Banking
January 2018
Briefing
Corporate Bonds
In this month’s Finance Briefing we review the legal
regime in place for Tanzanian corporate bonds, and in
particular, we focus on the regulatory aspects of issuing a
corporate bond to the public. We also focus on the role
of participating Tanzanian public institutions for
example the Capital Markets and Securities Authority
(CMSA), the Business Registration and Licensing
Agency (BRELA) and the Dar es Salaam Stock Exchange
(DSE).
The practice of companies issuing corporate bonds in
Tanzania has historically been uncommon, mainly
because the Tanzanian debt securities market is still
developing. It does however have a great deal of growth
potential. Government bonds continue to be the most
common type of debt instrument available in the
Tanzanian capital markets. We are seeing in the market
that raising capital solely through shareholders' equity or
debt financing may be difficult for companies operating in
sectors which are capital intensive for example the mining,
oil and gas or power sectors, and therefore raising funds
through investors in the public domain (capital markets)
is increasingly seen as an attractive means for securing
necessary funds without the direct involvement of existing
shareholders, financial or banking institutions.
Bonds and notes issued by a company are defined as
'securities' under the Capital Markets and Securities
Act, 1994 (the CMS Act). These are a type of debt
security where essentially the issuer (the company
looking to raise the funds) assures to repay with
interest at a later date the bondholders the amounts
extended to the issuer under the bond / notes. Like in
an ordinary loan arrangement, the bond can be issued
on a secured or unsecured basis.
Corporate bonds can either be publicly issued and
available to every investor trading on the stock
exchange at the DSE (public offering) or presented
privately to a select group of investors (private
placement). Part XII of the CMS Act along with the
CMSA's Guidelines for the Issue of Corporate Bonds
and Commercial Paper, 1999 (the Guidelines) cover
the steps for the issuance of corporate bonds through
public offerings.
The offer document or prospectus in which the bond /
notes are the subject matter of the offering must be
approved by the CMSA (in both public offerings and
private placements). The Guidelines refer to
requirements that must be met for the approval of
issuing corporate bonds such as, share capital, track
record, minimum issue lot, debt ratios, cash flow
projection, size of the issue, timing and the
announcement of the issue, etc. There are of course
corporate documents and financial information on the
issuer that must also be submitted to the CMSA
together with the offer document or prospectus – the
same applies for the DSE.
A copy of the approved offer document / prospectus
should ostensibly be registered at BRELA with the
Registrar of Companies, although clarity of the law
regarding the registration of the offer document /
prospectus at BRELA is somewhat lacking in the
Companies Act, 2002 (the Companies Act). The
Companies Act provides that an offer document must
state each matter it intends to offer. It shall also include
any reports that would be prescribed by the CMSA in
dealing with the issuance of corporate bonds. The offer
document must be signed by every person who is a
proposed director of the company / issuer or an agent
appointed in writing.
The offer document must be signed by every person
who is a proposed director of the company / issuer or
an agent appointed in writing.
There are of course complications that may arise in
dealing with more than one sector-sensitive authority in
such complex transactions, which is why it is important
for the prospective issuer to seek and obtain local
specialist advisers i.e. nominated adviser / investment
adviser, licensed bank, placing agents, brokers, accounting
and legal advisers to assist the issuer at each stage of the
offering. For example, an issuer could incur unnecessary
cost if it fails to meet any of the requirements for
corporate bond issuance for example, the Companies Act
provides that if an offer document is not registered at
BRELA but has been issued, the issuer would be liable to a
fine for every day it has failed to register the offer
document from the time the offer document was issued.
 The Companies Act does not specify the exact amount
of the fine, or the rate at which the fine would increase
each day. As of 2014, the Capital Markets and Securities
(Foreign Investors) Regulations, 2014 (the CMS
Foreign Investors Regulations) provide that foreign
investors are capable of purchasing securities from a
listed company or bonds from an issuer making a
public offer – such foreign investors can trade in
Tanzanian debt securities through a dealer or a broker.
The CMS Foreign Investors Regulations define a
foreign investor as follows:
1. with regards to a natural person, a foreign visitor
would be an individual who is not a citizen of
Tanzania;
2. in relation to a foreign body corporate, this is a
Further information
body corporate which does not have a Tanzanian
If you would like further information on any
issue raised in this update please contact: citizen as a majority shareholder, or a body
corporate which is not registered in Tanzania.
Peter Kasanda
Partner, Dar es Salaam Clyde & Co Tanzania's finance team has the legal
E: peter.kasanda@clydeco.com expertise to support entities / investors looking to issue
T: +255 767 850 054
a corporate bond in Tanzania or invest in the same,
Michaela Marandu and are here to respond to any legal questions you may
Senior Associate, Dar es Salaam
have as opportunities become available. Below is a
E: michaela.marandu@clydeco.com
T: +255 768 983 024 diagram showing (in summary form) the main steps
that would be taken by an issuer in a corporate bond
Tenda Msinjili
Senior Associate, Dar es Salaam
offering in Tanzania.
E: tenda.msinjili@clydeco.com
T: +255 768 983 016
Clyde & Co Tanzania
11th Floor, Golden Jubilee Towers
Ohio Street, PO Box 80512
Dar es Salaam, Tanzania

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CC011472 - January 2018