UGANDA MANAGEMENT INSTITUTE

MODULE: BUSINESS LEGAL FRAMEWORK

INTRODUCTION TO COMPANY LAW

RELEVANT LAWS

1. THE CONSTITUTION OF UGANDA 1995 (AS AMENDED)

2. THE COMPANIES ACT 2012, LAWS OF UGANDA
3. CASE LAWS & THE ENGLISH COMMON LAW DOCTRINES &
EQUITY
4. URSB ACT, LAWS OF UGANDA

BACKGROUND TO COMPANY LAW IN UGANDA

The body of company law in Uganda is constituted by the Ugandan
Companies Act, 2012, Laws of Uganda. The English Common Law and
doctrines of Equity and case law. The Ugandan company law is similar
to the English Company’s law and Ugandan courts greatly rely on
English decisions.

DEFINITION OF A COMPANY – According to the Longman

Dictionary of Law 7th Edition by Lib Curzon & PH. Richards the
company is defined as an association of persons formed for the
purpose of an undertaking or business carried on in the name of the
association.

Companies Act 2012, Laws of Uganda section 2 Defines a

company to mean a company formed and registered under the act or
an existing company or are – registered company.

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A company or corporation is a legal entity separate from its
members or shareholders. It is established by the process of law in
order to be an artificial party to legal relations; this legal personality
enables a company to enjoy rights of a natural person and subjects a
company to liabilities separate from its members. Thus, if a company
has 2 shareholders there exist 3 legal persons, the two members and
the company.

TYPES OF COMPANIES
1. Public companies – A public company it is set up by section 6 of
the companies Act 2012, laws of Uganda and has the following
characteristics;
- Minimum of two directors.
- Can issue shares to the public for example new vision Uganda.
- Trading license to commence business.
- It must hold a statutory meeting within 1 to 3 months of
operation.
- It can have one member to infirmity members.
- Can list its shares on the stock market for example, Uganda clays
Ltd, is listed on Uganda stock market.

NB: Shares are freely transferable at the stock market.

NOTE: That public companies are strictly regulated by
law/legislations there are stringent requirements to be full
filled before a company can be allowed to invite the public to
subscribe for shares, this is aimed at protecting the general
public.

2. PRIVATE COMPANIES – A private company is set up by the

Companies Act 2012, Laws of Uganda, Section 5 provides for
that, it has the following characteristics;
- Restricts the right to transfer shares.
- Limits the number of members from one to one hundred
members (1 to 100).
- Cannot invite the public to subscribe for shares.

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 - Cannot list its shares on the stock exchange for instance Uganda
stock exchange market.
A company limited by shares, this is one whose liability of the
shareholders at the time of winding up of the company is identified to
the amount, if any unpaid on their shares.
NB: Members subscribe for shares which constitute the share
capital private.
NB: For private company 1 to 100 members
For Public Companies it is one to infinity.

3. Statutory Companies / Corporations – These are established by

special legislations of parliament. They have the attributes of legal
personalities and the government is the owner or sole shareholder
for example the National Oil Company of Uganda, the NSSF set up
by NSSF Act, Laws of Uganda. Uganda Revenue authority, Uganda
Bureau of standards, Uganda National Drug Authority. Such entities
are independent and can contract and file legal proceedings
independently.

INCORPORATION PROCESS
A company is formed by law by registering it with the registrar of
company, at Uganda Registration Services Bureau (URSB)
established by the URSB Act, laws of Uganda. The registration it
is done in accordance with the Companies Act 2012, Laws of
Uganda, and a certificate of Incorporation is issued certifying that
the company has been dully incorporated and it signifies its legal
existence as a body corporate.

The following steps are taken when a promoter is registering a

company;
a) A statement of address of the intended registered office of the
company.

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 b) Reservation of the business name
c) A statement of particulars of the directors of the company.
d) A statement of Nominal capital
e) Memorandum of association & articles of association. This
contains the objectives of the company being formed.
f) The sharing holding details and the relevant details and names of
shareholders, their signatures, details of liability of the company.
g) Articles of association, they relate with the regulations of the
company, the rationale is to regulate the conduct of members of
the company in respect to company-oriented affairs.

NB: Companies Act 2012, Laws of Uganda sections 36, 15, 18,
19, 17, 22 (there are relevant).
NB: A statutory declaration by an advocate / solicitor engaged in
forming the company or any Director or secretary of the company. This
is relevant in that it signifies legal compliance. Section 22 (2)
provides for that statutory declaration.
NB: Section 22 (1) of the companies Act 2012, Laws of Uganda
provides for the issuing of the Certificate of Incorporation. It is the
conclusive evidence that signifies the company has been registered
and it legally exists.
NB: The necessary fees and duties must be paid to the registration
bureau before submitting the documents.

CONTENTS OF THE MEMORANDUM

1. Name of the company – A company name must be unique; it must
not resemble a name of an existing company. It must not be
offensive, Immoral or undesirable in the eyes of the registrar – In
London overseas trading company Vs the Raleigh Cycle Co.
Ltd 1959, – Court held, that it was open to the registrar to find out
that the mark, by being likely to cause confusion. The registrar’s
decision of objecting to registration a certain trade mark name on
ground of confusion was justified.

2. The registered offices of the company – The memorandum

must state that the registered office of the company is situated or

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 located in Uganda, Actual address communicated to the registrar of
the companies.

3. Objects clause – This indicates the objectives or purpose of the

company the reasons for setting up the company hence the
prospective investors are made aware of the activities of the
company. – in the case of Cot Man Vs. Broughman 1918, Ac,
S14 522 – Court held that, the objects clause must or should
identify the objectives of the company in plain, clear language, so
that the reader can identify, understand the corporate activities the
company is engaged in.

4. Liability of the members

5. The capital clause – This indicates the amount of share capital,

number of shares, the price and particulars of shareholders.

6 Subscription clause– This contains the names of the subscribers,

names, signatures and the documents should be witnessed.

ARTICLES OF ASSOCIATIONS
This contains regulations governing the conduct of members and
internal affairs of the company, and how they should deal with external
relationships.
The Directors, Members, Officers of the company should adhere and
follow the regulations.
NB: Company seal – This contains the company’s name and it is used
on company documents. E.g. company resolutions.
NB: Commencement of Business – A company can start operating
the business after it receives the certificate of incorporation.

Relevancy of incorporating a company

- Ownership of property – it can start procuring property and owing it,
in the company names. E.g. Assets like land, vehicles.

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- It can borrow money from a financial institution e.g. Barclays Bank
of Uganda.
- It can enter contractual agreements.
- It can file legal proceedings in case there is a dispute.
- Separation of Management functions.
- Perpetual succession – It is continuous in existence until winding up.
Or struck off the register, or amalgamation / Merger arrangements.

CONSEQUENCES OF COMPANY INCORPORATION

 Separate legal entity: Due to incorporation the company is

separate from the members.
 Limited liability: The fact of incorporation results in the fact that
the company Debits are not the Debts of the members and vice
versa in practice therefore, the liability of the members or
shareholders of the company is limited to the amount, if any, which
is still due and unpaid on their shares at the time of winding up of
the company. Beyond this amount, in the absence of any factors
justifying the winding up the company, no liability is visited on the
members necessitating recourse to their personal property. The
principle, was emphasized in Salomon case where court held
that Salomon as a member, was not under an obligation to repay
the company’s Debts, similarly in the case of Sentamu Vs
Uganda commercial Bank and Another 1983-HCB High Court
held that, a limited liability company is a separate legal entity from
the directors and shareholders, other members-individual members
of the company are not liable for the debts of the company.
 Property ownership: A company Owns its property separately
from its members relevant case is Kampala cotton Company Ltd
Vs Madhvani (1954) 21, EACA129. Court pointed out that a

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 limited liability company can own property, also pay rent.

In the case of Henry Munyanganizi Vs General Machinery Ltd

(1994) I KALR, the plaintiff applied for a loan from a Bank to
finance purchase of a tractor. The Bank issuing the loan required
that the plaintiff floats a company which he did, with himself, his
wife and brother being shareholders. The issue was whether the
plaintiff, as an individual could claim Ownership of the tractor Lady
Justice held, that a company is a legal entity irrespective of the
motives of the promoters and once it is formed under the provisions
of the law, the rules governing it must be followed, “that company
property is clearly distinguishable from the members and members
have no direct or proprietary rights to the company property but
only to their shares. Accordingly the plaintiff could not be said to be
the owner of the tractor bought by the company in which he was a
shareholder”.

NOTE: Property Ownership even extends to Bank Accounts

and proceeds.

 Legal Proceedings

Because a company is at law a different person altogether from its

members, it follows that a wrong made by the company can result
into legal proceedings against the company for instance civil action
a company can also take legal actions in order to enforce its legal
rights and obligations.

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 Relevant ease- Wani Vs Uganda Timber and Joiners Limited
HCCS, NUMBER 989/72

 Transferability of shares: The capital of a company is divided

into parts called shares. These shares are subject to certain
conditions for instance “Freely transferable”; this ability to separate
the fact of shareholding from the company is also a natural
consequence of corporate personality of a company.

 Separation of management functions

The management of the company is given to the selected directors

of the company and this is a result of incorporation.

 Contractual Capacity: Upon incorporation, a company acquires

contractual capacity; the company may enter into contractual legal
obligations in its own name for instance Business contracts like for
supply, employment agreements with its workers etc. Relevant
case- Lee Vs Lee Air Farming Limited (1960) 3 ALLER; 420
 Perpetual Succession: A Company upon incorporation assumes,
perpetual succession, this means- that its existence is continuous
unless it winds up in accordance-with the law, struck off the
company register or amalgamated with another company. The
company accordingly services beyond its shareholders, changes in
membership arising from death or bankruptcy of one of its members
or founders does not affect its existence. The death of any member
leaves the company unmoved, members of the company can come
and go but the company goes on forever.
 A company has no Racial Attributes: As a consequence of
corporate personality, it follows that a company cannot, take on the

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 physical attributes of its shareholders since its independent of them.
 Relevant case Katate Vs Nyakature (1956)7, ULR, 47: The
issue was whether a limited liability company whose shareholders
are Africans can be said to be African-Court held that, a limited
liability company is a body corporate and as such it has legal
existence which is distinct from its shareholders. Being a distinct
legal entity and abstract in nature, it is not capable of having racial
attributes of its shareholders.
 Borrowing powers: The Company upon incorporation- This can get
powers to borrow money when there is a company resolution
authorizing the action.

This principle was firmly established in the case of SALOMON Vs

SALOMON and Company Limited 1897, AC, 22 (HL). In this case
SALOMON carried on the business as a Leather Merchant. In the year
1892, he converted the business into a limited liability company by
forming Salomon and company Ltd. the shares in the company were
held by Salomon, his wife and 5 children. But Salomon held the
majority shares (20:001 of the 20,007 shares issued while each of
his family member held one share). The company then bought Salmons
business at 39,000 pounds part of which was made of debentures,
another part unduly paid shares and another in cash. Immediately
after incorporation, the company experienced difficulties and a year
later, it was wound up. It had sufficient assets to satisfy the debentures
but nothing was left for the unsecured creditors. The unsecured
creditors sued and contended that for all intents and purpose, salmon
was the company and could therefore not owe money to himself The
House of Lords, decided against the unsecured creditors, stating that
in law Salmon and the company were two different persons. That
Salmon was therefore entitled to the available assets in his preferred
position of a secured creditor. According to Lord Macnaghten,” The
company is at law a different person altogether from the subscribers to
the memorandum and thought it may be that after incorporation the
business is precisely the same as it was before and the same persons

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are managers and the same hands receive the profits the company is
not in law the agent of the subscribers or trustee for them”

The rationale of Salmon case in relation with company law is that a

company is a separate legal entity or artificial person legally existing,
so it is separate from the members.
Salmons case, was followed in the later years by Lee Vs Lees Air
Farming Ltd, 1960, 3 Aller, 429 Lee held 2999 of the company 3000
shares. He was the managing director and chief pilot entitled for
salary. While working for the company he was killed in an air crash and
his widow claimed compensation from the company, on ground that
Lee had been an employee under a contract of service. It was held that
the company and Lee were separate persons in law and therefore the
claim was upheld.

FORMATION OF THE COMPANY

Before the company can be legally established, some individuals must
carry out the preliminary work and this includes the following;
A) Signing Contracts
B) Arrangement for capital and credit facilities.
C) Planning in respect of premises
D)Machinery and equipment
E) Drafting the memorandum and articles of association
F) Actual registration of the company
The above functions are normally carried out by persons called
promoters
In TWY Cross vs. Grant 1877 – A promoter was described as one
who undertakes to form a company with reference to a given project,
and to set it going and who takes the necessary steps to accomplish
the purpose or task.

Corporate personality

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A company once incorporated is said to have corporate personality.
This is the artificial legal personality that enables the company to enjoy
legal rights on its own and separate from its members. Upon
incorporation, the company is liable for all its debts and obligations;
can own property separate from its members; can sue and be sued
and is endowed with perpetual succession among others.
The principle was first articulated by the House of Lords in the case of
Salomon v Salomon & Co. Lidu. In that case, Salomon was carrying
on business as a leather merchant until 1892 when he converted his
personal business into a limited liability company called Salomon & Co.
Ltd. The company shareholders were Salomon, his wife and their five
children. Of the company's 20,007 issued shares, Salmon held 20,001
and the balance was held by his family members. From his previous
business, Salomon had GPB 10,000 in debentures which were charged
on company assets. One year into business, the company experienced
challenges and was later wound up. Whereas the company assets were
sufficient to clear off debentures, it had nothing for the unsecured
creditors.
The creditors sued and obtained judgment from the Court of Appeal
which held that the company was a mere agent of Salomon who
remained the real proprietor of the business. That he was liable to
indemnify the company against its trading debts.

On appeal to the House of Lords, the decision of the Court of Appeal

was reversed with the House of Lords asserting that the company had
been validly formed and that the business belonged to it. That Salmon
was its agent and not it the agent of Salomon. Lord Macnaghten noted
in his judgment;
'...The company is at law a different person altogether from the
subscribers...; and though it may be that after incorporation the
business is precisely the same as it was before, and the same persons
are managers, and the same hands receive profits, the company is not
in law the agent of subscribers or trustees for them. Nor are the
subscribers as members liable in any shape or form, except to the
extent and in the manner provided by the Act...'

The principle of corporate personality has since been followed in

several cases and in some jurisdictions; it has been incorporated into
statutes.

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Lifting the corporate veil
The Act defines lifting the corporate veil to mean 'disregarding the
corporate personality of a company in order to apportion liability to a
person who carries out any act'. This exception to the principle of
corporate personality only occurs in circumstances where the company
is used for some illegal or improper purpose requiring the law to look
into the company and discover the natural person behind such
undesirable acts. In Solim Jamal & others V Uganda Oxygen Ltd &
others, court held that the court shall not look helpless in the face of
fraud. That where fraud has been committed, an exception to the
concept of separate personality would be invoked and the corporate
veil would be lifted
The High Court may, where a company or its directors are involved in
acts including tax evasion, fraud or where, save for a single-member
company, the membership of a company falls below the statutory
minimum, lift the corporate veil.
Other than the statutory provisions requiring lifting of the veil,
common law has developed some grounds that may justify courts to
look behind the corporate veil. The following are some of the reasons
that have prompted courts to lift the corporate veil.

1. Where there has been fraud or improper conduct in jurisdictions

where criminal liability is personal.
2. Circumstances pointing to the company being a vehicle for tax
evasion.
3. In cases of associated companies where the dispute requires to
apportion liability.
4. Determination of residence where control of a particular company
needs to be established.

The ultra vires doctrine

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This is a common law doctrine that restricted the incorporated
companies from pursuing objects that were not particularly articulated
in the company's memorandum of association or those incidental to
achievement of the stated objectives. In the case of Ashbury
Railway Carriage Co. Ltd v Riche, Lord Cairns explained that the
dual purpose of the doctrine of ultra vires was first the protection of
investors in the company so that they know the objects for which their
money is used and secondly, to protect creditors of the company and
ensure that company funds are not used in unauthorized activities. As
such any transaction pursued outside the stated objectives would be
said to have been done beyond the powers of the company and
therefore was ultra vires.

The effect of this was that companies would try to state as many
objectives in their memorandum of association as possible to avoid
being caught outside the rule. Innocent third parties would also be
caught by the rule if the transacted with the company believing that it
was authorized whereas not. Overtime the doctrine has had to be
modified by courts and legislators to ensure innocent third parties are
protected.

Under the Companies Act 2012, the doctrine was substantially

limited in as far as third parties are concerned. The Act also introduced
a company that can operate as a general commercial company with
basically two objectives; to carry on any trade or business whatsoever
and to do all such things as are incidental or conducive to the carrying
on of any trade or business by it. With this kind of objects, it would be
nearly impossible to have any activity that would fall out of the second
limb of the objectives. Though the directors must observe any
limitations on their powers contained in the company's memorandum
and any act beyond the company's capacity unless ratified by
members will make the director liable. The power of directors to bind
the company or authorize others to do so in favor of a person dealing
with the company in good faith cannot be limited by the company's
memorandum. Though it cannot be said that the doctrine was dealt
away with by the Act, it is clear that its application in Uganda has been
greatly affected.

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 Company meetings

a) Company decisions are passed or made through duly constituted

company meetings. Court may also intervene and cail for a meeting
where there is failure to call one. In the matter of Air-Rep
International Ltd,1 one of the two shareholders in Air-Rep
International Ltd had never been to the registered office of the
company and his whereabouts were unknown. On application of the
other shareholder, court held that section 135 of the companies Act
(Cap.85) [Now section. 142 of the Companies Act 2012 gives power to
court to order for a meeting of a company where it is impracticable to
call for the meeting in any way and that this case fell within the
provisions of the section. The order was made that a meeting of the
company be called by the applicant who would himself constitute a
quorum for the meeting.
The nature of the resolution will be determined by the members of the
particular meeting and the requirements of the Act. The various
company meetings that may be held include;

a)Statutory meeting. This is the first meeting required to be held by a

company limited by shares and every company limited by guarantee
and having share capital. It should be made within a period of not less
than one month and not more than three months from the date at
which the company is entitled to commence business. However,
private companies are exempted from this requirement except for a
company that was a private company before becoming a public
company

b) Annual general meeting. This is a general meeting of members

of the company required to be held in each year in addition to any
other meeting that year. It should be held within fifteen months from
one annual meeting to the other. A private company may at the
requisition of a member hold an annual general meeting.

1
"(1984) HCB 63.

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c)Extra ordinary general meeting. The is a general meeting held by
the company at the requisition of members holding not less than one
tenth of the paid up capital of the company and with a right to vote at
general meetings or members of the company representing not less
than one tenth of the total voting rights for companies without share
capital. All general meetings other than the annual general meeting
are called extra ordinary meetings and may be convened by a director
to the company.

d) Board meeting. This is a meeting held by directors of the

company to perform or dispatch company business. They may vote to
pass some decisions and the general rule is that the directors act
collectively. In case they there is equality of votes at the meeting, the
chairman usually has a casting vote and the decision is taken to have
been collectively made by all the directors.

Notices for calling meetings

The ordinary notice period for calling of any meeting other than an
adjourned meeting under the companies Act shall be of 21 days'
notice.
However a shorter notice can be taken to have duly called a meeting in
case of a general meeting, if called by all members entitled to attend
and vote at the meeting; and in case of any other meeting, by majority
holding at least ninety five per cent value shares or representing
ninety five per cent total voting rights at meetings of all members.
A special notice is one where a notice period of 28 days is required to
be given to the company by the person intending to move a special
resolution at a general meeting for business requiring a special notice.
A special notice is required when a company is to appoint auditor other
than a retiring auditor2 and in case of removal of a director before his
or her term expires or appointing some body in his or her place.
The High Court is vested with power to order a meeting. This court can
order a meeting on its own motion or on application of any director or
of any member of the company who would be entitled to vote at the
meeting. This can be done where there is a default to call for a
meeting in a manner provided.

2n
Section 168(1).

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 Company Resolutions

A company is an artificial person and operates through meetings and

resolutions made in those meetings. The minutes of meeting
proceedings are required to be entered and kept in a book for record
purposes and shall be open to the inspection of any member without
charge. Resolutions made may defer depending on the persons making
the resolution, the purpose for it or numbers required by law to pass a
particular resolution. The different resolutions include;

a) Special resolution. This is a resolution required to be passed by a

majority not less than three fourths or seventy-five percent of
members with power to vote at a general meeting of which notice
specifying the intention to propose the resolution as a special
resolution has been given. The resolution should be registered with the
registrar with in thirty days of passing it. Amendment of a special
resolution is only permitted if it is meant to correct a typographical
error or if the substantive object of the resolution is unchanged.

b)Ordinary resolution. This is a resolution of the members that is

effective when passed by a bare minimum of members. It is limited to
usual company business activities like appointment and removal of
directors, issue of shares among others.

c)Board resolution. This is a resolution passed by the board of

directors in a duly constituted directors meeting.

Company business requiring a special resolution

These are company transactions or activities that would require

sanctioning by the members holding at least 75% or three quarters of
the total nominal value of the company. Any such transactions done
otherwise may not have a legal effect. Such transactions include the
following.

a) Alteration of company memorandum with respect to the objects of

the company.

b) Alteration of the company's articles. However, alterations in

memorandum or articles increasing liability to contribute to share
capital shall not bind existing members without consent.

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 c) Re-registration of a private company as a public company.

d) Re-registration of unlimited company as limited.

e) Re-registration of a public company as private.

f) Alteration of conditions in memorandum which could have been
contained in articles.
g) Change of company name.
h) Determination on a portion of share capital not to be called up.
i) Reduction of a company's share capital.

j) Ratification of directors acts beyond their powers as contained in

company's memorandum.
k) Change of status from single member company to private company.
I) Resolution for the company to voluntarily wind up

Key officers of the company

Though some company business may require sanctioning of members,
it should be made clear that the day today management of company is
done by company officers. Such officers may have distinct roles and
duties as below.

Directors and their duties

Except for a private company which must have at least one director,
every other company must have at least two directors. The minimum
age for a person to act as a director is eighteen years. ln limited
liability companies, the liability of directors may be unlimited if
provided by the memorandum. In case of a single member company, a
person is nominated who shall become a nominee director in case of
death of a single member and another called an alternate nominee
director to work in case of non-availability of the nominee director.
Directors are appointed by members in a general meeting. A director
may be removed from office by an ordinary resolution before
expiration of his or her period of office." And a vacancy created by this
removal may be filled by the board of directors as a casual vacancy. A
person may also be disqualified from acting as a director for a period of
three years if he or she fails to keep proper accounting records;

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prepare and file accounts; send returns to registrar; file tax returns and
pay tax or if he or she allows a company to trade while insolvent.
The Companies Act 2012 highlights the duties of directors to include
the following:
a)To act in a manner that promotes the success of the business of the
company
b)To exercise a degree of skill and care as a reasonable person would
do looking after their own business.
c) To act in good faith in the interests of the company as a whole by
treating all shareholders equally; avoiding conflicts of interest;
declaring any conflicts of interest; not making personal profits at the
company's expense and not accepting benefits that will compromise
him or her from third parties.
d)To ensure compliance with the Act and any other law
Secretary
Every company other than a single member company must have a
secretary and a sole director shall not also be a secretary. A secretary
is appointed by the board of directors. In K.A Kristina v Indo Union
Assurance Co. Ltd, court held that the secretary as a servant of the
company is bound to carryout out the duties assigned to him with the
authority to bind the company in matters concerned with
administration
The duties of the secretary may be wide depending on the instructions
of the Board and some of the duties may include the following.
a)Preparation of minutes. It is the duty of the secretary to prepare
minutes of the proceedings of the company and directors. In Cairney
v Ba: court noted that it is usually the duty of a secretary to prepare
the minutes of the proceedings of the general as well as directors'
meetings.
Writing company letters. In Johnson v iytfle's Iron Agency' court noted
that as a general principle, when the secretary writes letters on behalf
of the company, it is to be assumed in the absence of contrary
evidence that he or she is authorized by the company to write them

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a)Certifying share transfers on behalf of the company. In Re: Fenwick
Stobart and Co.3, court noted that the duty of the secretary includes
certifying transfers and receiving and registering notices on behalf of
the company.
b)Signing company instruments. The secretary is the custodian of the
company seal and it is a requirement that every instrument to which a
seal is affixed shall be signed by a director and counter signed by the
secretary.
c) A document requiring authentication may be signed by a company
secretary.
d)Sign and file company resolutions and the annual return with the
registrar.

Auditors

Every company is required to appoint an auditor at each annual

general meeting until the conclusion of the next annual general
meeting. However, before the first annual general meeting, the
directors can appoint an auditor until the meeting when the members
can consider the position. The directors may also fill any casual
vacancy in the office of auditor. The registrar of companies may also
appoint a person to fill the vacancy of auditor if the annual general
meeting fails to appoint or re-appoint an auditor. Whereas it is the
responsibility of directors to prepare books of accounts for the
company, it's the auditors' duty to give an opinion on whether the
books were prepared in accordance with the law and whether there are
any material qualifications. Remuneration for the auditor is to be
ordinarily fixed by the company in a general meeting but may be set
by the registrar or directors depending on the circumstances or as
members may determine. The auditor must be a member of one or
more professional bodies specified in the Accountants Act, Cap 266
and not disqualified by the Companies Act 2012.
Voluntary winding up

A solvent company may wish to close shop for any reason including
completion of the purpose for which it was set up. However, for this to

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happen, the company must have made a full inquiry into the affairs of
the company and come to a conclusion that the company is able to pay
its debts within a period a period of twelve months. The company can
then take the following steps to voluntarily wind up operations.

1. The directors at their meeting shall make a statutory declaration

of solvency with in thirty days before a general meeting is called.
This will indicate that they have made an inquiry and the
company is able to pay its debts within 12 months.123

2. The declaration of solvency including a statement of the latest

assets and liabilities of the company is delivered to the registrar
with a copy to official receiver for registration before the passing
of a special resolution.

3. The company at the general meeting passes a special resolution

that the company be wound up voluntarily. The process of
winding up shall commence at the time of passing the
resolution.124

The resolution shall be registered with the registrar and a copy sent to
the official receiver (the liquidator of the company) within seven days
from the date of passing the resolution.

A notice of the resolution shall be published in the Gazette and in a

newspaper with a wide national circulation in official language within
fourteen days after the resolution is passed.

The process shall proceed in accordance with provisions of the

Insolvency Act125 relating to liquidation with necessary modifications to
the voluntary winding up of the company.

Relevant text books and materials for further reading

- Case laws

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- Companies Act 2012, Laws of Uganda.
- Company Law, Second Edition by Joseph Ogola, Lecturer of Law
Strathmore college Kenya Published by English press Nairobi Kenya.
- Company Law in Uganda by Professor David Bakibinga
- Gower & Davies’ Principles of Modern Company Law
- Cases and Materials in Company Law by L.S Sealy

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