Summary Note

• Types of business entities available in Zanzibar
• Responsible Authority for business registration
• Most common business type set up by foreigners
• Registration requirements
• Formation of a Branch/Subsidiary
• Registration of a Foreign Company
• Post and compliance registration requirements

Overview

Establishing a business entity in Zanzibar requires an understanding of its distinct legal framework, which differs from that of mainland Tanzania. In mainland Tanzania, company formation is governed by the Companies Act No. 12 of 2002. In contrast, Zanzibar’s company registration is regulated by ‘The Companies Act No. 15 of 2013’. Consequently, a company incorporated under mainland Tanzanian law is considered a foreign entity in Zanzibar, and similarly, a Zanzibar-registered company is deemed foreign on the mainland. Properly navigating these regulatory differences is crucial for ensuring compliance and effective business operations in Zanzibar.

What Business Entities can I set Up in Zanzibar?

Understanding the different types of business entities available is crucial:

• Sole Proprietorship:This is the simplest business structure, where a single individual owns and manages the business. Although it is straightforward to establish and manage, it carries unlimited personal liability, putting the owner’s personal assets at risk.
• Partnership: This entity involves two or more individuals who share ownership, profits, and liabilities according to an agreed partnership arrangement. Similar to sole proprietorships, partnerships expose the owners to personal liability.
• Limited Liability Company (LLC): The LLC is favored due to its flexibility and the protection it offers to shareholders’ personal assets. In an LLC, owners are protected from personal liability beyond their investment in the company, making it a popular choice for many businesses.
• Public Limited Company (PLC): Although less common for smaller enterprises, a PLC can raise capital by issuing shares to the public. This structure involves more complex regulatory and reporting requirements.

Registration Process in Zanzibar

Setting up a business in Zanzibar involves several key steps:

1. Name Reservation:The process begins with reserving a unique company name through the Business and Property Registration Agency (BPRA). This ensures that the name does not conflict with existing businesses.
2. These documents must be filed with the Registrar of Companies along with other required information, including:
3. Identification and details of directors and shareholders
4. Proof of address for the company’s registered office
5. Additional documents as required by Zanzibar’s Companies Act

How to Register a Foreign Company in Zanzibar (Branch/Subsidiary)

A company established outside of Zanzibar can establish a branch in Zanzibar by obtaining a Certificate of Registration from the Business and Property Registration Agency (BPRA). A company is deemed foreign if:

1.  It is incorporated under the laws of a foreign country or its management operates outside Zanzibar.
2. The majority of its shareholders are foreign nationals, and management control is exercised outside Zanzibar.

What is the most common business vehicle used by foreign companies in Zanzibar?

For foreign companies seeking to establish a presence in Zanzibar, the Limited Liability Company (LLC) is the most commonly adopted business structure. The LLC is favored for its ability to limit shareholders’ liability, protecting their personal assets from business-related risks. Its operational flexibility and relatively straightforward setup process also make it an attractive option. This structure aligns well with Zanzibar’s regulatory framework, positioning the LLC as the preferred choice for foreign investors aiming to establish a compliant and secure business operation in the region. Branch Registration to establish a branch, foreign companies must submit:

1. Company Name Reservation with the Business and Property Registration Agency (BPRA).
2. Memorandum and Articles of Association.
3. Details of Directors and Shareholders.
4. Proof of Registered Office Address.
5. Identification Documents for directors and shareholders.
6. Tax Identification Number (TIN) from the Zanzibar Revenue Board.

Upon completion of the registration documents with the registration agency, the Company will be issued with Certificate of Compliance from Zanzibar Property and Business Registration in Zanzibar (BPRA).

Compliance and Post-Registration

1. Annual Returns with the Registrar of Companies.
2. Corporate Tax Filings with the Zanzibar Revenue Board.
3.  Renewal of Business Licenses and Permits.
4. Maintaining Financial Records and preparing annual financial statements.
5. Compliance with Local Regulations.
6. Updating Company Information with the Registrar of Companies.
7. Periodic Audits if required.

Disclaimer

This article is provided by Aysha Ayoub, a legal consultant at Rive & Co, a pioneering law firm formed through the partnership of ABC Attorneys, Stallion Attorneys, and Sepia Attorneys. Rive & Co is known for its foundation of trust, credibility, and innovation in delivering expert legal solutions. Please note that this article is intended for informational purposes only and should not be considered legal advice. For guidance tailored to your specific circumstances, it is advisable to consult with a qualified legal professional.