DIRECTORATE OF BUSINESS REGISTRATION
SALIENT FEATURES UNDER THE COMPANIES ACT 2012
1.0 Background:
The Act amended, replaced and reformed the law relating to the incorporation,
regulation and administration of companies and to make provision for related matters.
This new law was aimed at forming Company law in Uganda, based on the principles of;
a) Promotion of business formalization,
b) Ease of business registration,
c) Promotion of competitiveness,
d) Efficient management of company affairs,
e) Regional harmonization of company law,
f) Aliening the law to current trends in Uganda, and
g) Generally to incorporate best practices in Company matters.
The Act only provides for core company matters. Matters of registration and
management of solvent companies,corporate insolvency listing and prospects are now
contained in the Insolvency Act and the Capital markets Authority Act.
2.0 Major reforms include1. Single member company as a private company (sec. 4(1))
2. The re-registration of registered companies, e.g. Limited to unlimited (Sec. 29),
Unlimited to limited section (Sec. 23), Private company to public company (Sec. 24)
A public company may also re-register as a private company (Sec. 33)
3. The principle of corporate governance (Sec. 14 & Table F). Public companies are
required to adopt table F which sets out the principles of corporate governance,
where asPrivate Companies may or may not adopt the principles.
4. The ultra vires rule (Sec. 18 & 51) has been done away with by introduction of a
Form for business registration that requires only the nature of business but not an
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entire list of objectives. Hence, Companies are no longer limited by the stated
objects.
5. 3rd Party dealings. See Sec. 53, 54.A person dealing with a company is not required
to inquire into the capacity of the Company/ Directors (Sec. 53).
Contracts which are purported to be made on behalf of the company have effect
against the person purporting to act for the Company (Sec. 54) and a Company may
adopt a pre-incorporation contract without novation.
6. A company is prohibited from giving financial assistance to any person or its
subsidiary to purchase or subscribe for shares in its holding company (Sec. 63).
However, Public & Private Companies may be allowed where net assets will not be
reduced by the financial assistance (Sec. 64 & 65). This is intended to avoid fraud
on the part of the person borrowing from the Company to acquire shares in the
same Company.
7. Directors actions bind the company (Sec. 52)
8. On request by members of the company the registrar may appoint an inspector to
inspect the affairs of the company (intended to reduce the time spent in court
hearings). This may occur in cases where the affairs of the company are intended to
defraud, there is misconduct in management or it isdesirable to conduct the
investigation. Sec. 172.
If deemed necessary, the Registrar may refer matters to DPP.
9. Minimum age of Director now at 18 years (Sec. 196) right from 21 years under cap
110.
10. The Act prohibits Public Companies from extending loans and guarantees to
directors (Sec. 203), exception beingMoney lenders Companies which may give
loans (Sec. 207).
11. A company is prohibited from any arrangement by which a director or a person
connected to the director acquires non-cash assets (219 and 220)
12. The registrar given powers to hear complaints from oppressed minorities
shareholders (Sec. 247).
13. Periodic Statements (Sec. 266). Applies to all Insurance companies whether
registered in or outside Uganda.
14. The Act introduces strict director qualifications and disqualifications intended to
ensure proper company management (sections 185, 195 to 201). Directors are given
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strict duties to carry out in company management to ensure that companies do not
collapse
15. The Act introduces Electronic filing of documents (Sec. 2 & 275). Anything required
to be filled manually may be filled electronically as well.
16. The Act has revised the fines and penalties under the current companies Act by the
use of fines in the new Act. It uses Currency points have (1st Schedule to the Act).
17. The Act introduces principles of Corporate Governance under Section 14. The
Section refers to table F that incorporated principles of corporate governance whose
purpose is to;
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Act as a guide to proper management of the company affairs
•
Protect the different stakeholders in a company
•
Draw distinctions between the board and directors
The table provides for the constitution of the Board of Directors (BOD), and
antecedents thereto as follows:
a. It is accountable for the performance and affairs of the company. They are
expected to act in good faith with due diligence and care in the interest of the
company
b. The composition of the BOD provides for responsibilities to enable:
•
Provision of strategic direction
•
Retention of full and effective control
•
Monitor operation and performance of the company
•
Review major plans
•
Ensure transparency, and
•
Oversee major capital expenditures
c. The BOD CompositionThe board should be composed of executive directors, andNon-executive
directors
d. Chairperson& Chief Executive Officer;
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There has to be a division of responsibilities between the executive officer and
the Board chairperson, the former being responsible for the evaluation of the
performance of the chairman.
e. Directors
Executive directors are involved in the day to day running of the company and
the secretary is charged with ensuring that new directors are brief on the
regulations that regulate the company.
f. Remuneration
To maintain quality management sufficient remuneration should be provided to
directors. The board should appoint a remuneration committee.
g. Meetings of the BOD
The board should meet at least once in three months, with a proper notice of the
meeting served.
h. Company Secretary
The secretary has a role in ensuring that the company adheres to corporate
governance principles. The secretary must therefore be a fit and proper person
falling within the categories provided under the companies Act.
End of document
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