Dstv Dailynews  Mobile


Latest News

Memarts of a company

I have worked with my bank and with increased borrowing have been advised to convert myself into a limited liability company, which I do not mind. My accountant drafted a long document called Memorandum and Articles of Association (Memarts). What are Memarts and how will they help. What else can you tell me about Memarts?

TK, Dar

We have noticed that very few companies have tailor made Memarts, most of them copy pasting from previous draftsman resulting in mistakes. Many persons do not known the consequences of poorly drafted Memarts.

To begin with Memarts are two separate documents although they seem to be clubbed into one. The Memorandum of Association contains the fundamental conditions upon which alone the company is allowed to be incorporated confi ning and defi ning the area of operation of the company.

The action of the company cannot go beyond the memorandum of the company and no company can be incorporated without fi ling of this memorandum. Its purpose is also to enable the shareholders and creditors and those dealing with the company to know what is its permitted range of enterprise. It must be stated that memorandum cannot be considered as limiting the powers conferred by the provisions of the Companies Act or by any other law.

On the other hand, Articles of Association of a company are its magnacarta whereby each shareholder is irrefutably attributed with notice of their purpose and content. These articles contain the regulations which govern internal corporate affairs and the conduct of the business. The articles are subordinate to, and controlled by, the Memorandum of Association which is the dominant instrument and contains the general constitution of the company. If there is a conflict between the memorandum and articles, then the memorandum prevail. However if there is any ambiguity in the memorandum, then the articles can be used to explain that ambiguity. The articles are normally regarded as a business document and should be construed so as to give them
reasonable business effi cacy. These articles prescribe the regulations or bylaws for the conduct of corporate affairs.

Production sharing agreement interpretation

I have been looking at the PSAs that Tanzania is offering to investors and do not understand why the Tanzania Petroleum Development Corporation (TPDC) should be given a share of the oil as a share of the profit? It is also hard for us to understand why there should be a limit on the amount of contract expenses that can be recovered?

EP, Dar

We are unsure why you don’t want TPDC to be given a share of the oil as part of the dividend of it being in the operation and being the licence holder. The oil would be drilled and extracted from Tanzanian soil and TPDC and the people of Tanzania have all the right to participate through this agreement. And this is what is currently being advocated unless of course you mean that TPDC should get a share of the profits in cash terms and not oil terms which we may not be acceptable as oil is also required locally here.

As for the contract expenses that can be recovered from the crude oil produced, the PSAs do not limit you to any such recovery unless of course the crude oil produced that year is low whereby a maximum percentage can only be recovered that period, with the rest of the expenses being carried forward to the following year, which is quite fair.

Company refuses to transfer shares of late husband

My husband was majority shareholder of a company in Arusha and died early last year. In his Will, I was the executor and beneficiary and after few months I managed to get a probate from the High Court in Arusha. I used that to transfer his shares into my name, as per the Will, but the company is refusing to accept it claiming they were not informed of this. What should I do?

RL, Arusha

We have greatly truncated the length of your actual question which you had sent as the matter is quite straight forward and all your revolving thoughts, some of which were quite impressive, are not necessary here. The Companies Act states very clearly that the production to a company of any document which is by law suffi cient evidence of probate of the will, or letters of administration of the estate, of a deceased person having been granted to some person; or the Administrator- General having undertaken administration of an estate under the Administrator-General’s Ordinance (Cap. 27). Provided that a company shall not be bound to give notice under this shall be accepted by the company, notwithstanding anything in its articles, as suffi cient evidence of such grant or undertaking. The Companies Act from the above gives you full protection.

You have not stated grounds that the other shareholders and or directors are refusing to transfer the shares. We do not see them having any such reservations especially when these shares have been inherited by you under your husbands Will. If this behavior continues, your attorney can consider taking the matter to Court to compel the other shareholders to recognize your shareholding. Meanwhile there might be major pilfering going on in the company and you might not want to delay this any further.

Breach of privacy

I sent my 14 year old boy to South Africa for some trials in a sports academy. Before they admitted him, he was escorted to the male bathroom to do a urine test. I protested but they said that this was compulsory. Is that not breach of his constitutional right to privacy?

QO, Dar

This issue has been debated in many countries and our research shows that it has almost always been in favour of the institute conducting the test. When your son was to take a urine test, he was likely escorted to a toilet but unlikely that they watched him take the urine sample. We must point out to you that our answer cannot be more specific as our constitution does not stretch as far as South Africa on such matters. You might need to contact a local lawyer who can guide you further.

over 8 years ago