This Article is dedicated to anyone in Tanzania who has come across the requirement to comply with the ‘beneficial ownership’ regulations. In the past year, at QnB, we have received a lot of enquiries on the subject and we thought it wouldn’t be such a bad idea to summarize what you need to know from the laws governing beneficial ownership. Lets dive in!

Beneficial Ownership under the Companies Act

The Finance Act of 2020 amended the Companies Act, (CAP. 212) by introducing the issue of beneficial ownership through the Companies (Beneficial Ownership) Regulations GN No. 391 of 2021; and later in 2023 the said Regulations were revoked by the Companies (Beneficial Ownership) Regulations GN No. 478 of 2023. The Regulations were introduced to regulate individuals who have direct or indirect beneficial interest in companies, with the goal to enhance transparency, integrity, and accountability within companies.

In that same spirit, the government in 2023 also introduced the Business Names (Beneficial Ownership) Regulations GN No. 714 of 2023 to regulate the beneficial owners in partnership businesses.

Who is a beneficial owner?

-A natural person who directly or indirectly 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 an arrangement directly or indirectly whether acting alone or together with other persons;

-On whose behalf an arrangement is conducted; and

-Who exercises significant control or influence over a person or arrangement through a formal or informal agreement.

A person can be either a direct beneficial owner or an indirect beneficial owner. A direct beneficial owner holds or acquires a beneficial interest in the company and the same is registered in his name while an indirect beneficial owner holds or acquires a beneficial interest in the company but the same is not registered in his name.

What is a ‘beneficial interest’?

This means a substantial economic interest or benefit or substantial or significant control in a company.

The rationale behind the Regulations

-To create trust and transparency in the company.

-To control illegal property acquisition.

-To control money laundering.

Laws governing beneficial ownership in Tanzania

The main laws governing beneficial ownership in Tanzania are:-

-The Companies Act, (CAP. 212)

-The Companies (Beneficial Ownership) Regulations GN No. 478 of 2023

-Anti-Money Laundering Act Cap 423 R.E 2022

-Business Names (Beneficial Ownership) Regulations GN No. 714 of 2023

Who is responsible to identify a beneficial owner?

The law requires every company to identify the beneficial owners, register their particulars and notify the registrar of companies through Form No. 14b and the beneficial ownership online portal.

Regulatory authority

Business Registration and Licensing Agency (BRELA) is the responsible regulatory authority for beneficial owners in Tanzania.

Political exposed person (PEP)

Before exposing the information of any beneficial owner, it is important to pinpoint whether a person is a PEP or not. The law requires that before reporting a political person as a beneficial owner, the company is supposed to get approval from its senior management.

The Anti-money Laundering Act defines a PEP is a natural person within or outside the United Republic of Tanzania who is or has been entrusted with a prominent public; who is or has been entrusted with the prominent function in an international organization including members of senior management.

Protection of the beneficial owners’ information

The law strictly prohibits the officers of BRELA to disclose or communicate any information of beneficial owners to any unauthorized person and are required to treat beneficial owners’ information with the utmost confidence, even after the cessation of their employment with BRELA.

Also, the Regulations restrict the disclosure of the beneficial owners’ information by the company without first obtaining their consent, unless its by the court order or for compliance purposes.

Who can access the information of beneficial owners?

Upon written request, the information held by the registrar of companies in the register can be made available to competent authorities such as:

-Financial Intelligence Unit;

-Tanzania Revenue Authority;

-Any authority that has functions of investigating or prosecuting any offence relating to money laundering;

-Competent authority with designated responsibilities for combating money laundering and terrorist financing.

Change of beneficial owner

In the event of any transfer or transmission of shares, or any changes affecting the share capital of the company, or any changes in voting rights which may affect the beneficial interest, the company is required to notify the registrar of companies through Form No 14f.

Cessation of a beneficial owner

Where an indirect beneficial owner ceases to be a beneficial owner, the company is required to notify the registrar of companies by filing a notice of cessation through Form No. 14c within 30 days from the date of cessation. The law is silent on the notification requirement for the cessation of a direct beneficial owner.

Consequences of non-compliance with the Regulations

A person who fails to keep records of the beneficial owners; fails to file beneficial owners’ information with the registrar of companies; fails to notify the registrar of any changes on such information; or who goes contrary to the Regulations commits an offence punishable by fine of not less than five million Tanzanian shillings but not exceeding ten million Tanzanian shillings.

Beneficial Ownership under the Business Names Registrations Act

Beneficial ownership in partnerships is regulated by the Business Names (Beneficial Ownership) Regulations GN No. 714 of 2023. These Regulations require the managing partners to keep records of beneficial owners (both registered and unregistered) and timely submit the same to the registrar of companies through Form No. UM-1. The information of a partner who is not registered in the partnership deed but holds a beneficial interest in a partnership is filed to the registrar through Form No. UM-3. The requirement for beneficial ownership disclosure extends to the registered partners who do not hold a beneficial interest in a partnership, whereby they are required to be disclosed to the registrar of companies through Form No. UM-2.

Protection of the beneficial owners’ information

Similarly to the requirements under the Companies Act, the beneficial owners’ information under these Regulations is protected and its disclosure or use by the managing partners or other partners is restricted only for purposes of compliance and communications with the respective beneficial owner. The beneficial owners’ information submitted to the registrar of companies is also protected by the Regulations, whereby, the registrar is required to protect and treat such information with strict confidentiality and disclose the same only to approved persons or authorities.

Change & Cessation of a beneficial owner

In cases of changes of beneficial owners or their information in a partnership, or cessation, the registrar of companies is to be notified through Forms No. UM-4 and No. UM-5, respectively.

Consequences of non-compliance with the Regulations

Any non-compliance to the requirements under these Regulations is punishable by a fine of not less than one million Tanzanian shillings but not exceeding five million Tanzanian shillings.

Author: Neema Masunga, Legal Officer