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Account debit, bank refusing to reimburse

EB, Dar

This is an interesting fraud with one amount being debited at the end of one month, and the same amount being debited the beginning of the next month. The bank owes you a contractual duty to safeguard your money and whilst it is true that you have been very late in reporting, this very fact of informing them very late cannot entirely absolve the bank of liability.

The bank might say that the fraud might have been recoverable had you reported it earlier, but this will not hold much water except to the extent of perhaps reducing the amount that they will be held liable to pay. If all that you are telling us is true, then you have a good case and your Attorney can guide you further.

Gold in my garden

What would happen if I dig into my garden and find gold? My neighbours say it is not mine? This land belongs to me, I wonder why that would ever be the case. Please guide me?

IT, Dar

This sounds like a fairy tale but sometimes fairy tales do come true. Assuming that you will and we hope that you do find gold will not  belong to you. You own the surface rights of the land you live on, not the rights to whatever is below the land. If you suspect that there is a chance you will find gold, you may apply for a prospecting license but whether it will be granted or not is another question. We suggest you contact your attorney who can guide you through the provisions of the Land Act and the Mining Act.

Dispute with fellow shareholders

We founded a company that is now a market leader in Tanzania. Initially we were only two shareholders, later adding each of our children as shareholders making a total of 4 of us. We are having issues with the company as the original shareholder is very old and is unwilling to enter into a very lucrative sale agreement. Even his son is not siding with his father. How can we sort this matter out? What should we do in order to make sure that we don’t enter into such turmoil in the future.

RP, Dar

It is quite unfortunate that after building such a successful company you are in this situation. You are not the only ones who face such issues. Many companies in East Africa face similar issues. Companies forget the difference between management and governance. Many companies also do not understand the importance of maintaining separate company and individual accounts. The drawing of funds from a pool of assets or cash is extremely risky and this is widely prevalent in the market. As they grow, such companies will face various challenges in the future.

You have asked us two questions. We start by answering the second because we don’t have enough details to guide you on the first. The question is what  could you have done that would have assisted you in not getting in such kind of a situation?
Apart from ensuring that you are well governed and managed, it is critical for company’s shareholders to enter into a shareholders agreement.

A shareholders agreement is an agreement between the shareholders of the company which supplements and in some instances limits some of the provisions of the Memorandum and Articles (MEMARTS)of the company. There are a number of reasons why you would want to enter into such kind of an agreement. First the shareholders agreement is a private document and not open to public inspection like the MEMARTS. It is also easy to amend as opposed to amending the MEMARTS all the time. The Shareholders agreement may also provide additional rights or protection measure to the minority shareholders of the company.

The shareholders agreement has amongst others clauses when and whom the shareholders can sell their shares to, what number of shareholders have to agree for certain proposals to be accepted (reserved matters for shareholders), tag along rights ie rights where if a majority of shareholders are willing to sell their shares then the last remaining shareholder must also sell his or her shares whether he or she likes it or not.

There may also be clauses on how management is to be appointed, the appointment of auditors and an arbitration clause, whereby the shareholders would know exactly what to do and where to go in the event that there is a dispute.

It is always recommended that a shareholders agreement be in place right at the incorporation stage of the company to avoid disputes going forward. Unfortunately most of the local companies here have no such agreements in place, which make them vulnerable to shareholder disputes.

As to what your rights are, we need to know what your percentage shareholding is, whether there is a shareholders agreement in place and who is managing the company and how the deal is going to benefit the company and its shareholders. We suggest you seek advice of your attorneys who can guide you after reviewing the situation and the documents.

A  tribute  to  the  late  Former  ...


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