Rights of Minority Shareholders to Petition for Winding Up of a Company
March 15, 2022

Operations of a company are normally dominated by the decision of majority shareholders. In some occasions, the dominance of majority shareholders in decision making may jeopardize the interests of the minority shareholders. This might be the case because in the course of making decisions, the majority shareholders might, in one way or another, strive to selfishly protect their own interests to the detriment of those of the minority shareholders and the interests and wellbeing of a company at large. In contemplation of this situation, the law has created different statutory tools to protect the rights of minority shareholders against majority shareholders. Such tools include derivative actions, action against unfair prejudice and winding up.

Minority shareholders can petition for winding up of a company under section 281 (1) of the Companies Act, [Act No. 12 of 2002] “the Act”.  Under section 281 (1) of the Act, a shareholder may petition to the Court for winding up of a company in their capacity as contributory or contributories. Section 271 of the Act defines a contributory to mean every person liable to contribute to the assets of a company in the event of its being wound up. A shareholder, whether minority or otherwise, is a contributory within the meaning of section 271 of the Act and he is therefore entitled to petition for winding up of a company.

 Minority shareholder (s) may petition for winding up of a company on just and equitable grounds as provided for under section 279 (1) (e) of the Act. The provision states that the Court has the power to wind up a company should it be of the opinion that it is just and equitable that the company be wound up. A petitioner is required to show, among other things, that it is important to wind up the company  due to deadlock in management of the company’s affairs, disappearance of the company substratum, oppression of minority shareholders’ rights  or exclusion of minority shareholder in management of a company. If the petitioner satisfies one or more of these conditions, then the Court shall hold that it is just and equitable that the company be wound up.

In the case of Sebastian Marondo & Anastazia Rugaba v Norway Registers Development East Africa Limited & Another, Winding Up Cause No 26 of 2019, HC-DSM (unreported) the High Court of Tanzania (Commercial Division), Madam Phillip, J: ruled out that the petitioners who are minority shareholders were contributories to the 1st Respondent’s Company and therefore have the right to petition for winding up under the provision of section 280 (1) of the Act.

More so, the Court has the discretion under the law to completely dissolve a company where it is satisfied that the minority shareholders are mistreated or repressed. The remedies under the law, were purposely designated to protect minority shareholders and deal with ranges of shareholders disputes in the course of running and operating a company.

Victory Attorneys & Consultants © 2022

Augustine Dominic Shio

Managing Partner

Augustine Dominic Shio is also known as Mr Shio is a highly sought-after and widely recognized criminal law expert with more than 30 years of experience advising and assisting corporations and individuals charged with white-collar crimes.

Overview

Before founding the firm Mr Shio held several positions in the public sector, he served as a Principal State Attorney at the Attorney General’s Chambers, Legal Advisor at the President’s Office (Commission for Enforcement of the Leadership Code), Director of Legal Services and Complaints at the Ministry of Home Affairs and retired as a Deputy Director of Public Prosecutions at the Directorate of the Public Prosecutions.

Mr Shio is a recipient of the Presidential Medal for his distinctive public services and ethics of the highest order. His distinguished aptitude in handling complex criminal cases, particularly money laundering, economic and organized crimes has enabled the firm to handle high profile criminal cases in Tanzania.

Practice Focus

As the firm’s head of the Financial & Organized Crimes Department, Mr Shio represents corporations and individuals in the telecoms, media & ICT, mining, oil & gas and banking sectors in high profile criminal cases. He has advised and prepared legal compliance models and for large scale agribusiness operators, public listed companies and securities dealers and brokers in line with sector-specific laws.

He possesses vast experience in advising multinational corporations on money laundering and tax evasion throughout the life span of their commercial transactions.

Mr Shio has represented clients in major plea bargaining negotiations at the office of the Director of Public Prosecutions. He is renowned for closing some of the best pleas deals in the country on behalf of many locals and expatriates charged with money laundering, economic and organized crimes and cybercrimes. Additionally, Mr Shio consults and assists criminally charged individuals to secure pre-trail and post-trial bail on serious criminal charges.

Education

Mr Shio holds a Bachelor’s Degree (LL.B Hons) from the University of Dar es Salaam, Certificate in Criminal Justice and Treatment of Offenders from the United Nations Institute (Fuchu, Japan). He is a certified criminal law expert in Money Laundering and Terrorism.

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