It is common to see a memorandum of association of a company having been amended entirely, that is, every clause therein being amended, changed, or replaced with a new clause. This is a common mistake for many people including corporate legal practitioners when drafting such documents. It is therefore critical to understand and keep in mind that not every clause in a memorandum of association of a company in Tanzania can be altered or amended as shall be explained below.
Section 6 of the Companies Act, No. 12 of 2002 of the laws of Tanzania, as amended from time to time (the “Companies Act”) states that, a company may not alter the conditions contained in its memorandum except in the cases, in the mode and to the extent for which express provision is made in the Companies Act. This means that a memorandum of association being a historical and most important document in a company, cannot generally be altered unless there is a specific provision in the Companies Act permitting such alteration.
Generally, a memorandum of association as a constitutional document is drafted to show the subscribers’ purpose to form a company, and when incorporated, the subscribers become members of the company. In addition, a memorandum of association signifies the subscribers’ intention to acquire the number of shares indicated in a memorandum of association.
In that regard, the following must be part of any memorandum of association, namely: -
In that regard, the following must be part of any memorandum of association, namely: -
the name clause – sets out the name of the company;
the objects clause –sets out the objectives of the company;
liability clause- sets out the liability of the members of the company;
capital clause – sets out the amount of share capital with which the company proposes to be registered and the division thereof into shares of a fixed amount and the nominal price of each share; and
association part – sets out the full names, occupation, and postal address of the subscribers, the number of shares taken by each, and the signatures of each subscriber.
Based on the restrictions mentioned in Section 6 of the Companies Act, the express provisions in the Companies Act which permits alteration of conditions contained in a memorandum of association are as follows: -
Name clause: Section 31 authorizes a company by special resolution to change its name. As a result, the name of a company appearing on a memorandum of association can be changed provided it is authorized by a special resolution of the members.
Objects of a company: Under Section 8 of the Companies Act a company can alter its objects. An object clause lists the range of activities which, upon its incorporation, a company will undertake.
Liability clause: Section 3 of the Companies Act authorizes any two or more persons, by subscribing their names to a memorandum of association and otherwise complying with the requirements of the Companies Act in respect of registration, form an incorporated company, with or without limited liability. In that regard, this implies that the limited or the unlimited liability clause appearing on a memorandum of association can also be altered.
The authorized share capital: Under Section 64 of the Companies Act, a company, if authorized by its articles of association, can alter the conditions of its memorandum of association in terms of the share capital. In our interpretation of the said section, this includes altering the share capital clause in a memorandum of association.
On the other hand, the following clause/condition in a memorandum of association cannot be altered or replaced, these are: -
Names of subscribers (association clause): The full names, occupation and postal address of the subscribers and the number of shares taken by each shall always remain the same for the lifetime of the company and as a result cannot be altered.
Below is a brief summary of the procedures to be followed when altering a memorandum of association: -
a company’s board of directors should constitute a meeting to recommend the proposal for the members’ consideration and subsequent approval;
a notice of an extraordinary general meeting of the members to pass the special resolution should be issued to all members of the company;
an extraordinary meeting of the members should be held to pass the special resolution. It is crucial to note that this is a special resolution and hence the requisite members threshold for passing it must be met (3/4);
once the special resolution is passed, the said resolution must be filed with the Registrar of Companies within 14 days together with a printed copy of its memorandum of association as altered.
Alternatively, the alteration of a memorandum of association can be passed and/or approved by way of a circular resolution in line with Section 147 of the Companies Act.
Note: This is not a legal opinion and the contents hereof are not meant to be relied upon by any recipient unless our written consent is sought and explicitly obtained in writing.
