By Pooja Mahendra Karia
It is therefore vital to acknowledge and understand the laws and regulations that govern trust law in Tanzania and the recent amendments to the said laws.
Trusts are generally advantageous since they allow the settlor to distribute the assets as they wish even after one dies and helps avoid actions from creditors and lawsuits in case of testamentary trust.
For a living trust it helps avoid probate, helps protect privacy, and provides certainty and peace of mind. For trusts within associations and organisations, a governing document like a constitution governs the relationship and administration of the trust, and there remains an efficient structure for compliance and administration.
Definition of key terms Several terms are important in understanding trust law: Trust means a legal relationship created by personal acts, by an order of the court or operation of the law, when specified property or interests are placed under the control and management of a trustee or trustees for the benefit of another party or parties, called a beneficiary or beneficiaries, or for purposes set out in the document creating the trust.
Settlors are persons who settles property on trust law for the benefit of the beneficiaries. He is also known as the grantor or donor of the said property. He creates and funds the trust. He legally transfers the asset or property to the trustee for the trustee to handle and manage it for the beneficiaries. A settlor is commonly found in living trusts and testamentary trusts.
A living trust is created by a person who places his assets and properties into the hands of trustees so that they can manage the properties for him while he is still living. A testamentary trust is found in the will of a person and only comes into existence after the person’s death stipulating how the trustees should manage and bequeath his property after his death.
A beneficiary is a person for whom the trusts are created. He/She is entitled of benefits from the trust arrangement. In trusts of organisations and associations, the beneficiaries must be a definite segment of the public.
Trustee means a person who holds, controls and manages property or any other interests for the benefit of a beneficiary or beneficiaries or for purposes specified in the document creating the trust Trust law in Tanzania is governed by the Trustees Incorporation Act Cap 318 ; and Trustees Incorporation Rules, 1956.
This Act has been amended from time to time over the years. This article focuses on the recent amendments made in year 2019 and 2020.
A trustee or trustees appointed by a body or association of persons bound together by custom, religion, kinship or nationality, or established for any religious, educational, literary, scientific, social or charitable purpose that own property in trust are supposed to compulsorily register under the Trustees Incorporation Act of Tanzania if there are not registered under any other law.
The list of properties in this context includes (As amended in 2020): land, finance, shares, monies, securities, stock or other property. Once registered, such trustees become a body corporate capable of suing and being sued in the corporate name, would have perpetual succession and a common seal, and can own and dispose of properties.
The law provides that every ‘body corporate’ registered under the Act has to have the words ‘registered trustees’ in their name. Most religious, educational, social and charitable institutions in Tanzania have constitutions that provide for election of trustees in their organisations.
And most of these organisations own various properties in Tanzania. The trustees elected by these organisations are therefore compulsorily registered and incorporated under the Trustees Incorporation Act.
The said registration is carried out by the Registration, Insolvency and Trusteeship Agency (RITA). This article focuses on the recent amendments made on the Trustees Incorporation Act and other laws videThe Written Laws (Miscellaneous Amendments) (No.3) Act, 2019 and (The Written Laws (Miscellaneous Amendments) Act, 2020 that affect Trust Law in Tanzania.
Amendments in 2019: The new amendments vide the Written Laws (Miscellaneous Amendments) (No.3) Act, 2019 amends several laws that affect trust law in Tanzania. Through this amendment laws regulating different entities in Tanzania such as companies, non-governmental Organisations, Societies, trusts, and sport associations have been amended with a major aim to provide clear definitions of each of these respective entities as shown below: (The author has only focused on entities that directly relate to trusts)
a) The amendment to The Non-Governmental Organisation Act that defines “Non-Governmental Organisation” also known by its acronym “NGO’’ and which includes Community Based Organisation (CBO) means a voluntary grouping of individuals or organisations which is non-partisan or non-profit sharing established and operates for the benefit or welfare of the community or public, organised at the local, national or international levels for the purpose of enhancing or promoting economic, environmental, social or cultural development or protecting environment, good governance, law and order, human rights” and does not include among others a trust formed and registered under the trustees incorporation Act and societies formed and registered under the Societies Act.
The amendment further provides that an organisation registered under the NGO Act that does not fit to be an NGO as per theabove definition will be deregistered two months after the coming into operation of the amendment. However, one may apply to the respective minister for extension of time within which the association may shift to the appropriate registry.
b) The amendment to the societies Act that defines: “society” means a nonpartisan and non-political association of ten or more persons established for professional, social, cultural, religion or economic benefits or welfare of its members, formed and registered as such under this Act”, but does not include among others trusts formed and registered under the Trustees Incorporation Act.
The amendment further provides that any association that is registered under the Societies Act and which does not fit to be a society as per the above definition will be deemed to be deregistered two months after the coming into operation of the amendment. However, one may apply to the respective minister for extension of time within which the association may shift to the appropriate registry.
c) The amendment to the Trustees Incorporation Act defines: “Trust” means a legal relationship created by personal acts, by an order of the court or operation of the law, when specified property or interests are placed under the control and management of a trustee or trustees for the benefit of another party or parties, called a beneficiary or beneficiaries, or for purposes specified under section 2(1), and excludes: It is important to note that the amendment to the Trustees Incorporation Act does not go further to stipulate on the procedure for deregistration or cessation or any other effect of an association to be a trust where it does not fit in the above definition.
It is very clear from the above definitions that an organization or association cannot be registered at various registries.
These amendments should be keenly looked at religious, cultural and charitable organisations, which according to the author’s experience have been registered at two or three registries; either because their governing constitution provide for such registrations or due to their organisation structures that provide for trustees, management committees and sub-committees.
It is advisable at this juncture that such organisations amend their constitutions and organisation structures to comply with the law. Such compliance is necessary to avoid deregistration or illegality of acts of the respective communities.
Associations and organisations should call meetings of their members and discuss which exact entity they belong to and then effect changes to their constitution and further register or de-register with the respective registries. Amendments in 2020: The new amendment to the Trustees Incorporation Act vide The Written Laws (Miscellaneous Amendments) Act, 2020 provides that the Administrator General who is also the RITA Chief Executive Officer (CEO), may before or after a trust is incorporated require disclosure of the names of settlers and beneficiaries of a given trust.
Although it is not a compulsory requirement, we would advise all the trusts incorporated under the Trustees Incorporation Act to prepare and keep with them an updated list of their settlors and beneficiaries since the amendment seeks to recognise settlers and beneficiaries.
Secondly, the new amendment extends the list of properties that an incorporated trust can hold, acquire, transfer, convey, assign and demise.
Before the amendment, an incorporated trust could only hold, acquire, transfer, convey, assign and demise landed property or interest therein. The list now includes: finance, shares, monies, securities, stock or other property.
This addition thus allows incorporated trusts to transact the additional properties in the furtherance of the objectives of their trusts.
Amendment vide the Finance Act 2020. The Finance Act amends the Trustees Incorporation Act to enable the obtaining of information relating to beneficial owners under a trust for the purposes of identifying beneficial owners. It requires any trustee(s) or any person who holds property in trust to: provide particulars of beneficial owners in writing in the application for registration as a trust, signed by persons making the application.
These particulars should include:
(a) full name and any former or other name;
(b) date and place of birth;
(c) telephone number;
(d) nationality, national identity number, passport number or other appropriate identification and proof of identity;
(e) residential, postal and email address, if any;
(f ) place of work and position held;
(g) nature of the interest including the details of the legal, financial, security, debenture or informal arrangement giving rise to the beneficial ownership; and
(h) oath or affirmation as to whether the beneficial owner is a politically exposed person or not.”
According to the amendment, “beneficial owner” means a natural person:
(a) who directly or indirectly ultimately owns or exercises substantial control over an entity or an arrangement;
(b) who has a substantial economic interest in or receives substantial economic benefit from an entity or an arrangement directly or indirectly whether acting alone or together with other persons;
(c) on whose behalf an arrangement is conducted; or
(d) who exercises significant control or influence over a person or arrangement through a formal or informal agreement;”.
“An arrangement” as per the Income Tax Act of Tanzania means: Includes an action, agreement, course of conduct, dealing, promise, transaction, understanding or undertaking, whether express or implied, whether or not enforceable by legal proceedings and whether unilateral or involving more than one person; “A politically exposed person” according to the Anti-Money Laundering Act means: A foreign individual entrusted with prominent public functions including heads of state or government, senior politicians, senior government, judiciary or military officials, senior executives of state owned corporations or agencies.
The Amendment further requires a trust to submit to the administrator general records of non-resident beneficiary and beneficial owner of the trust. This amendment stands to combat a number of issues.
Knowing who ultimately controls and benefits from a trust, company etc. is vital in fighting corruption and illicit financial flows. It is central in enhancing the role of transparency, the integrity of the financial sector and the law enforcement efforts.
The example below demonstrates how use of legal entities like trusts and companies obscures the identity of a beneficial owner.
*Source: IDB & OCED, “A Beneficial Ownership Implementation Toolkit” The disclosure of beneficial ownership helps overcome anonymity. Anonymity enables many illegal activities such as tax evasion, corruption, money laundering, and financing of terrorism. The author opines that trusts that are already registered should provide particulars of beneficial owners including records of foreign beneficiary and beneficial owner in order to ensure maximum compliance with the above amendments.
• Pooja Mahendra Kar - ia is a legal counsel with E & E International Consultants.