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On 22nd of December 2022 the President of Revolutionary Government of Zanzibar assented the Written Laws (Miscellaneous Amendment) Act No. 10 of 2022 which amended various laws to make a better provision thereof. In tandem with that Amendment the Companies Act No. 15 of 2013 (hereinafter “the Act”) was amended by repealing subsection 3 of Section 238 of the Act. The amendment removed the requirement introduced in 2021 for the companies originating in mainland Tanzania that intend to operate in Zanzibar to register subsidiaries.
The Position of the Law Prior Amendment.
On 24th June 2021, the Government of Zanzibar published the Finance (Public Revenue Management) Act, 2021 which amended various laws including the Act. Section 238 of the Act was amended by introducing subsection 3 which read as follows;
“…a company incorporated under the law applicable in Mainland Tanzania shall register a foreign subsidiary company under the law applicable in Zanzibar if it establishes a place of business in Zanzibar”
Note that, prior this amendment, Companies registered in Tanzania Mainland were issued with a certificate of Compliance upon registering a place of business in Zanzibar. Thus, this amendment removed the ability of the companies incorporated in Tanzania mainland to operate business as a branch in Zanzibar.
In line with the above amendment, the Minister for Trade and Industries Development issued a Public Notice on 21 September 2021, requiring all companies incorporated in Mainland and issued certificate of compliance by virtue of their operations in Zanzibar, to incorporate subsidiaries in Zanzibar within 90 days from the date of the Notice. The companies which failed to comply with the Notice were to be struck off the Register.
To briefly explain a subsidiary company is a separate legal entity from its parent company and operating under its authority with separate finances, operations and management. A branch company, on the other hand, is not a separate legal entity from its parent company and operates as an extension of the parent company.
The new position
The current amendment repealed Section 238(3) of the Act which required Companies incorporated in Tanzania wishing to operate in Zanzibar to register subsidiary companies.
Due to this amendment, companies incorporated in Tanzania Mainland now have the avenue to operate in Zanzibar only as a branch company.
Noticeably, the recent amendment has left most businesses that obtained certificate of incorporation following 2021 amendment in a dilemma on whether they now have to obtain a certificate of compliance or what will happen. It is also imperative to highlight that companies from Tanzania Mainland will no longer be required to prepare separate set of audited account for their Zanzibar operations.
Victory Attorneys and Consultants are experts in legal advisory and have advised several multinational companies in incorporation, compliance and commercial transactions. Victory Attorneys & Consultants can be reached through info@victoryattorneys.co.tz or through +255 752 089 685
