I am a director and shareholder in a manufacturing company in Tanzania. The Managing Director (MD), who is also a shareholder and director, has been playing with the company funds and hiding a lot of entries within the books of accounts. This was picked up recently by an independent auditor, where it was also found that the current company-appointed auditor had been colluding with the MD to hide entries and under-declare profits. Is this not a criminal offence?
26 March 2012
The criminal statute in Tanzania is called the Penal code, which provides for such an occurrence. It states that any person who being a director or officer of a corporation or company, receives or possesses himself as such of any of the property of the corporation or company otherwise than in payment of a just debt or demand, and with intent to defraud, omits either to make a full and true entry thereof in the books and accounts of the corporation or company, or to cause or direct such an entry to be made therein; or being a director, officer or member of a corporation or company, does any of the following acts with intent to defraud, that is to say destroys, alters, mutilates or falsifies any book, document, valuable security or account, which belongs to the corporation or company, or any entry in any such book, document or account, or is privy to any such Act; is guilty of a felony, and is liable to imprisonment for 14 years.
From the above, you can see that this is a criminal offence. The MD faces a stiff custodial sentence should these allegations be true.
Apart from the criminality, you also can file a suit for recovery of the funds that have been misused, including the under-declared profits. The criminal action may not automatically lead to a recovery. We therefore advise that you also consider instituting a civil suit. It is not unwise to get a legal advisor to assist you in this matter.