Share Transfers in Tanzania: Law, Practice, and Procedure

Ownership in a Tanzanian company is fundamentally determined by shareholding. Whether introducing a new investor, exiting an existing shareholder, restructuring ownership, or facilitating investment, share transfers are a core corporate transaction.

In Tanzania, share transfers are governed primarily by:

• The Companies Act, Cap. 212 [Revised Edition, 2023]
• The company’s Articles of Association
• Applicable tax laws and regulatory practice, particularly with the Tanzania Revenue Authority (TRA) and BRELA

This article provides a comprehensive, step-by-step guide to the law, practice, and procedure for share transfers in Tanzania, while also clarifying restrictions, tax implications, and regulatory filings.

Share Transfer vs Transmission of Shares

It is important to distinguish share transfer from share transmission, as the two are often confused but are legally different processes.

Share Transfer

A share transfer is a voluntary transaction carried out by mutual agreement between parties. It typically involves:

• A sale or gift of shares
• A share transfer instrument
• Payment of Capital Gains Tax (CGT)
• Approval in accordance with the company’s Articles of Association

Transmission of Shares

Transmission of shares occurs by operation of law, not by agreement, for example:

• Upon the death of a shareholder
• Bankruptcy or insolvency
• Mental incapacity

This article focuses only on share transfers, not transmission.

Legal Nature of Shares

Under the Companies Act:

• Shares are movable property
• Shares are transferable subject to the Articles of Association
• A company cannot impose restrictions on share transfer outside its Articles

For private companies, share transfers are commonly restricted to preserve the “closed” nature of ownership.

Preliminary Step: Review the Articles of Association

Before initiating any share transfer, the Articles of Association (AOA) must be reviewed carefully.

Articles usually address:

• Whether shares may be transferred to non-members
• Rights of pre-emption
• Directors’ powers to refuse registration
• Valuation methods for shares

Only restrictions contained in the Articles are legally binding.

Private shareholder agreements do not bind the company unless reflected in the Articles.

Step-by-Step Share Transfer Procedure in Tanzania

Step 1: Notice to Directors

The selling shareholder must notify the directors of their intention to transfer shares.

In most private companies:

• Shares must first be offered to existing shareholders
• If existing shareholders decline, shares may be offered to outsiders, subject to directors’ consent

Directors then communicate the offer to members in accordance with the Articles.

Step 2: Members’ Resolution Approving the Transfer

Once a buyer is identified:

• The company must pass a members’ resolution approving the transfer
• This is typically done through an extraordinary general meeting or written resolution

The resolution authorises the company to register the transfer.

Step 3: Sale Agreement and Share Transfer Instrument

(a) Share Sale Agreement

The seller and purchaser execute a sale agreement, which:

• Records the commercial terms
• Serves as evidence of the transaction

(b) Share Transfer Instrument

A Share Transfer Instrument must be executed by:

• The transferor (seller)
• The transferee (buyer)
• The company (through directors or director & secretary)

A share transfer is regarded as incomplete if the transfer instrument is not properly executed.

Step 4: Payment of Capital Gains Tax (CGT)

Under Tanzanian tax law:

• Share transfer attracts Capital Gains Tax
• CGT is charged to the seller/transferor
• The rate is 10% of:
  • The contract value or
  • The market value assessed by TRA (whichever is higher)

The tax is paid through a TRA control number, after which:

• A Tax Clearance Certificate is issued

This certificate is mandatory for registration of the transfer.

Step 5: Notification to the Registrar of Companies (BRELA)

Once the transfer is completed:

• The company must notify BRELA of the change in shareholding

Documents filed typically include:

• Members’ resolution
• Share sale agreement
• Share transfer instrument
• CGT tax clearance certificate

The change must also be reflected in:

• The company’s statutory registers
• The Annual Return filed with BRELA

Step 6: Surrender and Issuance of Share Certificates

Where a company issues share certificates:

• The seller must surrender the original share certificate
• The company issues a new share certificate to the purchaser

his formally recognises the purchaser as a shareholder.

Restrictions on Share Transfers in Private Companies

(a) Rights of Pre-Emption

Most private companies provide that:

• Shares must first be offered to existing members
• Price determination follows a method set in the Articles (directors, auditors, or formula)

Only if members decline may shares be transferred to outsiders.

(b) Directors’ Power to Refuse Registration

Articles may grant directors power to:

• Refuse registration of a transfer
• Only for reasons specified in the Articles

However:

• Share transfer cannot be totally prohibited
• Any refusal must be exercised in good faith and within the Articles

Practical Considerations for Investors and Companies

• Always review Articles of Association first
• Factor CGT timing early in transaction planning
• Ensure beneficial ownership records are updated after transfer
• Align share transfers with investment, tax, and regulatory strategy
• Late or incorrect filings can delay transactions and trigger penalties

Final Words

Share transfers in Tanzania are straightforward when handled correctly, but procedural precision is critical. Compliance with the Companies Act, Articles of Association, tax obligations, and BRELA filing requirements ensures that ownership changes are legally valid and enforceable.

Whether for investment entry, exit, restructuring, or succession, professional guidance helps avoid delays, disputes, and regulatory exposure.

Mak Africa Legal advises local and international clients on:

• Corporate compliance and regulatory filings
• Share transfers and restructurings
• Private equity and investment transactions

Legal Disclaimer

This article is provided for general informational purposes and does not constitute legal advice. Investors should seek specific professional legal guidance tailored to their circumstances before acting. Mak Africa Legal and its representatives accept no liability for decisions made solely on the basis of this article.

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