The Miscellaneous Amendments Act, Number 3 of 2019; Position of the Law, Implications and Way Forward for Companies Limited by Guarantee

1.0 INTRODUCTION

In June 2019, the Parliament of the United Republic of Tanzania passed the Written Laws (Miscellaneous Amendments) Act, No. 03 of 2019 (hereinafter referred to as “the Act”).

The Act has introduced new provisions and amended existing provisions of the Companies Act, Cap. 212. Existing companies limited by guarantee have been affected by the provisions of the Act. This brief shows the position of the new law with regards to the Companies Act and the Non-Governmental Organizations Act, No. 24 of 2002 (hereinafter referred to as “the NGOs Act”), its implications and our proposed way forward to allow full compliance of the Act. ,

2.0 THE AMMENDMENTS UNDER THE ACT

2.1 Definition of a company revised

Section 2 of the Companies Act has been amended to define a company as formed and registered under the Companies Act or an existing company “carrying out investment, trade or commercial activities and any other activity prescribed by the Minister for Trade.”

Commercial activities have been defined to mean 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;

On the other hand, investment activities mean 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;

While “trade” is defined as the transfer of goods or services from one person or entity to another.

Understandably, the definition of a company under the Act limits the scope of associations that can be registered as a company. For an association to be registered or continue to operate as a company its objective must be to undertake trade, commerce, investment or other activities that the minister may prescribe. Clarity on what constitutes other activities awaits the Minister as noted above.

2.2 Specific Provisions affecting Companies Limited by Guarantee

The Amendments introduces sections 3(3), 3A and Section 14(6) in the Companies Act which specifically affect companies limited by guarantee.

2.2.1 Section 3(3) provides further that a company which is limited by guarantee may only be incorporated under the Companies Act for the promotion of trade, commerce and investment or any other activity that may be prescribed by the Minister.

2.2.2 Section 3A provides that a company limited by guarantee that was registered before the Act must comply with the provisions of the Act within two months of it coming into force. This implies that a company limited by guarantee undertaking any other activity other than promotion of trade commerce and investment any other activity that may be prescribed by the Minister, must review and amend its objectives to adopt activities in line with the Act.

2.2.3 Section 14 (6) provides that the Registrar shall not register or maintain in the Register of Companies a company limited by guarantee which does not fall under section 3(3) i.e. one that engages in promotion of commerce, investment and trade or any other activity that may be prescribed by the Minister.

3.0 IMPLICATIONS OF THE AMENDMENTS TO COMPANIES LIMITED BY GUARANTEE

3.1 Companies Limited by guarantee shall only be registered or continue to be maintained in the Register of Companies where their objective is to promote commerce, trade and investment. Although the Amendments provide room for companies limited by guarantee to undertake any other activities prescribed by the Minister.

3.2 Companies limited by guarantee that do not have share capital and hold a Certificate of Compliance under section 11 of the NGOs Act, will no longer be governed by the Companies Act and will, after two months, be deemed to be registered under the NGOs Act.

3.3 Companies limited by guarantee that do not have a Certificate of Compliance issued under the NGOs Act and do not undertake activities of promoting trade, commerce and investment or any other activity that may be prescribed by the Minister, will neither be maintained under the Register of Companies nor as Non-Governmental organisations.

3.4 On the 26/07/2019, the Registrar of Companies issued a Public Notice that following the amendments, companies limited by guarantee does not intend to share profits and which do not promote commerce, trade or investment shall not be maintained in the Register of Companies but under Non-Governmental Organisations Register.