Share Premiums- Mind How You Keep And Use Them

The old Companies Act had no provisions on share premium.

It was perfectly legal for companies established in Tanzania before the entry of the new Companies Act to credit share premium to profit and loss accounts so as to make them available for paying dividends.

Under the new Companies Act that is prohibited. With the entry into force of the new Companies Act No 12 of 2002 (the Act), share premium is to be credited to a special statutory reserve called "the share premium account" to keep them distinct from profits and revenue reserves.

The application of the rules governing the reduction of capital apply to share premium. This means that share premium may not be distributed to shareholders without a special resolution passed by a general meeting of the company and the approval of the court obtained.