The Law On Single Shareholder Companies In Tanzania
March 15, 2022

The laws in Tanzania allow a company to be established by one person as a single shareholder. A Single Shareholder Company is a type of company which has limited liability and limits the number of its shareholder to one person. The setup of a single shareholder company was introduced in the year 2012 by the Business Law (Miscellaneous Amendment) Act No 3 of 2012 (hereinafter the Act) which amended section 18 of the Companies Act [Cap 212 R.E 2002].

A further step was taken in the year 2014 when the Minister for Trade enacted The Companies (Limited Liability Single Shareholder Company) Regulations (hereinafter the Regulations) to provide for, among others, the establishment and management of a Single Shareholder Company. This article describes some unique and important aspect of the law governing a single shareholders company in Tanzania as highlighted below:

A. Name of a company: It is mandatory for the name of a single shareholder company to include a phrase “Limited Liability Single Shareholder Company” as last words in its name as per Regulation 4 of the Regulations.

B. Officers of a company: The law compels a single shareholder company to have at least two officers, one of whom must be a director and a sole director is prohibited from being a company secretary pursuant to Regulation 6 of the Regulations.

C. Conversion of a company: A single shareholder company can be converted into a public or private company under Regulation 7(1) of the Regulations. Further, a Single Shareholder Company is prohibited from issuing share to the public or register any share in the name of two or more persons to hold one or more shares jointly as stated under Regulation 8(2). Equally It is also prohibited for a private or public company to convert into a single shareholder company under Regulation 8(1) of the Regulations.

D. Meetings: The quorum for a single shareholder company shall be constituted by one member present in the meeting or by a proxy under Regulation 9(1) of the Regulations. In addition to that, a member in the general meeting is required to provide written records of the decisions (if no resolution) to the company and notify the registrar as per Regulation 9(2) of the regulation.

E. Lifting Corporate Veil: A single shareholder member of a company shall be personally liable for all unlawful act committed in relation to the company as specified under Regulation 10 of the Regulations. This means that the corporate veil can be lifted and a single member can be held liable for all illegal acts committed in the conduct of company’s business.

F. Winding up of a single shareholder company: Section 275 (2) of the Companies Act [Cap 212 R.E 2002] vests a district or resident magistrate court with original jurisdiction to wind up a duly registered single shareholder company unlike other types of companies where the jurisdiction to wind up is solely vested with the High Court.

G. Director’s appointment and removal: The law has exempted the application of the provision of the Companies Act [Cap 212 R.E 2002] on requirement and procedure for appointment and removal of directors as stated under Regulation 11(1) of the Regulations. Furthermore, Regulation 11 (2) of the Regulations requires a sole member who is a sole director to declare his interest to himself in the contract.

H. Perpetual succession: It is a requirement under Regulation 13 (1) of the Regulations to appoint a nominee director and alternative director to manage the company in case of death of a sole member who is also a sole director. The alternative director is to handle the affairs of the company where the nominee director is not available. As the position stands in India, the law requires a single shareholder to state a name of a person who, in the event of death of a single shareholder, shall become a subscriber (member) of the company.

Noticeably, the law on single shareholder company in Tanzania seems to be missing some important aspects such as whether or not it is possible for a single shareholder company to be formed by any person without regard to his citizenship or residence. Secondly, it does not state whether a single shareholder has to subscribe to all the shares or not. In other jurisdictions, the law has clearly provided for ceiling on the share capital for a single shareholder company and stated that the company’s capital shall be paid in full upon the establishment of the single shareholder company.

Largely, a single shareholder structure of a company provides the opportunity for investors to have a company without the need to hassle for finding another shareholder. Similarly it creates ease in making decisions of the company as a single shareholder can make all the decisions on his own without any other person’s approval or vote. Most importantly, a single shareholder company affords a sole persons in business to trade with limited liability unlike a sole proprietor who has unlimited liability.

The practice of single shareholder company is highly awaited in Tanzania as it is expected that it will encourage and enable single entrepreneurs and sole proprietors to formalize their business in the corporate space. Surprisingly, seven years after the passing of the Regulations, the Registrar of Companies has not yet established a register of limited single shareholder company as required by Regulation 16 of the Regulations. The absence of the registry at BRELA for one Shareholder Company makes it impossible to establish and operate such type of company in Tanzania.

 

Authored by:

Fatma Haruna Songoro & Hemed Kaniki,
Victory Attorneys & Consultants,
IT Plaza Building 1st Floor,
Ohio Street/Garden Avenue,
P.O. Box 72015,
Dar es Salaam, Tanzania.
+255 752 089 685
[email protected]

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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