business forms in uganda

8/3/2019 Business Forms in Uganda

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RICHARD WEJULI WABWIRE



The distinct forms through which one can conduct business in

Uganda are;

Incorporated/Registered Company under the Companies Act

Statutory Companies

Trusts (Trustees incorporation Act)

NGOs

Partnerships

Sole Trader

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The Companies Act, Cap 110 of the Laws of Uganda;

Any seven or more persons, or where the company to be formed will

be a private company, any two or more persons, associated for any

lawful purpose may form an incorporated company, with or without

limited liability.

A company incorporated under the Act is regarded as a separate

entity from its members.

can sue and be sued, own property, operate a bank account in its

own name

The death, bankruptcy , mental infirmity or retirement of its

member does not affect its continuity.3



Unlimited Company

The liability of the members is not limited,

in the event of winding up, the members may be called upon to

pay to the full extent of their assets to meet the companies

liabilities.- very rare form of companies.

A limited Company may re-register as unlimited and vice versa

provided that where an unlimited company converts, the

liabilities prior to change are not extinguished.

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Company Limited by Guarantee

Liability of the members is limited to the extent of amount that

the members undertake (guarantee) to pay in the event of it

being wound up.

May or may not have a share capital- usually not

Must register its memorandum & Articles of Association

Must state the number of members with which it proposes to beregistered (increase beyond registered number must be brought

to attention of Reg. within 14 days)

▪ e.g. clubs, churches, NGOs

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Limited Company (Limited by Shares)

The members are liable for liabilities of the company to the

extent of their respective shareholding, in the event of the

company winding up.

Most Companies in Uganda are limited liability

companies (limited by shares)

A Limited liability company can be either;

A Private Company or

A Public Company

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A "Private Company “ is one which by its articles;

restricts the right to transfer its shares;

limits the number of its members to fifty,

prohibits any invitation to the public to subscribe for any shares

or debentures of the company.

Examples of limited liability companies▪ Eskom, Coach Africa, Century Bottling Company, Centenary Bank,

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A Private Company will cease to be treated as such and

will be regarded as a Public Company if ;

it fails to restrict transfer of its shares

fails to limit it membership to 50 members

invites the public to buy its shares

amends its Articles to exclude provisions that characterize a

private company.

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A Public Company is one that does not have the

restrictions imposed on a private company. i.e. it;

allows for transfer of its shares

has no limit to maximum number of membership.

may invite the public to buy its shares

Expressly states in its Articles that it is a Public Company

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Currently, there are some Public Companies whose shares are

available for sale/purchase (i.e. Listed Companies)on the

Uganda Securities Exchange

DFCU Bank, BATU, EABL, UG-CLAYS

Listed Companies are in addition to the Companies Act also

subject to the Uganda Securities Exchange Listing Rules.

The Listing Rules stipulate compliance requirements for as

long as the company or its securities remain listed on the

Uganda Securities Exchange.

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A Company comes into legal existence upon issue of a Certificate of

Incorporation.

The Certificate is issued upon compliance with requirements of the

Companies Act by filing the following documents (+ fees) with the

Registrar of Companies (Uganda Registration Services Bureau);

Memorandum and Articles of Association

Statement of Nominal Capital

Statutory Declaration of compliance with requirements of the Companies Act.

Particulars of Directors

Written consent of persons to act as directors (pubic companies)

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The Certificate of incorporation is conclusive evidence that the

company has come into existence.

A Private or Public Company without a share capital (e.g. NGOs)

may commence business immediately upon receipt of a Certificate

of incorporation

A Pubic Company having a share capital must obtain a Trading

Certificate in order to commence business.

A listed Public company must, in addition, comply with Capital

Markets Authority and Uganda Securities Exchange requirements.

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This entails Companies set up by Government through Acts of

Parliament to run specific undertakings e.g.

NFA Act- National Forestry Authority

NEMA Act- National Environmental Authority

PPDA Act- Public Procurement & Disposal Authority

UWA Act- Uganda Wildlife Authority

Water Act etc- National Water & Sewerage Corporation

Administration of Parliament Act- The Parliamentary

Commission.

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The objects for which they are set up, their governance and

management structure are stipulated in the Act creating them.

Difference between Statutory/Public Corporations and Public

Companies

Statutory corporation have no shareholders to subscribe to their

capital

Usually no profits/dividends are to be distributed

All gains/profits are usually ploughed back in the corporation’s

ventures or remitted to wider public use through Government’s

Consolidated Fund

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All Companies- whether limited, public, private, unlimited,

Statutory have Directors at the apex of their governance structure.

Every Public company must have at least two directors, and a

Private Company at least one Director

Directors are either;

named/appointed by the promoters at inception and

subsequently, in accordance with the Articles of Association or, Appointed in accordance with provisions of the Act creating the

Corporation

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Every Company must have a Secretary, and a sole director cannot

be the Secretary as well.

Directors are agents of the company with powers and duties of

carrying on the Company’s business subject to the mandate granted

by the Articles or creating Act.

They act on behalf of the company and are not personally liable if

they do not act outside their powers (ultra vires)

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A “Partnership” is the relationship which subsists between or

among persons, not exceeding 20 who carry on business in common

with a view to making profit.

Where a partnership is formed to carry on a profession, the numberof professionals , which constitutes the partnership shall not exceed

fifty.

The two types of Partnerships envisaged under the Partnership Act,

2010 are;

“General” Partnerships

Limited Liability Partnerships

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A “General Partnership” is the relationship which subsists between

or among persons, carrying on a business in common with a view of

making and sharing a profit.

All the partners are jointly and severally liable for all the debts

and obligations of the firm incurred while the they are partners.

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Limited Liability Partnerships- is one in which there are two

categories of Partners i.e.

General Partners who are liable for all the debts and obligations

of the firm.

Limited liability Partners who contribute a stated amount of

capital to the firm and are not liable for the debts and obligations

of the firm beyond the amount of capital contributed.

A body corporate may be a limited liability partner

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Features of the LLP include:

It should not consist of more than 20 or 50 (in the case of

professionals) people.

It should have one or more people called general partners who

will be liable for all debts and obligations of the firm.

There should be limited partners who contribute a stated amount

of capital to the firm and must not be liable for the debts or

obligations of the firm beyond this amount.

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Features of the LLP include:

A limited liability partner may not draw out or receive any part of

his/her contribution during the partnership.

Limited liability partners may not take part in managing the

partnership business and must not bind the firm, although they

may inspect the books to assess the state and prospects of the

partnership business.

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Entitled to share equally in capital and profits

Entitlement to interest in respect of advances beyond agreed

capital contribution to the firm

Obligation to contribute equally towards the losses sustained by the

firm

No partner is entitled to be paid for acting in the firm business

Duty to render accounts and full information

Accountability for private profits

Duty not to compete with the firm

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Indemnity by the firm in respect of expenses/ liabilities incurred in

bona fide pursuit of firm business

Differences may be resolved by majority of partners BUT change in

nature of business must be with consent of all partners

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Registration is mandatory for all firms carrying on business under

names other than true surnames and or corporate names of all

partners.(Bus. Names Reg. Act).

A LLP must register as such with the Registrar of Companies and

bear the letters “LLP “to its name otherwise it is taken to be a

General Partnership.

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Registrar to issue Certificate of Registration of the LLP upon receipt of

particulars of;

Name of LLP

General nature of business of LLP

Principal place of business

Full names and addresses of each partner

tenure, if any, for which LLP is entered and date of commencement Statement that partnership is LLP

Description of status of each partner- i.e. whether limited or general.

Sum contributed by each partner and form in which it is contributed

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Every partner has the right to participate in the management of the

partnership business (General

Partnership)…however…..anarchy….good order!!

A limited liability partner not to take part in the management of the

Firm business and not to bind the firm.

LLP may upon prior notice to general partners, inspect the books of

business of the firm…this does not amount to participation in

management.

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Unlike companies which have detailed requirements for

formation, there are no formal requirements for starting a sole

proprietorship.

No exclusive legislation governing sole proprietorships.

However, the Business Names Registration Act requires that if an

individual chooses to operate a business in names other than his

true names, then such name must be registered.

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“Same entity” aspect

the owner is inseparable from the business (unlike in case of a

company or LLP).

because they are the same entity, the owner of a sole

proprietorship has complete control over the business, its

operations, and is financially and legally responsible for all debts

and legal actions against the business.

taxes on a sole proprietorship are determined at the personal

income tax rate of the owner. i.e. a sole proprietorship does not

pay taxes separately from the owner.

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The Choice of corporate form in Uganda lies between;

a company,

a partnership or

Sole trader/proprietorship status

Most Corporate businesses are set up as Limited

Liability Companies.

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Uganda’s company law recognizes the corporate entity

in various forms;

Companies limited and unlimited

Statutory Companies

Partnerships

▪ General Partnership

▪ Limited Liability Partnership

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Based on the discussions / presentation onBusiness forms, and the handout on soleproprietorship, in Uganda, in your groups,

review the advantages and disadvantages of oneof the following corporate forms and report backto the plenary Limited Company Partnership Sole Trader

Timing: Discussion in Groups= 10 min Report back to plenary= 5 minutes each team

business forms in uganda

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