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Business Forms in Uganda
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Transcript of Business Forms in Uganda
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RICHARD WEJULI WABWIRE
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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
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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