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Resolving Insolvency in

Tanzania

Below is a description of the time, cost and outcome of the most common insolvency proceeding in each economy under the case study assumptions, as well as the strengths and weaknesses in existing insolvency regulations in four areas: commencement of proceedings, management of debtor’s assets, reorganization proceedings and creditor participation.

This information was collected as part of the Doing Business project, which measures and compares regulations relevant to the life cycle of a small- to medium-sized domestic business in 190 economies. The most recent round of data collection was completed in June 2016.

Compare Tanzania to 189 other economies.

  • Indicator Explanation Answer
    Recovery rate (cents on the dollar) 21.1
    Proceeding It would be in Bizbank's best interests to start a receivership proceeding (Section 405(c) of the Companies Act 2002) under the mortgage with a view to ultimately securing the sale of Mirage in order to recoup Bizbank's loan. receivership
    Outcome The hotel will stop operating and Mirage assets will be sold piecemeal by the BizBank appointed receiver as based on the current market, it is hard to sell the business as a going concern. piecemeal sale
    Time (in years) The receivership procedure takes approximate 3 years until BizBank is repaid some or all of the money owed to it. The delay is largely due to the possible delaying tactics adopted by Mirage. When the BizBank appointed administrative receiver tries to sell the assets, it is likely that Mirage would file for an injunction at the commercial division of the high court where no exclusive jurisdiction exists to deal with the insolvency case. Then pre-conference trial will set up the speedy track and the mediation period which takes about 3 months. After mediation elapses, a final pre-trial conference (1 month) is established. This follows the first hearing until the final judgment, and the whole process take approximate 2 years taking into consideration of adjournments and possible delaying tactics. Execution order will be granted by the court after 30 days granted to the losing party to appeal have elapsed, and the execution proceedings will take approximately 2 months until BizBank receives the sale proceeds. 3.0
    Cost (% of estate) The costs associated with the case would amount to approximately 22% of the value of the debtor's estate. Cost incurred during the entire insolvency process mainly include court or government agency fees 3%), attorney fees (3%), insolvency representative or receiver fees(3%), fees of accountants, assessors, inspectors and other professionals (3%), fees of auctioneers (7%), and fees of service providers and/or government levies (2%). 22.0
    Answer Score
    Strength of insolvency framework index (0-16) 9.5
    Commencement of proceedings index (0-3) 3.0
    What procedures are available to a DEBTOR when commencing insolvency proceedings? (a) Debtor may file for both liquidation and reorganization 1.0
    Does the insolvency framework allow a CREDITOR to file for insolvency of the debtor? (a) Yes, a creditor may file for both liquidation and reorganization 1.0
    What basis for commencement of the insolvency proceedings is allowed under the insolvency framework? (c) Both (a) and (b) options are available, but only one of them needs to be complied with 1.0
    Management of debtor's assets index (0-6) 4.0
    Does the insolvency framework allow the continuation of contracts supplying essential goods and services to the debtor? No 0.0
    Does the insolvency framework allow the rejection by the debtor of overly burdensome contracts? Yes 1.0
    Does the insolvency framework allow avoidance of preferential transactions? Yes 1.0
    Does the insolvency framework allow avoidance of undervalued transactions? Yes 1.0
    Does the insolvency framework provide for the possibility of the debtor obtaining credit after commencement of insolvency proceedings? Yes 1.0
    Does the insolvency framework assign priority to post-commencement credit? (c) No priority is assigned to post-commencement creditors 0.0
    Reorganization proceedings index (0-3) 0.5
    Which creditors vote on the proposed reorganization plan? (a) All creditors 0.5
    Does the insolvency framework require that dissenting creditors in reorganization receive at least as much as what they would obtain in a liquidation? No 0.0
    Are the creditors devided into classes for the purposes of voting on the reorganization plan, does each class vote separately and are creditors in the same class treated equally? No 0.0
    Creditor participation index (0-4) 2.0
    Does the insolvency framework require approval by the creditors for selection or appointment of the insolvency representative? No 0.0
    Does the insolvency framework require approval by the creditors for sale of substantial assets of the debtor? No 0.0
    Does the insolvency framework provide that a creditor has the right to request information from the insolvency representative? Yes 1.0
    Does the insolvency framework provide that a creditor has the right to object to decisions accepting or rejecting creditors' claims? Yes 1.0