Q&A – 24 November 2014
Seizure of matrimonial assets
My husband has been working in a public corporation and during this time of our marriage we have managed to open family investments including bars, a mini supermarket and two unisex salons. We have also managed to construct a beautiful house in which we now live. I must admit that most of the capital has been contributed by my husband although I have partly contributed through a loan I took from a micro finance institution in Dar es Salaam. I also am uncertain if my husband’s contributions have been from other sources apart from his lucrative salary and emoluments. Unfortunately, my husband and his colleagues are currently being prosecuted for corruption offences on allegation of embezzlement of funds in their office. I am now informed by a friend of mine that if my husband is convicted all our investments including the house we are living in will be forfeited by the government. I want to know if this is possible. Can I do anything to challenge this as I feel this will prejudice my rights as I have contributed towards these investments.
SD, Dar
The Prevention and Combating of Corruption Act, No 11 of 2007 speaks about the situation facing you and provides that the PCCB may in collaboration with the office of the Director of Public Prosecution recover proceeds of corruption through confiscation to the Government. This Act further provides that where a person is convicted of an offence of corruption under the Act, the Director of Public Prosecution may apply to the convicting Court or to any other appropriate Court not later than six months after conviction of the person, for a forfeiture order against any property that was obtained through corruption. By the proceeds of corruption the law has provided the meaning to be any property that is derived or obtained by a person from the commission of corruption offences.
Hence the aforesaid consequences upon conviction may be applicable to your husband although we don’t know the exact offence he is charged with. We must state that the forfeiture is not an automatic right of the PCCB or DPP and you should be ready to prove that the investments are not proceeds of crime.
Loans from foreign banks
I am borrowing Usd 300,000 from a foreign entity. I was informed that there is a restriction in taking foreign loans and that one must borrow from within the country. Is it true? Do I have to register this arrangement anywhere? I would rather keep it confidential.
JS, Arusha
The law does not restrict people from borrowing money from foreign entities as long as those foreign entities are legally registered in the country they are operating from. The Foreign Exchange Circular No. 6000/DEM/EX.REG/58 of 24th September, 1998 mandatorily requires all foreign loans to be registered with the Bank of Tanzania and for a debt registration number obtained. You will be required to provide the Bank of Tanzania with the full details of the loan and the entity which is advancing money to you.
Unfortunately without a debt registration number, you will not be able to remit the money back to the lender and hence the importance of such registration. You will appreciate that this arrangement was introduced by the Bank of Tanzania to monitor the loans that are coming into the country, and to ensure that the loans can be smoothly remitted back to the lender.
Foreign loans into the country have tax consequences at the time of remitting interest, by way of withholding tax on interest, and we recommend that you consult a tax expert to guide you on this.
Liable for Seller’s debt
My friend’s business was in trouble and to salvage the situation I bought all the assets of his company and not his shares. This is the guidance of the tax consultant as we were told that the assets were transferable. It has been three months since we closed this arrangement and some creditors including the Tanzania Revenue Authority are after me for my friend’s company’s debts. Why should I pay those debts when I only bought the assets? Am I liable in any way? Please guide.
KW, Dar
The Transfer of Businesses (Protection of Creditors) Act provides that, every person who acquires the goodwill or the whole or substantially the whole of the property of any trading or manufacturing business or any business of a like nature shall, notwithstanding any agreement to the contrary, be liable for all the debts and obligations for which the transferor thereof is liable in respect of that business at the date of the transfer unless notice of the intended transfer has been published in accordance with the provisions of section 4 not less than two months nor more than six months before the date when the transfer is to take effect. Section 4 of the Act requires the full details of the transaction to be advertised in the Gazette and in newspapers and should be signed by both the seller and purchaser.
Hence if you had advertised the sale, then you should not expect any legal issues. However if you did not, then the creditor and the TRA have the right to come after you. However the Act provides that, you shall be entitled to be indemnified by the seller as regard to all amounts for which you are made liable under this Act.