Authored by: Thecla Kannonyele (Advocate) – Head of Corporate and Commercial, June 2022

On 14 May 2021, the Minister of Industry and Trade through Government Notice No. 391 published the Companies Beneficial Ownership Regulations, 2021 (herein ‘the Regulations’) bringing into force Sections 115 and 149 of the Companies Act of 2002 as amended by the Finance Act No.4 of 2020 which introduced and defined a Beneficial Owner (herein ‘BO’) as a natural person who, directly or indirectly:

1. 1. 1. ultimately owns or exercises substantial control over an entity or an arrangement;
      2. who has a substantial economic interest in or receives substantial economic benefit from an entity or arrangement (whether alone or together with other persons);
      3. on whose behalf an arrangement is conducted; or
      4. who exercises significant control or influence over a person or arrangement through an agreement (formal or informal)

However, the recent amendments of the Anti-Money Laundering (Amendment) Act no. 2 of 2022 (Act no 2 of 2022) published and began operation on 8^th March 2022, has among other things introduced a wider meaning of the Beneficial Owner;

“Beneficial owner” means any natural person;

1. 1. who ultimately owns or controls the customer,
   2. on whose behalf a transaction or activity is being conducted,
   3. a person who exercises ultimate effective control over a legal person, legal arrangement, beneficiary of an insurance policy or other investment linked insurance policy and includes;

a.) in the case of a customer (who is defined as any natural person, legal person or legal arrangement that receives goods, products or services from a reporting person for exchange for money or any other consideration)being a legal person-

1. 1. 1. 1. the natural person who ultimately owns or controls the legal person through direct or indirect ownership of a majority shares or voting rights or ownership interest in that legal person and such ownership, ownership interest or control also includes possession of bearer shares, the ability to appoint or remove the majority of board members, the chief executive officer or senior management;
         2. a shareholding of five percent or more in the legal person or an ownership interest of five percent or more in the legal person held by a natural person shall be an indication of direct ownership or a sufficient percentage of the shares or voting rights or ownership interest in that legal person, or a shareholding of five percent or more or an ownership interest of five percent or more in the legal person held by a legal person, which is under the control of a natural person, or by multiple legal persons, which are under the control of the same natural person, shall be an indication of indirect ownership;
         3. if, after having exhausted all possible means and provided there are no grounds for suspicion of money laundering, terrorist financing and proliferation financing, no natural person under subparagraph (i) is identified, or if there is any doubt that the natural person identified is the beneficial owner, the natural person who holds the position of senior managing official;

b.) in the case of a customer being a trust-

1. 1. 1. 1. the settlor, trustee or the protector;
         2. the beneficiaries, or where the natural person benefiting from the trust has yet to be determined, the class of natural persons in whose main interest the trust is set up or operates; or
         3. any other natural person exercising ultimate control over the trust by means of direct or indirect ownership or by other means;

c.) in the case of a customer being any other legal arrangement, the natural person holding equivalent or similar positions to those referred to in subparagraph (b);

A BO is therefore a natural person who ultimately effectively owns or has a substantial controls over a legal entity. The Regulations provides for the requirement for disclosure by the BO for direct and indirect ownership, control and other rights and interests in a Tanzanian company.

1. 1. Direct Ownership: – these are natural persons registered as shareholders with BRELA and receive the benefits of the entities directly. They are bound to file disclosure as they appear in the Company’s records as having direct ownership and control.
   2. Indirect Ownership: – there are two types of holders for the recognized indirect ownership that are needed to be reported, this could be; ownership through a person; where the name of the shareholder appearing in the Company registry is not the one who receives the benefits; ownership under entity; this is where the registered shareholders of the company appear to be other companies that are controlled by natural persons; ownership under trust where a financial arrangement between three parties that hold assets for a beneficiary are created.

The legal requirements, procedures and time limit of reporting

1.) Requirements:

BO reporting requires the following:

a.) Reporting details of a natural person who fits the definition provided for under the Anti-Money Laundering (Amendment) Act of 2022 including:

• • • • full name, including any former or other name;
      • date and place of birth;
      • telephone number;
      • nationality, national identity number, passport number, or other appropriate identification;
      • residential, postal and email address, if any;
      • place of work and position held

b.) When reporting must disclose whether the BO is a politically exposed person (PEP) a natural person within or outside the United Republic who is or has been entrusted with a prominent public function; or who is or has been entrusted with a prominent function in an international organisation including a member of senior management such as a member of the board of directors, the chief executive officer, director, head of department, their deputies and equivalent functions, and includes family members and close associates of such a natural person.

c.) Reporting is to be done by the officers of company; hence the consolidation forms are to be signed by either the director or the secretary and be sealed with the company seal.

2.) Procedure and time limits:

The registration is to be done on the online platform separate from the usual BRELA ORS platform for registration of companies, found on https://bo.brela.go.tz where the director or company secretary is to register using their email addresses. The reporting requirement covers three scenarios/events of reporting which are: the BO Registration for the existing companies and the ones registered after the introduction of the requirement within 30 days from the registration date; BO Cessation to be filled when a person ceases to be a BO within 30 days from the date of cessation; and any changes to a Company’s BO must be notified within 30 days from the date of the change.

The BO forms as provided in the Regulations in respect of the reporting, are automatically generated by the system and a final consolidation form is also generated by the online platform and shall be printed, signed, sealed and uploaded back to the system as an attachment.

Time Limit: Reporting of the Beneficial Owner was initially provided to be completed before 1^st January 2022. However, after consideration of the fact that the reporting system was not yet ready and ensuing confusion on the legal interpretation by most companies and the public in general, the timeline was extended by the Minister to 6 months from 1^st January 2022 vide Public Notice made on 4^th January 2022.

Therefore, Companies in Tanzania are now required to maintain a register for their beneficial owners and to notify the Registrar of Companies of any changes thereto, in the online platform for BO reporting (per Section 16 of the Finance Act of 2020). The BO register is confidential and public access to such information is limited unless stated otherwise.

3.) Offences and Penalties.

It is mandatory for persons seeking to register new companies in Tanzania to ensure that their respective beneficial owners (if any) are identified and their details and/or particulars are submitted to the Registrar at the time of incorporation. A person who fails to file beneficial ownership detail commits an offence and thus liable to a fine of not less than TZS 5 million but not exceeding TZS 10 million as provided for under regulation 10 of the Regulations.

The Registrar has the power to refuse to register any document of a company that is required to be registered under the Companies Act if he is not satisfied that the company has provided accurate and up to date information on the beneficial owners of the company, which, in turn, may prevent a company from taking certain essential corporate actions.

Conclusion

The reporting requirement although being only for natural persons does not exempt the companies that cannot locate/identify a BO as defined by the Regulations without a responsibility. The companies with shareholders who do not fit the legal descriptions provided and those whose shareholders are government institutions hence owned by governments per instructions from the Office of the Registrar of Companies, are required to write a letter in declaration of the same to the Registrar.

Moreover, the requirement to report BO is currently prescribed to mainland Tanzania only and that no corresponding legislation/requirement has been made for Zanzibar to date.