces backward and forward Linkages.this is due to the fact some entrepreneurs demand raw materials from other firms (backwards linkages) and others supply firms to other firms (forwards linkages) hence creation of revenues and growth among firms. 5 December.

5 Challenges facing entrepreneurship in a country like Tanzania i. 5 December. Lack of enterprising culture-many people prefer to save their money in foreign banks rather than investing in income generating activities.M .most of financial institutions offers loans to those already have a business. Some demand colaterals which may not be available to entreprenuer. High cost of capital-microcredit institutions the major source of financing entrepreneurs offer loans at very higher interest rates. iii.1. ii. Limited source of funds. 2017 Faustine J.

Lack of enough support 5 December.M .1. Competition from big companies v.5 Challenges facing entrepreneurship in a country like Tanzania iv. 2017 Faustine J. vi. Limited production capacity vii. Stringent conditions imposed by foreign markets on products coming from third world countries.

M .1 Introduction 5 December. LECTURE TWO: OPPORTUNITIES AVAILABLE FOR ENGINEERING GRADUATES 2. 2017 Faustine J.

2017 Faustine J. It also encompasses other information distribution technologies such as television and telephones. 5 December. electronics. transmit. engineering. e-commerce and computer services. healthcare. semiconductors. software. 2. study.M . internet. retrieve. and manipulate data or information often in the context of a business or other enterprise. including computer hardware. Several industries are associated with information technology.1 Introduction • IT works with computers and internet to store. telecom equipment.

Why think about IT?
• Innovation is the great way to success in this digital
age.
• The path of innovation in business means doing
something different, smarter or better that will make
a positive difference in terms of value, quality or
productivity by using emerging or proved
technologies of the world.
• The technology which has already proved itself in last two
decades is of course the information technology (IT). It has
dramatically changed the lives of the individuals and
organisations.
5 December, 2017 Faustine J.M

Why think about IT?
• Currently online shopping, digital marketing, social
networking, digital communication and cloud computing
etc are the best examples of change which came through
the wave of information technology. Now accurate business
planning, effective marketing, global sales, systematic
management, real time monitoring, instant customer
support and long term business growth cannot be achieved
at the optimum level without IT.

5 December, 2017 Faustine J.M

The importance of IT in Business

• The success of every business depends on certain factors.
Some of which are accurate analysis, choosing the right
technology and the future vision.
• Research from the last two decades has proved that those
organizations that do invest in technology and choose the
path of innovation increase their market share, financial
figures and overall competitiveness.
• Information technology is the only technology which
provides opportunity to analyze specific data and plan your
business journey accordingly.

5 December, 2017 Faustine J.M

5 December. • In the modern age. 2017 Faustine J.M . • It provides the cloud computing and modern communication which enable you to form a global organization. it is proved that digital marketing is a great tool which let you promote your products or services to the global market while sitting in the comfort of your remote office or home. The importance of IT in Business • It also provides you many tools which can solve complex problems and plan the scalability (future growth) of your business. manage and monitor its virtual offices all over the world.

• Every successful organization has to go through a comprehensive market research process which enables management to make the right decision. group discussions using World Wide Web and of course through in-person interviews as well. Market research can be done in many ways through online surveys. blogs. forums. Roles of IT • Decision Making • Speed and accuracy are at the heart of making right decision for your business. 2017 Faustine J.M . 5 December.

. Roles of IT • Decision Making cont…. • Currently Big data.M . 2017 Faustine J. • These online tools not only provide real time responses from the potential audience but also ensure the accuracy of data by minimizing the risk of human errors. 5 December. Google Analytics and Microsoft CRM Dynamics are also great tools to extract useful information which can impact on decision making.

5 December. • . • The overall marketing covers public relation. • Many types of marketing can help you reach your potential customers. promotion and sales which subsequently impact on business growth. Roles of IT Marketing and Business Growth • The heart of the business success lies in its marketing which enables the management to identify its target audience first and then observe their trends and needs. 2017 Faustine J. advertising.M .

Currently web market is booming at a very fast pace because most of the entrepreneurs have understood that the long term success in business is not possible without digital presence on the internet. It is a broad term which includes many concepts like search engine optimization (SEO). MMS. blogging. SMS. discussion forum. social media marketing and Smartphone app advertisement etc. Digital Marketing is a modern phenomenon which let you promote your products or services all over the world. Faustine J. Roles of IT Marketing and Business Growth cont… Digital marketing here which was the dream in the past without Internet technology. 2017 on the internet every year. Millions of new websites are being added 5 December. email shot.M . pay per click (PPC).

Millions of new websites are being added on the internet every year. Roles of IT Marketing and Business Growth cont… Currently web market is booming at a very fast pace because most of the entrepreneurs have understood that the long term success in business is not possible without digital presence on the internet. 2017 Faustine J.M . 5 December.

Roles of IT Customer Support and Satisfaction • Higher level of customer satisfaction is the key to success which cannot be achieved without a real time customer support process. behaviors and satisfaction level. 5 December. Business success depends on knowing its customers needs. 2017 Faustine J. trends.M . Effective communication is the best tool to understand the customer demands. problems and their solutions.

online newsletters and text or multimedia messaging through the smart phone.M . member portals. IT provides many channels to communicate with the customer without going out in snow or rain. social media. Some of these channels are email. 2017 Faustine J. Thanks to the Internet Technology that has enabled us to communicate with millions of potential or existing customer in the real time.. Roles of IT Customer Support and Satisfaction cont. Enterprise organizations normally use customer relationship management systems (CRM) to hold valuable data for understanding customer behaviors and future needs. webinar. 5 December.

financial or human resources etc. • Information technology has played a vital role in automating such complex problems by introducing user friendly solutions.M . • These resources may include tangible. A decade ago. Roles of IT • Resource Management and Globalization • Resource management plays a crucial role in business success. 2017 Faustine J. 5 December. When it comes to medium or large organization. it is very hard for the top management to manage all the resources manually. most of the resource management solutions were desktop based.

the managers can manage or monitor their organizational resources virtually anywhere in the world by using their personal computer. 5 December. laptops. Roles of IT • Resource Management and Globalization Thanks to the internet and cloud technology which enables software engineers to introduce cloud based ERP (Enterprise Resource Planning) solutions. tablets or Smartphone. 2017 Faustine J. Google. Now. Most of multinational companies (Microsoft.M . McDonalds etc) in the world use these cloud based solutions to manage their virtual or physical offices and staff worldwide. This concept has introduced the idea of globalization. Amazon.

5 December.M . asking for suggestions newspapers. 2017 Faustine J. • Business opportunity can be identified through understanding a consumer market and what needs to be done to products or services to satisfy consumers. • Specific methods are interviews. Business Opportunity • A business opportunity is an idea that can be turned into business and it comes about after a thorough study or survey of a certain environment. observations. magazines. soliciting complaints. etc.

M . 2017 Faustine J. 5 December. as well as the primary IT & ICT sectors. IT & ICT professionals work in a variety of sectors including finance. property and business services. Opportunities Information technology (IT) and Information and communications technology (ICT) represent two of the most exciting areas of employment for new graduates. development and sales to technical roles. Careers in IT & ICT now encompass a broad number of areas from business consulting. In addition.

(c) General ICT management. 2017 Faustine J. (b) Systems analysis and administration. and ICT support. (d) Multimedia development. Common areas of work for ICT graduates include: (a) Software engineering and programming. Opportunities cont… The range of occupational pathways in ICT continues to expand as technology penetrates more and more aspects of daily life.M . 5 December.

5 December. The ICT industry did not succumb to the effects of the recent Global Financial Crisis as compared with many other sectors.M . Opportunities cont… Employment opportunities for ICT graduates are strong. and ongoing investment in technology and IT infrastructure suggests strong employment growth in the coming years. 2017 Faustine J.

5 December.M . 2017 Faustine J. Opportunities cont… The industry has developed a unique corporate culture in which flexible employment conditions are common place. so experienced ICT professionals can expect to find career opportunities almost anywhere in the developed world. ICT skills transfer easily from one country to the next.

youth bulge represents both a challenge and an opportunity for development. 2017 Faustine J. 5 December.4 Role of Youth in Economic Development • The old saying that youths are the leaders of tomorrow is not just a delaying tactic but an old and worn out proverb because it has become clear that youths should be leaders of today • Nearly 50% of the developing world population is youth and children there are 1.M .2 billion 15 to 24 year olds in the world and one billion live in developing countries this is often referred to as the 'youth bulge' as young people constitute a high and peaking proportion of many populations. 2.

• Youth know how to network both locally and internationally. • Youth can easily adapt to new technology and various changes in the society.M . 2. • Youth are optimistic due to many years ahead which force them to prepare any environment which can make them live comfortable. • Youths are the market for different goods and services 5 December.4 Role of Youth in Economic Development • Youth are energetic they can work for long hours and overcome various challenges at the work place. 2017 Faustine J.

5 December.M . an investment. 2017 Faustine J. political and socially unstable environments. Prevents and reduces vulnerabilities to economic. Promotes ownership and sustainability of interventions. Strengthens young people's abilities to meet their own subsistence needs.4 Role of Youth in Economic Development • The large numbers of young people are therefore an opportunity. Youth participation in development: i. 2. iii. ii.

M . plan the action and reap the satisfaction and rewards of having achieved the goal. When you are an employee. and get very attractive package. you work for others according to their plans. 2017 Faustine J. it is you who set the goal. 2. In an Entrepreneurship. The most exiting part of Entrepreneurship is that you are your own master. good office. 5 December. whims and finances.4 Paid Employment vs Self Employment • Graduate engineers may have opportunity to work in large companies both nationally and internationally. subordinates to lead and good title like Engineer…. Becoming an entrepreneur may necessitate you sacrifice all such benefits.

 You may participate in every aspect of running a business and learn and gain experience in a variety of disciplines. 5 December.M . 2017 Faustine J.  You will have the chance to work directly with your customers.  You will have the chance to build retirement value.  You will make money for yourself rather than for someone else.  You will be able to work in a field of area that you really enjoy.4 Paid Employment vs Self Employment • Why should you become an Entrepreneur/Self Employed?  You will be your own boss and boss to other people and make decisions that are crucial to the business success or failure.  You will have the personal satisfaction of creating and running a successful business. 2.

Rewards of ownership and retirement assurance. v. iv. Power to do things as he likes. 5 December. 2017 Faustine J.M . ii. Satisfaction of being own boss. Respect of family and friends.4 Paid Employment vs Self Employment Basically the following are the rewards for an Entrepreneur i. 2. Freedom to work. iii.

2. Frustration due to non-achievement of full objectives. 5 December. Social and family life is affected due to hard long hours of working. and debtors curtail his freedom.M . iii. 2017 Faustine J. Frustration due to availability of limited capital and other resources. v. laborers. ii. iv. suppliers. customers.4 Paid Employment vs Self Employment Penalties for an Entrepreneur i. Constraints of financiers. Risk of failure.

LECTURE THREE: SMALL BUSINESS
ENABLING ENVIRONMENT

3.1 Introduction to Small Business

5 December, 2017 Faustine J.M

3.1 Introduction to Small Business
• Small business is part of different types of business
sizes falling under an umbrella of Small and Medium
Enterprises (SME’S).
• SME’s is any acronym used to represent different types
of business, namely small and medium enterprises.
Below and above small and medium enterprises, are
micro and large enterprises respectively.
• The SMEs/SMEs cover non-farm economic activities
mainly manufacturing, mining, commerce and services.
There is no universally accepted definition of SME.
Different countries use various measures of size
depending on their level of development

5 December, 2017 Faustine J.M

3.1 Introduction to Small Business
• The commonly used yardsticks are total
number of employees, total investment and
sales turnover.
• In the context of Tanzania, micro enterprises
are those engaging up to 4 people, in most
cases family members or employing capital
amounting up to Tshs.5.0 million. The
majority of micro enterprises fall under the
informal sector.

5 December, 2017 Faustine J.M

• Medium enterprises employ between 50 and 99 people or use capital investment from Tshs.M . 2017 Faustine J.800 million.5 million to Tshs.200 million to Tshs. 3.200 million. 5 December.1 Introduction to Small Business • Small enterprises are mostly formalized undertakings engaging between 5 and 49 employees or with capital investment from Tshs.

3. 2017 Faustine J.M .1 Introduction to Small Business 5 December.

3.1 Introduction to Small Business 5 December.M . 2017 Faustine J.

1 Introduction to Small Business • This definition should not only be based on quantitative characteristics of the enterprises. 3.M . but should also take into account the difference between sectors. 2017 Faustine J. 5 December.

2017 Faustine J. however the same amount of investment in Poultry farming can be seen as a very large business. 3. then a small business is the one which is independently owned and operated for profit and it is not dominant in its field. From the above facts. 5 December.M .1 Introduction to Small Business • Small business in one sector does not mean small in another sector. For example 200 million in construction sector can be very small level of investments.

Macro Environment Tax policies and regulations • Good tax regime-the tax regime which is oriented to SME rather than the current 5 December. 2017 Faustine J.M . 3. micro environment and the immediate MSE facilitation (meso) environment. a.2 Enabling Environment for SME’s • The factors for enabling environment for enterprise can be divided into the macro environment.

2017 Faustine J. For example there are 27 different taxes and levies that apply to various businesses and a certain level of knowledge is required. Existence of provisions for tax exemptions not only for large businesses but also for SME’s. • Provision of knowledge on the tax system. 5 December. This is due to the fact that here are a large number of taxes and levies. 3.2 Enabling Environment for SME’s • situation where they are oriented to the large- scale sector.M .

3. 2017 Faustine J. because otherwise tax officials may demand unrealistically high taxes and bribes and will harass. The tax assessment and collection system lacks transparency and predictability.M . creating opportunities for tax officials to exhort bribes from small business operators.2 Enabling Environment for SME’s • Abolishing weakness on tax assessment. Some business people report that they have to conceal or even worse. 5 December. avoid growth.

this is due to the fact that inflation has huge impact on entrepreneurship as in inflation period. So the absence of inflation is a grace to the entrepreneur. 2017 Faustine J.2 Enabling Environment for SME’s Economic trends • Absence of Inflation. 3. the value of wealth decreases and the purchase power of people declines. 5 December.M . Therefore. consumers tighten their belts and there are fewer opportunities for entrepreneurs.

2017 Faustine J.2 Enabling Environment for SME’s • Low interest rates-this is due to the fact that high interest rates limits the amount of capital that a company can raise. • Employment related issues-Employment impacts on the entrepreneurship process. 5 December. High employment rates mean that there are less people opting for self-employment. if they can not receive adequate working capital. they are likely to die off quickly during the start time.M . Especially for SMEs. 3.

At the same time because of this high unemployment and limited earnings.M . 5 December. markets are naturally limited. the competition between these SMEs will become less. 2017 Faustine J. Good Business Registration and Licensing • Absence of business registration and licensing process which is unduly complicated and time- consuming because of excessive bureaucracy and in some cases because of demands for bribes by officials.2 Enabling Environment for SME’s as a result. 3.

Unfortunately however. Various agencies have been set up to facilitate the process of investing in businesses. 5 December. Furthermore these are centralized in Dar es Salaam. These include the Business Registration and Licensing Authority (BRELA) and Tanzania Investment Centre (TIC).M . these organizations mainly target large enterprises.2 Enabling Environment for SME’s • The government has started taking some initiatives to improve the situation. 3. 2017 Faustine J.

5 December. Encouraging people to start small business and invest in different sector.2 Enabling Environment for SME’s • Availability of enough information on these agencies. most women’s businesses are just too small to be served by these agencies. 3. The current situation is that most of SME’s lack information about the existence of these agencies and. 2017 Faustine J. Development of Enterprise Culture-providing entrepreneurship knowledge and training. in any case.M .

3. • Networking both locally and internationally. 2017 Faustine J. knowledge. product differentiation. skills/exposure. MICRO ISSUES • Owners/managers/ employees capabilities- attitudes.M .2 Enabling Environment for SME’s b. 5 December. • Strategies for and management for growth such as diversification. etc.

2 Enabling Environment for SME’s c. 5 December.M . packaging. Support and Development Services for MSE Promotion Availability of Marketing Services • Availability of adequate market outside the immediate locality. etc) to the sector. 3. The provision of marketing services to the majority of entrepreneur (market research. marketing intermediation. 2017 Faustine J. facilitation of sub-contracting arrangements.

M . They carry out market studies in Tanzania as well as abroad. for SMEs or their associations. FAIDA- Rural Economic Activities (REA) and TechnoServe provide marketing research services. The shortcoming is that these services reach only a very tiny proportion of SMEs. 3. 2017 Faustine J. Private Sector Initiatives (PSI). including the Finance and Enterprise Development Agency (FEDA). 5 December.2 Enabling Environment for SME’s • A few private firms and NGOs.

5 December. 2017 Faustine J. They also require a forum through which they can have their voices heard and their interests taken into account.2 Enabling Environment for SME’s Availability of Business Information and Policy Advocacy • Providing entrepreneurs with information about sources of inputs.M . technology. 3. premises and laws and regulations related to their businesses.

However. 5 December.2 Enabling Environment for SME’s • Business associations. in actual practice very little is available for this purpose. Few and their strengths and weaknesses are analyzed below. There are a number of MSE operators’ associations. 3. 2017 Faustine J. government agencies and other NGOs are supposed to provide these services.M .

There are a number of public sector research and development (R&D) institutions like Tanzania Industrial Research and Development Organization (TIRDO). 5 December. 2017 Faustine J. 3.M .2 Enabling Environment for SME’s Opportunity for Technology Development and Transfer • Technology is the capacity and know-how necessary for the processing of raw materials into products. thereby adding value and generating wealth.

Kilimanjaro Industrial Development Centre (KIDC). These institutions have been developing and disseminating appropriate technology for SMEs. 2017 Faustine J. and the Cleaner Production Centre of Tanzania (CPCT).2 Enabling Environment for SME’s • Technology Development and Transfer Centre (TDTC) of the University of Dar es Salaam.M . Centre for Agriculture and Rural Mechanization and Technology (CARMATEC). 3. 5 December.

which have been based on donor and government subventions. The assumption that these institutions could develop and sell technology to manufacturers has not worked because the technology they develop is so simple that it can be and is easily copied by informal manufacturers. have dried up. 5 December.M . 2017 Faustine J. 3.2 Enabling Environment for SME’s However most have had to scale down operations or resort to commercial production because funding sources.

2 Enabling Environment for SME’s Provision of well tailored Technical Training • There is a wide range of service providers of technical training all over the country. 5 December. technical training is aimed at employability in large public or private enterprises. Generally. The most prominent among them are the Vocational Education and Training Authority (VETA) Centres. not self-employment or employment in SMEs. 2017 Faustine J. This is unfortunate because there are very limited job openings in the formal sector. 3.M . They include public institutions and private colleges. religious organizations and NGOs.

2017 Faustine J. VETA has changed its curricula to include some aspects of entrepreneurship in order to prepare and encourage its graduates to employ themselves.M . As a result. most of the graduates from the technical institutions remain unemployed. 5 December.2 Enabling Environment for SME’s • Of late. even if they could employ themselves. 3. the market for the products they have learnt to produce is often limited relative to their number. • However.

M .2 Enabling Environment for SME’s Provision of free Advisory and Consultancy Services • The most common consultancy services to SMEs relate to preparation of business plans and loan proposals and improvement of management practices. Some of the service providers include SIDO. Techno Serve and some business development projects such as FAIDASEP and Rombo-Pact. 2017 Faustine J. NGOs. 3. 5 December.

5 December.2 Enabling Environment for SME’s • The main problem with consultancy services is sustainability. As a result. the service is only available when there is a donor sponsoring it. It is also not quite clear whether these services have had any impact. Hardly any MSE operators are able and willing to pay any fee for consulting services. 2017 Faustine J. 3.M .

2 Enabling Environment for SME’s Provision of Entrepreneurship and Business Training • Lack of business and entrepreneurship skills inhibit potential entrepreneurs in accessing relevant business information. there are many institutions which offer training to SMEs. articulating their needs as well as dealing with regulatory and other challenges. Currently. 3.M . 2017 Faustine J. such as bureaucracy. 5 December.

2017 Faustine J. Other Higher Learning Institutions have highly trained staff but some tend to be theoretical. 5 December.M . 3. The major weakness of this body is that their programmes are too expensive for most SMEs and outreach is limited to a few SME operators.2 Enabling Environment for SME’s • It offer high quality entrepreneurship programmes and generate highly trained staff.

M . particularly in the urban areas where the businesses are concentrated. corruption and the very limited number of surveyed plots. 3.2 Enabling Environment for SME’s Availability of Business Premises • Recent studies show that SMEs face serious problems in terms of working premises and as much as 60 per cent of businesses in the informal sector operate along the streets. it is close to impossible for SMEs to acquire plots for constructing business premises because of bureaucracy. 2017 Faustine J. In Tanzania. 5 December.

even relatively well-to-do business operators are forced to locate manufacturing and other types of businesses in residential areas. 2017 Faustine J. 5 December. 3.M .2 Enabling Environment for SME’s • As a result. This in turn often creates frictions with government enforcement agencies.

2017 Faustine J. and consequently creates and added burden for women entrepreneurs. by their nature. The disease has been claiming the lives of many entrepreneurs as well as their employees. The responsibility for care and the overall impact of HIV/AIDS tends to fall disproportionately on women. 3. including SMEs. make the SMEs operators and their employees more vulnerable to this disease than other occupations. Some businesses. It is crippling SMEs whose owners have to care for their sick or orphaned relatives. 5 December.2 Enabling Environment for SME’s Fight against HIV/AIDS and Health • HIV/AIDS is a major threat to all economic activities.M .

M .2 Enabling Environment for SME’s • The existing AIDS awareness campaigns are targeted mainly to the general public and are not specifically targeted at business people who are more vulnerable. 5 December. 2017 Faustine J. Institutions which offer such services are few in number and mainly consist of NGOs and the Ministry of Health. 3.

000. The largest demand for credit is in the range of Tshs 50. The estimated demand for MSE credit is 2. compared to about 50.000 to 500. 2017 Faustine J. 3.M .000 borrowers being served currently.5 million borrowers.2 Enabling Environment for SME’s Access to Financial Services • Studies have shown that many SMEs lack access to finance for starting. 5 December. operating and expanding their businesses.

000 to 500. 3. The main beneficiaries are microenterprises primarily in trade. MEDA and Poverty Africa are the most prominent and widespread.000 per MSE recipient or loan group. food vending and agriculture. with a repayment period of 6-12 months) are available from several MFIs. of which PRIDE. 5 December.2 Enabling Environment for SME’s Small and short-term loans (typically rising in stages from Tshs 50. 2017 Faustine J.M .

which is above the commercial lending rate (20-25 per cent). These rates would be a disincentive to long- term borrowing even if this was available.2 Enabling Environment for SME’s • Loans attract an interest rate of between 25 and 40 per cent per annum.M . 3. 2017 Faustine J. 5 December.

M . 2017 Faustine J.1 Forms of Entrepreneurship 5 December. LECTURE FOUR: PLANNING FOR A SMALL BUSINESS 4.

The single owner is called the proprietor or sole trader. 4.1.1 Sole Trade-meaning • Sole proprietorship or sole trade is a business that is owned and usually operated by one person. 2017 Faustine J. etc. guest houses.1. decorations. 5 December. beauty parlors accountants or other activities from wholesaling to retailing or small scale farming.M . Employees or members of his family sometimes assists him. barber’s shop. Proprietorships tend to be small retail stores or solo providers of professional services like physicians. restaurants. manufacturing. attorneys.

. The business is owned by a single person (sole trader) and it is usually fairly small. All decisions of the business are made by the owner. 2017 using his/herFaustine personal J. iv. in the case of serious losses resulting in inability to pay its creditors the sole trader will be called up on to make pay the creditors 5 December.e. 4.1.1. The law does not recognize the sole proprietorship as a separate entity i.2 Sole Trade-characteristics • Sole trade has the following characteristics which differentiate it from other forms of business organization:- i. The owner provides the necessary capital. iii. ii.M assets.

for any business to be successful. his/her main objective is to earn profit. • Secondly. 5 December.3 Formation of a Sole Trade • When an individual plans to start a business. • A sole proprietor should be very clear about what kind of goods or services he or she wants to deal in. The sole proprietor should know the size and nature of the business so that the required amount of capital can be raised.1. There are number of factors to be taken into consideration. 4.1. proper planning and research is very essential before the business is formed.M . 2017 Faustine J. the kind of capital or investment available to start the business. For example.

1.M . The sole trader must be aware of any legal issues which are to be adhered for example licenses or permits and any other requirements depending on the kind of business. The sole trader must put his business in a best areas where many customers can be cultivated.1. 2017 Faustine J. This again depends on the nature of the business. 5 December.3 Formation of a Sole Trade • Another important factor is the location of the business.Tanzania announced the annual renewal of business licences starting from July 2013. Many businesses have failed or succeeded depending on the location. For example The Ministry of Industry and Trade. 4. • Then comes the legal formalities.

for example is it students.1. • Also. Faustine J. Sole trader can apply for a license from the municipality where the business premises are located. 4. working people. Sole traders must also get certificates of registration of business name from Business Registrations and Licensing Agency (BRELA).1.3 Formation of a Sole Trade Business licenses are therefore no longer free.M . 2017 season. or the sick? • Also important is the time factor because every business has a low or high 5 December. • The sole proprietor has to know the kind of customers the business is targeting. the sole proprietor should know the risks involved in that particular type of business.

It is easy to manage and the cost of organization/operation is low iii. ii.1. 5 December.the sole trader is completely free to make decisions about the business operations.1. 2017 Faustine J. Flexibility.the owner or proprietor owns all the profits. In most cases. only a license is needed to go into business iii. No/few formal and complex procedures for starting the business.4 Advantage of sole trade i. Retention of profits. 4.M .

M .1. 4. profits or other vital facts. v.4 Advantage of sole trade iv. Personal relationship.1. Secrecy-the sole trader is not required by the government to publicly reveal their business plans.a more personal relationship is possible between the employer on one hand and his employee and customer on the other hand who as a result understand better another’s point of view 5 December. 2017 Faustine J.

If the business fails the owner’s personal property can be seized and sold to pay creditors.1.e. i. 4.5 Disadvantage of sole trade i.1. 2017 Faustine J. This means there is no legal difference between the debts of the business and the debts of the owner.M . Unlimited liability. Limited business skills and knowledge-a business owner is unlikely to have expertise in all areas of management. controlling etc. organizing. planning. 5 December. financial management. ii.the sole trader is personally responsible for all the debts of his or her business.

the business must close down.1.M . iv. 4. Limited ability to borrow.Financial institutions are usually not willing to lend large amount of money to sole traders because only one person can be held responsible for repaying such loans and the assets of most sole traders are very limited. Lack of continuity. It also means that even when he has to attend to other functions.5 Disadvantage of sole trade As a result. 2017 Faustine J. the business can suffer in areas in which the owner is less knowledgeable.in the event that the owner dies.1. his business will come to end. 5 December. iii.

2. and the name under which their business is carried on is called the "firm name.M . and each owner is a partner.1. Persons who have entered into partnership with one another are called collectively a "firm". 2017 Faustine J. A partnership has two or more (a maximum of 20 people) parties as co-owners. 5 December.1 Partnership-meaning • "Partnership" is the relationship which subsists between persons carrying on business in common as defined with a view of profit. 4.

professional service firms (law. usually spelled out in writing in the form of a contract between the partners.2. Faustine . because an irresponsible partner can create large debts for the other general partners without 5 December. General partnerships have mutual agency and unlimited liability.). 2017 their knowledge orJ.Mauthorization. etc. 4. Partnerships are therefore quite risky. Partnerships are governed by agreement. accounting.1. real estate. and oil and gas exploration companies operate as partnerships.1 Partnership • Many retail establishments. meaning that each partner may conduct business in the name of the entity. and can make agreements that legally bind all partners without limit for the partnership’s debts.

accountants iii.2 Characteristics of Partnership i. 2017 Faustine J. the relationship is for either a specified period or a specified purpose at the expiry of which the partners is dissolved. Membership is between two to maximum of twenty.M . With a temporary partnership. ii. 4. The partnership may be a temporary partnership (joint ventures) or permanent partnership.2. It is easy to set up partnership and future disputes can be avoided if there is a partnership deed. However.1. for professional services the number may be up to fifty and each partner is a qualified person e. 5 December.g.

4.1.2.2 Characteristics of Partnership
iv. There is a possibility of division of labour and
specialization
v. New partner may be admitted to cope with or for
the purpose of expansion
vi. Partners can raise more capital than a sole trader
vii. A person who is a minor according to the law to which he
is subject is not competent to be a partner in a firm.

5 December, 2017 Faustine J.M

4.1.2.3 Types of Partner/ship
a) Their participation in management
• Active partner- This is a partner who in
addition to providing capital and sharing
profits and losses plays an active role in the
affairs of the business. He takes part in the
management of the firm and may often be
given a fixed area of responsibility
• Dormant partner (sleeping or silent) – This
partner contributes towards capital, shares
profits and losses but takes no part in the
management of the business.
5 December, 2017 Faustine J.M

4.1.2.3 Types of Partner/ship
(b) The degree of liability in the partnership
• Limited partnership-The limited partner is a
person who contributes capital to a business
but is not active in managing it, his or her
liability is to the amount that he or she has
invested. In return for their investment,
limited partners share the profit of the firm.
Legally, it is not allowed to a limited partner.
• A limited partnership has both general and
limited partners. The general partners own
and operate the business and assume liability
5 December, 2017 Faustine J.M

while the limited partners serve as investors only. 2017 Faustine J. 4.He/she a partner who has unlimited liability and may be called upon to meet the firm’s debts from his/her personal 5 December.1. • General partnership.2. they have no control over the company and are not subject to the same liabilities as the general partners.M .3 Types of Partner/ship for the partnership.

1. (c) Capital contribution • Quasi partner-He/she is person who does not contribute any capital or take any part in the business but allows the firm to use his name as a partner. 2017 Faustine J. He/she is generally not liable for the debts of the firm.M .3 Types of Partner/ship resources if the firm fails to settle them.2. He is responsible (liable) for the debts of the firm 5 December. He/she takes active role in management of the firm. 4. • Real partner-Contributes capital and takes part in the business.

4 Formation of Partnership • When a partnership is formed a “partnership deed” or “articles of partnership” or a partnership agreement is normally drawn though it is not legal requirement. dormant. active etc. 2017 Faustine J.g. address and occupation of each partner – Status or type of each partner e. 4. 5 December. The aim is to provide reference in case of disputes between partners • Contents of Partnership Deed – Name of the firm – Name.2.M .1.

1. 4. interest to be allowed on capital. free accommodation. salary if any. right to inspection of books of accounts.M . drawing allowed. facilities.g. death or admission of a partner – Manner of keeping books of account – The procedures to be adopted at dissolution of 5 December.2.4 Formation of Partnership – Capital contribution – How profits and losses are to be shared – Rights of each partner e. allowances.partnership 2017 Faustine J. right to sign documents on behalf of the business – Duties allocated to partners – Method of calculating goodwill at the time of retirement.

interest to be allowed on capital. drawing allowed.M .2. 4. right to sign documents on behalf of the business – Duties allocated to partners – Method of calculating goodwill at the time of retirement.partnership 2017 Faustine J.1. death or admission of a partner – Manner of keeping books of account – The procedures to be adopted at dissolution of 5 December. right to inspection of books of accounts. allowances. facilities. free accommodation.4 Formation of Partnership – How profits and losses are to be shared – Rights of each partner e.g. salary if any.

4. 2017 Faustine J.4 Formation of Partnership – The duration of partnership if temporary – The purpose for which the firm is established 5 December.2.M .1.

4. the following provisions apply: • Every partner has the right to take part in the management of the business • In case of differences arising as to ordinary matters connected with business.M .2. 2017 Faustine J.4 Formation of Partnership In absence of a written partnership agreement. the majority of the partners may take decision • No change may be made in the nature of the business without the consent of all partners • All profits and losses must be shared equally by all partners 5 December.1.

4 Formation of Partnership • No interest is to be allowed on capital • No salary has to be paid to partners for their service to the business • 5% interest has to be paid on loans advanced to the business by the partner • Every partner will have the right to inspect the firm’s books of account 5 December. 4.1.M .2. 2017 Faustine J.

1. 4. • The firm must indemnify a partner for liabilities incurred by him in the conduct of the business • Every partner who has access to the firm’s funds or other properties must render accounts. 2017 Faustine J.2.5 Rights and duties of partners Specifically the following are the Rights and duties of partners • Every partner is the agent of the firm and his other partners for the purpose of the business of the partnership.M . displaying utmost good faith 5 December.

1. 4.5 Rights and duties of partners • If a partner has private business that competes with the partnership all profits made by him should be surrendered to the firm • No new partner may be admitted without the consent of all partners • No partner may be expelled without dissolving the partnership • A majority of partners cannot expel a partner 5 December.M . 2017 Faustine J.2.

– All profits and losses are shared among the partners 5 December.5 Advantage of Partnership – Ease and low cost of formation-legal requirements are limited to registering the name of the business and purchasing whatever licenses that are needed.M . 4.1. – Availability of capital and credits. Therefore it is possible to expand business more easily. Banks and suppliers may often be more willing to extend credit to such partnership than to an individual owner.2. 2017 Faustine J.Partners can put together their funds so that their business has more capital than would be available to a sole trader.

2.M . 4. 2017 Faustine J.it brings in a wider degree of skills.5 Advantage of Partnership – Combined business skills and knowledge.1. knowledge and experience from each of the partners. 5 December.

4.6 Disadvantage of Partnership • Unlimited liability. This may slow or even retard the firm’s progress • Mistake of one partner-if one partner makes a mistake.Partners may disagree on various issues that can affect business.1. withdrawal or legally declared incompetence of any kind • Effects of partners’ disagreements.2.M . 2017 Faustine J.Each partner is personally responsible for the debts of the partnership • Lack of continuity-Partnership are terminated in the event of the death. all the partners have to suffer the consequences 5 December.

2.1. 2017 Faustine J.by any partner giving notice of dissolution to others 5 December.M . Expiration or notice A partnership is dissolved • If entered for a fixed term or by the expiration of that term • If entered for a simple venture or undertaking by the termination of that venture or undertaking • If entered into for an undefined time.7 Dissolution of Partnership • A partnership may be dissolved in any of the following ways: i. 4.

1. 4. Illegality • An event may happen which makes it unlawful for the business of the firm to be carried out. Order of the court • On application by a partner.7 Dissolution of Partnership ii.2. 2017 Faustine J. iv. the court may dissolve the partnership in the following cases: – When a partner is incapable by any reason of mental 5 December. Bankruptcy or death • The death. bankruptcy or insanity of any partner causes the dissolution of a partnership iii.M .

M .2.7 Dissolution of Partnership disorder of managing and administering his property and affairs • When a partner other than the partner suing. commits frequent breaches of the partnership agreement • When the court thinks it is just and equitable to dissolve the partnership 5 December. 2017 Faustine J.1. 4. becomes permanently incapable of performing his duties as partner • When a partner other than the partner suing.

partnerships and co-operatives.1. other forms being sole trade/proprietorships. quite separate 5 December.3.1 Company-meaning • A company can be defined as an association of two or more persons for any lawful purpose. by subscribing their names to a memorandum of association and otherwise complying with the requirements of the Act in respect of registration. • Company is among the forms of business units carried out in different parts of the world. • A company is corporate body i.e it is created under law and has an entity of its own. 2017 Faustine J.M . 4.

1 Company -meaning from the members that comprise it.1. incur liabilities. be sued by others and do anything for which it has been formed. sue others. • It is a legal entity which can enter into contracts. 5 December. 2017 Faustine J.3.M . 4.

M . ii. Limited Companies-These are companies whose liability of members is 5 December. 4. There are different types of registered companies. These includes:- i.which are companies whose formation and control is vested under parliamentary control. These are:- i.which is a company registered by the registrar of companies for example BRELA in Tanzania. Registered Companies.2 Types of Companies We have major two types of companies. 2017 Faustine J.3.1. Statutory Companies.

the members are not required by the law to contribute fully to the assets of the firm (business estate) from the property of their private estates. 2017 Faustine J.where the liability for members is limited to the nominal amount of the shares they take.3.e each shareholder is only liable to the extent of the value of shares he holds.M .1. This means that in case of business failure. as stated by the memorandum. 5 December. This applies to companies formed for trade or gain. These types of companies are further classified as: • A company limited by shares.2 Types of Companies limited (i. 4.

4.3.g charitable organizations and professional institutions may form this type. 5 December.1. Companies formed for purposes other than trade e.M . 2017 Faustine J.where the liability for members is limited to the amount they have agreed to contribute to the assets of the company in the event of the winding up of the company as stated by the memorandum.2 Types of Companies • A company limited by guarantees.

the members are required by the law to contribute fully to the assets of the firm (business estate) from the property of their own (private estate) in order to meet company’s obligations. 5 December.3. Unlimited Companies • The liability of the members is not limited which imply that in case of business failure. 2017 Faustine J.1.2 Types of Companies ii. 4.M .

2 Types of Companies iii. 4. 2017 Faustine J. 5 December. • They have at least 7 members and unlimited maximum number. being a company the memorandum of which states that it is to be a public company.3. • A ''public company'' is a company limited by shares or limited by guarantee and having a share capital.M . Again.1. registered company may be a public or a private company. • Public companies are formed when it is desired to go to the public for funds to expand an existing business.

2017 Faustine J.3. • A “private company” A ''private company'' means a company which by its articles restricts the right to transfer its shares. 5 December.2 Types of Companies • The shares are transferable and can be offered to the public for subscription.M . and limits the number of its members from two to fifty (shareholders only not others like employee). 4.1. and • Prohibits any invitation to the public to subscribe for any shares or debentures of the company.

3 Formation of a company • Formation of the company start when any two or more persons. 5 December. • The company must also have a seal. • The documents must be signed by the members.1. associated for any lawful purpose subscribe their names to their memorandum of association (one of key documents) and otherwise complying with the requirements of the laws in respect of registration to form an incorporated company with or without limited liability. • Another important documents for this exercise. 2017 Faustine J. is the article of association. 4.3.M .

The two documents are attached to a set of three forms: • Form 1: Declaration of Compliance (to be attested by notary public) • Form 14: Particulars of Directors or Managers • Form 15: Notice of Situation of Registered Office. 2017 Faustine J.1.3. • Since the documents have to include the company’s name. 4. it is prudent to check in advance that 5 December. among other things) together with the prescribed fee.3 Formation of a company • The documents are to be delivered to the office of the registrar of companies (for example in Tanzania is BRELA which registers companies.M .

• If the documents are in order. the registrar issues a certificate of incorporation and the company there upon comes into existence.1. If a name exists.M . • In order for the company to start its activities.3. which is issued by Ministry of Industry and Trade or the local government’ granted after having the respective permits • Other things need to be taken into account either before or after incorporation including:- 5 December.3 Formation of a company proposed name is likely to be available. 2017 Faustine J. it cannot be reused. 4. it is necessary to have a Trading License.

5 December. Social security laws (Pensions Acts). • Acquire rights towards various utilities providers (Water. usage and bills and related issues). telecommunications. internet.c. Safety laws (OSHA) e.t.1. posts) in relation to installation procedure.M . Electricity.3. 2017 Faustine J. • Have a bank account • Comply with various laws and regulations such as Employment laws (ELA).3 Formation of a company • Having Taxpayer Identification Number (TIN) • Comply with various taxes for example those in Local Government Authorities. 4.

1. • Be aware and comply with import/export procedures-pre shipment inspection.M . tarrifs etc. 4. which determines the eligibility of each project for an EIA.3.g NEMC. 2017 Faustine J.3 Formation of a company • Make sure that the projects are registered with environmental authority e. 5 December. taxes.

or with 5 December. with ''public limited company'' as the last words of the name in the case of a public company.This is the document that defines the constitution of the undertaking in its relation to the outside world.3 Formation of a company Some of the necessary documents for company formation are discussed below.1. i.3. 4. It lays down powers and limitations of the company and establishes the company’s individual identity. Name Clause.M .This states the name of the company. 2017 Faustine J. a. It gives the following details. Memorandum of Association.

ii.1.M . 2017 Faustine J. The company can adopt any names it pleases except that it may not register a name identical with that of of the company already in existence and does not give a false idea of the nature of the company.this outline the objectives for the company existence. The company can not act beyond these objectives.3 Formation of a company ''limited'' as the last word of the name in the case of a company limited by shares or by guarantee (not being a public company). The promoters therefore draft this clause in such away that almost all the 5 December. Objects Clause.3. 4.

1. The statement of a company’s objects in its memorandum serves double purposes: It protects the shareholders. who can discover from it the extent of the company’s power. 4. who learn from it the purposes to which their money can be applied.3. • Any act done by the company beyond the powers indicated in the object clause. beyond the powers of the company and therefore 5 December.M . It protects persons dealing with company. is utra vires that is. 2017 Faustine J.3 Formation of a company all the main and secondary activities intended to be undertaken are registered.

types of shares whether ordinary or preferences. the value of each share.total amount of the share capital. The company is governed by the laws of that country. 4. 2017 Faustine J. It includes. Capital Clause.3.this gives the name of the country which the office is situated. the units into which the capital is divided. iii. Situation Clause.M .This states the share capital the company wishes to have.3 Formation of a company invalid. iv.1. The total value of all the shares is called nominal share capital. It also indicates other details necessary for locating the office. 5 December.

3 Formation of a company Once the memorandum is registered a company becomes empowered to raise this amount by selling share.there must be a clear statement that the liability of the company is limited by its shares or otherwise in the event of its being wound up vi. v.M . 2017 Faustine J. 4. It then referred to as authorized or registered share capital.1. Declaration. Liability Clause.3. The registration fee is calculated according to this amount.This must be signed by not less than two members in the case of private company and 5 December.

3. who declare that they intend to take and pay for at least one share each.1.M . • All companies must prepare a memorandum of association. • The memorandum must be in English 5 December.3 Formation of a company seven in the case of a public company. 4. 2017 Faustine J.

5 December. Articles of Association • This govern the internal structure of the company. Articles shall be: (a) in the English language. (b) printed. who declare that they intend to take and pay for at least one share each. 2017 Faustine J.3 Formation of a company seven in the case of a public company. 4.1.M .3. b. • All companies must prepare a memorandum of association.

g general meetings whereby a company for example shall in each year hold a general meeting as its annual 5 December. Procedures for calling company meeting e. and signed by each subscriber to the memorandum of association in the presence of at least one witness.numbers of members with which the company proposes to be registered. Members.1. The articles of association include the following:- i.M . who shall attest the signature and add his occupation and postal address. ii. 2017 Faustine J. 4.3 Formation of a company ( c) Divided into paragraphs numbered consecutively.3.

the re-election of any directors retiring and seeking re-election in accordance with any requirement in the company's articles.3. 5 December. the directors' report.3 Formation of a company general meeting in addition to any other meetings (extraordinary general meetings) in that year. 2017 Faustine J. Proceedings at general meetings.1.M . Notice of general meetings. such as :- • To have laid before the members the annual accounts. the auditors' report. 4. the appointment of auditors for the period up till the next general meeting at which accounts are laid.

appointment of attorney by power of attorney.3 Formation of a company (iii) Voting rights of shareholders -e. endorsing. drafts. drawing. accepting. 5 December. 4. 2017 Faustine J. (iv) The number and powers of directors-not less than two.g every member shall have one vote or no member shall be entitled to vote at any general meeting unless all moneys presently payable by him to the company have been paid.1. of cheques. promissory notes. bills of exchange. or other negotiable instruments. signing.M .3.

4.1.3.3 Formation of a company
(v) Disqualifications of directors e.g without the
consent of the company in general meetings holds
any other office of profit under the company; or
becomes of unsound mind; or resigns his office by
notice in writing to the company.
(vi) Proceedings of directors e.g calling of directors
meeting, appointment of chairman of board of
directors, delegation of powers, remuneration- the
method of deciding the level of payment of
directors, retirement, e.t.c.
5 December, 2017 Faustine J.M

4.1.3.3 Formation of a company
(vii) Appointment of secretary, remuneration, power,
termination of contracts,
(viii) The seal of the company-limit on signing
documents/instruments to which the seal is affixed
especially by a director, secretary or second
director.
(ix) Borrowing powers of the company,
(x) Company’s accounts- types of transactions (e.g all
sums of money received and expended, all sales
and purchases of goods by the company; and all
assets and liabilities of the company), where books
5 December, 2017 Faustine J.M

4.1.3.3 Formation of a company
to be kept (especially at the registered office of the
company, or other place or places as the directors think
fit), types of accounts (especially profit and loss
accounts, balance sheets, group accounts), inspection
of the company, presentation of accounts (in general
meetings), destruction of books of accounts, e.t.c.
(xi) Auditing of Company books, appointment of auditors
and their duties,
• Alteration may be fairly simple. A meeting of all
shareholders is called and the majority passes a
resolution seeking alteration. The resolution is then
forwarded to the registrar of companies and the
alteration effected.
5 December, 2017 Faustine J.M

M . 4. The resolution is then forwarded to the registrar of companies and the alteration effected. A meeting of all shareholders is called and the majority passes a resolution seeking alteration. 2017 Faustine J.1. 5 December.3.3 Formation of a company • Alteration may be fairly simple.

1 Definition of Planning 5 December. 2017 Faustine J.M . 4.