Q&A – 22 June 2020
Winding up of insolvent company
I want to voluntarily wind up my company as it has more liabilities than assets? Is there any law that stops me from doing so?
The Companies Act, Act No 12 of 2002 states that, where it is proposed to wind up a company voluntarily, the directors of the company or, in the case of a company having more than two directors, the majority of the directors, may, at a meeting of the directors make a declaration in the prescribed form to the effect that they have made a full inquiry into the affairs of the company, and that, having so done, they have formed the opinion that the company will be able to pay its debts in full within such period not exceeding twelve months from the commencement of the winding up as may be specified in the declaration.
Hence, and as one would expect, a company which has more liabilities than assets cannot be voluntarily wound up by the members of the company. Such company can only be wound up by order of the Court.
If you attempt to do so, you may be criminally liable. For further legal assistance, please consult your attorney.
Liability of directors
My lawyer says that if I am a non executive director, I cannot be held responsible for the actions of the company. Is that true? What can I do to protect myself?
It is not true. Directors have a fiduciary duty towards the company and its shareholders. Additionally, it is untrue that the directors can walk scot free, even if in a non executive position, from the conduct of the company.
Infact even under the Companies Act, Income Tax Act, VAT Act, Tax Administration Act, National Security Act, Anti Money Laundering Act, to mention a few, directors can not only be held personally liable for the actions or inactions of a company but may also be imprisoned if they do not exercise reasonable diligence in their duties.
We recommend that you only be a director of companies with proper governance in place and get a directors liability insurance which however will not cover you for any criminal actions although your legal fees may be covered.
Suicide drugs originated from me
I am a pharmacist in Dar and one of my patients bought some drugs from my pharmacy and proceeded to commit suicide. In his suicide note he wrote that he bought the drugs from me. The police are now after me. What can this be? Please guide me.
Section 216 of the Penal Code states that any person who (1) procures another to kill himself; or (2) counsels another to kill himself and thereby induces him to do so; or (3) aids another in killing himself, is guilty of a felony, and is liable to imprisonment for life. Aiding someone with suicide, if that is what you did, is perhaps what the police are looking for you for.
We hope the drugs that he used to kill himself were prescribed drugs otherwise this can brew serious trouble for you. You should consult your lawyer.
Refund of uni fees
My son saw an advert from a university that said all their graduates get jobs. Infact the advert said 100% job guaranteed. I studied there and this is the second year, am jobless. I have paid millions of shillings to this institute and want to sue them for misrepresentation, recover my money and claim for damages. Please guide me.
We would have liked to look at the advert before we answer this question. In any case, there is a chance that you can sue the university; however if your grades were not good, or you did not study when there you cannot blame your university. Knowledge transfer unfortunately doesn’t happen by way of a transfer cable, but hard work and studying. There have been similar cases in other countries where universities have marketed aggressively seeking students, and what they have presented in their adverts has amounted to being held as misrepresentation. We suggest you consult your lawyer who can study this case in its entirety before you sue.