TRACE Associates Limited & Others vs Rosemary Tryphone (Civil Appeal No. 435 of 2023) [2025] TZCA 848 (11 August 2025)

IN THE COURT OF APPEAL OF TANZANIA AT DODOMA (CQRAM: LEVIRA, J.A., MASHAKA, 3.A. And NANGELA. J.A /1 CIVIL APPEAL NO. 435 OF 2023 TRACE ASSOCIATES LIMITED ..... . ..................... . ...... 1 st APPELLANT PIUS KASHAIZA BENGESI ....... . ......... . .......................2N DAPPELLANT ALBIN EVARIST . ....................................................... 3 R DAPPELLANT VERSUS ROSEMARY TRYPHONE .......... . .................................. RESPONDENT (Appeal from the decision of the High Court of Tanzania, Commercial Division at Dar es Salaam) (Agatho, :n dated the 5th day of May, 2023 in Misc. Commercial Case No. 49 of 2022 JUDGMENT OF THE COURT 25th July & 11th August, 2025 MASHAKA. J.A.: Rosemary Tryphone, the respondent, is the daughter of the deceased Tryphone C. Rwechungura and a founding shareholder of the 1s t appellant company, incorporated in 1997 with authorized share capital ofTZS. 500,000/=, divided into 1,000 shares at TZS. 500/= each. The 1s t appellant was founded by three shareholders; the respondent held 200 shares; Tryphone C. Rwechungura held 450

shares, and Mr. Christopher M. Lwoga held 350 shares. They subscribed to the Memorandum and Articles of Association of the 1s t appellant. At its incorporation, the 1s t appellant's directors were: Pius K. Bengesi, Tryphone C. Rwechungura, and Albin Evarist. The founding shareholder and director Tryphone C. Rwechungura passed away on 12th December 2002. Following his death, the family held a meeting to settle administration of his estate, including appointing an Administrator. On 17th March 2003, Ms. Verediana Rwechungura (the deceased's wife) was appointed Administratrix of his estate. Before the formal appointment of the Administratrix Ms. Verediana Rwechungura on 17th March 2003, the 1s t appellant's Board had invited her to attend a Board meeting which was held on 29th January 2003. In that meeting, Ms. Verediana Rwechungura had sought for clarifications on the 1s t appellant's business performance, share transmission, and dividend payments, but the 2n d appellant, Managing Director and other directors were evasive in providing the information. The respondent had been studying and working abroad, hence she relied on updates from the Administratrix. It is alleged that

in June 2022, the 2n d appellant claimed that the respondent and her late father had transferred their shares to him in 1998 and asserted that the respondent was no longer a shareholder or director. The respondent denied ever transferring her shares or being lawfully removed as a director. She also had no knowledge of any lawful transfer of her late fathers shares. The respondent conducted an official search on 22n d July 2022 at BRELA and it confirmed that the Directors are Pius K. Bengesi, Tryphone C. Rwechungura (the deceased), and Albin Evarist, while the shareholders were Christopher M. Lwoga holding 350 shares, Tryphone C. Rwechungura holding 450 shares, and Rosemary Tryphone holding 200 shares. The records from BRELA Online Record System (ORS) contradicted the 1s t appellant's 2017 Statutory Return, which showed altered shareholding of shares and directorship. She also pointed out that there were no changes in the Memorandum and Articles of Association (the MEMARTS) (exhibit PI) and, that, BRELA ORS showed no changes to the ownership structure of the 1s t appellant company. It was the respondent's contention that she was never informed of any changes, and no proper transfer documents (Form 210b) were filed at BRELA.

The respondent claimed that there was non-compliance by the 1s t appellant as it has operated for 20 years without proper filing of records including failure to submit the annual returns from year 2017 to 2021, no proper notification of changes in directors and shareholders, no official meetings of the directors or members were held. The respondent instructed Rex Advocates in 2020 to settle the matter amicably by writing a letter to the 1s t appellant on 29th July 2022, requesting for audited/management account for the years 2002-2022 and a meeting was scheduled on 10th August 2022 to resolve the issues. The 2n d appellant rescheduled the meeting to 20th August, 2022 citing travel commitments. On the rescheduled date 22n d August, 2022 the 2n d appellant failed to attend or even communicate, hence, incapacitated an amicable resolution. The respondent decided to file a petition, Miscellaneous Commercial Case No. 49 of 2022 contending that the 2n d and 3r d appellants are deliberately concealing the 1s t appellant's true and accurate business status. The respondent claimed that the purported share transfers and directorship changes were done illegally, without her knowledge or consent and the 1s t appellant company had violated statutory compliance requirements for years. The respondent filed

the petition under section 233 (1) and (3) (a), (b) of the Companies Act 2002, CAP 212 of the Revised Laws of Tanzania seeking for declaratory order that she was the rightful shareholder and member of the 1s t appellant company, that the 1s t appellant's company statutory records be regularized and prayed for costs for the petition. The appellants, in their joint reply to the petition, conceded that the respondent was a subscriber to the MEMARTS of the 1s t appellant but on 11th March, 1998 at a consideration of TZS. 100,000/=, the respondent transferred her 200 shares in the 1s t appellant company to the 2n d appellant through a Deed of Transfer (annexure T-2) and it was presented for registration at BRELA. They further asserted that, upon the demise of Tryphone C. Rwechungura, on 25th October, 2006 the administrator of his estates transferred the 450 shares of the deceased to the 3r d appellant at a consideration of TZS. 225,000.00 each as seen in the Deed of Transfer (annexure T-l), From that date the deceased ceased to be a member of the 1s t appellant and the administratrix never participated in any affairs of the 1s t appellant for almost 16 years until the respondent surfaced in 2022.

During trial, the petition was heard by way of written submissions. The respondent raised three issues; one, the status of the respondent in the 1s t appellant company; two, whether there is an act of unfair prejudice committed against the respondent and; three, the fate of the shares held in the 1s t appellant company by the late Mr. Tryphone C. Rwechungura, who was a shareholder and Director. The High Court held that there was no any evidence tendered by the appellants to prove the transfer of shares nor share transfer deed submitted to BRELA for registration. Consequently, if there was any change concerning the structure of the 1s t appellant the same ought to have been reflected in the BRELA ORS. Dissatisfied, the appellants preferred this appeal founded on three grounds of complaint, however during hearing of the appeal, Mr. Shayo, learned counsel representing the appellants prayed to abandon grounds 2 and 3 of appeal and remain with ground 1 of appeal that:

1. The trialJudge erred in law and fact when he ignored the Deed o f Transfer marked Annexure T-2 which is evidence that on 11/03/1998 the respondent transferred to

the 2n d appellant her 200 shares in the 1st appellant company. In support of the appeal, Mr. Shayo adopted the written submissions and list of authorities filed earlier and argued that the trial Judge ignored the Deed of Transfer marked exhibit D2/Annexure 1-2 dated 11th March 1998 which was tendered in evidence that the respondent transferred her 200 shares in the 1s t appellant company to the 2n d appellant. Mr. Shayo contended that the respondent submitted the document RK - 4 the annual returns she got from BRELA and it revealed that the respondent was no longer a shareholder. Concerning the letter marked RK - 5, which stated that the respondent was still a shareholder of the 1s t appellant company on 22n d July 2022, it was his contention that the trial court wrongly relied on the said document because the person who signed the letter was not called to testify and it did not come from BRELA. When probed further by the Court whether they challenged the tendering of the document marked RK-5 in evidence, Mr. Shayo submitted that they did not challenge the same. On the part of the respondent, she was represented by Messrs. Julius M. J. Kamote and James Ndumbaro, both learned counsel and adopted the written submissions and list of authorities which were

earlier filed to form part of their oral submissions. Mr. Kamote addressed us in opposing the appeal and contended that under the Companies Act, the MEMARTS of the 1s t appellant were registered accordingly and binding upon the company and its members. Section 15 (a), (b) and (c) of the Articles of Association provides for the procedure to be followed when a shareholder intends to sell or transfer shares. It was his contention that the appellants did not observe and implement the dictates of their Articles of Association and not shown if they ever filed the transfer documents with BRELA. At a certain period of time, the 1s t appellant was reminded to follow the procedure regarding filing annual returns in accordance with the law. It was emphasized by Mr. Ndumbaro who also addressed us that the letter marked RK - 5 is a genuine letter from BRELA. They prayed to the Court to dismiss the appeal. In rejoinder, Mr. Shayo was in agreement with the respondent's submission which he called it a historical background. He contended that the BRELA ORS was established in the year 1998. Also, he conceded that there was no certificate of shares issued after the sale of shares. It was his submission that though they recognized that the letter marked RK - 5 was a genuine letter from BRELA, it did not

acknowledge the changes of the 1s t appellant and its updated annual returns which were filed by the appellants. Having heard the submissions by parties on the single ground of appeal and gone through the record of appeal before us, the issue for determination is whether there was any valid transfer of shares of the respondent to the 2n d appellant. As a first appellate court, this Court has power under rule 36 (1) of the Court of Appeal Rules, 2009 (the Rules) to revisit and re evaluate the entire evidence in an objective manner and come up with its own finding of fact. See, Leonard Dominic Rubuye t/a Rubuye Agrochemical Supplies v. Yara Tanzania Limited (Civil Appeal No. 219 of 2018) [2022] TZCA 419 (13 July 2022). The position of transferring shares in a company is well settled that it has to be in compliance with the Articles of Association and the Company Act. In dealing with a similar situation, the Court in David Joseph Mahende v. Afriscan Group (T) Ltd (Civil Appeal No. 200 of 2016) [2025] TZCA 25 (18 February 2025) held to that effect. Firstly, in the instant appeal in terms of article 6 (c) the Articles of Association of the 1s t appellant, it states that it is a private limited

company and the right to transfer shares is restricted in the manner hereinafter prescribed which is under the heading Transfer of Shares. The transfer of shares is regulated by a procedure agreed upon by the shareholders in the Articles of Association particularly under Article 15 which provides: "TRANSFER OF SHARES 15. The directors may in their discretion and without assigning any reason thereof refuse to register the transfer o f any shares to any person whom it shaii in their opinion be undesirable for any reason whatsoever to admit to membership. Subject to articles 2 and 3 hereof the right to members to transfer their shares shall be restricted as follows: (a) No share shall be transferred to a person who is not a member so long as any member or any person selected by the directors as one who it is desirable in the interest of the company to admit to membership. (b) Every share holder or trustee in bankruptcy or any person who may desire to sell or transfer any such shares and every personal 10

representative o f the deceased shareholder shall give notice in writing to the directors that he desires to make such sale or transfer such notice shall constitute the board o f directors o f the company as his agent for the sale o f such shares to any member or members o f the company at a price to be agreed upon between the party giving such notice and the board o f directors or in case o f difference to be determined by the auditor o f the company, (c) Upon price o f such shares being agreed upon or determined as per clause (b) above , the board o f directors shall forthwith given notice to such share holder other than the shareholder desiring to sell or transfer the said shares stating the number and price o f such shares, inviting the person to whom notice is sent to state within twenty-one days from the date o f such notice. The board o f directors shall apportion such share amongst the shareholders (if more than one) who shall have expressed their desire to purchase the same and as far as may 11

be prorate according to the number o f shares already heid by them respectively, or if there be only one such shareholder the whole o f shareholder shall be obliged to take more than the maximum number o f such shares stated in his answer to the said notice. Upon such apportionment being made or such one shareholder, notifying his intention to purchase as the case may be. The person (party) desiring to sell or transfer such shares shall be bound upon payment o f the said price to transfer the shares to the respective shareholder or to the single shareholders who shall have agreed to purchase the same " As we gleaned at page 194 of the record of appeal, exhibit D2/annexure T-2 concerns the transfer of 200 shares of the respondent to the 2n d appellant for a consideration of TZS. 100,000.00 each on ii<* March 1998. Can we positively say that this annexure T-2 alone suffices to prove that the respondent had sold her shares to the 2"“ appellant? Let us begin with the complaint by the appellants that the trial court had ignored annexure T-2. It is our 12

view that the trial court did not ignore annexure T-2 because the trial Judge at page 476 of the record of appeal referred to the share transfer document which is annexure T-2 and held that if there were changes in the shareholding structure then it should have been reflected in the BRELA ORS, which, we equally find that is the correct position. Under the Companies Act, the transfer of shares is governed by both statutory provisions and the 1s t appellant company's own Articles of Association. Section 74 of the Act provides that shares or interest of any member in a company shall be movable property transferable in manner provided in the Articles of the Company. Thus, this provision confirms that the articles of association primarily govern the share transfer. Upon perusing the Articles of Association, article 15 provides for the transfer of shares as alluded to earlier. After such transfer, it is a requirement of the law that the deed of transfer has to be delivered to the company for registration and such transfer is not valid unless it is registered pursuant to section 77 of the Act and thereafter in terms of section 79 of the Act, the transferor of any share or interest in a company shall enter in its register of members the name of the transferee in the same manner and subject to the conditions as if the application for the entry were

made by the transferee. Thus, once the transfer is complete, the name of the transferee is required to be registered in the register of members. With that simple procedure stipulated in the law, apart from annexure T-2 alleging that the respondent transferred her shares to the 2n d appellant, there is no any other evidence to support the said transfer. It is worthy to take note that there is no other document to ascertain that the procedure envisaged under article 15 of the Articles of Association was followed before the so-called transfer of shares. If the deed of transfer was valid in 1998, immediately after the incorporation of the 1st appellant in 1997 while the founding shareholder and director was still alive, there is no evidence adduced on minutes of a Board meeting to discuss such matters of interest concerning a founding shareholder. Nonetheless, if there is any such evidence it ought to be redundant by annexure RK-5 which is the official search from BRELA ORS which confirmed that the Directors and Shareholders of the l* appellant had not been changed as there was no any new member registered. The argument advanced by the appellants that there was a system failure on the BRELA ORS lacks a foundation. The respondent had pointed out that there were no changes in the Memorandum and

Articles of Association (exhibit PI) and that the BRELA records showed no alterations to the ownership structure of the 1s t appellant. Since the exhibit D2/annexure T-2 shows that the respondent transferred her shares way back in 1998 and the official search was conducted in the year 2022, it is doubtful why it took that long for the 1s t appellant to take any initiative to substitute the name of the respondent with that of the 2n d appellant and be reflected in BRELA ORS if indeed there was a valid transfer of shares. We hold that the entire process surrounding the Deed of Transfer of shares was fatally flawed due to the noncompliance with the Articles of Association, which govern the transfer of shares, and as such, the transfer of the 200 shares cannot be considered legally binding. In David Joseph Mahende v. Afriscan Group (T) Ltd (supra), the Court had this to say: We say so because if there is an instrument governing the company's operation , such as a Memorandum and Articles o f Association, which are like the constitution o f the company\ conforming to what has been provided is a must and not an option, .... unless otherwise stipulated."

After evaluating the evidence and considering the arguments presented, we are of the finding that the alleged transfer of shares violated the procedural requirements outlined in the 1s t appellant company's Articles of Association hence making the deed of transfer of the respondent's 200 shares to the 2n d appellant invalid, not binding, and unenforceable. We find there is no need to fault the reasoning of the trial court. For the foregoing reasons, this appeal has no merit. Thus, we dismiss it with costs. DATED at DODOMA this 8th day of August, 2025. M. C. LEVIRA JUSTICE OF APPEAL L. L. MASHAKA JUSTICE OF APPEAL D . J. NANGELA JUSTICE OF APPEAL Judgment delivered this 11th day of August, 2025 in the presence of Ms. Bernabeta Shayo, learned counsel for the Appellant and Mr. Julius Kamote, learned counsel for the Respondent, is hereby certified as a true copy of the original. 16