Highlights:
• Different modes by which a foreigner may acquire a domestic company.
• Restrictions on investment shares
• Obligation to Declare
• Requests for Specific Authorization

Overview
The law in Tanzania recognizes various approaches of business operation. It may be a Sole business proprietorship owned by one part who is in charge of everything and operating under the business name; Partnership where two or more individuals though an agreement (partnership deed) and share management and profits; Companies which involve two or more people/corporations forming a new entity with separate legal recognition from its members, this may either be a local or foreign, limited or unlimited and limited by either shares or guarantee; Cooperative Society which is a voluntary joining together to achieve a common need by forming a democratically controlled institution; and Non-governmental organizations which are appropriate for non-profit-sharing organizations.
This article is centered at scrutinizing the guidance for establishment and operating an investment in Tanzania by a foreign investor and how an investor can acquire the interests in the domestic corporation without diverging from the legal and procedural requirements. There are various ways which a foreign investor may wish to venture and acquire the interests in a domestic company as elucidated below; –

Share Subscription: Since, it is through shares we can ascertain the extent of authority and control of an individual or company in an entity. Subscription of shares is where the company agrees to sell a specific number of shares at a specific time and price, such that the subscriber becomes a shareholder. Since shares determine the power and mandate one has over the company, an investor will be at a better position to venture in, after he has conducted a due diligence so as to ascertain the financial and legal status of an entity before investing. This will reveal the assets and liabilities of the company but also the commitments which members of the prospective entity have.
The same can be completed by initially spotting the potential company to invest, conducting due diligence, executing the share agreement. The same has to follow the due legal procedures like notifying the registrar of companies, paying the capital gain taxes in respect of the shares sold to an investor (to mention few).

Merger and Acquisition: a foreigner may also be an entity desirous to invest in an already established business with the view of either revamping the nearly dead established business or expansion of the already existing business. Mergers occur when two companies join forces. Such transactions typically happen between two businesses that are about the same size and which recognize advantages the other offers in terms of increasing sales, efficiencies, capabilities and shares assets and interests. And acquisitions occur when one company buys another company’s assets and liabilities and folds it into its operations. Mergers and acquisitions involving privately held companies entail a number of key legal, business, human resources, intellectual property, and financial issues. For a foreigner to successfully navigate a sale of your company or acquiring interest over the company in Tanzania, it is helpful to understand the dynamics and issues that frequently arise so as to have certainty in what you are about to venture in.

Restrictions
Before one has invested or ventured in any industry, one has to bear in mind the restrictions available to various sectors so as to make sure that the desired investment complies with not only the legal restrictions but also the culture of business operation in Tanzania. Below are the sector restrictions worthy to be noted by a foreigner wishes to invest in Tanzania.
i. Foreign capital participation in the telecommunications can be up to 75% maximum; This is to say that, in the telecommunication investment a foreigner or foreign entity can not acquire the interests (shares) in the company in excess of the 75% of the shares.
ii. Tanzanian TV stations can be owned up to 49% by foreigners. This means that, majority of investment in Tv stations has to be owned by locals and an investor can venture or acquire interests up to 49%.
iii. Foreign investors are barred from acquiring shares in nationwide newspapers.
iv. Telecommunication companies are required to list 25% of their shares on the Dar es Salaam Stock Exchange.
v. Minning. Foreign mining firms must have at least 5% from a local company (where 51% of shares are owned by Tanzanians and 100% of its’s non managerial positions is held by Tanzanians. In addition, foreign firms are required to grant 16% of its carried interest to the government. foreign companies that provide goods and services to the mining sector must incorporate a joint venture company in which a local Tanzanian company holds equity of at least 20%.

Obligation to Declare
A foreign company is not obliged to register with Tanzanian Investment Centre – mainland, however if registered they become eligible to incentives including VAT, import duty exemptions. Likewise in Zanzibar, a company may register with the Zanzibar Investment Promotion Authority (IPA) to get investment incentives.

Requests For Specific Authorization
The Tanzania Investment Act No. 10 of 2022 categories the incentives into two categories; Strategic or Major Investment categories in order to qualify for incentives. The minimum investment capital to obtain “strategic investor” status is USD50 million for wholly owned foreign companies and joint ventures with Tanzanians. The threshold is USD300 million for the “special strategic investor” status. The status is granted by the National Investment Steering Committee (NISC). Foreign investors are barred from most tourism activities: Mountain guiding, travel agency, car rental and tour guiding are not open to foreigners. Port services licenses are only granted to Tanzanian companies. Furthermore, there are various restrictions in fisheries: Foreign-owned ships cannot engage in local trade. Only Tanzanians can be licenses as shipping agents. Fishing and fish export licenses cost three times more for foreigners as compared to the local company. It further excludes some operations and collection of specified fish and its products. Gemstone minning licenses are granted exclusively to Tanzanians however in some circumstances the minister may wave this requirement. For businesses requiring natural resources, the government of Zanzibar via ZIPA is strict on foreign investment in Zanzibar because priority is given to Zanzibarians.

Disclaimer: This article is authored by Irene Gunze, an Advocate and Head of Corporate Services from Rive & Co, a new and innovating law firm as a result of the partnership between ABC Attorneys, Sepia Attorneys and Stallion Attorneys, built on the foundation of trust, credibility, and novelty, offering expert legal solutions. This Article is for informational purposes only and should not be construed as legal advice. It is recommended to consult with a qualified legal professional for advice specific to your situation.