Types of companies Tanzania.

TYPES OF COMPANIES

There are various ways by which companies may be classified. Companies may be classified on the basis of ownership or members, on the basis of liability, on the basis of control and on the basis of incorporation

On basis of ownership/members: Public and Private Companies

1.) Public Company means a company, which is not a private company. 

Basic Characteristics

a. The general public is allowed to subscribe for membership on fulfilling of few general conditions. The minimum number of members is seven.

b. It can not commence business unless it obtains a certificate of commencement of business]

c. The memorandum of public company shall state that it is a public company

d. Transfer of shares is free 

Under the Companies Act a public company is the company limited by shares or guarantee and having a share capital, being a company the memorandum of which states that it is to be a public company.

2.) Private Company 

This is normally what Americans call a close corporation. A private company (sometimes refereed as to quasi- partnership company) is in nature of a partnership of persons with mutual confidence in each other and its articles place positive restrictions on absolute transfer of shares. See S. 27 of Cap 212.

Basic characteristics

a. Restricted membership. Section 27(1) (b) of Cap 212 limits the number of its members to fifty. In determining this number of 50, employee-members and ex-employee members are not to be considered.

b. Restricts the right of members to transfer its shares S. 27(1) (a) of Cap 212

c. Prohibits any invitation to the public to subscribe to any shares in or the debentures of the company. S. 27(1) (c) of Cap 212. The Companies Act, 2002 creates an offence for a private company which is not a private company limited by guarantee and not having a share capital to offer to the public (whether for cash or otherwise) any shares in or debentures of a company.

S 28 of the Act states that if a private company alters its articles such that they no longer include the provisions required for a private company (s.27), the company shall on the date of the alteration, cease to be a private company and shall amend its memorandum to state that it is a public company. The company should, within 14 days send notification to the registrar who shall issue a certificate to the effect that the company is the public company. 

On the basis of liability: Limited and Unlimited companies

Companies may be limited or unlimited companies. Company may be limited by shares or limited by guarantee. "Limited Liability" - this refers to the liability of the members, not the liability of the company. The company will always be liable to the full extent of its debts.  

(a) Company limited by shares (s.3(2)(a) of Cap 212

(i) The most common kind of registered company. 

(ii)Members of the company take shares issued by the company. Each share is assigned a nominal value - the amount that must be paid to the company for the share. 

(iii)When the company is registered, its memorandum must state the total nominal value of all the shares it is going to issue (called the registered capital, or nominal capital or authorised share capital). 

The memorandum also states the number of shares to be issued: e.g. 10,000 shares of Tshs. 100 each = registered capital of Tshs. 1,000,000. 

(iv) Liability of a member (shareholder), when the company is wound up is limited to the amount, if any, on the nominal value of his shares which has not been paid. No member of company limited by shares can be called upon to pay more than the face value of shares or so much of it as is remaining unpaid.

(v) Shares are normally partly or fully paid for when issued, so company will have a contributed capital.

b) Company limited by the guarantee.  S. 3(2)(b) of Cap 212 

A company limited by guarantee is a registered company having the liability of its members limited by its memorandum of association to such amount as the members may respectively thereby undertake to pay if necessary on liquidation of the company. Members agree to contribute a specified amount to the company’s assets in the event of the company being wound up. (Total amount payable by all members is called the "guarantee fund").  Companies limited by guarantee are not usually formed for business ventures

The liability of members to pay the guaranteed amount arises only when the company has gone into liquidation and not when it is a going concern. Members, therefore, do not have to pay anything as long as company is a going concern - so company has no contributed capital. 

C. Unlimited Company: S.3(2)(c) 

The liability of members of an unlimited company is unlimited. Therefore their liability is similar to that of the liability of the partners of a partnership firm. The following are basic characteristics of unlimited companies

I. Members have unlimited liability (If company is being wound up, members can be made to contribute to the company’s assets without limit to enable it to pay its debts.) 

II. Cannot be public companies. 

III. Can be set up with or without a share capital. 

IV. Not subject to the same restrictions on alteration of capital as other types of company, and do not normally have to file annual accounts.

On the basis of control (Holding and Subsidiary companies)

When a company has control over another company it is known as a holding company. The company so controlled is known as a subsidiary company. A company shall be deemed to be subsidiary of another company if: -

1. That other company controls the composition of its board of directors; or

2. That other company holds more than half in face value of its equity share capital

3. Subsidiary of another subsidiary. Where the company is a subsidiary of another company which is itself a subsidiary of the controlling company, the former becomes the subsidiary of the controlling company e.g. Company B is subsidiary of the Company A and Company C is subsidiary of Company B, therefore Company C is subsidiary of Company A.

The control of the composition of the Board of Directors of the company means that the holding company has the power at its discretion to appoint or remove majority of directors of the subsidiary company without consent or concurrence of any other person.

In determination whether one company is subsidiary of another, shares held or powers exercisable in the following cases shall not be taken into account.

a) Any shares held or power exercisable by the other company in fiduciary capacity

b) Where shares are held or power is exercisable by any person by virtue of the provisions of any debenture or of a trust deed for securing any issue of such debentures; and

c) Where shares are held or power is exercisable by lending company by way of security only for the purpose of a transaction entered into in the ordinary course of that business

You may also refer to section 487 of the Companies Act. 

On the basis of incorporation

(1) Statutory: - these are companies created by special Act of the legislature. Such companies are generally formed to carry out some special undertakings. These companies are owned by the government and the main objectives of these companies are to provide some necessary services for the benefit of the entire country. The provisions of companies Act may apply if not inconsistent with the special Act. 

S.2 of the Companies Act defines Statutory Corporation as the meaning given in the public corporations Act: ''public corporation'' means any corporation established under the Public Corporation Act or any other law and in which the Government or its agent owns fifty one percent or more of the shares but does not include an institution of learning, a district development corporation, a research institution or a sports institution;

(2) Registered: - these are Companies formed and registered under Companies Act 2002, Cap 212. Such companies come into operation only when they are registered under the Act and the certificate of incorporation has been issued by the registrar. Such companies derive their powers from the Companies Act, memorandum and articles of associations.

(3) Unregistered Companies –  S.425 of Companies Act, 2002

(4) Foreign Companies means a company incorporated in a country other than Tanzania under the law of that other country and has established the place of business in Tanzania. According to S.433 of the Companies Act, foreign companies are companies incorporated outside Tanzania, which, after the appointed day, establish a place of business within Tanzania and companies incorporated outside Tanzania which have, before the appointed day, established a place of business within Tanzania and continue to have a-place of business within Tanzania on and after the appointed day.  

A foreign company shall not be deemed to have a place of business in Tanzania solely on account of its doing business through an agent in Tanzania at the place of business of the agent.

According to section 434 of the Companies Act, Foreign companies which, after the appointed day, establish a place of business within Tanzania shall, within thirty days of the establishment of the place of business, deliver to the Registrar for registration -

(a) a certified copy of the charter, statutes or memorandum and articles of the company or other instrument constituting or defining the constitution of the company, and, if the instrument is not written in the English language, a certified translation thereof,

(b) a list of the directors and Secretary of the company containing the following particulars; his present name and surname and any former name or surname, his usual address, his nationality and his business occupation, if any; Provided that, where all the partners in a firm are joint secretaries of the company, the name and principal office of the firm may be stated instead of the particulars mentioned

(c) a statement of all subsisting charges created by the company, being charges of the kinds set out in section 99 and  not being charges comprising solely property situate outside Tanzania;

(d) The names and addresses of one or more persons resident in

Tanzania authorised -

(i) to accept on behalf of the company service of process and any notices required to be served on the company, and

(ii) to represent the company as its permanent representative for the place of business, including a statement as to the extent of the authority of the permanent representative, including whether he is authorised to act alone or jointly.

(e) the full address of the registered or principal office of the company, and the full address of the place of business in Tanzania;

(f) a statutory declaration made by a director or Secretary of the company stating the date on which the company's place of business on Tanzania was established, the business that is to be carried on and, if different from the registered name of the company, the name under which that business is to be carried on;

(g) a copy of the most recent accounts and related reports of the company including, where such are not in English, a translation of the same.

On the registration of the documents specified above, the Registrar shall certify under his hand that the company has complied with the provisions of that section and such certificate shall be conclusive evidence that the company is registered as a foreign company. This certificate is commonly known as “Certificate of Compliance”.