Transfer and transmission of shares in Tanzania.

 

Transfer of Shares

The transfer of shares in a company is a process governed by the company's articles of association, which serve as its rules and regulations. In this process, a shareholder, known as the 'transferor,' has the right to transfer their shares to another party, referred to as the 'transferee.' This transfer can occur through a sale or as a gift. (See section 74 of The Companies Act, 2002 (Act. No 12/2002).

However, it's important to note that certain restrictions on share transfers might exist within the articles of association of a company. These restrictions can include a requirement for shareholders to offer their shares to fellow shareholders before considering external parties. It's essential to review company's specific articles of association to see specific existing requirements.

The articles of association may grant company directors the authority to refuse the registration of a transfer. However, this discretion must be exercised in good faith and within a reasonable timeframe, which is typically within 2 months. See section 80(1) and (2) of The Companies Act, 2002 (Act. No 12/2002).

For a share transfer to be valid, the transferor must complete and sign a stock transfer form and provide it to the transferee, along with the share certificate.

Transmission of Shares

Transmission refers to the automatic transfer of shares under specific legal circumstances (operation of law). This occurs, for instance, in the following situations:

When a shareholder dies and leaves a will, their shares are automatically transferred to the executor named in the will. In cases where a shareholder dies without leaving a will, their shares are automatically transferred to their Administrator upon the Court granting Letters of Administration, which appoints the Administrator as their personal representative.

When a shareholder is declared bankrupt, their shares are transferred to their trustee-in-bankruptcy, the individual responsible for managing their financial affairs. See section 21, 53, 54 of The Bankruptcy Act, Cap 25 of 2019

To validate this transfer, the executor or administrator must provide the company with a court order/judgment granting them authority as the personal representative of the deceased shareholder. Subsequently, the personal representative can choose to:

Register themselves as a member of the company.

Directly transfer the shares to the rightful inheritor.

Transfer the shares to a buyer if they intend to sell them.

Similarly, a trustee in bankruptcy must present the court order appointing them to the company. Following this, they can decide whether to be registered as a member of the company or to transfer the shares to a buyer.