The growing concerns of business and market have made mergers and acquisitions for companies in Tanzania inexorable. The desire to increase resources, and expand market share or source capital which could in turn spruce up business while making it competitive and well-planned, have been proven to be the driving forces towards the growing trends of merger and acquisition in Tanzania. The regulatory authority with a mandate over mergers and acquisitions in Tanzania is the Fair Competition Commission (FCC) as established under section 62(1) of the Fair Competition Act No. 8 of 2003.
Merger entails the acquisition of a share in a business or rather part of that business either established inside or outside Tanzania hence resulting in change of a control. By change of control in a merger it means a situation where one party acquires the possibility of exercising material or decisive influence over another company or the ability to change the fundamental operations of a company.
Acquisition as defined under the Fair Competition Act, 2003 means acquisition either alone or jointly with another person, of any legal or equitable interest in such shares or assets but does not include acquisition by way of charge only specifically this happens in relation to shares or assets
Requirement to Doing Merger
Before the merger is done, the law in Tanzania requires that the same should be notified. The notification of the merger is mandatory under section 11(2) of the Fair Competition Act No. 8 of 2003 and should be done through the Fair Competition Commission. It should be understood in mandatory terms that a merger is notifiable under section 11(2) of the Competition Act if it involves turnover or assets that are above the threshold that the Commission shall set from time to time by an Order and published in the Gazette. The mode of calculating the threshold is also prescribed in the Order.
Procedures for Doing Merger Via the FCC
The Competition Rules, G.N No. 344 of 2018 provide the procedures for notification of a merger to FCC. The procedure as articulated under the Rules includes among others the following;
- Filing notification to FCC and within 5 good days the FCC will revert with feedback towards the intended merger so notified.
- If the FCC notifies the firms that, the notification was complete after assessment, the firms shall need to wait 14 days for the FCC to further examine the notification and if there is no doubt, the same shall be approved.
- If further examination is required by the FCC over the notified merger, then the transaction shall wait for 90 days, which can also be extended to another 90 days, making 180 days. This means the merger is barred from continuing during the examination phase for the above-specified period.
- After completing the investigation/examination, the FCC may either approve the merger, approve the merger with conditions or even prohibit the same from happening.
Significantly, Section 11(1) of the Fair Competition Act, 2003 prohibits mergers and acquisitions that are likely to create or strengthen dominance in the market. It should also be noted that the Fair Competition Act imposes a penalty of a fine of not less than five per cent (5%) but not exceeding ten per cent (10%) of the annual turnover which has a source in Mainland Tanzania due to commission of an offence or being involved in the same. If the person committing the said offence is a corporate body, and person who was a director, manager or officer of that body corporate may be charged jointly in the same proceedings with such body corporate.
In any event the body corporate is convicted of an offence under the Act, every such director, manager or officer of that body corporate shall be deemed to be guilty of that offence unless he proves that the offence was committed without his knowledge or instead, he exercised all due diligence to prevent the commission of that particular offence so committed at the moment.
Conclusion Remarks
Application for merger and acquisition in Tanzania is not a free business and a night task. The process is subject to fees as provided by the law. Moreover, the process is subject to compliance which if not abided as the law directs, might attract penalties and fines against persons /companies involved. Thus, whenever one plans to conduct a merger and acquisition, one should keep in mind that the process is regulated and for efficiency never forget to engage an attorney for guidance throughout the process.
Disclaimer
This Article has been prepared for general guidance on matters of interest only and does not constitute professional advice. It would be best if you did not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty, express or implied, is given as to the accuracy or completeness of the information contained in this publication and, to the extent permitted by law. AVC & Partners (Advocates), its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining from acting, in reliance on the information contained in this publication or for any decision thereto.
