PRESIDENT S S OFFICE PROPERTY AND BUSINESS FORMALIZATION PROGRAM (MKURABITA) STAKEHOLDERS WORKSHOP; PROPOSALS FOR BUSINESS FORMALIZATION IN TANZANIA

Transcription

1 PRESIDENT S S OFFICE PROPERTY AND BUSINESS FORMALIZATION PROGRAM () STAKEHOLDERS WORKSHOP; PROPOSALS FOR BUSINESS FORMALIZATION IN TANZANIA By; ADAM MAMBI Consultant for March,,

2 Introductory Remarks Business formalization which aims at empowering people in the informal sector is among the main targets of Compliments with the NSGPR (MKUKUTA) Use of assets to access capital Use of assets as collateral to access loans for business Improve business organization forms 2

3 Objectives Identify key barriers to business formalization e.g. (administrative and legal) Identify best quality archetypes that can be adopted Design reform proposals for business formalization Link with other on-going reforms and identify gaps for intervention by Identify and review polices and laws that need reforms 3

4 1.Problem; Complicated legal requirements for formation and drafting contracts Sub-objective 4.1: Simplification of documentation, attestation and registration of contracts agreements at local government level Some outputs: Outputs 4.1.1: Simplified documentation and registration of contracts agreements. Problem The current system is not user-friendly at local level. Section 10 of the Notaries Public and Commissioner for Oaths Act provides for the lists of persons given powers of notary public in respect of administering oaths, taking affidavits, attesting signatures and certifying copies of excluding Village executive Officers and Ward Executive Officers. 4

5 The activities required for this output are: Activity : Amend laws that require attestation/certification done by commissioner for oaths. Amend Section 10 of the Notaries Public and Commissioner for Oaths Act to give VEO and WEO limited powers to certify legal documents. Activity : Drafting standardized regulations and guidelines for VEO and WEO to simplify procedures for making legal and enforceable documents at their areas ii. Output 4.1.2: Legal enforceability of contracts. iii. Output 4.1.3: Creation of confidence for more people doing business at local level iv. Output 4.1.4: Recognition of legal documents by law enforcers 5

6 Output 4.1.5: Legally empowered VEO/WEO attesting legal documents at local level. Activity : Draft by-laws that provide for standardized and simple format of contracts and other related legal documents made in Swahili. Activity : Make provisions for decentralizing the attestation and certification system at local government level e.g. WEO, DEO vi. Output 4.1.6: Simplified business transaction at local government level. 6

7 Activity 1.: Amend the primary court rules and ward tribunal Act and rules to simplify enforcement of contracts that are made local government level Activity.2: Implement capacity building for VEO and WEO on new guidelines and regulation for contract formation and attestation of documents. Activity 3: Improve infrastructure and registry system for business transactions at local level This sub-objective and outputs are in line with objective 5.2 of the National Trade Policy. vii. Output : Reduced costs and time for business transactions. 7

8 2. Problem Lack of Legal Framework for Limited Liability Partnerships (LLPs) and Limited Liabilty Single Shareholder Companies (LLSSCs) Lack of Limited Liability Single shareholder Company (LLSSC) and Limited Liability Partnerships (LLPs). No legal framework for introduction of Limited Liability Single shareholder Company (LLSSC) and Limited Liability Partnerships (LLPs). The Companies Act 2002 do not accommodate registration of sole traders to form small companies with single shareholder limited status 8

9 Objective: Introduction of new business forms of organization for small business that allow Limited Liability Single shareholder Company (LLSSC) and Limited Liability Partnerships (LLPs) Output 4.2.1: New Business organization forms (LLSSCs & LLPs ) introduced for newly formalized small business. 9

10 Activity : Amend companies Act to accommodate Limited Liability Single shareholder Company (LLSSC) and Limited Liability Partnerships (LLPs). Activity : Draft Partnership Act Activity : Draft Regulations to amend Companies Act 2002 Activity : Develop strategies for capacity building for small business entities ii. Output 4.2.2: Simplified regulations and Memorandum and Articles of Association Activity : Reform National Trade Policy to clearly accommodate Small Business The reform objective links with SMEs Development Policy objectives 1, 3 and 5 Sub-objective 4.3: Reform the commercial court system and improve and legalize the customary alternative dispute resolutions such as 10

11 ADVANTAGES/WHY LLP? Body corporate and exist as a separate entity (a person at law with its own property and liabilities separate from members) formed by agreement of two or more persons Members has limited liability/members not personally liable in the ordinary course of business All members have equal rights in sharing capital and profit of the firm Unlimited powers/capacity. can act beyond powers without any problem of the legal doctrine of Ultravires. The affairs of ordinary company/partnerships are controlled by company legislation/memat. They can only operate within the object laid down within its Memorandum of Association 11

12 Unlike Ordinary partnerships, under LLP no duty of care at common law for negligent work. Easy transfer of Membership. New Members may transferred by agreement with the existing members Agency; each member is an agent of an LLP, can represent and act on behalf in all its business. LLP will not bound by the action of the member not authorized and the other person dealing with is aware Simple winding/ Dissolution for LLP: Unlike GP, no one member of a company/partnership can wind up and by death, bankruptcy or insanity. Can be dissolved by agreement of members In a winding up, past and present members become liable to contribute to the assets of LLP to the extent that they have agreed to do so in the LLP agreement. 12

13 Bankruptcy/removal from memberships; LLP can just give notice to others at any time unless stated for a fixed period [Moss V. Elphik [1910] Execution of Documents. Unlike normal companies/ordinary Partnership where the signature must be made by the Secretary and Director, for an LLP two members can be signatories for valid execution of Documents. Internal flexibility: great flexibility in internal matters management (No formal meetings) 13

14 Advantages of LLSSCs Removes artificial private single shareholder companies Simple MEMAT Simple meeting-only one member can make a decision or by proxy Few officials (one director and one company secretary) Easy to convert it into ordinary company (no reregistration requirement, just simple statement) Simple Winding up/dissolutions (death of shareholders ends the business) 14

15 3. Problem Complicated dispute settlement procedures The procedure is complicated and expensive. Local alternative Dispute Settlement Mechanisms are not legally enforceable. Objective 3.: Reform the commercial court system to accommodate disputes of small commercial entities Output : Small commercial court at lower level for small entities established The activities for this output are: Drafting rules for simplified mediation and conciliation: Activity 1: Introduce legal provisions in the commercial courts law for the establishment of subdivision of small commercial court at he primary court for small business Activity 2: Draft regulations and rule for procedure of a small commercial court that will deal with small claims Output : Reduced backlog of cases 15

16 Activity 3: Capacity building for commercial dispute resolutions for Magistrates at Primary and District Court level Activity : Make provisions for employing more Magistrates at Primary and District Courts who are expert in commercial dispute resolutions Sub-objective: Improve and legalize the customary alternative i. Output : Simplified dispute settlement procedures and enforcement of Alternative Dispute Resolution at local level attained 16

17 The Activities required for this outcome are: Activity : Amend the current laws such as Civil Procedure Act, Arbitration Act, Magistrate Courts Act, Commercial Court Rules, and Primary Court Civil Procedure Rules to accommodate the local Dispute mechanisms under the current legal system to simplify enforcement. Activity : Draft standard rules on procedures for alternative dispute settlement ii. Output : Speedy dispute resolution iii. Output : Reduced costs and delay of cases iv. Output : Enforceable customary dispute resolution 17

18 vi. Output : Peace and harmony among businesses strengthened This objective Links with the SMEs Development Policy on the establishment of a window within the commercial court for handling SMEs dispute Sub-objective 4.4: Simplification of registration procedures of mortgages, charges and pledges, immovable and movable properties Main outputs for this reform objective: i. Output 4.4.1: Formation of a new Agency which will be under the Ministry of Industry, Trade and marketing dedicated to the registration of transfer of chattels and pledges 18

19 4. Problem; Cumbersome registration procedures for immovable and movable (pledges and mortgages). Movable and immovable properties are not usable as collateral to secure loans and credits. There is Lack of collateral to acquire loans from formal financial institutions. Movable properties such as livestock are not legally recognized as pledges that can be used as collateral. Output : Simplified registration procedures of mortgages, charges and pledges and movable properties _Activity : amending the Chattel Transfer Act 1942 [R.E 2002 CAP 210], The Land Act and Village Land Act to simplify registration procedures Activity 1: drafting regulations to simplify procedure for registration of pledges, mortgages and charges to facilitate ace to credit from financial institutions 19

20 Activity 3: create mechanisms to allow registration of instruments for transfer of chattels, mortgages and charges to be registered at the local government level. iii. Output 4.: Incentives for borrowers to use movable property as collateral created Activity 5: Reform relevant laws such as The Chattel Transfer Act to simplify registration procedures to make borrowers to use movable property as collateral. Activity 6: Introduce simplified registry system of movable and immovable properties. Activity 2. Introduce simplified registry system of movable and immovable properties. 20

21 Output: Easy and simplified accessibility of credit facilities The Chattel Transfer Act of 1942 [R.E 2002 CAP 210] do not give room for decentralized registration and transfer of pledges, mortgages, charges and other instruments for securities. The activities required for this output are: Activity.1: Drafting miscellaneous laws amending the Chattel Transfer Act and The Land Act and Village Land Act to simplify registration procedures Activity 2: Drafting regulations on the registration, transfer and use of chattels and pledges v. Output 3 Increased use of pledges as collateral Activity 4.: creating awareness to business financial institutions stakeholders 21

22 Activity 5.: Drafting bye-laws to allow Attestation of instrument to be done by authorized Local leaders who are not appointed by the Minister such as VEO and WEO at their area. vi. Output : Decentralized registration and Attestation of pledges and instruments The Minister has immense and discretionary powers on the registration and transfer of movable and immovable properties at central level. Activity.1: capacity building for WEO and VEO on the procedures of attestation of pledges and instruments 22

23 5.Problem; Complicated and centralized business name registration due to outdated laws. This reform objective has some outputs: Output 4.5.1: Simplified registries with specific time framework and costless The relevant activities for this output are: Activity 1: Amend the current sector laws that govern regulatory authorities dealing with registration and licensing procedures Activity 2: introduce integrated policy framework to govern all matters related to business transactions. Output 4.5.2: Increase in business entities registered at local level Activity 1: improvement of infrastructure and registry centres at district level. Activity 2: Amend to provide for functions of Chief Registrar of at the national level who shall delegate his powers to the registrar at District level to simplify transactions. Output 3: Increased tax revenues 23

24 6. Problem Complicated & Centralized taxation and accounting system. This objective is in line with objective 1.1 of the SMEs Policy which provides for the simplification of Businesses registration and licensing procedures to enable the business environment. Sub-objective 4.6: Simplification and decentralization of accounting and taxation system for small business i. Output 4.6.1: Accounting system for small business simplified There is also bureaucratic and complicated tax regime administered by many institutions. The obligation to hire a Certified Public Accountant (CPA) to generate reliable and acceptable accounting instruments for tax and financial purposes makes access to an accounting system more expensive for small businessmen. 24

25 The relevant activities are: Activity 1: amending the laws to simplify accounting system Activity 2: drafting regulation to introduce procedures for simplified accounting system to small business entities ii. Output 2: Taxation system for small businesses simplified Activity 1: Reform policies governing the taxation system. Activity 2: Reform laws governing the taxation system Activity.3: Introduce integrated taxation system 25

26 Output : More compliance with tax rules attained Access to the accounting system is complicated and costly for small business Legal and procedural requirements for accounting system do not give room for small business to comply. Activity 1: Capacity building on simplified taxation system for small business entities Activity 2: Draft simplified taxation system regulations for small business 26

27 . Output 4.6.4: Reduced tax evasion Small businesses are not comfortable with the current presumptive tax assessments. The activities required for this output are: Activity : Introduce regulation eliminate presumptive tax assessments. Activity : Amending taxation laws to introduce simplified taxation system v. Output 4.6.5: Increased tax revenues Activity : introducing simplified integrated taxation system Activity : introducing one stop centre for payment and collection tax This reform objective compliments with the trade Policy

28 Links with the SMEs Policy on simplified tax system Output 4.7.3: More staff employed by small business entities. Output 4.7.4: Capacity building for small business entities. This objective links with the SMEs Policy on the categorization of SMEs and simplified labour obligations Sub-objective 4.8: Simplification of documentation and business information for small businesses Output 4.8.1: Market and Business information access by more small business. 28

29 7. Problem Lack of efficient business information. There is inadequate official statistics on business information related to small businesses ii. Output 4.8.2: Increased number of financial institutions that access business information and facilitate loans and credit access by small business entities. The activities required to generate these outputs are: Activity : Introduce a National database statistics for business enterprise. Activity : Reviewed Laws and amend relevant laws that administer business to introduce a National database statistics for SMEs. 29

30 Activity : Introduce the law to protect data and privacy to reduce e-security risk of unauthorized access to business information. (limited access to certain information e.g. capital) Activity : Design umbrella legislation with basic provisions to progressively achieve the objectives of a Credit Bureau system. This objective is in line with the SMEs Development Policy objectives specifically objective 3.3 that is geared toward improving information services for small business 30

31 8 Problem addressed; Lack of Personal and business formal identification Reform Proposal; Amend the laws relating to birth and death certificate, personal identification and regulations to simplify registration of citizens at the village level to facilitate business Integrated national Registry System (Database)/cross reference National ID should link all information related to persons including bussiness actrivites. Business database should link other databases 31

32 Reviewed Laws and Regulations The Birth and Death Certificate Registration Act, The Tanzania Citizenship Act and the Personal Identification Act [R.E 2002 CAP 357] The Registration and Identification of Person Act,

33 9. Problem Labour Laws not well suited to SMEs Complicated and costly labour and insurance obligations. Small business might be confronted with some heavy obligations and high costs of compliance due to their nature of size, turn over or capital investment, insufficient working premises and limited access to finance Days and hours of work (45 hrs week & 9 hours a day), Payment on overtime, daily and weekly rest, public holidays. Mode of payment calculations/hourly, weekly or monthly wage rate/payment leave 33

34 Objective/Output: Simplified labour laws and Regulations i. Output : Simplified labour laws and regulations that guarantee incentives for small business. Activity 1: Reform labour laws and regulations to simplify recruitment procedures Activity 2: Reform labour laws and regulations to simplify dispute settlement procedures. ii. Output 3: Easy compliance with labour regulations for small business entities 34

35 10. Problem addressed; Unfair competition Reform Proposal Review and reform polices and laws related to fair competition at the market. Introduce effective Legal framework and regulations that will effectively regulate the market behaviour to empower small business to access market fairly. 35

36 The following unfair practices should be prohibited to protect SMEs Predatory dumping &pricing (charging price lower that the cost of production) Price fixing Price rebates/fidelity rebates/bonuses abuse of dominant position. Mergers/acquisitions 36

37 Areas to be improved in the Law Improve enforcement Need of improving policy Foreign investment above 500, 000 US $. Counterfeit, Establishment of private organizations/ngos as watchdog on the quality of products/services 37

38 THE END!!!; THANK YOU FOR YOUR ATTENTION!! REFORMS IN PROGRES!!!!! Adam Mambi (Lawyer), Consultant;, Part-time Lecturer, University of Dar Es Salaam, ; Mobile;