INSTITUTE OF ACCOUNTANCY ARUSHA

GROUP ASSIGNMENT

PROGRAM: MASTERS IN BUSINESS ADMINISTRATION

MODULE NAME; CORPORATE LAW AND GOVERNANCE

FACILITATORS NAME; DR. MATHIAS NKUHI

ACADEMIC YEAR; 2021/2022

GROUP 3B

NO NAME REGISTRATION
NUMBER
1 DEDAN GOSPEL MBA/0023/21
2 HALIMA MOHAMED MBA/0043/21
3 KELVIN FELIX MBA/0016/21
4 MAHMUDY KASIM JAKAYA MBA/0054/21
5 SARARISPER MAVURA MBA/0005/21
QUESTION TWO:
Zungu Teyo is a celebrated tour guide in Arusha Tanzania. He has guided thousands of foreign
tourists to and from the famous Mountain Kilimanjaro peaks since early 1990s. In March 2022,
he met Mr. Peter Dizzo, an African-American tourist who took a serious interest in investing in
the tourism sector in Tanzania. He wants to register a company for inter-alia, tourism services.
He has done so in all other countries he had visited before. While introducing himself, Zungu
Teyo told Mr. Peter Dizzo that he had a degree in business administration and that he has friends
who can assist in the process. On that note, Mr. Peter Dizzo was convinced that it can be done
and he is even considering taking Mr. Zungu Teyo on board as a shareholder in the company to
be formed. However, he (Mr. Peter Dizzo) wants to hear from the friends of Mr. Zungu Teyo
(referred to above) about a number of issues.
Required:
Assuming that you are Mr. Zungu Teyo’s friend, from your knowledge of company law, assist
Mr. Peter Dizzo with the following:
(a) Identify for him the documentation required for registration of a company in Tanzania
pointing out the main reason for each.
(b) Mention and explain to him the main characteristics of a company that will protect him
from personal liability.
(c) Highlight to him other forms of business association which operates in Tanzania and how
distinct are they from a company.
Answer;
There are several requirements needed when planning to register a company in Tanzania and
some of these documents can be elaborated by The Company Act of 2002 as follows:
Certified copy of memorandum of association.
This in effect, defines the company and what it can do. It is the requirement under section 5 (1)
of the Act that there should be at least one witness who must attest the signature by subscribers
to the memorandum.
The articles of association.
These usually regulate the internal management, and the rights and duties of shareholders vis-à-
vis the company and each other. They deal with matters such as transfer of shares, meetings,
voting and other rights of shareholders, dividends, and directors’ powers of management.
A list of directors and company secretary of the company.
A statement of all subsisting charges created by the company.
Names and addresess of one or more persons resident in Tanzania
This is authorized to accept on behalf of the company service of process and any other notice
required to be served on the company, and to represent the company as its permanent
representative at its place of business.
Full address of registered principal office of the company and full address of the place of
business in Tanzania.
A company shall at all times have a registered office which all communications and notices may
be addressed. On incorporation, the situation of the company’s registered office is that specified
in the statement sent to the Registrar under s. 14 of the Companies Act.
Statutory declaration

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This is made by the director or secretary of the company stating the date on which the company’s
place of business in Tanzania was established, the business that is to be carried on and if
different from the registered name of the company, the name under which that business is to be
carried on.
A copy of the most recent accounts and related reports of the company including if not in
English a translation of the same. To check the financial viability of the company.

b) main characteristic that protects an individual from personal liability is limited liability.
Limited Liability: The liability of the members of the company is limited to contribution to the
assets of the company up to the face value of shares held by them. A member is liable to pay
only the uncalled money due on shares held by him when called upon to pay and nothing more,
even if liabilities of the company far exceeds its assets. The personal property of a shareholder
cannot be attached for the debts of the company if he/she holds fully paid up share. A company
may be limited by shares or by guarantee (s. 3(2) of the Companies Act, 2002). In a company
limited by shares the liability of members is limited to the unpaid value of shares. In a company
limited by guarantee, the liability of a member is limited to such amount, as the members may
undertake to contribute to the assets of a company, in the events of its being wound up.
c) other forms of business association
Sole Proprietorship. This is an individual carrying on business either in his own name or in an
assumed name which is usually referred to as the Trade Name. Compared to a company, It does
not have a separate legal entity, Liability of the sole proprietor is unlimited and property of the
firm belongs to the sole proprietor.
Partnership.
is sum total of persons who have come together to share the profits of the business carried on by
them or any of them. Compared to a company, It does not have a separate legal entity, Liability
of the partners is unlimited, Property of the firm belongs to the partners and they are collectively
entitled to it. In case of a company, the property belongs to the company and not to its members
and a partner cannot transfer his shares in the partnership firm without the consent of all other
partners.
Cooperative.
This is an association or organization that is formed by people of common interest who
voluntarily come together and resources to promote their welfare. Sam, M. (2010). Cooperative
societies are easy to form, contain open membership, have democratic management, have limited
liability and stability. Whereby they contain several disadvantages such as inefficient
management, absence of motivation, contain rigid rules and regulations, lack of stiff competition,
lack of secrecy and lack of incentive and initiative,

QUESTION THREE:
The doctrine laid down in Solomon v. Solomon and Co. Ltd has to be watched very carefully. It
has often been supposed to cast a veil over the personality of a limited company through which

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the courts cannot see. But that is not true. The courts can and often do draw aside the veil. They
can and often do, pull off the mask. They look to see what really lies behind. Source: Lord
Denning M.R in the case of Littlewood v Inland Revenue, (1969), WLR 1241 (Emphasis by Italics
and bolding).
Required: Describe and explain the concept of Lifting/piercing corporate veil and circumstances
under which the veil may be lifted.
Answer;
Piercing the Corporate veil
Piercing the corporate veil refers to a situation in which courts put aside limited liability and hold
a corporation's shareholders or directors personally liable for the corporation’s actions or debts.
Veil piercing is most common in close corporations. While the law varies by state, generally
courts have a strong presumption against piercing the corporate veil, and will only do so if there
has been serious misconduct. Courts understand the benefits of limited liability, as it "encourages
development of public markets for stocks and thus helps make possible the liquidity and
diversification benefit that investors receive from those markets." As such, courts typically
require corporations to engage in fairly egregious actions in order to justify piercing the
corporate veil. In general, this misconduct may include abusing the corporation (e.g.
intermingling of personal and corporate assets) or having undercapitalization at the time of
incorporation. Cornell Law Review article and this Cornell Law Review article (2019).
The circumstances under which the veil may be lifted are as follows;
Protecting public policy.
The courts invariably lift the corporate veil to protect public policy and prevent transactions
contrary to public policy. In the case of Connors v. Connors Ltd (1940) 4 All ER 174 it was held
that where there is a conflict with public policy, the court will lift the veil of incorporation.
Bourne, N. (2000)
Statutory lifting.
Apart from judicial considerations, the exercise may also be carried out statutorily under the
provisions of Companies Act for example, where the number of members is reduced bellow the
statutory minimum
Prevention of fraud or improper conducts.
The legal personality of a company may also be disregarded in the interest of justice where the
machinery of incorporation has been used for some fraudulent purpose. In Jones v Lipman
(1962) All ER 442. L agreed to sell certain land to J. He subsequently changed is mind and to
avoid the specific performance of the contract, he sold it to a company which was formed
specifically for that purpose. L and a clerk of his solicitors were the only members. J brought
action for specific performance against L & and the company. The court looked at the reality of
the situation, ignored transfer and ordered that the company should convey the land to J. Bourne,
N. (2000)
Determination of character of a company whether it is enemy.
A company may assume an enemy character where persons in de facto control of its affairs are
residents in an enemy country. In Daimler Co. v Continental Tyre & Rubber Co. Ltd (1916) a
company was incorporated in England for the purpose of selling in England tires made in
Germany by a German Company which held bulk of shares in the English company. The holders
of remaining shares except one, and all the directors were Germans, resident in German. During
the First World War, the English company commenced an action for recovery of a trade debt.
Held: The Company was an alien company and the payment of the debt to it would amount to
trading with enemy, and therefore the company was not allowed to proceed with the action.

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Where the Company is a sham or is formed to avoid legal obligations.
Where the use of an incorporated company is being made to avoid legal obligations the court
may disregard the legal personality. Nicole & Sandra partners, sell their business to Benja and
undertake not to start a similar business and not to compete with Charles for certain number of
years. After some time they form a private company, become the principal shareholders and
directors and start a similar business. The court may restrain the company from carrying
business. Bourne, N. (2000)
Agency or trust.
Where a company is acting as agent for its shareholder, the shareholders will be1ffya. liable for
the acts of the company. It is a question of fact in each case whether the company is acting as an
agent for its shareholders. There may be an Express agreement to this effect or an agreement
may be implied from the circumstances of each particular case. In the case of F.G.Films ltd, An
American company financed the production of a film in India in the name of a British company.
The president of the American company held 90 per cent of the capital of the British company.
The Board of trade of Great Britain refused to register the film as a British film. Held, the
decision was valid in view of the fact that British company acted merely as he nominee of the
American Company.
Thus, it is abundantly clear that incorporation does not cut off personal liability at all times and
in all circumstances. “Honest enterprise, by means of companies is allowed; but the public are
protected against kitting and humbuggery”. The sanctity of a separate entity is upheld only in so
far as the entity is consonant with the underlying policies which give it life.

REFERENCES.
Bourne, N. (2000) essential company law. Third edition. Cavendish Publishing Limited, The
Glass House, Wharton Street, London WC1X 9PX, United Kingdom

Clarkson, Kenneth W.; Roger LeRoy Miller; Frank B. Cross (2018). Business law : text and
cases (Fourteenth ed.). Boston, MA

Jason Gordon, (2021), Law Transaction and Risk Management, The Business Professor, UK.
Plender and Wallace, (1985), The Square Mile: A guide to the New City of London, Century
Publishing.

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Sam, M. (2010), Cooperative in Tanzania mainland: Revival and Growth, Working Paper
Number 14, Dar es Salaam – Tanzania.
United Republic of Tanzania. (2002) Company Act.