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Arrest of judgment debtor

QP, Dar

Indeed there are provisions whereby a judgment debtor may be arrested in execution of a decree. The Civil Procedure Code (CPC) of Tanzania provides that a judgment debtor may be arrested in execution of a decree at any hour and on any day, and shall, as soon as practicable, be brought before the Court, and the Court may order his detention.

The CPC further provides that where the decree in execution of which a judgment-debtor is arrested is a decree for the payment of money, and the judgment-debtor pays the amount of the decree and the costs of the arrest to the offi cer arresting him, such, offi cer shall at once release him.

The detention is for a period of six months and he may only be released prior to the six months if he pays up or on the request of the party that requested his detention or on the omission by the person on whose application he has been detained to pay subsistence allowance. Please be informed that the law requires you, the decree holder, to pay subsistence allowance to the judgment debtor when he is in prison and failure to pay such amounts to the normal standard of the judgment debtor is a ground for him to be released.

The advantage of this detention approach is that the judgment debtor might pay in fear of imprisonment. The main disadvantage is that if the judgment debtor does not fear going to jail for six months, you will have to incur further expenses to keep him there, and still not recover the amount. All subsistence allowances that you spend on the judgment debtor whilst in detention, may be added to the debt owed to you.

Non Tanzanian purchasing prospecting licence

I intend to purchase a prospecting licence for gold in Tanzania. The individual is ready to sell me this right. My only worry is if the law allows to transfer this right to a company owned 100% by non Tanzanians. What other measure should I take to ensure that the PL is genuine and that I will not get into trouble later on.

EL, Dar

According to the Mining Act 2010, a Prospecting Licence (PL) is a mineral right. Section 9 of this Act further adds that the holder of a mineral right, or where the holder is more than one person, every person who constitutes the holder of that mineral right, shall, subject to subsection (2), be entitled to assign the mineral right or, as the case may be, an undivided proportionate part thereof to another person.

Subsection (2) states that no special mining licence; mining licence or any undivided proportionate part thereof shall be assigned to another person without a written consent of the licensing authority. In your case the prospecting licence for gold can be transferred and there is no restriction as to who can hold it.

To answer your question on the genuinity, we strongly recommend that you do an in depth due diligence as to the identity of the mineral rights holder and whether he or she is in default of any of the terms of the PL. The starting point is by conducting a search of the PL at the Ministry of Energy and Minerals, to ensure that there is no default.

You should also consider paying a visit to the area itself to see what activity is ongoing there. The biggest challenge is the identity of the PL owner. Unfortunately Tanzania does not have a national identity system and verifying the identity of persons is quite challenging. Whilst you can request the seller for his or her passport and/or copy of the voter ID card, these are not 100% full proof. Your lawyers can guide you further.

Purchase of shares or assets

I am negotiating with a party to purchase a certain company that produces a famous product. When negotiating I am unsure whether it is to my advantage if I purchase all shares of the company or only purchase the company’s assets. Is this one and the same thing?

DP, Dar

Your decision on whether to buy the shares of the company as opposed to the assets alone, or vice versa, will largely be dependent on tax considerations. For example when you purchase shares, the seller must pay capital gains tax and also applicable is stamp duty for the share transfer.

When you purchase the shares of the company, you become the company’s member, and you then carry the burden of both the assets and liabilities of the company. The biggest fear for businessman are tax consequences. The Tanzania Revenue Authority (TRA) is allowed by law to reopen your books for upto fi ve years. That means that after you take over the company, the TRA will hold the company liable to pay tax and you, as a member of the company, may end up suffering.

If you want to buy the shares of the company, it is advisable that the books of accounts of the company be properly looked at and re-audited, to ensure compliance. In the sale of shares agreement, you should also insert a provision in which the seller covenants with the company and you as an individual member, to indemnify both against tax liabilities incurred in the past years but assessed after the transfer of shares. Coming to the sale of asset. This allows you to carry on the business under the umbrella of your own company with fewer taxation hassles.

This type of transaction does not come with the liabilities of the company and hence is the preferred way of taking over a company’s assets in Tanzania. Value Added Tax may apply, depending on the type of asset and business you are engaged in. And yes if it is a famous product, don’t also forget to buy the trademarks of those products. Many a times the company’s value is in its trademarks than in the assets. You should consult your auditor and/or tax consultant for further information.

THE month of September 2020 is on its ...

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