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Tanzania recently issued regulations relating to the beneficial ownership information disclosure requirements which were incorporated into the Companies Act. The Companies (Beneficial Ownership) Regulations, 2021 apply to both private and public companies (including listed public companies) incorporated in Tanzania with no exemptions. In addition, the Regulations do not put in place any quantifiable thresholds which would trigger beneficial owner filings. As such, any shareholding or voting control, no matter the percentage of shares held, or voting control enjoyed, whether in a public or private company, is reportable. Furthermore, beneficial ownership reporting is not limited only to a shareholding interest or voting control.
Any natural person who enjoys ‘substantial control’ or has a ‘substantial interest’ or ‘substantial economic interest or benefit’ is recognised by the Regulations as a disclosable beneficial owner. Therefore, a natural person who enjoys rights to substantial dividend income declared or paid, or who enjoys other control rights like, for example, over financial policies, may potentially be reportable. The Regulations also cover all direct and indirect ownership, control and other rights and interests in a Tanzanian company. As such, the Regulations see through layers of ownership.
From a practical perspective, compliance with these Regulations will require careful consideration by the officers of a Tanzanian company. For example, in the case of a private equity investment, all the natural persons holding shares (whether directly or indirectly) in the Limited Partnership and General Partnership of the PE Fund would potentially have to be disclosed. Further, in both complex corporate structures and offshore trust set ups, all the natural persons would be disclosable. Crucially, in the case of trusts, the wording of the Regulations could result in the disclosure of beneficiaries (even if fully discretionary). The Regulations require companies to ‘take reasonable steps’ to identify beneficial owners or face a fine of not less than TZS 5 million (approx. USD 2,155) and not more than TZS 10 million (approx. USD 4,311). As such, directors and other senior officers of a Tanzanian company must now carefully consider what steps and actions are to be taken to show that “reasonable steps” were taken to ensure compliance.
We have put together a comprehensive analysis of the Regulations and their potential impact on doing business in Tanzania. Read the full article here.