CLYDE & CO BANKING & FINANCE UPDATE: TANZANIAN COMPANIES REGISTRY THREATENS TO DEREGISTER 100,000 NON-COMPLIANT COMPANIES

The Tanzanian Companies Registry, the Business and Registration Licencing Agency (BRELA), has announced that all companies failing to submit their annual returns and audited accounts and update their company files as required by Tanzanian company law could be struck off the register.

In an announcement on 6 October, BRELA Chief Executive Officer Frank Kanyusi reported that Tanzania has 120,000 registered companies but only 20,000 of them adhere to the statutory requirement to file accounts and annual returns. He stated that after a three month grace period, expiring on 5 January 2015, all companies in default of their filing obligations would be de-registered, with additional proceedings threatened against their owners and officers.

This represents a change in practice from BRELA’s previous approach, which has been, in respect of returns, simply to levy fines for late filing of returns, and to flag any issues caused by non-filings on a company search report against the company (if one were requested by lenders or other interested parties). In respect of non-filing of accounts, we understand that this requirement has been ignored by many companies (even those which have filed annual returns), without any consequences to date.

This change in practice could have serious implications for Tanzanian companies, Tanzanian branches of foreign companies and their investors. We consider below the legal basis for the announcement, the potential penalties and this issues this raises for investors.

Further, under Section 438, Tanzanian registered branches of foreign companies are also required to file annual accounts on the same basis as Tanzanian companies, and BRELA has specifically stated that the proposed enforcement process would also apply to such branches.

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