The Written Laws (Miscellaneous Amendments) (No. 3) Act 2019 (“the Act”) introduced section 400A in the Companies Act, 2002 regarding the procedure to strike off (or, remove) the name of a company by the Registrar of Companies (“the RoC”), of his or her own accord, from the Register of Companies (“the Register”). The removal of a company from the Register means that the company will no longer be in existence unless upon an order of restoration granted by the High Court of Tanzania upon an application made therefor under section 400A(5) by the company, shareholders or creditors.
Where the RoC has reasonable cause to believe the existence of any of the grounds stipulated under section 400A(1) for striking off a company, then he shall send a notice in writing to the company, signifying his intention to strike the company off the register. These grounds are listed below:
- a registered company has been fraudulently registered;
- a registered company is engaged in criminal activities such as money laundering, human trafficking, drug trafficking, terrorism financing or any other offence as may be prescribed by the Minister upon consultation with the relevant authorities;
- at the time of incorporation, there was misrepresentation or fraud by a registered company;
- by operation of law, all shareholders or directors have been prohibited from entering the country; or
- a registered company is operating contrary to its objectives as prescribed in the memorandum and articles of association.
The notice which the RoC is required to issue should consist the ground/s on which he intends to strike off the name of the company from the Register. The company is granted leeway to provide to the RoC, within a period of 30 days from the date of receipt of the notice, reasons in writing as to why it should not be struck off the Register. If the company fails to provide reasons within the prescribed time or if the RoC is not satisfied with the reasons provided, he shall proceed to strike off the name of the company off the Register.
However, instead of providing the RoC with reasons as to why it should not be struck off, the company may decide to challenge the RoC’s notice by making an application to the High Court of Tanzania. Otherwise, the RoC is required to publish in the Gazette the name of the company which has been struck off and to notify the company of his decision and the reasons thereof. But the RoC shall not, within a period of five years, register another company with the same name.
Moreover, within that period, if the company, a shareholder or creditor is aggrieved by the decision of the RoC to strike off the name of the company from the Register, either may apply to the High Court of Tanzania to restore the company in the Register – consequently allowing the company to re-establish existence as if it had not been struck off.
The new provision in the Companies Act 2002 gives the RoC broad-decision making powers to strike off the name of a company off the Register and these powers are not sufficiently limited by the inbuilt due diligence clauses due, in part, to the prescribed statutory grounds which are couched in broad terms. For example, the Roc can take steps to strike off a company if he has reasonable cause to believe that the company is engaging in ‘money laundering’ or ‘criminal activities’ without requiring a criminal conviction by a competent court of law, or that by operation of law all the company’s shareholders and directors have been prohibited from entering Tanzania.
As might be expected, this has negative impact on attracting new and retaining existing investments in the country. In addition, the provision is silent on whether the RoC should inform other regulators in Tanzania such as the Tanzania Revenue Authority and specific sectoral regulators like the Bank of Tanzania (in the case of a financial services company) about the proposed action to strike off the company from the Register and whether these regulators can raise an objection and, if so, within what timeframe.
Furthermore, there is a glaring omission on the status of liabilities of a company that has been struck off by the Registrar, of his or her own volition. Can the company escape its liabilities through this approach or do the liabilities of the directors continue post-striking off? I hope that the Minister responsible for Trade will clarify these curious points in the envisaged regulations.
• • •
If you would like further information on any issue raised in this blog post, send me a message via this online contact form.
• • •
This blog post is intended as a general overview and discussion of the topics and issues dealt with. The information is not intended to be, and should not be used, as a substitute for seeking legal advice or other professional advice in relation to any particular situation.
Subscribe to Tanzania Law Blog – Paul Kibuuka‘s insights into Tanzanian law and the legal issues relating to doing business or investing in Tanzania.
Tanzania Law Blog - Paul Kibuuka's insights into Tanzanian law and the legal issues relating to doing business in Tanzania. 