The Written Laws (Miscellaneous Amendments) (No. 3) Act, 2019 (Act No. 9 of 2019) that came into effect on 30th June, 2019 have made comprehensive amendments to the Companies Act (Cap. 212), the Non-Governmental Organisations Act (Cap. 56), the Societies Act (Cap .337) and the Trustees Incorporation Act (Cap. 318). Among others, the amendment to the Companies Act, Cap 212 gives two months for Companies that operated as NGOs to comply to the amendment of will be struct off. The amendments are meant to redefine the meaning, purpose and objectives of each entity registered as a Company or NGO or Society or Trustee and set a clear line between these entities. Onwards, the amendments requires Companies that were registered but undertaking NGOs activities or NGOs registered but undertaking Companies or Societies activities to formally reorganize and choose the appropriate registry suitable for their operations or will be truck off of the register. In this update we highlight the changes and the impact to the set up of the entities and the way forward.
Amendment of the Companies Act, Cap 212
The amendment of the Companies Act, Cap 212 has among others redefined the meaning of the term Company. Section 2 of the Act replaced the old definition to the term Company with a new definition as
“Company” means a company formed and registered under this Act or an existing company established for investment, trade or commercial activities and any other activity as the Minister may, by notice published in the Gazette, prescribe;
Unlike the previous definition, the amendment specifically imposed the requirement that a company must be established for investment, trade or commercial activities. The purpose behind this amendment has been to restrict the scope of operations of Companies within these three activities or any activities as the Minister may prescribe. The terms Commercial activities, Investment activities and trade have also been added in the amendments. The terms specifically defines their purpose, scope and application in relation to the Company. Still the aim is to confine a Company activities into Commercial undertaking and limit any opportunity for Companies to engage in other non-Commercial activities. The new terms have been defined as:-
“Commercial activities” means all activities of industry and trade, including, but not limited to, the buying or selling of commodities and activities conducted for the purpose of facilitating such buying and selling;
“investment activities” means transactions involving sale or purchase of equipment plants, properties, securities, capital, stocks, debentures or other assets generally not held for immediate re-sale and any other activity as the Minister may, by notice published in the Gazette, prescribe;
“trade” means the transfer of goods or services from one person to another.
Not only that but also, a new Section 3(3) has been added to qualify the activities of Companies limited by Guarantee. The new section 3(3) requires the Companies Limited by Guarantee to be confined to promote commerce, investment, trade or any other activity as the Minister may, by notice publish in the Gazette.
In enforcing the restriction and limiting the Companies into the confines of investment, trade or commercial activities the new Section 3A has been added. The section puts a timeline of 2 months upon which, a company that was established for any other activities, other than investment, trade or commercial activities to comply to the act. This means, Companies that were registered but conducting other activities that is not directly related to investment, trade or commercial activities will have two months to comply to the Companies Act. (Section 3A(1)).
The addition of Section 3A(2) in the Companies Act target specifically existing Companies Limited by Guarantee. That, registered Companies Limited by Guarantee which had subsequently obtained a certificate of compliance under the Non-Governmental Organizations Act, shall have 2 months from the date of coming into operation of the new section 3A be deemed to have been registered under the Non-Governmental Organizations Act and struck off from the Companies register. Thus, Companies Limited by Guarantee which had also certificate of Compliance from Non Government Organisation have 2 months to either comply to the Companies Act and remain registered under the Companies Act or shift and be registered as Non Government Organisation. If no action is taken then after 2 months such Companies shall automatically be struck off from the Company Register and be registered as Non Government Organisations. It is important to note that, the timeline provided to comply is 2 months otherwise automatic deregistration from Company register would apply. However, section 3A(3) empowers the Minister to extend the time within which the company has to shift to its appropriate registry.
Furthermore, the controversial amendment of the Companies act has been addition of section 400A on the powers of the Registrar to strike off a company fraudulently registered or conducting illegal business. The Registrar of Companies has now been empowered to deregister any company, for any of the following reasons;-
- Where a registered company has been fraudulently been registered;
- Where a registered company is engaged in criminal activities such as money laundering, human and drug trafficking, terrorist financing or any other offences as may be prescribed by the Minister;
- Where at the time of incorporation the company committed an act of misrepresentation or fraud;
- By operation of law, where all shareholders or directors have been prohibited from entering the country (Tanzania); and
- Where a Company is operating contrary to its objectives contained in the memorandum and articles of association.
The Law has however, provide for a step by step requirement for the Registrar to fulfill before finally struck off the Company such as:-
- The registrar must issue a notice of its intention to struck off the Company;
- The Company shall have 30 days to provide reasons why it should not be deregistered or the Company can challenge the notice in Court.
Amendment of the Non Government Organisation Act, Cap. 56
The amendment of the Non-Government Organisation has as well been done to realign and redefine the scope and purpose of the Non-Government Organisation uniquely from other form of entities. Thus amendment of Section 2 redefines Non-Government Organsantion as:-
“Non-Governmental Organization” also known by its acronym “NGO” and which includes Community Based Organisation (CBO) means a voluntary grouping of individuals or organizations which is non-partisan or non-profit sharing established and operates for the benefit or welfare of the community or public, organized at the local, national or international levels for the purpose of enhancing or promoting economic, environmental, social or cultural development or protecting environment, good governance, law and order, human rights and lobbying or advocating on such issues; but does not include:
- a company formed and registered under the Companies Act,
- a trust formed and registered under the Trustees’ Incorporation Act;
- a trade union formed and registered under the Employment and Labour Relations Act;
- a religious or faith propagating organisation;
- a cooperative society formed and registered under the Cooperative Societies Act;
- an agricultural association formed and registered under any written law other than this Act;
- a society formed and registered under the Societies Act;
- a political party formed and registered under the Political Parties Act;
- a community microfinance group (VICOBA) registered under the Microfinance Act;
- a sports association formed and registered under the National Sports Council of Tanzania Act; and
- any organisation which the Minister may, by order published in the Gazette, declare not to be a non-governmental organisation for the purpose of this Act
Parallel to the redefinition of NGO, section 8A has been added to provide for deregistration of Organisations that are not in conformity to the requirements of NGOs. Section 8A provides that a registered Organisation which does not fit to be a Non-Governmental Organization by virtue of the definition of NGO shall, after expiration of 2 months from the date of coming into operation of section 8A, be deemed to have been de-registered. The law however, provides the opportunity to apply for extension of time to the Minister in order to shift to an appropriate registry without being deregistered.
The amendments also extend to Section 4(1) with the addition of clause (i) and (j) to empower the Registrar of Non-Governmental Organizations to suspend the operation of any NGO that violates the law or to conduct monitoring and evaluation of NGOs activities on quarterly basis. in line with this, section 4A has also been added to empower Registrar in collaboration with law enforcement organs to investigate any NGO.
Important to note also section 17 has been amended to provide for renewal of Certificate of registration of NGOs after 10 years. Renewal of the Certificate must be done 6 months before the expiry date of its registration. Renewal of Certificate of Registration may be granted or refused subject to satisfaction of the Board that Organisation has complied with the registration requirements stipulated by the Act. Before these amendments, Certificate of registration of NGO was issued perpetually without renewal.
Amendment of Societies Act, Cap 337
The Societies Act has also been amended with the same purpose to redefine the term Society by stating essential features and excluding entities that do not qualify as Society. Therefore, the term Society has been defined as:-
“society” means a non-partisan and non-political association of ten or more persons established for professional, social, cultural, religion or economic benefits or welfare of its members, formed and registered as such under this Act, but does not include-
- a company formed and registered under the Companies Act;
- a trust formed and registered under the Trustees’ Incorporation Act;
- a trade union formed and registered under the Employment and Labour Relations Act;
- a cooperative society formed and registered under the Cooperative Societies Act;
- an agricultural association formed and registered under any written law other than this Act;
- a political party formed and registered under the Political Parties Act;
- a non-governmental organisation formed and registered under the Non-Governmental Organisations Act;
- a community microfinance group (VICOBA) registered under the Microfinance Act;
- a sports association formed and registered under the National Sports Council of Tanzania Act; and
- any society which the Minister may, by order published in the Gazette, declare not to be a society for the purpose of this Act;
Similarly, Section of the Act has been amended to provide for deregistration of associations registered under the Act, and does not fit to be a society by virtue of the definition. Such entities shall, after expiration of 2 months from the date of coming into operation of section 4, be deemed to have been de-registered. Section 5 has however, provided to the procedure for application of extension of time to the Minister. It is now a criminal offense for any Foreign Society to operate in Tanzania without a proper registration. Amendment of Section 7 of the Societies Act requires that any Foreign Society (i.e. a Society not registered in Tanzania) intending to operate in Tanzania must be duly registered.
Amendment of Trustees Incorporation Act, Cap 318
Similar to others above, the Trustee Incorporation Act has also been amended accordingly. Amendments encompass the definition of the term “trust” as well as who is a “trustee”. These terms were not defined under the act. Hence, addition of Section 1A is meant to clearly define the terms as:-
“trust” means a legal relationship created by personal acts, by an order of the court or operation of the law, when specified property or interests are placed under the control and management of a trustee or trustees for the benefit of another party or parties, called a beneficiary or beneficiaries, or for purposes specified under section 2(1), and excludes:
- a non-governmental organization registered under the Non-Governmental Organizations Act;
- a company registered under the Companies Act;
- a society registered under the Societies Act;
- a trade union formed and registered under the Employment and Labour Relations Act;
- an agricultural association formed and registered under any written law
- other than this Act;
- political party registered under the Political Parties Act;
- a sports association or club registered under the National Sports Council of Tanzania Act;
- a community microfinance group (VICOBA) registered under the Microfinance Act;
- a cooperative society formed and registered under the Cooperative;
- Societies Act; and
- any trust which the Minister may, by order published in the Gazette, declare not to be a trust for the purpose of this Act.
Likewise, the a trustee has been defined as;-
“trustee” means a person who holds, controls and manages property or any other interests for the benefit of a beneficiary or beneficiaries, or for purposes specified in section 2(1).”
As highlighted above, the Written Laws (Miscellaneous Amendments) (No. 3) Act, 2019 (Act No. 9 of 2019) has reformed the registration requirements for entities by streamlining the overlapping meaning, scope and purpose of entities registered in Tanzania. More so, is the explicit provision of essential elements that differentiates one entity from the other be it a Company, a Non-Government Organisation, a Society or a Trust. Therefore, it is important for entities intending to register or already registered in Tanzania to take immediate steps in realigning their objectives, scope and activities to the relevant entities and, where appropriate, re-register to relevant registry timeously as provided by the law.
FIN & LAW -Client Update, JULY 2019 – Amendment of Companies Act
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