Claim on company assets

I am a majority shareholder in a company that owns several properties registered in the company’s name. Recently, one of the other shareholders passed away, and her family has included the company and its properties as part of her estate. Although the deceased was widely known as the owner of the company, there are other shareholders, including myself. What legal action can I take to prevent the company and its assets from being treated as part of the deceased’s estate?

TM, Dar es salaam

Your question touches on a fundamental principle of company law. Under the Companies Act, a company is recognized as a separate legal person from its shareholders. This means that a company can own property, enter into contracts and incur liabilities in its own name, independent of the individuals who hold shares in it.

As a general rule, property registered in the name of a company belongs to the company itself and not to its shareholders, regardless of whether a shareholder owns a majority of the shares or is widely perceived as the owner of the business. Consequently, upon the death of a shareholder, what ordinarily forms part of the deceased’s estate are the shares held by that shareholder and any rights attached to those shares, rather than the company’s assets.

This position was recently reaffirmed by the Court of Appeal in Kellen Rwakatare and St. Mary’s International Academy Limited v Administrator of the Estate of the Late Rev. Dr. Getrude P. Rwakatare, Revision Application No. 1591 of 2024. In that case, the Court emphasized that assets belonging to a company cannot be treated as assets of a deceased shareholder’s estate merely because the deceased had an ownership interest in the company. The Court observed that what passes to the estate are the deceased’s shares and not the company’s property.

If the company and its assets have been included as part of the deceased’s estate, you may challenge such inclusion before the Court handling the probate or administration proceedings. Depending on the circumstances, it may be possible to lodge an objection or take other appropriate legal steps to protect the interests of the company and its shareholders. You should consult your lawyer for further guidance.