Summary Notes:

• Procedures
• Notice to Directors of the Company / intention to transfer shares
• Board Resolution to Approve Share Transfer
• An instrument of transfer of shares/Share purchase agreement (SPA)
• Payment of Capital Gains Tax
• Surrender and Issuance of Share Certificate

OVERVIEW

The shares are said to be movable property and, subject to certain conditions, freely transferable, so that no shareholder is permanently or necessarily wedded to a company. When the joint stock companies were established, the object was that their shares should be capable of being easily transferred.

According to the provision of Section 79 of the Companies Act No. 15 of 2013(The law of Zanzibar) enunciates the principle by providing that the shares held by the members are movable property and can be transferred from one person to another in the manner provided by the articles.

Procedures.

1.Notice to Directors of the Company / intention to transfer shares

The process commences with the transferor (seller) providing written notice to the directors of the company. This notice should detail the intention to transfer shares and include information about the prospective transferee (buyer).

2. Board Resolution to Approve Share Transfer:

Upon receipt of the notice, the board of directors convenes a meeting to consider the proposed share transfer. A board resolution is passed to approve the transfer, ensuring that it aligns with the company’s interests and legal requirements.

3. An instrument of transfer of shares/Share purchase agreement (SPA)

Following the board’s approval, the transferor and transferee enter into a sale contract. This legally binding document outlines the terms and conditions of the share transfer, including the number of shares, purchase price, and any relevant warranties or representations.

According to the provision of section 82 of the companies Act No. 15 of 2013 together with regulation 16 (2) of the Companies Regulation,2017, provides for details or requirement to be contained in an instrument of transfer of shares before delivering to the registrar, include the following below;

• names, identification and addresses of transferor and  transferee;
• consideration of which the transfer is made;
• number of shares transferred;
• share numbers;
• terms and conditions of transfer; and
• particulars of witnesses attest the signatures of the transferrer and transferee, or of the persons duly authorized on behalf of the transferor or the transferee.

4. Payment of Capital Gains Tax:

When it comes to income tax Zanzibar rely in accordance with Tanzanian tax laws. Therefore, the parties involved in the share transfer must settle any applicable capital gains tax. This tax is calculated based on the profit gained from the sale of shares and is paid to the Tanzanian Revenue Authority (TRA). Usually is 10% for resident and 20 for non-resident.

5. Notification to Registrar of Companies:

Once the transfer is completed, the company is obliged to notify the Registrar of Companies about the change in share ownership. This involves submitting the necessary documentation, including the board resolution, sale contract, and other relevant paperwork.

6. Surrender and Issuance of Share Certificate:

Following the Registrar’s approval, the transferor surrenders their existing share certificate, which is then canceled. Subsequently, a new share certificate is issued to the transferee, officially recognizing them as the new shareholder.

Disclaimer: This article is authored by Faridi Bakari Chambali, from Rive & Co, a new and innovating law firm as a result of the partnership between ABC Attorneys, Stallion Attorneys and Sepia 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.