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Mistress wants my money

I had a long affair with a lady with whom I broke up recently. In return for her not telling anyone about our affair including my wife, we entered through our lawyers into a settlement agreement that I pay her Tsh 2.2M every month in addition to paying her medical insurance premium. In consideration the lady was to keep her mouth shut and stay in a different city. I have been paying her these amounts for the past 4 years and am now in deep financial crisis. She says that I have breached the agreement by not paying her and intends to sue me. How do I handle this? Have I not being overpaying her? UI, Dar

Our answer will address the issue of enforceability of the agreement you entered into not the fact that it is likely, when you get sued if you do, that your wife will find out which was the precise reason you entered into the agreement. It seems you entered into the agreement after being blackmailed and were under duress when you signed. It doesn’t matter if both your lawyers were involved. Also immaterial is the fact that you have been paying her for the past few years.

Our opinion is that the agreement is illegal in that it is against public policy and was entered into under duress after being blackmailed. The chances of the lady winning the case against you, assuming you have disclosed all material facts to us, are very low.

If you are sued, we recommend that you also file a counter claim against the lady to pay you the sums you have paid her over the last few years. So that you are not in a compromising position, you might want to consider informing your wife about this.

That is for you to decide and you should perhaps consider meeting a marriage counselor prior to disclosing this to your wife. The issue of adequacy of value does not come in as we believe your agreement was illegal from the outset. However Court’s will generally not go into the adequacy of a consideration.

Shareholders rich, company poor

There is a very large and successful company in Tanzania that has opened so called subsidiaries for each of its businesses. I supply goods to one of these subsidiaries which is always having difficulties paying. My question is twofold: how can the subsidiary be unable to pay the debt when its shareholders are very strong companies owned by very strong people. Secondly, can I directly claim my amount from the shareholders? TY, Dar

Your first question on why the subsidiary is unable to pay its debt is a question we cannot answer. It is more of an accounting issue that you should ask an accounting firm, Your second question is very interesting and we answer it below.

The shareholders of a company are distinct from the company itself meaning that the company has a distinct legal identity from the shareholders. The shareholders own the shares of the company not the assets- the assets are owned by the company. The shareholders are also generally not liable for the debt of the company as it is the company that has borrowed not the shareholders in their individual names. If you have ever borrowed, you will realize that the banks make the shareholders sign a personal guarantee, which is meant to make the shareholder liable for the debt of the company as they are normally not automatically liable.

In order for you to reach out to the shareholders and make the shareholders liable, you need to pierce the veil of incorporation. In order for one to be successful in piercing the corporate veil, one must show the following two prongs: that there is such unity of ownership and interest in the firm that the separate personalities of the corporation and shareholder no longer exist; and that the Court’s refusal to allow piercing would promote an injustice or sanction a fraud.

The application of the above test has proven to be anything but simple, and there are some important caveats and inconsistencies that are worth pointing out. There is no list of necessary and sufficient conditions to tie down this doctrine to determine what goes into the determination of the two prongs.

Some Courts have at times only used one of the two prongs. Factors taken into consideration to pierce the veil of incorporation include commingling of funds and other assets of the two entities (ie shareholder and company), the holding out by one entity that it is liable for the debts of the other, maintaining identical equitable ownership in the two entities, use of the same offices and employees, use of one as a mere shell or conduit for the affairs of the other, inadequate capitalization, disregard of corporate formalities, lack of segregation of corporate records, treatment by an individual of the assets of the corporation as his own and identical or significantly overlapping directors and officers. As to the second prong, the key appears to be proof of some form of bad faith motivation underlying the actions of the company.

A number of cases have offered the following clarifications as to what counts and doesn’t count as bad faith: a simple difficulty in enforcing a judgment or collecting a debt does not satisfy this prong, nor does the fact that the shareholder provide funds to a subsidiary for the purpose of assisting the latter in meeting its financial obligations, so long as it is not for the purpose of perpetrating a fraud.

Inequitable results are more likely to be found in situations where the corporate form is used to avoid the effect of a statute or regulation. By the same token, Courts are perceived to be more receptive in those contract cases where the alleged wrong involves some sort of fraud. Hence for you to be able to pierce the veil of incorporation and hold the shareholders liable for the debt of the company, you must satisfy some of the above. As stated before, piercing the veil and holding the shareholder liable for the debt of the company is not the easiest thing to do- your attorney can guide you further.

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Absence of transfer pricing regulations We are a company in Tanzania with a holding company in Europe.

The biggest challenge we face is that on transfer pricing, especially since these regulations don’t exist at the moment. In the absence of such regulations, what should we assume. Is there case law in this area? TG, Dar

Fortunately as we answer this question, the Income Tax (Transfer Pricing) Regulations 2014 have been published. These have been gazetted by the Minister for Finance under power of sections 33 and 129 of the Income Tax Act 2004 and are now in force. Should you wish a soft copy you can e mail us on info@fbattorneys.com and we can send it out to you. Apart from other regulations contained therein, you may want to pay particular attention to: Regulation 4(5) which states that a 100% penalty (based on underpayment of tax) shall be imposed on a person who contravenes this regulation; Regulation 5 talks of the transfer pricing methods to be applied; Regulation 9 construction of these regulations to be in manner consistent with the OECD/UN Model. However in the event of inconsistencies, the Income Tax Act and these Regulations will prevail; Regulation 12 address advance pricing arrangement that can be entered into after seeking approval from TRA. Your tax consultant can guide you further.

One pastor criticizing another

I am a follower of a certain prophet and we worship daily in a suburb of Dar es Salaam where our church is registered. Astonishingly, and without even a flflflicker courtesy, there is a nearby church’s pastor who has been giving sermons through his loudspeakers criticizing our mission and our pastor. Among the allegations are that we are all pretenders, our pastor used to be a leader of a gang in Dar es Salaam, our belief is nothing but geared to con the nation and that we shall all not enter into heaven. We have all along been praying for him so that he may stop but this he hasn’t and this has reached boiling point now. Apart from beating him up, which is an option I am considering, is there a legal way we can deal with the situation? ID, DSM

To being with our country is one country in Africa whereby all religions live in harmony with each other. It is a model that other African countries are learning from and such utterances are taken very seriously by the government as it can lead to disharmony. Bearing the above in mind, the Penal Code specifically provides that any person who with the deliberate intention of wounding the religious feelings of any person, utters any word, or makes any sound in the hearing of that person or makes any gesture in the sight of that person or places any object in the sight of that person, commits an offence and is liable to imprisonment for one year. What you have told us likely falls within the ambit of the foregoing provisions hence punishable and we advise you to report the commission of the offence to the police station for their further steps. If you take the law into your hands, as you seem to propose to do, please note that you will end up in jail and the pastor might continue doing what he is doing. On personal attacks of character, the proper avenue is to pursue your recourse by filing a defamation suit by all those who have been injured by the statements. We advise you to continue enjoying your rights of worship as guaranteed by the constitution.

Death after one year

Two years ago,I beat my wife up badly because of an argument we had. She was admitted in hospital where I was informed that she had some fractured ribs and injury to the brain and I ensured she got the best medical care. However immediately after the incident, I was charged, pleaded guilty and imprisoned for six months. After she got better I did not see her ever since until ten months after the incident when she was found dead in her bed. Few days ago the police showed up at my door and took me to the police station for questioning on the grounds that I am the one who caused her death due to the beating. I am now informed that they intend to charge me with murder. As far as I am informed, she went back to work and was fine. I hadn’t seen her from the date she left and never came to visit me in prison. How can I be held liable for murder in such circumstances? Please guide? LA, Arusha

The Penal Code provides that, “a person is not deemed to have killed another if the death of that person does not take place within a year and a day of the cause of death.” Meaning, it wouldn’t be murder if your wife passed away 12 months and 1 day from the date of the physical abuse you inflicted upon her. Since you state that your wife passed away only 10 months from the date of the incident, then the police have grounds to charge you with murder. Simply because your wife was better, was released from hospital and had gone back to office, doesn’t necessarily mean that the injuries you caused her did not lead to her early death. The police must have performed a postmortem on the body of your wife and may have reasonable grounds to charge you under the said provision. You should seek legal assistance.

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