Practice Areas > Corporate Insolvency

Lawcastles provides services on all types of judicial and non-judicial insolvency procedures. We assist our clients to select appropriate route in restructuring dilemma: to work out or to go to court.
All companies incorporated in Tanzania are subject to local insolvency law. Tanzanian corporate insolvency law is mainly contained in the Companies Act, 2002 (‘Act’) and applies to companies incorporated in Tanzania. This Act is supplemented by Insolvency Regulations, 2005. Apart from the Act, there are special procedures provided for banks and insurance companies under the Banking and Financial Institutions Act, 2006 and Insurance Act, 1996 respectively.
Corporate insolvency procedures under the Tanzanian law include the process of appointing ‘receiver and manager’ and ‘administrative receiver’, ‘company voluntary arrangement’, ‘schemes of arrangement; ‘administration’ and winding-up by the court’. In all procedures, claims of foreign creditors are treated the same as the claims of local creditors. Briefly, these insolvency procedures can be described as follows:
·         Receiver and manager route (sections 405 to 415 of the Act) allows the creditor to cease the assets of debtor out of court proceedings. Receiver and manager can be appointed by a creditor under the terms of the debenture.
 
·         Administrative Receiver (sections 416 to 423 of the Act) is a special status of a receiver and manager appointed over the whole or substantially the whole of the company’s property. Unlike receiver and manager whose primary objective is to collect debts, the statutory objective of the administrative receiver is to enable the business to be sold as a going concern. Like receiver and manager procedure, administrative receivership also allows the creditor to cease the assets of debtor out of court proceedings.
 
·         The voluntary arrangements (sections 240 to 246 of the Act) apply to any composition in satisfaction of debts or to a scheme of arrangement of company’s affairs. The purpose of the arrangement is to enable a scheme to be effected with minimal involvement by the court. The principal feature of this procedure is that a voluntary arrangement must be voted upon by creditors must be reviewed, endorsed and administered by an insolvency practitioner.
 
·         Scheme of arrangement can be promoted and sanctioned under sections 229 to 232 of the Act. Section 229 provides that if a compromise or arrangement is proposed between a company and its members or creditors, or any class of them, is approved by a majority in number representing 75 per cent in value of those present in person or by proxy at meetings of each class of member or creditor, and is subsequently sanctioned by the court, it shall be binding upon all members or creditors, or upon the class of members or creditors, and upon the company.
 
·         Administration (sections 247 to 266 of the Act) is a court sanctioned corporate restructuring procedure equivalent to Chapter 11 of US Bankruptcy Code. The Act prescribes a number of purposes for which the order can be sought, and there must be an expectation that the order will achieve one or more of them.
 
·         Liquidation is a process by which life of a company is brought to an end and its property administered for the benefit of its members and creditors. Liquidation or winding-up begins either by court order (compulsory liquidation) or by members passing a resolution to wind-up. The process of liquidation is described under section 274 to 404 of the Act.
To contact the partner in charge for corporate insolvency advisory services, please click here.