THE UNIVERSITY OF ARUSHA

FACULTY OF BUSINESS ADMINISTRATION

BUSINESS LAW II,
(BUS 07402)

EXECUTIVE NOTES
Prepared by ASUBUHI JOHN YOYO
YOYO & CO.ADVOCATE
1. The word “company” has a Latin origin which simply refer to a
group of persons taking meals together.
2. In common usage, the term “company refers to an association of
people, who contribute money or money worth and employ the same
to a common purpose and share loss and profit arising there from.
Persons, who contribute money are known as “members” or
shareholders, proportion of capital which each member is entitled to is
“share” and persons who act on behalf of company are called
Directors.
3. A company is an entity or artificial person with separate
personality distinct from its founders, an artificial persons with
ability to own property buy the same in its own name, employ people
capable to sue or be sued in its own name.
4. The principle of separate entity or legal personality of the company
was firmly established in the famous English case of SALOMON VS
SALOMON (1897) AC where Lord Macnaghten held that, the company
is at law a different person all together from its subscriber.
5. There are various modes under which companies can be categorized,
to wit , on the basis of formation, there are statutory companies ,
formed by the act of parliament , chartered companies (that come into
being upon being chartered ) and Registered companies that come into
being by registration .
6. on the basis of ownership there are private owned companies and
public owned companies on the basis of liability there are limited
liability company and unlimited liability company and on the basis of
place of registration, there are local company and foreign company.
7. The major difference between public and private companies is found in
membership numbers - in private company it is two to fifty while in
public is two to infinitive, other differences are found in free
 transferability of share, the feature of public company, trading in share
through stock exchange and the requirement for issuing a prospector
or statement in lieu of prospector before registration.
8. Companies Act, No 12 of 2002,is the major law that governs companies
Affairs in Tanzania, being the mother law it provides for general
principles applicable to all companies in Tanzania be it statutory
companies, chattered companies , and registered companies
9. For registered companies, the acts provides for legal procedures
for operating its affairs which for the purposes of clarity can be
systematically comprehended in three levels;- level one how to
incorporate a company (step by step) level two formalities of running
affairs of the company upon it incorporation and level three
formalities for winding up or closing the company.
10. The incorporation of the company under the companies Act
involves the following steps choice and clearance of name,
preparation of the registration documents that is MEMAT
( memorandum of association and Articles of association,) and FORM
NO 14A and 14B then lodging the documents to the registrar of
company finally payment of requisite fees, the filing fees,
registration fees, and stamp duty. Upon satisfaction of all requirements
the climax is in Issuance of the certificate of incorporation by the
registrar.
11. Registration of public companies requires as a condition the
endorsed of the prospectus by the capital market and security
authority and issuance of the same to public to be subscribed to
before registration begins, the requirement that elongate the process
and make it cumbersome when compared with public.
12. Foreign companies are companies dully registered abroad but operates
in Tanzania these companies does not register in bongo but rather
formalize its operation in Tanzania by acquiring the certificate of
compliance, the condition for obtaining certificate of compliance
includes but not limited to securing place of business, getting person
representing them in bongo, fulfilling other legal requirement by
immigration and investment laws of the land submitting to BRELLA
all authentic documents legalizing its operations abroad.
13. Upon the insurance of the certificate of incorporation, issuance of
charter or enactment of the act as the case can be, the company can not
operate legally until it fulfill other conditions like obtaining the
requisite licenses from relevant authorities ,opening bank account ,
and making tax clearance

14. Despite having legal personality that is quite distinct from its
founders, company cannot execute anything without human being.
Human agents who carries out the affairs of the company are its
directors, member /shareholders whose powers right and liabilities
are regulated by the companies act Articles of association and other
laws .
15. Directors are class of members who are charged with the
management of the company on behalf of the others, they are
collectively termed as the board of directors, and they act in
representative capacity for and on behalf of the company.

16. One of the salient feature of the new companies act , is the additional
duties and responsibilities it imposes to directors which make them
personally liable as it practically deter them from taking
advantage of the veil of incorporation In a nutshell, the directors’
duties include duty to act honestly in good faith , duty to act with skill
and diligence in discharging their duties, duty to use powers for proper
purpose and duty to have regard to the interest of the employees and
bonafide third parties.
17. Membership or share holding in company can be acquired by either
subscription to the memorandum of the company, by transmission or
by transfer of share whatever the mode as the case may be,
membership rights, duties and liabilities are guided by the Act ,
articles of association and General Law.
18. Right to vote and to participate in the companies affair is one of the
fundamental membership right which is exercised at the general
meeting where all members get the forum to probe the directors over
the affair of the company.
19. The absolute powers of the majority share holders have been grossly
neutralized by the new act through creation of an avenue where the
minority shareholders can initiate complaints against the majority
shareholder when the companies’ affairs are being prejudiced; the same
is done by filing a petition to high court.
20. There are two major ways under which a business company may
source out funds for its operation one, by subscriptions from its
members (share capital ) or by borrowing from lending institution .
21. In order to borrow from lending institutions a company must make
security for loan by creating charges over its assert. Charges are
twofold, fixed charges and floating charges. Fixed charges are created
over the fixed assets of the company while the float charges are created
over circulating asset of the company like cash or stock in trade. The
instrument or document that is used by the company as the formal
acknowledgement of the debt is called debenture.
22. For companies limited by share the key determinant for rights and
liabilities of its members is the amount of shares they own or contribute.
It is through the shares that member’s rights right to vote, right to profit
is determined. In practice, there are major classes in share holding
namely the majority share holders / preferential share holder and the
ordinary share holders.
23. General meeting is a platform where all members of the company get
opportunity to deliberate over companies affairs , Annual General
meeting is the key meeting that is held annually in every calendar year,
its major agendas among others is the annual account director report
and auditor’s report.
24. The extra ordinary general meeting is the emergence meeting held at
the request of members and its major businesses among others is to
make resolutions. The resolution can be ordinary one or special
resolution. The special resolutions are the one that requires seventy five
percent vote and it is reserved for business like alteration of
memorandum and articles of association, winding up of the company,
and transformation of the company.
25. It is a mandatory requirement for a registered company to file annual
return on the anniversary date or 28 days later. The return are
essentially an updates over all affairs or progress of the company it is
accompanied by statement of account editors report and balance sheet
failure to file annual return is a criminal offence which may lead to
removal of company from registry.
26. There are two bodies that are vested with powers under the law to
monitor the affairs of the company the registrar of the company and
the Court of law, the registrar may order investigation and inspection
over the affair of the company and may give sanctions or penalty
 likewise the court of law can receive complaint and may appoint
inspectors to investigate over the affairs of the company.
27. The new Act make have introduced new provision in relation to
companies which are insolvent or approaching insolvency, these
companies may make voluntary arrangement with its creditors to wit
winding up of Company can be totally awarded.
28. Winding up of the company is a process under which a company come
to an end there are two modes of winding up, the voluntary winding
up which is initiated by companies members and compulsory winding
up which is initiated by the Court
29. in both modes for winding up either by members or by the Court of
law the process involve the appointment of liquidator replaces the
directors and assumes control over the company affairs he/she collect
asset, pay debt and distribute surplus to company member in
accordance to their right.