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Corporate Governance and Capitalisation



Globalization has resulted in the opening of markets and injection of direct foreign investment in markets of emerging economies. The foregoing has witnessed market reforms whereas Governments' investments in business have been on the decline while private capital has assumed a centre role.

That as from 1967 to 1992 all big corporations in Tanzania were state owned. These Corporations were characterised by corruption, in form of embezzlement of public resources and favoritism, managerial incompetence, political interference and government subsidization.[1] Tanzanians state owned corporations at that time were operated without regard to market discipline with lack of effective control and accountability as managers had uncontrolled powers.[2]

Injection of Private capital in direct foreign investment has caused and/or has been through the corporate vehicle. The foregoing influenced companies do business through public listed companies with wide spread shareholders, both local and foreign. The foregoing has seen most African governments pulling away from business and selling their shares, on conditions, some of which makes it mandatory for citizens to hold certain share percentages in the newly formed public Corporations. The foregoing has raised the number of listed public corporations in Tanzania that now stands at 15,[3] the number is destined to increase, compared to early 1990s. The said increment needs as conditions precedent, a supportive and protective legal and regulatory framework for protection of shareholders, that is corporate governance.

However corporate governance has seen a number of corporate scandals in the developed markets of America, Delaware, and Europe which scandals forced state intervention and control from security authorities. This paper seeks to research on whether shareholders of listed companies in Tanzania are protected under relevant securities laws, whether the said laws and institutions created there under adequately meet the challenges and whether there is any need for improvements and/or amendments to the laws and institutions. The foregoing will be weighed against lessons learnt from recent corporate scandals in Europe and America.

Most if not all previous researches on this subject in Tanzania has been conducted by economist who looked at shareholder protection as a component of corporate governance from an economic perspective. This paper will attempt to analyse the said issues from a legal perspective.


1.2 Defining Corporate Governance and Capitalisation

There is no precise legal or economic definition of corporate governance. However a clearer and widely used definition of corporate governance is that found under the Organisation for Economic Co-operation and Development, OECD. Under the OECD preamble corporate governance is defined as ‘a set of relationships between a company's management, its board, its shareholders and other stakeholders'. Corporate governance also provides the structure through which the objectives of the company are set, and the means of attaining the objectives and monitoring performance are determined.'[4]

The main theory behind corporate governance is the control of the corporation that is vested in a board of directors elected by shareholders to run the business. The primary relationship that has shaped corporate law is between managers on the one hand and on the other hand the owners (Shareholders).[5] The possible mismanagement or self dealing by the managers in control of the corporation is the focus of corporate governance. However a balance must be struck between the shareholders to monitor management and the need for the managers to take risks and operate the business in an effective and profitable manner.[6]

There are two main categories of corporations. In this paper the words “public listed corporation(s)” is used synonymously with the word “public listed company(s).” There two main categories of companies, namely private or closely held corporations and public or listed corporations. The major difference between the two is that public listed corporations are companies whose shares are listed and publicly traded at stock markets while private/closely headed corporations do not trade shares publicly nor are they listed in any stock markets. Issues of corporate governance in public listed companies have revolved around shareholders right to a voice in corporate matters and the monitoring of managers against managers' power to operate the business without shareholders interference.[7]

This dissertation focuses on public listed corporations in Tanzania.

1.3 Capitalisation: Shares and Equity

Corporations require capital to function. In corporations capital is raised vide equity creation that includes investment of funds by owners or by creation of debt through borrowing.[8] It is the protection of the former, shareholders, that this paper shall dwell on. Basically shareholders are classified into two main groups; namely common shareholders and preferred shareholders.

Common shareholders have been defined as the residual claimants in the corporation as they have a claim to receive income and assets of the corporation after all other claims have been settled. They are directly concerned with the success of the business as their returns are dependent upon the profitability of the company.[9]

On the other hand preferred shareholders only hold preferred shares when authorized under articles of association. This group receives fix dividends, when, declared after creditors are paid their interest but before common shareholders are paid dividends, however as opposed to common shareholders who have rights to vote, preferred shareholders have no such rights to vote.[10]

When talking of shareholders protection under corporate governance regarding public listed corporations it is pertinent to list that there are two categories of such shareholders, namely majority shareholders on the one hand, who are normal controlling shareholders and minority shareholders on the other hand.

A majority shareholder has been defined as a shareholder or a group of shareholders who acting together own a majority or 51% or more of the voting shares of a corporation thus de jure control for most shareholder decisions, including selection of directors.[11]However the percentage needed to take control in public listed companies depends on a number of factors including how widely dispersed are the other shareholders, thus at times a shareholder or a group of shareholders acting together may be controlling shareholders though they hold less that 51% of voting rights, still being the biggest holders of percentage in ownership or in a situation of parent subsidiary where the parent has larger voting rights as against other shareholders.

1.4 Shareholders protection

That as the main focus on this paper is shareholders protection in Tanzania it is worthy at this stage to define what the term entails as that will be the scope of the paper.

Shareholders protection is defined as a set of laws or rules protecting the rights of non controlling shareholders.[12] This paper shall discuss on the protection of shareholders in public listed companies with special focus on Tanzania, a country in the Eastern part of the African continent.

Marco Pagano and Pablo Volpine have stated that the managers use of their control over companies resources for their own advantage, at times, to the detriment of the non controlling shareholders, as a potential area of conflict of interests. Thus from the foregoing the authors arrive at a conclusion that a set of laws and regulations protecting the rights of the non controlling shareholders is the fundamental definition of shareholder protection[13].

In their assumption Pagano and Volpine state that profits are not entirely verifiable by non controlling shareholders thus can be appropriated not only by managers but also workers in terms of managerial packages, higher bonuses, empire building, and easy life. Thus the foregoing at times turns workers into allies of the sitting management against the thread of corporate raiders.[14]

Under the OECD principles areas that shareholders rights and shareholders need protection are listed[15] as:

i) Ensuring the basis of effective corporate governance framework including that of ensuring that the governance framework promotes openness, transparency and efficient markets, consistent with the rule of law and clearly articulate the division of responsibilities among different supervisory, regulatory and enforcement authorities

ii) Right of shareholders and key ownership functions that encompass corporate governance should protect and facilitate the exercise of shareholders rights

iii) Equitable treatment of shareholders both minority and foreign shareholders. All shareholders should have the opportunity to obtain effective redress against violation of their interests

iv) Disclosure and transparency, ensured timely and accurate disclosure is made on all material matters pertaining to the corporation, including the financial position, performance, ownership and governance of the company.

Part One article VI of the OECD contains principals that state the responsibilities of the Board. It should be born in mind that most of the shareholders rights and protection, subject matter of this paper are related to the actions and omissions of and/or by the Board(s).

That under the said article it provides that corporate Governance should ensure the strategic guidance of the company, the effective monitoring of the management by the board, and the boards' general accountability to the company and shareholders. [16]The article goes further and points out that the board should;

a) Act on a fully informed basis, in good faith, with due diligence and care, in the best interests of the company as a whole

b) Where the decisions may affect different shareholders groups differently, the board should treat all shareholders fairly

c) Apply high ethical standards taking into account interests of stakeholders

d) Fulfill its key functions.

That in the following chapters this paper aims at analyzing whether the legal and institutional frame work in Tanzania accords shareholders of public listed companies protection in accordance with the OECD Principles, assuming that the principals provides minimum standards, of effective corporate governance and shareholder protection.



The development of modern corporate governance and its relationship with shareholders protection has been shaped to a great extent by several corporate scandals that rocked America and Europe.


The first avalanche of corporate scandals that rocked the United States of America resulted from the corporate boom in the 1920s. The stock market boom of the 1920s saw shares in corporations rising steadily in one direction, upwards, leading to what experts called ‘market bubble'. This market bubble led to a burst in 1929.[17]

When he came into office President Franklin Roosevelt tried to address the market crush by legislation as it was widely believed that the market crush had to a great extent been caused by fraud in stock markets by many publicly traded corporations and self dealing in the financial sector.[18]The foregoing state of affairs resulted in great reforms at the federal level that saw the passage of federal security laws. The above laws insisted on disclosure to investors, regulation of proxies, anti fraud and insider trading rules, the role of independent accountants and reform of the stock markets including insider trading rules.[19]

The second wave of corporate scandals in the United states of America followed the 1990s' stock market boom caused by technological revolutions in telecommunications and high technology sector and the rise of the internet. Investors were rushing to invest in stock markets thus resulting into a sharp investment rise in the above said sectors. Thus the foregoing led to over valuation of the stock markets that led to another bubble as at the beginning of 2001.[20] The said bubble evidenced a number of corporate scandals.

Corporate Scandals that arose included the Enron scandal. The shares of Enron, as a trading Company traded as high as 90 US Dollars thus making it a Wall Street star. That as the scandal unfolded it was discovered that Enron had been cheating by making its income statements look better through trading with fictitious independent entities. Most of the said transactions were illegitimate and designed to remove liabilities from its balance sheet and increasing revenue and profits on its statement, thus fraudulent accounting aimed at increasing its shares and share value[21]. Share increase justified increased salaries and bonuses for managers and enabled them to cash in on higher market prices the value of their stock options with some directors involved in both sides of the said illegitimate transactions.[22] Further, from the said accounting frauds Enron executives received the sum of $ 1.4 billion as compensation in year 2000 and $ 745 in 2001.[23] On the part of employees, it witnessed a loss of pensions and stock options that were invested in Enron shares. That the foregoing happened despite Enron having outside lawyers, independent directors and gatekeepers like accountants and auditors, none of them stopped the said scandal from happening or the will to report the same to relevant authorities.[24]

Further Enron and other trading companies were held accountable for manipulating the electricity market in California, actions that resulted in huge rises of the price of electricity, that caused enormous financial losses that brought one of California public utility to its collapse.[25] Further Enron used to cook its books for purposes of tax gimmicks that generated income for purposes of reporting to investors and at the same time created losses for tax purposes.[26]

Further, the foregoing scandals forced Enron into bankruptcy that caused great financial loss by eroding down shareholders value and many employees pensions that had been invested into the company.[27]

The Enron scandal had a wide net which saw a number of banks taken to task for assisting and or facilitating the scandals. Citigroup made $ 188million out of Enron related transactions and as a result Citigroup suffered a loss of $ 11 billion in value.[28] JP Morgan Chase suffered a loss of $ 322 in 2001as a result of assisting Enron and Argentina. [29] That from the foregoing in July 2003 JP Morgan and Citigroup paid fines totaling $ 255 million to SEC for assisting Enron in its wrongdoing and further JP Morgan and Citigroup paid $ 162.5 million and $50 million to the state of New York to avoid criminal prosecution. [30]

Further auditing companies were not spared of the roles they played in facilitating the Enron scandals. Arthur Anderson & Co, an audit firm that gave unqualified opinions on Enron's annual statement reports, like 2001 statement filed at SEC that stated that Enron's accounting and financial disclosures were right in all material aspects and made $ 52 million from Enron. Enron offices in Huston had destroyed large amounts of Enron's documents and deleted computer files and emails, Oregon and Chicago offices followed the line in attempts to conceal records.[31]

The foregoing Enron scandals was soon followed by other major corporate scandals in America including but not limited to WorldCom that involved massive accounting malpractices that improperly inflated earnings by $ 11 Billion, this scandal was later labeled as the largest bankruptcy record in the World.[32] There were a number of more financial scandals like Adelphi, communications, Imclone and Tyco.

That apart from massive fines that corporations paid, over 30 officers were charged with crimes related to Enron scandal, including more than 20 former Enron executives, including Michael Kopper who for leniency of jail sentence agreed to testify against former Enron executives [33]however he too was sent to jail.


Europe was not spared of the said corporate scandals as the Enron scandal spread. The Royal Bank of Scotland was charged by the Enron Bankruptcy examiner of having actual knowledge of the wrongdoings of Enron and for lending substantial assistance to that conduct through and finance by the bank.[34]Barclays bank was also trapped in the web, charged by the bankruptcy examiner, along with Citigroup, Deustch Bank, JP Morgan and the Bank of America for acting as placement agents for Euro 1.0 billion of Enron's zero coupon convertible bonds in 2001. A class action suit was brought up against Barclays bank for financial irregularities related to backing up Enron's commercial paper debt. It was further charged for financing several of Enron's questionable transactions that concealed debt off Enron's balance sheet and increased its cash flow.[35]

Detailed discussions of the scandals might need thousands of pages, but for purposes of demonstration in this limited paper the foregoing suffices.

Pinto and Branson go further and point out that one major difference in the scandals of 1929 and 2001 is that the 2001affected many widely dispersed shareholders who had invested personal savings and/or retirement benefits. The foregoing raised public outcry and raised political temperature that forced politicians into action.[36] In response thereto, United States of America Congress in a bipartisan support enacted the Sarbanes-Oxley Act of 2002, hereinafter referred to as ‘Sarbanes-Oxley'.[37]


That as a result of these corporate scandals, especial the WorldCom scandal, pressure increased for more legislation. The said pressure resulted into the enactment of the Sarbanes-Oxley Corporate Reform Act of 2002. It was signed into law on July, 30th, 2002 after having passed through Congress. The act created a public organization, the Public Accounting Oversight Board (PCAOB). The act further required all chief executives and chief financial officers of publicly traded companies to certify the accuracy of financial reports knowingly false statements carried jail sentences of up to 20 years and penalties of up to $ 5 million. SEC was authorized to seek freezing orders for extraordinary payments made to executives at companies with accounting problems. The law further provided for protection of whistleblowers. Documents retention period was increased to five years with 20 years jail term for violation. The act further barred corporations from making personal loans to managers.[38]

However, since then the corporate world has been crying of losses they incur in the process of compliance to the requirements under Sarbanes-Oxley while corporate scandals continued to surface thereafter.[39]

The foregoing scandals raised issues among others as to whether there were sufficient laws and regulations protecting among others shareholders of public listed corporations in America and by analogy in other places of the World.

Despite the Sarbanes-Oxley and European Union Regulations the world witnessed yet another wave of corporate scandals between 2005-2009, an era involving major banks in Europe and America.


Jerry Markham laments that despite several regulatory reforms introduced after the happening of major corporate scandals, more scandals were witnessed. He states the 1929 market crash resulted in a new deal and the adoption of further federal security laws and regulations on the concept that forced disclosures would prevent corporate misconduct. That attempt proved to be an empty shell.[40]

The author goes and argues that for a complex economy like that of the United States of America, needs more that haphazard and costly approach of legislation and regulations. He argues that a cost benefit analysis should be conducted before passing any such legislation and regulations initiated by law Professors who have little or no experience in operations and management of businesses. The foregoing he complains is still the norm despite the never ending cycle of reform, failure, and then more regulations, Sarbanes -Oxley being the most recent failure.[41]

The pump and dump schemes of the 1990s continued to surface after passing of the Sarbanes-Oxley. Such scandals included Great White Marine & Recreation in which $10 million scheme was witnessed. Ponzi schemes like Global Express Capital Real Estate Investment ILLC ran a $48 million Ponzi scheme and the New York stock Exchange scandal over the $187.5 million retirement package given to its executive Richard Grasso and other market abuses that forced SEC to charge and fine NYSE. [42]All these scandals were witnessed after Sarbanes -Oxley

On the other hand Pinto and Branson in support of the legislatives moves like the Sarbanes-Oxley argue that the corporate scandals discussed above needed federal regulatory response such as those introduced by the Act including addition of criminal remedies to enforce fiduciary duties and the act intended to fill the gap created by failure of the market mechanism to protect investors. However Pinto and Branson are in agreement with Markham that the effectiveness of the laws, Sarbanes-Oxley inclusive, remains unclear and further reforms might be necessary.[43]

In my opinion despite the recurrence of corporate scandals post Sarbanes -Oxley as argued by Jerry Markham, those reforms are aimed at preventing corporate scandals, the reforms cannot be expected to be water tight as unscrupulous managers will always find ways to go round the regulations, but one thing for sure is that such managers know very well that they will be caught, they will be shamed, charged, fined and jailed. The foregoing criminal and civil penalties imposed by the reforms have to a great extent minimized the scandals and sent a clear message that no manager will get away by commissions and/or omissions detrimental to shareholders, public, Governments and society at large. Thus the said regulations were necessary as doing nothing was not and will never be an option.




Formation and registration of companies, including public companies in Tanzania is regulated by the Companies Act 2002.[44] Registration or incorporation of new companies is provided under part II of the said Act, by the presentation to the Registrar of companies, a Memorandum and Articles of Association under section 14. However under section 14(5) of the Companies Act, the Registrar shall not register an open-ended investment company unless the memorandum and articles of association have previous been approved by the Tanzania Capital Markets Development Authority.

That upon registration, the Registrar is obliged to certify under his hand that the company is incorporated. The Registrar shall also state whether the incorporated company is limited, in case the company is public, he shall state that the company is public[45] and shall thereafter issue a certificate of incorporation which shall be conclusive evidence that all registration requirements under the Act have been fulfilled.[46]

Further, the law permits a private company to change its status to a public company upon fulfilling requirements listed thereunder.[47]


That as pointed out before, the incorporation of companies in Tanzania, inclusive of public companies that might later be listed, is subject to and involves not only the company registry, the Capital Markets Regulatory Authority is involved in case the intended company to be registered is an open ended investments company.

That as for public companies the law prescribes conditions for the making of an offer document subject to regulations made by the Tanzanian Capital Markets Regulatory Authority.[48]

Tanzania Capital Markets and Securities Regulatory Authority

The Tanzania Capital Markets and Securities (CMSA), hereinafter referred to as the Authority, is a fully fledged Government Agency established to promote and regulate securities business within the United Republic of Tanzania.[49] It is a creature of statute, the Capital Markets and Securities Act, 1994 [as amended by Act No. 4 of 1997]. The Act is supplemented by regulations in line with its regulatory functions that include:

* To register, license, authorize and/or regulate stock exchanges, investment advisers, securities dealers, their agents and/or representatives.

* To be a watchdog over securities, to guarantee orderly, fair and equitable dealings in securities.

* To control and supervise activities of market stakeholders for the purpose of maintaining proper standards of conduct and professionalism in the securities sector.

* To formulate principles for the guidance of the securities sector.

* To determine the minimum required capital for a license holder, depending on the size of operations and risk involved at the material time

* To follow up on the solvency of license holders and take necessary steps to protect the interests of customers where the solvency of any such licence holder is in doubt.

* To protect the integrity of the securities market against any abuses arising from the practice of insider trading

* To review, approve and regulate takeovers, mergers, acquisitions and all other forms of corporate business combinations.[50]

That for a company registered at the company registry to qualify as a listed company it has to be a public company as defined under the Tanzania Capital Markets and Securities Act. Under the said act a public company is defined as;

“…a company whose articles of association do not restrict the right to transfer its shares, do not limit the number of its Members and do not prohibit any invitation to the public to subscribe for any shares or debentures of the company.”[51]

That from the foregoing for a company to trade its securities it has to be listed at a stock market or stock exchange. The establishment of a stock market or a stock exchange is provided for under section 25 of The Capital Markets and Securities Act which provides inter-alia;

“that no person shall establish or assist in establishing or maintain or hold himself out as providing or maintaining a stock market unless it is a stock market or a stock exchange”.

Under the said Act “stock exchange” is defined as any body corporate which has been approved by the Authority under section 26 and a stock market is defined as a market, exchange or other place, at which, or a facility by means of which, securities are regularly offered for sale, purchase or exchange.[52]

That under section 26 the Authority has the sole mandate to approve a body corporate to operate as a stock exchange upon that body making an application and fulfillment of criteria provided under the said law.[53]

That further under the law, a stock exchange is obligated to provide assistance to the Authority as well as exercise disciplinary powers over its members on behalf of the Authority, subject to review of such powers by the Authority.[54] However the Authority retains powers to issue directions to a stock exchange as and when it deems fit.[55]

The Dar es Salaam Stock Exchange

That since the law came into force, only one stock exchange has been approved, that is the Dar es Salaam Stock Exchange, hereinafter referred to as the DSE. The Dar es Salaam Stock Exchange (DSE) was incorporated in 1996 as a company limited by guarantee without a share capital. It became operational in April, 1998. The DSE is a non-profit making company created to facilitate the Government implementation of financial reforms and to encourage wider share ownership of privatized and all other companies in Tanzania.[56]

Listed companies at the Dar es Salaam Stock Exchange based on data from its website,, as visited on 15th April 2010 are as hereunder;


































































To be qualified for listing as members, the said companies had to comply with the basic listing rules made by the Dar es Salaam Stock Exchange.[57]

The basic functions of the Dar es Salaam Stock Exchange fits well within the ambit of corporate governance in that it provide a market for listed securities by creating conducive environment enabling companies wishing to join to do so and those wishing to leave as well.[58]

The DSE further facilitates price transparency as the price mechanism ensures buyers and sellers can trade at prices determined by the market. It further facilitates transparency vide through disclosure requirements on all price sensitive information so that investors make informed decisions. Disclosure is at two levels, first at the initial offering stage when companies have to fulfill elaborate listing requirements relating to offer documents and secondly, through continuous listing obligations, thus DSE also acts as an information hub.[59]

DSE further facilitates privatization of formerly state owned public corporations and spreads ownership in facilitating privatization of corporations whose shares have been sold by the government through DSE. It further facilitates the pulling together of capital for enterprises by enabling companies to sell new shares/bonds at better prices which lowers the costs of capital and improves their chances of increasing operating profits. DSE further facilitates the creation of wealth as shares offer investors actual return as they out-perform inflation on average. Shares listed at DSE have performed very well above inflation rate when compared to bank deposits due to the fact that the said shares have been increasing in value with time. Further DSE contributes to the cultural transformation of Tanzania by enabling Tanzanians learn on stock market dynamics and operations as well as enlightening Tanzanians and other interested parties of the benefits associated with investing in listed companies.[60]



The central idea of corporate finance is that the separation between ownership and control creates a conflict of interests within companies, called the agency problem. Thus a set of laws and regulations protecting the rights of non controlling shareholders is often referred to as shareholder protection. The laws and regulations protecting non controlling shareholder differs from country to another due to a number of reasons ranging from stage of production, ideology or cultural, political conflicts between different constituencies and political economy.[61]

The key assumption of Marco Pagano and Paulo Volpine, to which I agree, is that corporate profits are not entirely verifiable by non controlling shareholders and can therefore be appropriated by managers and workers. This extends the customary notion of private benefits of control, within the corporate jargon are resources appropriated by managers at expense of non controlling shareholders. These benefits do not only accrue to managers or controlling shareholders, but to all company insiders, including workers as well as service providers.[62] Thus from the foregoing the need to have laws and , regulations and systems in place to protect shareholders is inevitable.

In Tanzania as part of the commercial world there are laws and regulations in place aimed at protecting shareholders. That apart from the said laws and Regulations Tanzania also has guidelines on corporate governance by Public Listed Companies.[63] This chapter and following chapters will attempt to see as to whether the said laws and regulations provide adequate shareholder protection in Tanzania. In so doing the OECD Principles on shareholder protection will be used as minimum acceptable international standards of shareholder protection mechanisms, as the OECD member countries include EU member states and the USA.


4.2.1 Under the OECD basic shareholder rights, which I refer to as protection mechanisms, include the rights to: secure methods of ownership and registration, conveyance or transfer of shares, obtain relevant, timely and regular material information on the corporation , participate and vote in shareholders meetings, elect and remove members of the board and share in the dividends of the corporation.[64] The foregoing is also replicate in the Tanzania guidelines.[65]

In Tanzania the right to secure methods of registration is provided for under the Companies Act, in that two or more persons may form and incorporate a company either private or public.[66] Under the same act shares in companies, including listed companies are transferable in a manner laid down in the articles of a company. Further offer documents concerning public companies are strictly and in a detailed way guided under the same law.[67]

Shareholders rights to obtain relevant and material information of the corporation on timely and regular basis in Tanzania is as provided under the Companies Act whereby a company must hold an initial general meeting within 18 months from incorporation, hold at least one general meeting annual and any extra ordinary general meeting as need be. In the said meetings the shareholders shall be availed with annual accounts, directors' report, auditors' report, proposal for appointment of auditors, proposals for the appointment and resignation of directors.[68] Any such meeting must have been presided by at least a minimum 21 days notice to shareholders.[69]That further under the Tanzania guidelines, a company has an extra duty to supply to shareholders half annual and quarterly results as a matter of best practice.[70]

Powers to election and/or removal directors vest with the general meeting upon voting and by resolution.[71] The right of shareholders to share profits of the corporation is provided for under the law upon the general meeting declaring dividends and pay the same provided that the company's ability to discharge its liabilities as they fall due, and the realizable value of the company's assets will not be less than the amount of its liabilities.[72]

4.2.2 Another shareholder right under OECD is that of participation in and to be sufficiently informed on, decisions concerning material corporate changes such as amendments to the statutes, or articles of incorporation or similar governing documents of the company, authorization of additional shares and extraordinary transactions, including transfer of all or substantially assets, that has the potential of resulting into the sale of the company.[73]

In Tanzania shareholders right to participate and to be informed in change of governing documents of the company is provided for under section 13 of the Companies Act in that such changes must be by a special resolution following members meeting. The foregoing is also replicated in the Tanzanian guidelines.[74]

That as for any extraordinary transaction including transfer of assets that might result in sale is regulated by the Capital Markets and Securities (Substantial Acquisitions, Takeovers and Mergers) Regulations 2006. The regulations are made under section 148(1) of the Capital Markets and Securities Act.

The objectives of the regulation include[75]:

(a) Fair treatment of shareholders who stand to be affected by acquisitions, takeovers and merger transactions resulting in different business combinations.

(b) Transparency and efficient system of substantial acquisition of shares, takeovers and mergers of public and listed companies and matters arising thereof or connection therewith.

(c) Timely and adequate disclosure of information to enable shareholders to make informed decision as to the merits or otherwise of an offer.

(d) A fair and informed market in shares of corporations affected by substantial acquisitions, takeovers and merger transactions.

That under the said regulations, shareholders right to information on any offer, or where an offer is in contemplation is laid down in article 1 of the 1st schedule and it is mandatory that such information is furnished to all shareholders. Further, under article 5 of the 1st schedule, it is mandatory that shareholders be given sufficient information, advise and time to reach an informed decision on an offer and relevant information shall not be withheld. It is further provided under article 6 therein that all persons concerned with acquisitions, takeovers and mergers shall make full and prompt disclosure of all relevant information and take every precaution to avoid the creation of or continuance of an uninformed market. Further parties must take care that statements are not made which mislead shareholders and the market.

4.2.3 Another protection mechanism per OECD is that shareholders should participate effectively and vote in general and other shareholders meetings and should be informed of the rules, including voting procedures that govern such meetings.[76] The Tanzania guidelines state that the board should ensure that shareholders' right of participation at general meetings are protected by availing to them sufficient information on voting procedures, opportunity to put questions to the management, right to place items on the agenda, opportunity to vote in absentia and opportunity to consider the costs and benefits of their votes.[77]

In Tanzania member's right to vote in members meetings is provided for under section 136 of the Tanzania Companies Act. The Act further recognizes members' right to vote by proxy. The law further recognizes representative of institutional shareholders in company meetings if such a person has been chosen to represent such institutional shareholder by its directors.[78]

Shareholders rights to make views known on remuneration policies for board members and executives is also provided for. The Companies Act imposes a total ban on directors taking loans from the company[79]and where any such funds are taken by a director to meet expenditure incurred or to be incurred by him for purposes of the company or for purposes of enabling him perform functions of the company the same must have been authorized by the general meeting or approved by the next general meeting.[80]

The law further makes it unlawful for a company to make any payments to a director by way of compensation for loss of office, or as consideration for or in connection with his retirement from office without the proposed payment being disclosed to members of the company and the proposal being approved by the company in the general meeting.[81]The law extends the said ban to any transfer of assets of the company to a director.[82]

The law further imposes an obligation to lay before the general meeting any accounts showing amounts of each director's emoluments, amounts of each directors or past director's pensions, amount of any compensation payable to any director or past director in respect of lose of office in relation to the company of any of its subsidiary.[83] The Tanzania guideline insists on the foregoing and imposes the duty for listed companies to establish a formal and transparent procedure for remuneration of directors which should be with the approval of the shareholders. [84]The law further extends the above requirements to other officers of the company apart from directors.[85]

4.2.4: Another OECD protection mechanism calls for capital structures and arrangements that enable shareholders to obtain a degree of control disproportionate to their equity ownership should be disclosed.

In Tanzania mandatory disclosure of members holding five percent or more shares or voting rights in any listed company is provided for. Such a shareholder is obligated to disclose such holding to the company and to the stock exchange. The provision further obligates the company to disclose to the authority names and addresses of promoters and persons having control of the company, the number and percentage of shares or voting rights held by each such person.[86]

That the regulations further obligates any acquirer who acquire shares or voting rights, when taken together with shares or voting rights, if any held by him, thus entitling him to five percent of more of shares or voting rights in a company, to disclose to the company. Further upon acquiring between five and twenty percent shares or voting rights such acquirer is obligated to disclose the aggregate of his shareholding and voting rights before and after acquisition to the company within 3 working days from the date of the acquisition.[87]

The regulations further impose a duty on the company whose shares or voting rights have been acquired as hereinabove to disclose such acquisition to the authority and the stock exchange the aggregate number of shares held by each such person within seven days of the receipt of such information.[88]The regulations further impose the duty of continuous disclosure to the company, the authority and the stock exchange. Further where two or more persons acting in concert acquire shares or voting rights over such shares in a company, their holdings and acquisitions shall be aggregated and treated as holding or acquisition by one person for purposes of the regulations, and each of them acting in such manner shall ensure the obligations under the regulations are fulfilled.[89]

4.2.5 Another OECD protection mechanism provides for corporate control should be allowed to function in an efficient and transparent manner. This mechanism will be discussed under the separation of management from control in another chapter.

4.2.6 Another OECD protection mechanism calls for the exercise of ownership rights by all shareholders, including institutional investors, that such rights should be facilitated. Further those institutional shareholders, should be allowed to consult with each other on issues concerning their basic shareholder rights as defined in the principles subject to exceptions to prevent abuse.

In Tanzania under the guidelines to the regulations it is provided that institutional investors are encouraged to make direct contact with the company's senior management and board members to discuss performance and corporate governance matters as well as vote during the annual general meetings of the company. Further companies are guided to organize regular investor briefings when half-yearly and annual results are declared to explain performance and interact with investors.[90]

Further the said guidelines require companies to establish and use company's website by shareholders to ease communication and interaction. The guidelines further calls for the establishment of shareholders' association as a means of promoting dialogue.[91]




Under traditional corporate theory control of a corporation is vested in the board of directors elected by shareholders. In turn the board chooses officers to run the business, thus the basic relationship is between directors and officers on the one hand and shareholders on the other hand. Possible mismanagement or self dealing by those in control at the detriment of the shareholders has always been the focus of corporate governance.[92]

The roles of managers become more crucial in public traded or listed companies due to numerous widely dispersed shareholders who trade their stocks in stock markets. Apart from providing liquidity to stock markets corporate governance also aims to protect shareholders. This is attained by having a set of rules such as on disclosure, fair trading practices, fraud, market manipulation and insider trading.[93]

However the separation of management from control is beneficial when managers operate the business in ways that benefits the shareholders. If managers unfairly self deal or mismanage the business, the shareholders may be exposed to losses or insufficient gain. Much of corporate law in Europe, America and Tanzania aims at having monitoring devices to protect shareholders from losses resulting from the separation of ownership from control.[94]

In Tanzania the role of management in incorporation, inclusive public or listed companies is vested in the board of directors and regulated under the Companies Act and more regulations for the later under the Capital Markets and Securities Act.

Under the Tanzania Companies Act, directors of a company have powers necessary for managing, and for directing and supervising the management of, the business and affairs of a company.[95]

In Delaware and Europe the foregoing has been achieved by a combination of market forces, legislation and case law. In Europe there are several regulations aimed at protecting shareholders from mismanagement.

However the management role is not a blank cheque, as in so doing a director of the company must act honestly and in good faith and in what a director believes to be in the best interests of the company as a whole[96]and for proper purpose.[97]

Tanzania has guidelines that put in place extra responsibilities on boards of public listed companies under special guidelines that have the force of law.[98] The guidelines call for an effective board and board committees accountable to shareholders. The board should be sufficiently remunerated to run the company effectively. Such remuneration should be approved by shareholders. Further the board should be supplied with relevant, accurate and timely information to discharge its duties and it should annual disclose its affairs, in the annual report, in remuneration policies as incentives to the shareholders.[99]

The guidelines further provide for a balanced board for listed companies. The balance should be between executive and non executive directors. The non executive directors should on minimum compose one third of the whole single tear board and should be of diverse skills or expertise in order to ensure that no individual or small group of individuals can dominate boards' decision-making process. Further the guidelines provide that appointment of board members should be formal and transparent. Potential appointees should disclose any potential areas of conflict that may undermine their position or service as directors before appointments.[100]

The regulations further obligates for a clear separation of the role of a chairman from that of the chief executive officer as a device to provide necessary checks and balances such that no one individual has unaffected power of decision-making. Where such roles are combined a rational for the same should be disclosed and approved by shareholders.[101]

The guideline further imposes upon the single tier board the role to foster long term business of the corporation consistent with their fiduciary responsibility to shareholders. Board members should commit sufficient time to their functions and act on a fully informed basis, while treating all shareholders fairly.[102]

The guidelines further provide for the boards' responsibility to promote and protect the rights of shareholders, including:

i) Fair and equitable treatment of all shareholders, minority shareholders inclusive.

ii) Board should provide all shareholders relevant information on company's performance through availing of regular annual reports, accounts, half yearly and quarterly reports.

iii) Board should avail vide secured method of transfer and registration of ownership as well as a certificates or such other statement evidencing such ownership to all shareholders.

iv) Board should also avail shareholders the right to participate and vote in all shareholder meetings including election of directors.

v) Board should be available to take questions and give clarifications on company's performance to shareholders at all times.

vi) All shareholders should be entitled to dividends and other rights for bonuses, shares, script, and dividend or rights issue, as applicable and in proportion to its share holding in the company's share capital.

Other relevant board roles and duties that are related to shareholders rights have been discussed in chapter 4 hereinbefore. The above roles and duties are applicable in the normal cause of a company's business. However there are extra rules that come to play during the process of any acquisition, merger or takeover of the company. Such duties are discussed here after.


General concept

Mergers and tender offers have no distinct definition, in general mergers refer to negotiated deals that meet certain technical and

legal requirements. Tender offer usual means one firm or person is making an offer directly to the shareholders to tender, sell their shares at a specific price. Mergers may involve, in most cases, dealing between friendly parties while takeover may entail a friendly or a hostile approach.[103]Thus in this sense mergers and tender offers are two distinct forms of takeovers.[104]

That within the European Union, mergers are provided for under the 3rd Directive[105]while takeovers are provided for under the Takeover Directive (Takeover Bids).[106]


In Tanzania the conduct of all persons engaged in substantial acquisitions, takeovers and merger transactions are guided by general principles in the 1st schedule of the Capital Markets and Securities Act (Substantial Acquisitions Takeovers and Mergers).[107]

Salient futures of the said principles include equal treatment of all shareholders and shareholders of the same class and where control of a company is acquired or consolidated, a general offer to all shareholders is a requirement.[108]Further where an offer is in contemplation, neither an offeror nor offeree company nor their advisers may avail information to some shareholders that is not available to all other shareholders at the same time and manner.

Under the principles, shareholders shall be given sufficient information, advice and time to reach an informed decision, such information shall be prepared with the highest degree of care, responsibility and accuracy and shall be disclosed promptly as not to mislead shareholders or the market.[109] Oppression of minority shareholders and non controlling shareholders is out rightly prohibited.[110]

Further under the principles directors should act for the interests of shareholders as a whole and not to their personal interests or those derived from personal and family relationships, and the shareholders their representatives[111]and the board of the offeree shall seek independent advise in the interests of the company from outside and independent advisors.[112]

The principles further prohibit the board of the offeree, where they have reason to believe a bonafide offer might be eminent or where a bonafide offer has been relayed, from taking any action in relation to the affairs of the company without the approval of the shareholders at a general meeting.[113]The foregoing is meant to guarantee that the board of the offeree does not frustrate the offer. Further the principles provide for uniformity of such offer to all shareholders of the same class of shares.[114]

The aim of such principles is to make sure that shareholders of a public listed company are treated equal and get a fair market value of their shares in the event of a merger or takeover.


Public listed public companies, as well as any other company, must hold a general meeting at least once a year. Under the Companies Act every company must hold an initial meeting within eighteen months from the date of incorporation and at least one general meeting not more that fifteen months from the previous general meeting.[115] Further on a members demand, notwithstanding anything in its articles, directors of a company shall call an extra ordinary general meeting as long as that member holds not less than a tenth of the paid up share capital and where there is no share capital; members should represent not less one tenth of the voting rights of all members having at the said date a right to vote at the general meeting.[116]

Under the Companies Act roles of the general meeting include:

(a) Considering annual accounts

(b) Considering directors' report

(c) Considering auditor's report

(d) Appointing auditors and other service providers for the period till the next general meeting at which accounts are laid

(e) The electing or confirming any directors retiring and seeking re-election in accordance with the requirements in the articles of association.[117]

That apart from the requirements under the Companies Act, public listed companies have to adhere to the guidelines made under section 10(d) of the Capital Markets and Securities Act. The said requirements have been discussed at length in the chapter 4 of this dissertation.


Professor Barle and Means, in their book THE MODERN CORPORATION AND PRIVATE PROPERTY (1932)[118] found that may public traded companies had a dispersion of ownership in that not one shareholder owned a large number of shares which meant separation of ownership from control. Ownership usually implies control, but without a concentration of ownership in shares, managers who control the corporation, information and the voting mechanisms are in defacto control of the corporation with little supervision by the shareholders. Because of the vacuum created by separation of ownership from control, management of many corporations tend to become self perpetuating.[119]

The above authors go further and state that the separation of ownership from control is beneficial when managers serve as specialists who use their knowledge to boost the value of the firm at the benefit of shareholders. On the other hand if the corporation is mismanaged shareholders will suffer loss. Corporate law focuses on balancing the costs and benefits of the separation and use different monitoring tools to protect shareholders from losses that might be created by the separation.[120]

That in the case of Tanzania such monitoring devices, referred to as shareholders protection mechanisms have been provided by the law and guidelines discussed in chapter 4 of this dissertation. Further the said devices aim at striking a balance between separation of control from ownership.




That as observed in chapters 3 and 4 Tanzania has in place modern shareholders protection mechanisms that at least meet the minimum standards set out under the OECD principles on corporate governance. The OECD principles as observed earlier have been adopted as minimum standards of corporate governance in Delaware as well as in Europe and the rest of the world.

The foregoing can be gathered from analyzing some of the standards applicable in regard to protection of shareholders of public listed companies within the European Union at different stages from formation, operation period of a corporation as well as during takeovers or merger of a corporation, if any.

However the social political economy set up of Tanzania, that differs from the setup in Europe will also be looked at as well as the size of the economy. The economies of Europe and Delaware are massive, likewise the challenges on shareholder protections issues are complex thus demanding complex and rapid response. That as seen in chapter 1 of this dissertation, that despite of modern shareholder protection mechanism, corporate scandals keep cropping up under sophisticated arrangements. A typical example is the latest bank scandal that is making headlines in America involving Goldman Sachs' in which the bank is accused of marketing some investments that the banks' own staff dismissed as junk.[121]


Since independence Tanzanian politicians decided to pursue socialist policies based on the then USSR and China policies. The policies included nationalization of major means of production as well as economy. The foregoing witnessed the Tanzanian government taking the sole role in managing nationalized corporations. This period saw the mushrooming of state owned corporations known as parastatal organizations.

However the said policies proved failure in the corporate world and most parastatal corporations became loss making entities and a burden to Tanzanian citizens that they were meant to serve. Reasons for such failures have been discussed in chapter 1 of this dissertation. In the early 1980s, Tanzania made an about turn and switched from socialist economy to capitalist economy with insistence on open economy in which private capital took center stage. This era witnessed the privatization of state owned corporations that went hand in glove with overhaul of institutional and legal setup to carter for an open and competitive economy. The foregoing witnessed the corporation or company taking center stage in the Tanzania economy setup.

That from the foregoing, late entry of Tanzania into the corporate world might have been a blessing in disguise in that Tanzania had to formulate its laws and institutions based on already advanced corporate models like the OECD, Delaware and the European Union.


That within the European Union types of companies, their formation and registration is provided for under the 1st Directive.[122] The Directive provides for types of companies, disclosure requirements from constitution to the liquidation process under article 1-a through e. Further the directive has elaborate provisions as to registration under the same article. Further the directive provides instances for nullification of companies. Comparatively Tanzania has such elaborate provisions in the Companies Act as observed in chapter 3 of this dissertation. The Tanzanian Companies Act is a recent piece of Legislation[123] that repealed and replaced the Companies Ordinance. The Companies Act is modeled on the United Kingdom Companies Act.

Thus on types of companies, formation, registration and disclosure and repository requirements Tanzania is at par with the rest of the corporate World specifically with Europe, Delaware and other OECD member states.


That from the said changes and in order to attract capital to the private sector, Tanzania apart from having a modern company law, embarked on the process of and enacted the Capital Markets and Securities Act, Cap 79 of the Laws , Revised Edition. The Law came into force on 1st October 1994. The Act applies to Tanzania mainland as well as Tanzania Zanzibar.[124]

The aims of the Capital Markets and Securities Act, includes the establishments of the Capital Markets and Securities Authority as a body corporate.[125] The functions and powers of the authority are laid down under sections 10 and 11 of the Act. The said functions and powers have been discussed in details in chapter 3 of this dissertation.


Part III of the Capital Markets and Securities Act, provides for the establishment of a stock market of stock exchange and of approval in the form of a corporate body.[126] To date only one stock exchange has been approved and functioning, that is the Dar es Salaam Stock Exchange. The Dar es Salaam Stock Exchange has been discussed in detail in chapter 3 of this dissertation.

The regulation of public trading in securities in Tanzania is at par with those of Delaware and Europe. There are a wide range of regulations, made under powers derived from the Capital Markets and Securities Act, that aim being to minimize, control and penalize actions that might be detrimental to shareholders interests in public listed companies. The said regulations have been based on the OECD model and EU Directives like the Second Directive on protection of Capital, the Third Directive on legal merger of public limited liability companies, the Fourth Directive on annual accounts, the Eight Directive on audits, the Tenth Directive on cross border mergers, the Takeovers Directive (takeover bids), the Shareholders Directive, the EC Recommendations on Independent Directors, the EC Recommendations on Directors Remuneration, the Stock Exchange Admission Directive, the Financial Markets Directive and the Market Abuse Directive[127], to mention but some.

In Tanzania there are likewise a wide range of regulations aimed at regulating public listed companies for the main purpose of protecting shareholders. The said regulations in summary as per capital Markets and Securities Authority include[128]:

(a)Capital Markets and Securities (Foreign Companies Public Offers Eligibility and Cross Listing Requirements) Regulations, 2003. : The Regulations are known as the Capital Markets and Securities (Foreign Companies Public Offers Eligibility and Disclosure Requirements) Regulations, 2003. The regulation come into effect on 21st May,2003

b)Capital Markets and Securities (Foreign Companies Public Offers Eligibility and Cross Listing Requirements) Regulations, 2003 [amended in 2005]: The Regulations carter for capital market participation by foreign issuers of securities, in regulates the eligibility criteria and disclosure requirements to make public offers or cross listing possible at the DSE.

c)Capital Markets and Securities (Foreign Investors) Regulations, 2003: The Regulations provide for the limit of aggregate securities to be held by foreign investors and also prescribe the basis and conditions which foreign investors will participate at the DSE, the means by which the Authority can monitor observance of the laid down limits by the Dar es Salaam Stock Exchange.

d)Capital Markets and Securities (The Capitalization and Rights Issue) Regulations, 2000: The Regulations lays down disclosure requirements that an issuer is obliged to adhere to during capitalization by way of rights issue.

e)Capital Markets and Securities (Advertisements) Regulations, 1997: The Regulations provides for the vetting of securities advertisements by the Authority and elaborate conditions that have to be met by advertisers in the securities business. Such conditions include the requirement for the content and presentation of the advertisement. The advertisement should not be done unless it is fair, or it should not contain unfair or misleading statements and should not exaggerate the success or performance of the company.

f)Capital Markets and Securities (Accounting and Financial Requirements) Regulations, 1997: The Regulations provide for the proper keeping of accounting records, preparation of the annual financial statements as well of handling of customers money in a lawful manner. The Regulations were amended in 2003 so as to include provisions for penalties in case of non-compliance on the part of dealers.

g)Capital Markets and Securities (Prospectus Requirements) Regulations, 1997: The Regulations are supplementary to the general provisions on public issues of securities contained in the Capital Markets and Securities Act. The prospectus is an important document required where a public offer is being made. The items to be included in the prospectus are enumerated in the Regulations. The foregoing include what is to be stated in the first page of the prospectus. Others include information on the right of holders, information on bankers, capital of the issuer, debt of the issuer, any material contracts, the use of the proceeds from the issue and such related matters.

h)Capital Markets and Securities (Licensing) Regulations, 1996 : The Regulations elaborate procedures to be complied with by the applicants for licensing. Such applicants include dealers, investment advisers or their representatives. Prescribed application form formats are provided for in the Regulations. General conditions relating to licenses once obtained are also elaborated, including the provision that the license shall be personal to the applicant and the requirement for a licensee to inform the Authority of any relevant alterations, in writing and timely.

i)Capital Markets and Securities (Establishment of Stock Exchange) Regulations, 1996: The Regulations provide for procedures for the establishment of a Stock Exchange. Applications for establishment of a Stock Exchange are to be made by a corporate body to the Authority, the Authority may grant approval subject to certain conditions, and will continue to regulate the stock exchange once it is approved.

j)Capital Markets and Securities (Registers of Interests in Securities) Regulations, 1996: Certain market players are required by the Act to maintain a register in the prescribed form of the securities in which he / she has an interest. The registers of interest in securities enable transactions to be easily traceable by the Authority and other interested parties thus enhancing transparency in securities transactions.

k)Capital Markets and Securities Authority Enforcement Guidelines, 2004: The Guidelines set out the practices and procedures to be adhered by the CMSA when conducting investigations or inquiries where there is a potential violation of the law by market participants or otherwise.

l)Capital Markets and Securities (Corporate Governance) Guidelines, 2002: These are the most relevant and important guidelines in shareholder protection. The Guidelines aim at improving and strengthening corporate governance practices by issuers of securities through the capital markets. They further target at promoting standards of self-regulation aiming towards raising the level of governance in line with international standards.

The Guidelines have been issued based on the importance role that good governance has in corporate performance, capital formation and maximization of shareholders value to protect investors' rights.

The Guidelines apply to public listed companies and any other issuers of securities through the capital markets including issuers of debt instruments.

m)Capital Markets and Securities (Custodian Securities) Regulations, 2006: The regulations may be cited as the Capital Markets and Securities (Custodian of Securities) Regulations, 2006.


From the above analysis it, follows that it is indeed true that Tanzania's late entrance into the corporate world, on a positive note, was a blessing in disguise in that it was able to adopt and did formulate its legislation and institutional setup using minimum standards based on tested models like the OECD, Delaware Law and European Union Regulations.

However the economy of Tanzania is too small as compared to Delaware and Europe. The small size of the Tanzania economy is reflected by the fact that only 15 public companies have been listed and trading at the one and only Dar e s Salaam stock Exchange. The only minor case has been the intervention by the regulatory authority on the case of a company known as NICOL on minor procedural irregularities.

Thus the small number of listed companies have not yet posed challenges testing the laws and regulations. Likewise the Institutions have also not been tested as to their capacity and capabilities to sense, let alone prevent and deal with any corporate scandal as of yet

However Tanzania has been amending its laws and regulations on protection of shareholders from lessons learnt from advanced economies in response to new challenges. That as it has been observed in chapters 1 and 2 of this dissertation, laws and regulations in developed economies, Europe and Delaware have always been amended or new ones enacted in response to or in anticipation of new corporate challenges. That of late there is a debate in United States Senate on reforming financial regulations to bring accountability to Wall Street so as not to allow another financial crisis as the recent one that triggered the global financial crisis.[129]


Of late Tanzania has been shifting its policies towards mandatory listing on some sectors of the economy, namely mobile telecommunications and mining.

The Electronic and Postal Communications Act enacted in April 2010 provides for mandatory listing of mobile telephone companies. Under the law all mobile telephone companies in Tanzania have to be listed at the Dar es Salaam Stock Exchange within three years from the date the law is enacted. The president assented to the law in April 2010. The aim of the said law is to give the government access to accounts of the companies and collect revenues that the companies are accused of concealing.[130]

However the abovementioned law has been criticized vigorously by the companies as well as the Dar es Salaam Stock Exchange in that listing of companies at any stock exchange should be voluntary as doing otherwise amounts to interference with property rights. The Dar es Salaam Stock Exchange rightly argues that decision on listing and when to list on any stock exchange should be left to shareholders of a company. Further that the companies decisions to list should be voluntary and based on capital needs and assessment of market appetite as well as fiscal and other listing attractions.[131]


From the foregoing, it follows that the research question whether or not the existing legal and regulatory framework provide sufficient protection to shareholders interests in listed Companies in Tanzania as compared to Europe and the United States of America, has been answered in the affirmative in that as of now, there are sufficient safeguards in place for protection of shareholders of public listed companies in Tanzania. However the said safeguards have not been put to test. Whether or not the said safeguards are adequate or otherwise still remain to be tested.



The Tanzania Companies Act, Cap 212

The Banking and Financial Institution Act, 1991.

Public Corporations Act, 1992,

The Capital Markets and Securities Act, 1994 as amended by Act No: 4 of 1997] and Regulations made thereunder;


Capital Markets and Securites (Corporate Govenance) Guidelines 2002


1. Bagachwa M.S.D., Mbele, A.V.Y. and Van Arkadie, B. (Eds.). 1992. Market reforms and parastatal restructuring in Tanzania. Dar es Salaam: Economics Research Bureau.

2. Burkart, Mike and Panunzi Fausto, Agency Conflicts, Ownership Concentration and Legal shareholder Protection, Discussion Paper Series No. 2708 Center for Economic Policy Research 2000, London.

3. CACG. 1999. Principles for corporate governance in the Commonwealth, CACG guidelines. In Tricker, R.I (Ed.). 2000. History of management thought: Corporate governance. Aldershort, Burlington USA, Singapore, Sydney: Ashgate Publications Limited.

4. Fama, E.F. and Jensen, M.C. 1983. Separation of ownership and control. In Tricker, R.I (Ed.). 2000. History of management thought: Corporate governance. Aldershot: Ashgate Publication Limited.

5. Kay, J. and Silberston, A. 1995. Corporate Governance. In Tricker, R.I (Ed.). 2000. History of management thought: Corporate governance. Aldershort, Burlington USA, Singapore, Sydney: Ashgate Publication Limited.

6. Kraakman, Renier & Others, The Anatomy of Corporate Law, 2nd Ed.(Oxford University Press) New York.

7. Jerry W. Markham, A Financial History of Modern U.S Corporate Scandals From Enron to Reform (M.E Sharpe Inc.,2006)

8. Lemayon L. Melyoki, Determinants of Effective Corporate Governance in Tanzania, Phd. Dissertation, University of Twenty, The Netherlands, October 2005 at

9. Melyoki, L. L. 2004. Corporate governance in Tanzania: some recent developments and the remaining challenges. The Accountant, 17 (3): 20-32.

10. Monks R.A.G. and Minow, N. 2002. Corporate governance (2nd ed. (reprint)). Oxford: Blackwell Publishing Ltd.

11. Mtatifikolo, F. P. 1992. The social context of reforms: Poverty and poverty alleviation in Tanzania. In Bagachwa M.S.D, Mbele, A.V.Y, and Van Arkadie, B. (Eds.), Market reforms and parastatal restructuring in Tanzania. Dar es Salaam: Economic Research Bureau.

12. Nyangetera, B.M. 1992. Reforming and restructuring the financial sector in Tanzania. In Bagachwa M.S.D, Mbele, A.V.Y, and Van Arkadie, B (Eds.), Market reforms and parastatal restructuring in Tanzania. Dar es Salaam: Economic Research Bureau.

13. OECD principles of Corporate Governance at accessed at November 2009.

14. Oman, C., Fries, S. and Buiter, W. 2003. Corporate governance in developing, transition and emerging-market economies. OECD Development Centre, Policy Brief No.3.

15. Pagano Marco and Volpine Paulo, shareholder Protection,Stock market Development and Politics, Discussion Paper Series No. 5378 Center for Economic Policy Research 2005, London.

16. Pinto, R. Arthur and Branson, M. Douglas, Understanding Corporate Law, 3rd ed. (LexisNexis) San Francisco.

17. Reese A. William Jnr. and Weisbach S. Michael Burkart, Protection of Minority shareholder Interests, Cross Listings in the United states and Subsequent equity Offerings, Working Paper Series No. 2708 Center for Economic Policy Research 2001, London.

18. Dr. Raaijmakers, G.T.M.J and Mellenbergh, R (Eds.) The European Regulation of Company and Securities Law, (Ars Aequi Libri, Nijmegen 2009).

19. Roe, M. J. 2003. Political determinants of corporate governance: Political context, corporate impact. Oxford: Oxford University Press RHI. Inc. 2003. White paper on: The impact of the Sarbanes-Oxley Act on Private Business.

20. Scott, C. 1993. Privatisation, control and accountability. In McCahery, J., Piccioto, S.and Scott, C. (Eds.), Corporate control and accountability. Oxford: Oxford University Press.

21. Weston J., Fred, Mitchell l. Mark and Mulherin J. Harold, Takeovers, Restructuring, and Corporate Governance, Pearson Educational International, 4th Edition, New Jersey 2004.

[1] Lemayon L. Melyoki, Determinants of Effective Corporate Governance in Tanzania, Phd. Thesis, University of Twenty, The Netherlands, 2005 p.12.

[2] Ibid.

[3] Dar es Salaam Stock Exchange, Quarterly Report, Issue No. 41, September 2009

[4] OECD Principles of Corporate Governance, 2004 at

[5] Pinto R, Arthur and Branson M. Douglas, Understanding Corporate Law,, Lexis Nexis, 3rd edition, 2009,p.87

[6] Ibid.

[7] Ibid, p.87

[8] Ibid at p.69

[9] Ibid, pp. 71-72

[10] Ibid,p.72

[11] Ibid. p.227

[12] Marco Pagana & Paolo Volpin, “Shareholder Protection, Stock Market Developments and Politics”, Discussion paper No. 5378, Financial Economics, Center for Economic Policy Research, December 2005, p.1

[13] Ibid.,

[14] Ibid.,p.3

[15] OECD Principles of Corporate Governance, 2004, at

[16] Ibid,

[17] Above Note 3, at p. Arthur R. Pinto & Douglas M. Branson, Understanding Corporate Law, Lexis Nexis, 3rd Ed.,2009, p136

[18] Ibid

[19] Ibid

[20] Ibid.

[21] Jerry W. Markham, A Financial History of Modern U.S Corporate Scandals from Enron To Reform, New York, (M.E Sharpe 2006) at p.100

[22] Ibid

[23] Ibid. at p. 101

[24] Above, Note 17 at p. 137

[25] Ibid .

[26] Ibid,at p. 109

[27] Above, note 17 at p. 137

[28] Above, note 21 at p. 119

[29] Ibid., at p 120

[30] Ibid., at p.125

[31] Ibid., at pp. 197,205-206.

[32] Ibid., at pp. 337-338

[33] Ibid., at p. 110

[34] Ibid p.126

[35] Ibid. at p. 129

[36] Ibid.

[37] Ibid. at p. 138

[38] Ibid., at pp 455-457

[39] Ibid., at Pp 467-468

[40] Ibid., at p. 661

[41] Ibid., at p 663

[42] Ibid.,at Pp 498-503

[43] Above Note 5 at pp.140-141

[44] Companies Act, 2002, Act No. 12 of 2002.

[45] See Note 44 above, section 15(1)

[46] See Note 44 above, section 15(2)

[47] SeeNote 44 above, section. 29

[48] SeeNote 44 above, sections .46-47

[49] The Capital Markets and Securities Act, [ Cap 79 Revised Edition 2002] and visited on 29th March 2010

[50] See above Note 49.

[51] The Capital Markets and Securities Act, Cap 79 (Revised Edition 2002) of the Laws of Tanzania.

[52] See Note 51 above, Article 2

[53] See Note 51 above, section 26(1)-(7)

[54] See Note 51 above, section 28

[55] See Note 51 above, section 30

[56] See, visited on 15th April 2010

[57] Dar es Salaam Stock Exchange Handbook, June 2007 pp. 6-26. Rules are also found in DSE Blue Print.

[58] See Note 57 above, p. 4

[59] See note 57 above,p.4

[60] See Note 57 above, pp. 4-5

[61] Marco Pagano and Paolo Volpine pp -1-2

[62] See Note 61 above p. 4

[63] Guidelines on Corporate Governance Practices by Listed Companies in Tanzania- made under section 10(d) of the Capital markets and Securities Act, 1994. One of the objectives of the principles is to strengthen corporate governance practices in Tanzania and promote standards of self regulation to bring level of corporate governance in line with international trends-page 4.

[64] OECD Principles p. 33

[65] See note 63 above, p. 16

[66] Companies Act, Act No. 12 of the Laws of Tanzania, section 3

[67] See Note 64 above sections 46-54 and 58

[68] See Note 64 above sections 133 and 134

[69] Above Note 64 section 135

[70] See Note 63 above, page 16

[71] Above note 64 sections 192 and 193

[72] Above Note 64 section 180

[73] See note 63 above page 16

[74] See note 63 above p.16

[75] Government Notice No. 168 Capital Markets and Securities (substantial Acquisitions, Takeovers and Mergers) Regulations- Regulation 3

[76] See Note 63 above

[77] See Note 63 above, Page 17

[78] See note 64 above section 141

[79] See note 64 above section 200

[80] See note 74 above section 200(2)(a)

[81] See note 74 above section 201

[82] See note 74 above section 202

[83] See note 74 above section 206

[84] See Note 63 above, page 7

[85] See note 74 above section 207

[86] See Note 75 above, article 6

[87] See Note 75 above article 7(1)-(3)

[88] See note 75 above article 7(4)

[89] See note 75 above article 8(1)-(5)

[90] See note 63 above p. 16

[91] See note 63 p. 17

[92] Pinto R, Arthur and Branson M. Douglas, Understanding Corporate Law,, Lexis Nexis, 3rd edition, 2009,p.87

[93] See note 92 above pp 94 and 95

[94] See note 92 above p 89

[95] Companies Act, Act No. 12 of the laws of Tanzania-section 181

[96] See note 95 above-section 182.

[97] See note 95 above section 184

[98] Guidelines on Corporate Governance Practices by Listed Companies in Tanzania- made under section 10(d) of the Capital Markets and Securities Act, 1994.

[99] See note 98 above pp 7 and 8

[100] See note 98 above p 8

[101] See note 98 above p. 10

[102] See note 98 above pp 11-12

[103] Weston J., Fred, Mitchell l. Mark and Mulherin J. Harold, Takeovers, Restructuring, and Corporate Governance p. 5

[104] See note 103 above.

[105] Directive concerning mergers of public limited companies (78/855/EEC) OJ L 295/36 0f 20.10.1978

[106] Directive 2004/25/EC of the European Parliament and of the Council of 21st April 2004 on takeover bids 92004/25/EC) OJ L142/12 OF 30.03.2004.

[107] Government Notice No. 168 made under section 148(1) of the Capital Markets and securities Act, Chapter 79 of the laws of Tanzania

[108] See note 107 above articles 1 and 2

[109] See note 107 above, articles 4,5 and 6

[110] See note 107 above, article 7

[111] See note 107 above , articles 8 and 10

[112] See note 107 above, article 9

[113] See note 10, article 11

[114] See note 107 above, article 12.

[115] See section 133 Companies Act of Tanzania

[116] See note 115 above section 134.

[117] See note 115 above.

[118] Professor Barle and Means, the Modern Corporation and Private Property, (1932) as cited in Pinto R, Arthur and Branson M. Douglas, Understanding Corporate Law,, Lexis Nexis, 3rd edition, 2009 pp 97 and 98.

[119] Pinto R, Arthur and Branson M. Douglas, Understanding Corporate Law,, Lexis Nexis, 3rd edition, 2009 p. 88

[120] See note 117 above p.88

[121] See http// visited on 28-04-2010

[122] 1st Directive(protection of company members interests and others (168/151/EEC), OJ L 65/8, 14.3.1968

[123] The Tanzania Companies Act came into force on 28th June 2002.

[124] Section 1 of the Capital Markets and securities Act, Cap 79 of the laws of Tanzania

[125] See note 123 above section 6

[126] See note 123 above sections 25 and 26.

[127] The above directives are found in book by Prof. Dr. Raaijmakers, G.T.M.J and Mellenbergh, R (Eds.) The European Regulation of Company and Securities Law, (Ars Aequi Libri, Nijmegen 2009).

[128] Capital Markets and Securities website visited on 28-04-2010

[129] visited on 29th May 2010.

[130] http/ visited on 8th May 2010.

[131] http/ visited on 8th may 2010