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Legal update on the concept of Beneficial Ownership

Legal Update

By Angela Mndolwa and Flora Obeto

On 14 May 2021, the Minister for Industry and Trade through the Government Notice No. 391 of 2021 published the Companies (Beneficial Ownership) Regulations, 2021 (the Regulations), fully bringing into force sections 115 and 149 of the Companies Act 2002 as amended by the Finance Act, No. 4 of 2020 (the Act) which requires every company to notify the Registrar of Companies of its beneficial owners (BO). The Regulations further highlights filing formalities, non-disclosure of BO’s information’s and offences and penalties for non-compliance of the Regulations.

Section 2 of the Act and Regulation 2 of the Regulations defines a BO as a natural person who meets any of the following conditions:

  • ultimately owns or exercises substantial control over an entity or an arrangement;
  • who has a substantial economic interest in or receives substantial economic benefit from an entity or arrangement (whether alone or together with other persons); or
  • on whose behalf an arrangement is conducted; or who exercises significant control or influence over a person or arrangement through an agreement (formal or informal).

Every company is now required to take reasonable steps to identify its BO’s, and maintain a register with their particulars including full name, birth certificate number, national identity card number or passport number, personal identification number, nationality, date of birth, postal,  business and residential address, telephone number, email address, occupation or profession, nature of ownership or control, the date on which a person became or ceased to be a BO, as well as any other relevant detail the Registrar may require from time to time.

The Registrar of Companies (the Registrar) is also tasked to maintain a register of BO’s to that effect.

Filing formalities:

Registered owners of shares who are not BO’s of such shares are required to file with their respective Companies, a declaration that they do not hold beneficial interest in such shares. The declaration must be made using the prescribed Company Form No. 14 d within 30 days from the date the name of such registered owner is entered into the register of the Company. In instances where the BO changes, the Regulations requires the registered BO to make further declaration to the Company on such shares within 31 days using the prescribed Company Form 14 d.

In terms of the Regulations, a BO whose names is not registered as a shareholder is required to file with the company, a declaration disclosing such interest using the prescribed Companies form No. 14 e within 30 days after acquiring such beneficial interests in the shares of the Company or the date following the coming to effect of the Regulations.

Upon receipt of such declaration by a company, the Regulations requires the company to note such declaration in its register of members and its register of BO. The company is then required to notify the Registrar on such declaration, change of particulars of the BO’s, transfer or transmission of shares or an increase or reduction of share capital or a restructuring of a company’s share capital or changes in the voting rights leading to any change in beneficial interest within 30 days (the Notice). Such Notice will be filed using Companies Form 14 f and must be duly completed and signed by a director or the Company secretary. The company is also required to note the change in its annual returns.

The Registrar of Companies may refuse to register such Notice and any other document if he is not satisfied that the company has provided accurate and up to date information on the BO’s of the company as required by the Act and shall communicate his decision to the company accordingly.

Non-disclosure of BO’s information:

While the Regulations prohibit the disclosure of BO’s information to the public, a carve out exists in relation to requests for information made to the Registrar by criminal investigation and law enforcement agencies and financial sector regulators. Otherwise, a company is prohibited from using or disclosing any information about its BO, except for communicating with the specific BO concerned or in order to comply with any requirement of the Regulations, or in compliance with a court order

Offence and penalties:

Disclosure of BO’s information in any manner other than for the purpose outlined under the Regulations is punishable with a fine not exceeding TZS 10M and not less than TZS 5M.

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