Acquiring shares in a Tanzanian company is not simply a matter of signing a Share Purchase Agreement ("SPA") and paying the purchase price. In a share acquisition, the purchaser acquires the company together with its existing assets, contracts, employees, licences, tax history, litigation exposure and regulatory liabilities, including liabilities that may not be obvious from the balance sheet.

That is why legal, financial, tax and regulatory due diligence should be completed before the transaction closes. The central principle is simple:
The purchaser should not only establish what it is buying, it should establish what liabilities and obligations it is inheriting.

In Tanzania, this is especially important because company information sits across several registries and regulators. Depending on the target's business, a purchaser may need to investigate through BRELA, the Tanzania Revenue Authority (TRA), the Registrar of Titles, sector regulators, the Fair Competition Commission (FCC), the courts, the Workers Compensation Fund, NSSF, and the Personal Data Protection Commission.

Below is a practical, Tanzania-focused due diligence framework for share acquisitions and company/business acquisitions.

1. Corporate Structure, Incorporation and Statutory Compliance

The first step is confirming that the target company legally exists, is properly constituted, and has complied with its obligations under the Companies Act, Cap. 212, the principal legislation governing companies incorporated in Mainland Tanzania.

At minimum, request the Certificate of Incorporation, Memorandum and Articles of Association, current statement of share capital, register of members, register of directors and secretaries, register of beneficial owners, share certificates, BRELA annual returns, notices of changes (directors, shareholders, registered office, share capital), board and shareholder resolutions and minutes, any shareholders' agreement, and details of subsidiaries or associated companies.

An official BRELA search should always be conducted rather than relying solely on documents supplied by the seller. It verifies the company's status, registered shareholders, issued share capital, directors and secretary, registered office, registered charges, beneficial ownership information (where available), historical changes in shareholding and management, and outstanding statutory filings.

A target can appear commercially active while carrying real compliance problems, outdated shareholder records, unfiled annual returns, unregistered changes in directors or charges, defective share transfers, or constitutional restrictions on the proposed transaction. These should be identified and, where appropriate, remedied before closing.

2. Verifying the Seller's Title to the Shares

The key question here is whether the seller actually owns the shares it proposes to sell, and has the legal capacity to transfer them. The purchaser should reconcile BRELA records, the register of members, share certificates and the seller's underlying acquisition documents, and establish whether the seller holds the shares beneficially, as nominee, on trust, or subject to a pledge, option or shareholders' agreement.

The Articles of Association and any shareholders' agreement should be reviewed for pre-emption rights, rights of first refusal, tag-along/drag-along rights, consent requirements, restrictions on transfers to competitors or foreign shareholders, and compulsory transfer provisions.

Under the Companies Act, section 79 requires a proper, duly stamped instrument of transfer before a company may register a share transfer; section 81 addresses entry of the transferee in the register of members; and section 82 covers notice where registration is refused. Closing mechanics should therefore extend beyond execution of the SPA to the proper execution, stamping and registration of the share-transfer documentation.

3. Beneficial Ownership Due Diligence

Beneficial ownership is now a central part of Tanzanian corporate due diligence under the Companies (Beneficial Ownership) Regulations, 2023 (GN No. 478 of 2023). A beneficial owner is a natural person who ultimately owns or controls an entity, has a substantial economic interest, or exercises significant control through formal or informal arrangements.

The purchaser should establish who ultimately owns the target, whether registered shareholders are acting as nominees, whether there are undisclosed beneficial owners or intermediate holding structures, and whether beneficial ownership records match the actual ownership structure. This matters most where the target has foreign, nominee or corporate shareholders, trusts, offshore holding companies, or complex shareholder arrangements, since a transfer of shares or voting rights can trigger beneficial-ownership filing obligations, and the regulations restrict registration of certain changes where these requirements are not met.

4. Corporate Authority to Enter into the Transaction

Both the seller and target must have the necessary corporate authority to proceed. On the seller side, review board and shareholder resolutions, constitutional documents, powers of attorney, and any partnership, trust or financing documents that restrict the seller's authority. On the target side, where the Articles or a shareholders' agreement requires company-level approval, obtain the appropriate board and shareholder approvals, waivers of pre-emption rights, and consent to registration of the transferee. The SPA should make completion conditional on delivery of these approvals.

5. Share Capital and Capitalisation Table

The purchaser should build an independent capitalisation table covering authorised, issued and paid-up share capital; the legal and beneficial identity of shareholders; voting rights and preference-share terms; and any options, convertible instruments, warrants, pledges or pre-emption rights. This matters because a purchaser expecting to acquire 100% of a company may find its stake diluted after closing by an undisclosed option, convertible instrument or beneficial interest.

6. Charges, Security and Company Indebtedness

A target may have borrowed from banks, shareholders, related companies, directors or private lenders. The purchaser should run a BRELA search for registered charges, debentures, fixed and floating charges, mortgages, guarantees and negative pledges, but should not rely on that search alone.
Registered security is not the same as total financial indebtedness. The purchaser should also request loan agreements, facility letters, overdraft arrangements, shareholder and intercompany loans, finance leases, guarantees, letters of credit, and evidence of repayment or discharge, together with a seller declaration that, except as disclosed, the company carries no undisclosed indebtedness or security.

Separately, the shares themselves, not just the company's assets, may be pledged; for example, a shareholder may have used its shares as security for a personal loan. Request any share pledge or security agreements, lender consents, and release/discharge documents, and confirm with the relevant lender that the shares are unencumbered. The SPA should include a warranty that the shares are transferred free of all liens, charges, pledges, options and other encumbrances.

7. Financial, Tax and Stamp Duty Due Diligence

Legal due diligence should be coordinated with financial due diligence: audited financial statements (three to five years), management accounts, trial balances, bank statements, aged receivables/payables, fixed-asset registers, related-party transactions, contingent liabilities and off-balance-sheet obligations. Key questions include whether revenue and customers are concentrated, whether receivables are recoverable, whether liabilities are understated, whether related-party dealings are at arm's length, and whether the company is technically insolvent or dependent on the seller's continued involvement.

Tax due diligence is essential because, in a share acquisition, historical tax liabilities remain with the target after completion. Review corporate income tax, VAT, withholding tax, PAYE, Skills and Development Levy, customs and excise duties, stamp duty, transfer pricing, and any TRA audits, objections, appeals or arrears. Obtain the TIN certificate, tax clearance certificate (where applicable), filed returns, TRA assessments and correspondence, and transfer-pricing documentation. Where historical tax exposure exists, the SPA should include a specific tax indemnity rather than relying on general warranties alone.

Under the Stamp Duty Act, share transfers attract stamp duty, currently 1% of the value of shares as approved by the relevant authority, subject to exemptions, and the Companies Act requires the transfer instrument to be duly stamped before registration. The transaction documents should clearly allocate responsibility for assessment, payment, stamping, filing and registration.

8. Material Contracts and Change-of-Control Risk

Review customer, supply, distribution, financing, lease, franchise, agency, technology, licensing, joint-venture and government contracts. The critical issue in any share acquisition is change-of-control clauses, provisions requiring prior consent, notification, regulatory or lender approval, or that trigger termination or renegotiation on a change of control. A deal can technically close while leaving the target in breach of a material contract if such a clause goes unnoticed, which is why a dedicated change-of-control workstream (see Section 15) matters.

9. Regulatory Licences, Foreign Ownership and Investment Status

A company can be validly incorporated yet unable to lawfully operate without sector-specific licences. Identify every licence the target's business requires, and check the relevant regulator, which may include the Bank of Tanzania, TCRA, EWURA, the Mining Commission, PURA, TCAA, TIRA, CMSA, TMDA, TBS, the Gaming Board or the FCC. TCRA, for example, expressly requires applications for changes in shareholding structure of licensed telecoms businesses.

Where the purchaser is a foreign investor, the relevant question is not whether a foreigner may hold shares generally, but whether this purchaser may acquire this percentage of this business without breaching sector-specific ownership, licensing or local-participation rules. Tanzania's investment framework changed with the Investment and Special Economic Zones Act, 2025, which came into force on 1 July 2025 and repealed the Tanzania Investment Act, 2022, so older investment certificates and incentive arrangements should be checked against the current framework.

Sector legislation in mining, petroleum, telecommunications, broadcasting, banking, insurance and other regulated industries may impose additional local-content or ownership restrictions, and a foreign purchaser should obtain a specific foreign-ownership and regulatory analysis before signing.
Where the target holds an investment certificate or special economic zone status, also check the incentives granted, conditions attached, minimum-investment and ownership conditions, and whether a change of ownership requires notification, approval, or affects continued eligibility for those incentives.

10. Litigation, Employment and Insolvency

(a) Litigation. There is no single public database that can conclusively confirm a Tanzanian company has no litigation. Due diligence should therefore combine court and registry searches, seller disclosure, director questionnaires, external counsel enquiries, and review of legal correspondence, contingent liabilities and published judgments, covering High Court, District Court, Labour Court, Commercial Court, tax, arbitration, regulatory, land, debt-recovery and insolvency matters. The seller should represent that there are no undisclosed claims or threatened proceedings.

(b) Employment. In a share acquisition, the purchaser inherits the target's employment relationships. Review employment contracts, collective bargaining agreements, senior-management and expatriate arrangements, work/residence permits, pension and NSSF/Workers Compensation Fund compliance, and any disciplinary or termination disputes under the framework set by the Employment and Labour Relations Act, 2004 and the Workers Compensation Act. Red flags include workers misclassified as independent contractors, undocumented employment, unpaid statutory contributions, expatriates without valid permits, and change-of-control payment obligations.

(c) Insolvency. Determine whether the target can continue as a going concern by reviewing creditor schedules, statutory demands, winding-up or receivership proceedings, unpaid judgments, overdue taxes and covenant breaches. The Companies Act contains extensive provisions on winding-up, receivership, fraudulent trading and wrongful trading, if the target is distressed, the transaction may need a different structure from an ordinary solvent acquisition.

11. Intellectual Property, Land and Environmental Compliance

(a) IP. For technology, manufacturing, pharmaceutical, consumer or brand-driven businesses, IP can represent much of the value being acquired. Review trademarks, patents, designs, copyright, domain names, software, trade secrets and licences, and confirm that key IP is owned by the target itself, not by founders, employees, related companies or a foreign parent, supported by a registry search where appropriate.

(b) Land. Where the target owns or leases property, review Certificates of Right of Occupancy, derivative rights, leases, encumbrances, planning approvals and environmental approvals, with a search at the Registrar of Titles. Tanzania's land framework treats land as public land held by the President as trustee, with rights of occupancy and derivative rights as the principal mechanisms for investor land holdings. A foreign purchaser should not assume that acquiring shares automatically confers unrestricted land rights, the analysis should check whether the target still qualifies to hold its land interest, whether the deal changes its foreign-control status, and whether consent is required.

(c) Environmental. Environmental liabilities can be significant and can survive completion, particularly in mining, petroleum, manufacturing, agriculture, chemicals and energy. Review Environmental Impact Assessments, certificates, audits, pollution and waste-management records, and any regulatory notices or rehabilitation obligations, under the Environmental Management Act (amended 2025).

12. Data Protection and Competition/Merger Control

(a) Data protection. The Personal Data Protection Act, 2022 establishes minimum requirements for processing personal data and created the Personal Data Protection Commission (PDPC). Where the target processes significant personal data, fintech, telecoms, banking, insurance, health, e-commerce, review PDPC registration, data-controller/processor status, privacy policies, cross-border transfer arrangements, and any breaches or regulatory investigations, and confirm whether customer and employee data can lawfully transfer to the purchaser's group post-completion.

(b) Competition. The Fair Competition Act, 2003 (as amended, most recently in 2024) regulates mergers in Mainland Tanzania through the Fair Competition Commission. A "merger" generally includes a share, business or asset acquisition resulting in a change of control. The applicable notification threshold remains TZS 3.5 billion, assessed against the combined assets or turnover of the merging firms. Where notification is required, the parties should not proceed to completion while it is pending, the SPA should include an FCC approval condition precedent.

13. Regulated Sectors: Banking, Foreign Exchange and AML

Where the target operates in banking, microfinance, insurance, payments or fintech, ordinary corporate due diligence is not enough, review the regulatory licence, ownership-approval and fit-and-proper requirements, capital adequacy, AML and sanctions compliance, insider lending and change-of-control requirements. The Bank of Tanzania has specific guidance on ownership changes for licensed microfinance providers, and such deals should be structured around the applicable regulatory approval process from the outset.

Where either party is non-resident, review payment currency, Bank of Tanzania foreign-exchange requirements, repatriation, source of funds, and any foreign borrowing or security that a change of ownership might affect (lender consent, reporting, repayment).

Finally, establish the identity and background of the seller, beneficial owners, directors, major shareholders and intermediaries through KYC, beneficial-ownership verification, sanctions and PEP screening, and source-of-funds checks, particularly important for deals involving politically exposed persons, government contracts, natural resources or cash-intensive businesses.

14. Red Flags That Should Trigger Escalation

Some findings warrant an immediate pause rather than a routine note in the report:

• The seller is not the registered shareholder, or the register of members conflicts with BRELA records

• Undisclosed beneficial owners, or shares already pledged to a lender

• Significant unpaid tax, or pending winding-up proceedings

• Material, undisclosed litigation

• An invalid sector licence or foreign ownership exceeding permitted limits

• A material contract that terminates automatically on change of control

• Disputed land title or significant environmental liability

• Fraudulent or inconsistent corporate records, or an inability to trace the source of ownership or key asset title


Frequently Asked Questions

1. Does a purchaser of shares inherit the target company's historical liabilities in Tanzania? Yes. Because the company remains the same legal person after a share acquisition, historical tax, litigation, employment and contractual liabilities generally transfer with it, which is why pre-completion due diligence is essential.

2. What is the current merger-notification threshold under the Fair Competition Act? TZS 3.5 billion, assessed against the combined assets or turnover of the merging parties, under the framework administered by the Fair Competition Commission.

3. Is a BRELA search enough to confirm a target company has no security over its assets? No. BRELA searches reveal registered charges, but not all forms of indebtedness. Loan agreements, shareholder loans, guarantees and finance leases should be reviewed separately, alongside a seller declaration on indebtedness.

4. Does acquiring shares in a Tanzanian company automatically transfer its land rights or business licences? No. Regulatory licences and land rights are generally tied to conditions in the underlying licence or right of occupancy, and a change of ownership can trigger separate consent, notification or eligibility requirements.

Conclusion
Due diligence in a Tanzanian share acquisition should not be treated as a document-collection exercise. Its purpose is to determine whether the purchaser should proceed, what price should be paid, what conditions should be satisfied before closing, and how residual risk should be allocated between the parties.
A purchaser of shares acquires not merely the company's assets and business, but the corporate vehicle together with its historical legal and commercial baggage. A robust due-diligence exercise should therefore combine corporate, share-title, beneficial-ownership, financial, tax, contractual, regulatory, competition, employment, IP, land, environmental, data-protection, litigation and insolvency review.

The best due-diligence question is not "Is the company registered?" It is: "If we acquire 100% of this company's shares tomorrow, what legal, financial, regulatory and commercial risks will we inherit on day one?" That question should drive the entire process.

This article is for general informational purposes and does not constitute legal advice. For due diligence support on a specific Tanzanian share or company acquisition, please get in touch with our corporate/commercial team.