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ENTREPRENEURSHIP FOR ENGINEERS

HANDOUT 5-LEGAL AND BUSINESS DEVELOPMENT SERVICES

Legal Services

There are different types of legal services required for setting up and operating a formal business
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in the country. These include:

Company Registration

This process must be preceded by formation of a business entity in a form a sole proprietorship,
partnership or limited liability company. lfthe business form is sole proprietorship or partnership
it must be registered under the Business Names Registration Act. All businesses operating in
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this country must register with the Business Registration and Licensing Agency (BRELA),
which is under the Ministry of Industries and Trade. The following documents are required in the
process of forming a company:

• Name of the company (which must be cleared by the Registrar of Companies).

• The address of the registered office in Tanzania
• Names, residential addresses and nationalities of the first subscribers and directors (at
least two).
• Memorandum of Association (stating in details the objects of the company) and Articles
of Association (stating in detail the management structure and processes). At least two
copies of each document must be filed;
• Filing a prescribed form to make a declaration that a company has complied with the
requirements of the Tanzanian company law; and
• Payment of the filing fee, registration fee and the stamp duty.

Investment Approval

In making application for investment incentives from Tanzania Investment Center, the following
documents are required:

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 • Three (3) copies of the project's Business Plan/Feasibility Study. The intended project
should aim at foreign exchange generation and savings, import substitution, creation of
employment opportunities, linkage benefits, transfer of technology, expansion of
production of goods and services etc.
The feasibility study should contain (i) clear statement of the project objective, (ii)
information regarding the investor (iii) details of investment costs (foreign and local
expected capital expenditure) (iv) how the proposed investment will be financed, specific
sources(s) of finance for the project, terms and conditions of the loan if applicable, (v)
sources of technology if applicable (vi) project financial and economic analysis (vii)
market study, (viii) project capacity, production process if applicable, (ix) environmental
impact assessment (x) expected employment generation,(xi) proposed implementation
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• Three (3) duly filled copies of application forms which are issued by the Tanzania
Investment Center at a fee ofUS$ 100;
• In case of expansion/rehabilitation, a copy of audited account for the past three years;
• A copy of the company's Memorandum and Articles of Association;
• A certified copy of the Certificate of company Incorporation;
• A brief profile of investors(s);
• Evidence of sufficient finance capital available to implement the project;
• Evidence of land ownership for the location of the project;
• Project implementation schedule; and
• An overall covering letter to which all the above are attached.
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Obtaining a General Business License

All businesses must obtain a general business license issued under the Business Licensing Act,
1972. Besides this, there are different types and number of licenses which must be acquired
according to the specific sector to which the business belong. To obtain a general business
license, the applicant must submit the following documents:

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 • Photocopy of the certificate of incorporation or certificate of compliance (in case of a
company) or certificate of registration (in case of partnership or sole traders);
• Memorandum and Articles of Association showing among other things that the objectives
of the company allow it to do the business which the license is being applied for;
• Proof of Tanzania citizenship e.g. photocopy of passport, birth certificate, or in case of a
non-citizen, resident permit Class A (showing the holder to be the investor in that
company/business) ;
• In case the shareholders of the company are non-residents, a Powers of Attorney to a
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citizen/resident must be submitted;

• Proof by the applicant having a suitable business premises for the business applied. Proof
that can be submitted includestitle deed, tenancy agreements, receipt of rent or property
\ tax payment); and
• Tax identification number (TIN) issued by Tanzania Revenue Authority.

The following are examples of sector specific requirements:

• Customs agency license (issued by Tanzania Revenue Authority) for those applying for a
license to Garryout the business of clearing and forwarding.
• Telecomrnunications/postaVbroadcasting license (issued by Tanzania Communications
Regulatory Authority) for those applying for a license to carry out
telecommunications/postal/broadcasting business.
• Insurance license (issued by Insurance Supervisory Department) for those applying for a
license to carry out insurance business.
• Special license /permit (issued by Tanzania Food and Drugs Authority) for those
applying for a license to carry out business relating to food, drugs and cosmetics.
• Professional certificates/authorization for all professional businesses e.g. engineers,
doctors, lawyers, pilots, accountants, ship captains, etc (issued by the respective
professional organization).
• Industrialliicense (issued by the Ministry of Industries and Trade) for those applying for a
license to establish industries and factories.

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Registration with Tax Authorities

Once a company has been incorporated by the Registrar of Companies, the company is required
to register with the nearest Tanzania Revenue Authority (TRA) office. The first document that
must be issued by TRA is Tax Identification Number (TIN). Normally, Tax Identification
Number is issued within three days ..

Once the Tax Identification Number has been issued, the tax file will be opened. Once a file
number has been issued, the company is expected to complete provisional tax return forms.
These have to be submitted within three months of the initial accounting date. The company
must estimate its profits for the first year and make quarterly provisional tax payments. Once a
file number is issued, TRA will issue an Income Tax Clearance Certificate, which can be used to
obtain the general business license.

If the turnover of the business is Tanzanian Shillings Forty Million the business must register for
Value Added Tax. VAT is charged at 20%. In order to be registered for VAT, the following
applicant must fill the application form obtained from Tanzania Revenue Authority (Value
Added Tax Department). The filled form must be returned with the copies of the following
ÿcuments:

• Certificate of incorporation or certificate of compliance (in case of a company) or

certificate of registration (in case of partnership or sole traders);
• Memorandum and Articles of Association showing among other things that the objectives
of the company allow it to do the business which the license is being applied for;
• Proof of Tanzania citizenship e.g. photocopy of passport, birth certificate, or in case of a
non-citizen, resident permit Class A (showing the holder to be the investor in that
company/ business);
• In case the shareholders of .the company are non-residents and don't have a resident
permit, a Powers of Attorney to a citizen/resident must be submitted;
• Proof by the applicant having a suitable business premises for the business applied. Proof
that can be submitted includes title deed, tenancy agreements, receipt of rent or property
tax payment);
• Tax identification number (TIN) issued by Tanzania Revenue Authority;
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 • Income Tax Clearance Certificate issued Tanzania Revenue Authority (Income Tax
Department);
• Business license issued by the Ministry of Industries or local authority under the Business
Licensing Act; and
• Three photos of the applicant or one of the resident directors of the company or local
representative.

Steps involved in registration of a Private Limited Liability Company

1. Apply for clearance of the proposed company name at the Business Registration and
Licensing Authority (BRELA) ..
2. Apply for a certificate of incorporation and of commencement at Registrar of Companies.
3. Apply for taxpayer identification number (TIN) with the Tanzania Revenue Authority.
4. Have income tax officials in~pect the office site of the new company.
5. Apply for PAVE with the Tanzania Revenue Authority.
6. Apply for a business license from the regional trade officer (depending on the nature of
business).
7. Have the land and town-planning officer inspect the premises and obtain his/her
signature.
8. Have the health officer inspect the premises and obtain his/her signature.
9. Apply for a VAT certificate with the Revenue Authority.
10. Receive VAT/stamp duty inspection.
11. Register for the workmen's compensation insurance at the National Insurance
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Corporation or other alternative insurance policy.
12. Obtain registration number at the National Social Security Fund (NSSF).

Other Legal Services:

1. Business laws & regulations
Different sectors are governed by specific licenses & regulations, therefore it is important to seek
legal advice on the required licenses and regulations which must be fulfilled in a particular
sector. In this case, the government has established organizations known as regulatory authorities
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which have the mandate to oversee and administer laws and regulations pertaining to different
economic activities in the country. In addition, there are courts responsible for commercial and
labour issues. Implementation of laws and regulations are important in the formation and
operations of formal businesses. Some of these organizations include the following:

Tanzania Revenue Authority

The Tanzania Revenue Authority (TRA) is a government agency charged with the responsibility
of managing the assessment, collection and accounting of all central government revenue.

Functions:

• To assess, collect and account for Government Revenue;

• To administer effectively and efficiently all the revenue laws of the Central Government.

• To promote voluntary tax compliance.

• To improve the quality of services to the taxpayers;

• To counteract fraud and other forms of tax evasion;

• To produce trade statistics and publications.

The Energy and Water Utilities Regulatory Authority (EWURA)

EWURA is an a.utonomous multi-sector regulatory authority responsible for technical and

economic regulation of the electricity, petroleum, natural gas and water sectors in Tanzania.

Functions:

• To provide licensing, tariff review and monitor performance & standards with regards to
quality, safety, health and environment.

• To promote effective competition and economic efficiency as well as protecting-the

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interests of consumers.
• To protect the interests of consumers.

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 • To protect the financial viability of efficient suppliers
• To promoting the availability of regulated services to all consumers including low
income, rural and disadvantaged consumers;

• To protect and preserve the environment.

• To enhance public knowledge, awareness and understanding of the regulated sectors.

The Surface And! Marine Transport Regulatory Authority (SUMATRA)

This is a multi-sector regulatory agency responsible for rail transport, port and shipping
services, maritime safety & security and road transport.

Functions:

• To promote effective competition and economic efficiency

• To promote the interest of the consumers Protect the financial availability of efficient
suppliers.

• To protect the availability of regulated services to all consumers including low income
rural and disadvantaged consumers.

• To enhance public knowledge/ awareness and understanding of the regulated sectors.

• To regulate safety and security in the transport sector.

• To facilitate the resolutions of complaints and disputes

• To disseminate information about relevant to the functions of the authority.

Business Registrations And Licensing Agency (BRELA)

BRELA is a Government Executive Agency responsible for business registration and licensing in
the country.

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 . Functions:

• To administer companies and business names laws.

• To regulate business by administering business and industrial licensing laws.

• To administer intellectual property laws.
• To encourage and facilitate local and foreign business investment.
• .To stimulate scientific and technological inventiveness and innovation and encourage
technology transfer.
• To protect the development of creativity in artistic, literary works, and expression of
folklore by protecting such work.

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Tanzania Food And Drug Authority (TFDA)
TFDA is a regulatory body responsible for controlling the quality, safety and effectiveness of
food, drugs, herbal drugs, cosmetics .and medical devices. It is also responsible for protecting the
public health by ensuring various na~ional standards of food, drugs, cosmetics and medical
devices are met and adhered to.

Functions:

• To evaluate and register drugs, prepackaged food, cosmetics, herbal drugs, medical
devices and food supplements before their approval for distribution and marketing in the
country.
\...... • To ensure that all dealings in food, drugs, herbal drugs, cosmetics and medical devices
are done after obtaining relevant licenses and permits.
• To inspect manufacturers, wholesalers and retailers and clinical trials sites at port of
entry to ensure that standard requirements for food, drugs, herbal drugs, cosmetics and
medical devices are complied to.
• To control importation and exportation of food, drugs, herbal drugs, cosmetics and
medical devices in order to ensure their safety, quality and effectiveness by giving details
and procedures to be followed when goods are imported and exported.

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 • To monitor continually safety of food, drugs, herbal drugs, cosmetics and medical
devices available in the Tanzania market.

• To carry out laboratory analysis for quality, safety and effectiveness to determine the
quality, safety and effectiveness of food, drugs, herbal drugs, cosmetics and medical
devices manufactured or imported into the country.

• To control and organize promotion of food, drugs, herbal drugs, cosmetics and medical
devices in the country.

• To educate and inform stakeholders on all issues related to institution's functions such as
control of the quality, safety and rational use of drugs, food, herbal drugs, cosmetics and
medical devices.

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Tanzania Bureau Of Standards (TBS)
TBS was established to undertake measures for quality control of products of all description and
promote standardization in industry and commerce.

Functions:

• To provide for the testing of locally manufactured and imported commodities with a view
to determine whether such commodities comply with the provisions of laws dealing with
standards relevant to such commodities.

• To undertake measures or quality control of commodities of all description and promote

standardization in industry and commerce.

• To provide training to the industries and small and medium enterprises (SMB) on matters
concerning quality packaging design.

• To make arrangements or provides facilities for testing and calibration of precision

instruments, gauges and scientific apparatus for the determination of degrees of accuracy
by comparison with standards approved by the ministers on recommendation of the
council and the Issue of certi~cate in regard there to.

• To provide standard marks which allows manufactures whose products have conformed
to Tanzania standards to use the TBS mark of quality

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 • To provide symbols which manufactures may use to promote their products and
consumers seek as evidence of quality.

Tanzania Communications Regulatory Authority (TCRA)

TCRA is an independent Authority for overseeing the postal, broadcasting and electronic
communications industries in the Republic of Tanzania. It has the mandate is to regulate the post
al, electronic communications and broadcasting industries in the United Republic of Tanzania.

Functions:

• To promote effective competition and economic efficiency;

• To protect the interests of consumers;
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• To promote the availability of regulated services

• To provide licensing and enforce license conditions of broadcasting, postal and
telecommunications operators;
• To establish standards for regulated goods and services;
• To regulate rates and charges (tariffs);
• To manage the radio frequency spectrum;
• To monitor the performance of the regulated sectors; and

• To monitor the implementation ofICT applications.

The National Environment Management Council (NEMC)

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NEMC was established with a broad mandate in response to the national need to oversee
environmental management issues including sustainable management of the environment,
prevention and control pollution, waste management, environmental quality standards, public
participation, environmental compliance and enforcement. It also has the mandate to undertake
enforcement, compliance, review and monitoring of environmental impacts assessments,
research, facilitate public participation in environmental decision-making, raise environmental
awareness and collect and disseminate environmental information.

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Functions:

• To enforce and ensure compliance of the national environmental quality standards.

• To review of Environmental Impact Statements (EIS) and conduct environmental monitoring and
auditing of projects and facilities.
• To undertake and co-ordinate research, investigation and surveys in the field of environment and
collect, and disseminate information.
• To carry-out research and surveys for the proper management and conservation of environment.
• To render advise and technical support to entities engaged in natural resources and environmental
management.

• To initiate and evolve procedures and safeguards for the prevention of accidents which may cause
environmental degradation.

• To enhance environmental education and public awareness; and establish and operate national
information system for sound environmental management.
• To publish and disseminate manuals, codes and guidelines relating to environmental management
and prevention or abatement of environmental degradation.
• To issue restoration and recommend for easements orders, and save prohibition notice.

2. Commercial and Labour Courts

The Commercial Court is responsible for handling all commercial disputes. It was
established with the aim of ensuring efficient management and expeditious disposal of
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commercial disp~l~~s~o as to encourage businessdevelopment ~der ~free market eC?l1omy
and also growth of foreign investments.

The Labour Court is responsible for hearing and determining employment disputes .
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3. Insurance

Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another,
in exchange for payment. An insurer is a company selling the insurance; the insured, or

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 policyholder, is the person or entity buying the insurance policy. The amount to be charged
for a certain amount of insurance coverage is called the premium. Insurance is a form of risk
management primarily used to give protection against an uncertain loss which is important
for any business undertaking. Hence businesses must be insured in order to avoid losses
which might cost the life of the business itself or its employees.

Basic legal principles of insurance:

• Indemnity - the insurance company indemnifies, or compensates, the insured in the case
of certain losses only up to the insured's interest.

• Insurable interest - the insured typically must directly suffer from the loss. Insurable
interest must exist whether property insurance or insurance on a person is involved. The
concept requires that the insured have a "stake" in the loss or damage to the life or
property insured. What that "stake" is will be determined by the kind of insurance
involved and the nature of the property ownership or relationship between the persons.

• Utmost good faith - the insured and the insurer are bound by a good faith bond of
honesty and fairness. Material facts must be disclosed.

• Contribution - insurers which have similar obligations to the insured contribute in the
indemnification, according to some method.
• Subrogation - the insurance company acquires legal rights to pursue recoveries on behalf
of the insured; for example, the insurer may sue those liable for insured's loss.
• Proximate cause - the cause of loss (the peril) must be covered under the insuring
agreement of the policy, and the dominant cause must not be excluded.
• Mitigation - In case of any loss or casualty, the asset owner must attempt to keep the loss
to a minimum, as if the asset was not insured.

Some Types of Insurance

Machinery insurance, or equipment breakdown insurance insures against accidental physical

damage to boilers, equipment or machinery.

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 Marine insurance and marine cargo insurance cover the loss or damage of vessels at sea or on
inland waterways; and of cargo in transit, regardless of the method of transit.

Public liability insurance covers a business or organization against claims should its operations
injure a member of the public or damage their property in some way.

Mortgage insurance insures the lender against default by the borrower. Mortgage insurance is a
form of credit insurance.

Travel insurance is an insurance cover taken by those who travel abroad, which covers certain
losses such as medical expenses, loss of personal belongings, travel delay, and personal
liabilities.
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Automobile insurance: Commercial automobile policies cover the cars, vans, trucks and trailers
used in business. The coverage will reimburse the business owner if vehicles are damaged or
stolen or if the driver injures a person or property.

Property insurance insures against loss or damage to the location of the business and its contents.
It can also insure the property of others in your control when the loss occurs.

Liability insurance insures against liability legally imposed upon business because of the
negligence of the business or its employees. Put another way, it protects business when the
business is sued for negligence.

Workers' compensation is a system where the employee is not allowed, by statute, to sue their
employer for on-the-job injuries; but, in return, the employer must participate in a system that
provides nearly automatic payment to the employee in case of injury for medical bills and
damages.

Health insurance: This insurance offers a health coverage benefit to the business owner and
employees.

Life and disability insurance protects the business against the death or disability of key
employees. For example, one partner carries a life insurance policy naming the partnership as a
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 beneficiary. If that partner dies, and the business has planned properly, the proceeds of the policy
can be used by the business to buyout the share of the decedent's partnership interest from the
estate.

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