Q&A – 25 December 2017
Voluntary winding of a 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?
UD, Iringa
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.
Banker refuses to change torn bank notes
I was given torn bank notes which my banker has refused to change for me. What options do I have and what are my rights?
GO, Dar
Replacement of torn notes is the prerogative of the Bank of Tanzania. The Bank of Tanzania act provides for this and states in section 29(1) that no person shall be entitled to recover from the Bank the value of any lost, stolen or imperfect bank note or coin, or of any bank note that has been mutilated or of any coin that has been tampered with. (2) Without prejudice to subsection (1), the Bank may decide on any value that may be awarded to any person who present to the Bank a bank note which is the subject of any events referred to in subsection (1).
(3) The circumstances in which and the conditions and limitations upon which, the value of any lost, stolen or imperfect notes or coins, mutilated notes or coins which have been tampered with may be refunded as of grace by the Bank shall be within the absolute discretion of the Bank.
(4) For the purposes of this section, a coin shall be deemed to have been tampered with if the coin has been impaired, diminished or lightened otherwise than by fair wear and tear, or has been defaced by stamping, engraving or piercing whether or not it has been diminished or lightened.
From the above, you can see that it is the Bank of Tanzania which has the discretion to decide what torn notes to accept. For example, if you have both pieces of the note, then the Bank of Tanzania usually allows for such change. We suggest you consult the Bank of Tanzania which is a very efficient organization and usually timely responds.
Borrowing from foreign bank
I am borrowing dollars 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.