PROCEDURES OF FORMING A COMPANY IN TANZANIA

MKAMA KALEBU. MAGOTI1.

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.

1
LL.B, the University of Dodoma; PGDLP(On going) the Law School of Tanzania.
  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 Number Street(Mtaa) District(Wilaya) Region

(Mkoa)
( Mahali ilipo biashara) (Namba)

(c) Phone numbers( Namba za

simu)

(d) Email (Barua pepe)

4. Corporation Name

Jina la Kampuni
Street( Mtaa) District(Wilaya)
6. Situation of the Registered or Number Region( Mko
principal office of the a)
 Corporation (Namba)

(Anwani ya mahali ofisi za

Shilika/Kampuni zilipo

7. Other Business of the

Corporation (if any)

Shirika/Kampuni linafanya
shughuli/kazi gani nyingine?)

8. Have you ever used this a. YES ( state the date

Business name before? (Je jina that you have started
hili la Biashara limeshaanza using it)
kutumkika?) 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 /=
For registration of a company not having a share capital where the
2 TSHS 300,000 /=
number of members as stated in the Articles of Association:
Filling fee for the application, meaning shs. 22,000/= for each document
3 TSHS 66,000 /=
i.e Memorandum and Articles of Association, Forms no. 14a and 14b.
Each Stamp duty for each copy of the Memorandum and Articles of
4 TSHS 5,000 /=
Association is charged
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 /=
For the receipt and/or registration by Registrar of any document which
8 TSHS 22,000 /=
under the Act is to be delivered to him
For the late filing/registration fee to be paid to the Registrar of any
9 TSHS 2,500 /=
document delivered to him (per month or part thereof)
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 USD 750 /=
constituting or defining the constitution of the company
- For registration of filling any document required to be delivered to the
USD 220 /=
Registrar under Part XII of the Act/other than the balance sheet
- For filling of Balance Sheet USD 220 /=
- For late filing/registration fee to be paid to the Registrar of any
USD 25 /=
document delivered to him out of time (per month or part thereof)
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.

Thank you.
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